Core inflation nudges higher

Despite the headline (seasonally adjusted) CPI data coming in a good deal lower than expected, the more significant (so far as potential RBA rate decisions is concerned) core inflation measures nudged very slightly higher in the June quarter.

The headline CPI came in as +0.2% q/q for a +1.9% y/y rate. Expectations had been for +0.4% q/q to leave the annual rate about unchanged at +2.1%. However, the more closely-watch core measures (Trimmed Mean and Weighted Median) both came in at +0.5% q/q for an annual increase of 1.8%; a slight increase from the +1.75% rate of the previous quarter and broadly in line with expectations.

Given that the A$ on a trade weighted basis has risen by 4.8% over the past year, it is little surprise that Tradables inflation is a major reason for low price increases. Over the year we see Tradables inflation running at just +0.4% y/y (down from +1.3% y/y last quarter) while Non-tradables hit a new 3 year high of +2.7% in June. If the RBA can actually get their way and drive the A$ lower then we should see the Tradables inflation numbers start to edge higher, and that in turn will no doubt push CPI back up. The ultimate result of that, of course, would be the RBA having to push rates higher which would counter the decline (if there is one) in the A$!

Insights from the new Labour Account Australia data from ABS

Yesterday the ABS released for the first time their experimental data series Labour Account Australia. In the ABS’s own words..”This publication presents experimental estimates for the Australian Labour Account for the period 2010–11 to 2015–16. The Australian Labour Account consists of eleven sets of tables focusing on four central quadrants of Jobs, Persons, Labour Volume and Labour Payments. Data in each table are available annually, and for the 19 industry divisions defined in the Australian and New Zealand Standard Industry Classification (ANZSIC). The experimental estimates presented here have been compiled from existing published and unpublished data from various sources.

There are some major differences with the more familiar Labour Force data that the ABS produce each month. Most obvious amongst these is the fact that the Labour Account data counts all workers (who are “usually resident”), including those in the defence force, children under 15 years and non-residents (all of whom are excluded in the Labour Force data). It also looks at secondary jobs; i.e. jobs where the person being employed already has a primary (or “main”) job.

Full details of this new data set can be found on the ABS website here.

Taking a look at the main findings for the period from 2010-11 to 2015-16, and considering compound annual growth rates over those five years, we can see that:-

  • The number employed has been rising at 1.3% pa
  • The number of “secondary jobs” has risen more strongly at 1.8% pa
  • Total (“filled”) jobs have therefore risen 1.4% pa
  • Total labour income (which includes compensation to employees and income from self-employed work) has risen by 4% pa
  • Average Labour Income per person employed has been rising by 2.6% pa while average hourly income per employed person is up 2.8%.
  • The reason for the difference being that the average hours worked per job has been falling 0.2% pa
  • Over the same period estimated Australian population has been growing at 1.6% pa

This new data set is a welcome addition to the ABS suite of releases and provides a useful insight into the broader labour market, albeit only on an annual basis.

CCIQ Queensland Economic Update using Conus Trend Industry Jobs data

We are delighted to see CCIQ making extensive use of the Conus Trend Industry Jobs data series in their Queensland Economic Update (download it here). The use of the Trend data allows a much clearer and timely picture of regional jobs in the various industries across Queensland than previously available.

The Conus Trend Industry Jobs series uses the ABS quarterly regional data as a basis but dis-aggregates their 4 quarter average outcomes to estimate a quarterly series which is then trended using an adjusted X-12-ARIMA model. The resultant Trend provides industry jobs data across all of the industries and regions in Queensland for each quarter from August 1999.

For further information on the Conus Trend Industry Jobs series please contact Pete Faulkner pete@conus.com.au

Jobs report as expected; but it’s generally good news

The ABS jobs data for June shows a total of 14,000 new jobs (seasonally adjusted) which was just slightly lower than market consensus expectations of a 14.4K increase. As expected the unemployment rate came in unchanged at 5.6% (after May was revised up from 5.5%). The good news lies in the full-time jobs data which showed a sharp spike up of 62,000, after May also saw a large increase of 53,400. Over the past 12 months the economy has added 240,200 new positions, of which 175,400 (or 73%) have been full-time. Also pointing towards a healthy labour market was a good increase in the Participation Rate which, at 65.0, now sits at its highest level since Jan 2016.

The less volatile (and preferred) Trend series showed jobs up 26,400 with the unemployment rate also at 5.6% (down from 5.7% in May). Trend jobs are up 227,100 for the 12 months with 169,500 (75%) of those full-time.

In Queensland, despite a move up in the seasonally adjusted unemployment rate to 6.5% (from 6.1%), the story is also looking positive. The seasonally adjusted data showed a decline of 1,000 jobs in the month although full-time positions were up 7,400. Over the past 12 months jobs are up by 44,600 of which 10,200 (23%) have been full-time. Here too we have seen a move to higher participation with the rate at 15 month highs of 64.9.

The Trend series in Queensland shows jobs up 7,000 in June (the 8th consecutive month of gains) with full-time up 5,100. Over the past 12 months a total of 43,300 new Trend jobs have been added of which 14,600 (34%) have been full-time. The Trend unemployment rate fell in June to 6.3% (from 6.4% in May). The graph below shows clearly the improvement we continue to see in the Queensland labour market, although it continues to lag behind that of the nation, especially when we consider full-time work.

Is North Queensland being dudded by Brisbane? Not according to the data.

A fascinating post from Gene Tunny at Adept Economics over the weekend which attempts to dispel the (widely held) view that the North of the state has received less than its “fair share” of capital expenditure from Brisbane.

