TIP: Super Tuesday! Productivity, job ads, new housing approvals, house prices, consumer spending...
It's a massive week for economic data updates
The RBA meets today for the last official interest rate pow-wow of the year. The expectation is that rates will be kept on-hold - however, a cascade of economic data updates yesterday will have the pundits fluttering this morning.
Let's kick off with productivity. In 2019, Australia experienced its first negative productivity reading since the ABS introduced this index in 1994. This measures productivity of workers; the Productivity Commission puts low productivity down to a lack of investment by business.
We've known for a long time that business spending was down. Lots of factors play into this, not least of which is confidence by business that they should be investing in this economic climate.
This result will not be what the economic boffins in Canberra wanted to see. They also won't be thrilled at the comments from former Productivity Commissioner Gary Banks: "Trying to stimulate demand through monetary and fiscal measures won’t cut it, I’m afraid, and these pose risks of their own. The causes of [economic weakness] require regulatory and other reforms to enhance the supply side of the economy."
For a government hell-bent on surplus over stimulus and reform, these comments aren't helpful.
Job ads are monitored as a measure of employment growth or otherwise. In 2019, it was revealed yesterday, job ad numbers dropped nearly 13 per cent across the year. Again, it's not really the kind of information that fits Treasurer Josh Frydenberg's narrative.
The ABS also released its October building approval numbers yesterday. They fell faster than expected, by 8 per cent on September, led by the continuing slump in high-rise approvals.
That brings the total 12 month decline to 22.6 per cent, which is reinforcing fears of a housing shortage in key markets. NAB director of economics and markets Tapas Strickland went on-record to say that this decline in approvals is across both high-density and detached residential, and that the decrease in approvals "is yet to find a floor."
BIS Oxford Economics' Maree Kilroy predicts that it'll be June quarter 2020 before we start to see approvals turn around.
Master Builders Australia chief economist Shane Garrett is one of many saying that with population growth, Sydney and Melbourne in particular are facing a housing shortage in the medium term.
That'll only speed up the situation we're seeing now, where supply shortage and low interest rates are driving up prices. CoreLogic said yesterday that nationally, prices increased 1.7 per cent in key markets.
Sydney prices jumped 2.7 per cent and Melbourne 2.2 per cent in November. For Sydney, that was the fastest month of growth since 1988.
This has reignited commentary of the here-we-go-again variety, where affordability once again becomes the big issue. Except this time, it won't be foreign buyers who are the boogeyman - it'll be lack of supply.
There is hope however, that this rapid increase in values will translate into better consumer confidence. UBS reckons this will be the case, and will be watching - like many others - to see sales results from last weekend's Black Friday and Cyber Monday sales.
UBS is predicting that travel, online department stores, hardware and convenience stores will be the beneficiaries of increased consumer spending in the short term.
This remains to be seen. No doubt the managers of our national accounts will be hoping this is true, especially with the next round of quarterly numbers scheduled for release tomorrow.