Is North Qld under-funded by the State Government relative to the South East?

I would point out that the imbalance, as evidenced by Gene’s data, is greater for the Rest of Queensland (approx +45%) as a whole than it is for North Queensland (approx +32%). Also, within Gene’s definition of North Queensland, the imbalance comes largely from a significant overspend in the Fitzroy region where capital expenditure appears to be some 60% above that justified by population levels. A similar level of overspend is also seen in Inner Brisbane. One might also argue that Darling Downs-Maranoa would be considered as SEQ (certainly by those in the North) where the “overspend” seems to be close to double that justified by population.

A problem with any analysis of capital expenditure is that during any one year expenditures are inevitably very lumpy; large scale expenditure projects tend to be like that. Even considering for a longer period, as Gene has done (in this case 5 years), is unlikely to smooth out all this lumpiness; mining related infrastructure in the Fitzroy region could well be a case in point here.

Nevertheless, however one wishes to cut the cake, the data seems to show clearly that over the period analysed (the past 5 years) the North of the state certainly hasn’t done badly from State government spending; no matter what the received wisdom seems to suggest.

Tourism boom continues as departures exceed 10 million in 12 months for first time

In the past 12 months more than 10 million Aussies have travelled abroad for the first time ever. New data for May from the ABS shows that, over the past 12 months, 10,019,900 short-term departures have been made from the country; a new record. Departures are up 7.6% from a year ago and up 4.3% for the 12 month period.

Arrivals are growing even more strongly. For the month pf May arrivals were 7.9% higher than a year ago and they are up 9.9% for the total over the 12 month period. China continues to show solid growth with arrivals up 9.1% from last May and 11% higher for the 12 month period. More than 1.25 million arrivals from China were recorded in the past 12 months; another new record high.

Regional Building Approvals data shows some improvement in the North

The ABS released their regional (unadjusted) building approvals data this morning for May; we have constructed our own Conus Trend data and they show some improvement across the North.

When we consider the data at the SA4 level we see that the Conus Trend has Cairns approvals up to 86 (after April was revised up to 84) and Townsville also up to 87 (again, April was revised higher to 85).

Across the state as a whole Trend approvals were up in Greater Brisbane, although they remain down 18.2% for the year, at 1,958. In the Rest of Queensland the Trend dipped to 1,563 and is down 14.8% for the year. Commentary on the QLD data released last week is here where we note that QLD generally did better in May; clearly that was due to improvements in Greater Brisbane rather than the regions.. 

In our own region we also see some small improvements across the Local Government Areas. The Cairns Regional Council (incl Douglas Shire) see Trend approvals edge higher to 53 (after April was revised up from 43). The Cassowary Coast Regional Council now sits at 6 (after April was revised up from 5) while the Tablelands Regional Council (incl Mareeba Shire) are now at 18 (after April was revised up from 17). To our South Townsville continues to see improvements with Trend approvals in May at 75 after April was revised up from 73.

The complete set of Conus Trends for the SA4 Regions in QLD is available for download below. Feel free to use this data (for non-commercial purposes) but we would appreciate you acknowledging Conus when you do so.

Conus Trend Regional Building Approvals QLD – May 2017

 

Building Approvals dip nationwide but QLD might be doing better

The ABS data for Building Approvals for May came in significantly weaker than had been expected with a fall of 5.6% m/m seasonally adjusted for a 19.7% decline on the year. The more stable (less interesting, and therefore less commented upon…but more reliable as an indicator) Trend series had approvals down by 1.9% for the month and 18.1% over the year. 

In QLD a recovery in the units market saw approvals looking better (at least on the Trend basis). Seasonally adjusted data showed a 10.5% decline for the month and down 13.1% for the year but the Trend showed a 2.2% increase for the month (which is the 5th consecutive month of gains) and a 16.7% decline over the course of the year.

The Cassowary Coast Budget…a closer look

The Cassowary Coast Regional Council brought down their 2017-18 Budget earlier this week with a 1.65% general rate increase and balanced budgets projected into the future. Much was also made of the Council’s decision to pay off some $19 million of debt early to become debt-free as of this year. What has not perhaps been so well publicised is the fact that the 2016-17 Budget, which had been forecast as balanced, looks likely to have registered a $3.5 million deficit as a result of that decision.

Looking at the actual expected result for 2016-17 compared to the Budget last year we see that Revenues are slightly higher (approx $700,000)  while Expenditures are approximately $4,200,000 higher. When we look more closely we see that the reason for the difference is $3,600,000 more finance costs paid to QTC; presumably early repayment fees incurred when the debt was repaid. So while the Council has indeed become debt-free it comes at a cost.

Running down the cash reserves to pay off the debt has two counteracting effects. Firstly it reduces the amount of interest payable by Council in future years, but secondly it decreases the interest earned by Council on those cash reserves. Using the 10 year projections in the Budget we see that the combined effect of the reduction in interest paid will be approx $7,700,000 over the decade. However, we also note that projected interest earned falls by $4,000,000 over the same period. When we add the $3,600,000 early repayment costs incurred this year we can see that over the decade the net effect is virtually zero. In addition it’s worth noting that the 2017-18 Budget projects the Council to borrow approx $4 million by the end of 2018-19 rising to just under $11 million by 2022-23; the Council won’t be debt-free for long.

Let me be clear, there is nothing wrong with making this decision. But we should be clear that over the long term it really does nothing for our financial position (indeed in the short term the upfront early repayment fee actually costs us; things don’t balance out until the end of the decade). In addition we should be aware that while Council is debt free for now, its own Budget projections have that situation lasting only a couple of years.