Economic Indicators FINSIA/API

Transcription

1 Economic Indicators FINSIA/API February 1 Bill Evans Chief Economist

2 Current Forecasts February 13 Latest Mar-13 Jun-13 Dec-13 RBA Cash yr swap yr US 1 yr AUD/USD

3 Current Forecasts- February 1 Latest Mar-1 Jun-1 Dec-1 Mar-1 RBA Cash Aus 1yr yr swap US 1 yr AUD/USD

4 Market pricing v s Westpac cash rate f cast 5 bps Consensus WBC Sources: Westpac Economics Mar-1 Jun-1 Sep-1 Dec-1-5

5 World growth: Westpac & IMF forecasts 13 IMF (Oct 1) 13 1 WBC 1 IMF/RBA World US Euro zone China Australia

6 US employment growth: disparity persists 3 s Non-farm payrolls average monthly job growth s 3 5 Household employment 5 1.5% % Sources: BLS, Westpac Economics H1 1H 13-5

7 US discretionary income growth worse still % Nominal per capita income; average annual growth Real Sources: BEA, Westpac Economics % *Disposable income less housing, food, health and transport (services and gasoline)

8 Core inflation historically weak 1 mth %chg annualised Core CPI mth %chg 1 1 Core PCE Dallas Fed PCE TM Sources: Ecowin, Westpac Economics

9 China: the key messages 1. The recovery exhibited a stop-start nature in the first half of the year.. The month-of-september data showed signs that the recovery had peaked, with a loss of momentum in both domestic and external demand entering Q. 3. The pipeline is not being replenished with sufficient urgency to maintain current growth rates in infrastructure; new housing controls are being imposed in tier 1 cities; and the lagged impact of less accommodative monetary policy (new credit has been soft in halve of last months) will soon be felt.. Now that the Plenum is past and the NAO report on local government debt has been released, cyclical policies will tilt more decisively towards tightening. 9

10 Chinese construction activity %yr %yr Sources: CEIC, Westpac Economics Raw %yr %yr 3mma 1 %yr 1mma Jan 5 Jul Jan 8 Jul 9 Jan 11 Jul 1 Jan 1 1

11 Euroland credit contracting, inflation very weak %yr %yr core CPI (lhs) 1 3 Credit to residents (rhs) Source: Factset, Bloomberg -1 Sep-98 Sep- Sep- Sep- Sep- Sep-8 Sep-1 Sep

12 Australia: growth in context % yr % yr GDP growth long term avg: 3.% 5yr avg Westpac forecasts Sources: ABS, Westpac Economics - - Dec-9 Dec-9 Dec-98 Dec- Dec- Dec-1 Dec-1 Dec-18 1

13 Qld economic performance & outlook 1 % chg % chg 1 8 GSP:.% avg. GSP State demand Gov't f/cs 8 Sources: ABS, Qld Gov't, Westpac Economics - 199/ /9 /1 5/ 1/11-13

14 Qld: Contributions to state final demand Consumption yr to Sep 1 Housing -.. yr to Sep 13 Investment Public Sources: ABS, Westpac Economics Final demand ppts 1

15 Resource exports LNG replaces coal. ppts annual average contribution to real GDP ppts. 1.5 Other LNG Coal Iron ore Resource exports Source: Treasury 5- to to to to

16 Global met coal prices vs. 8 th percentile USD/tonne Aust ave met coal price 8th percentile production cost Source: Westpac Economics, Bloomberg, AME

17 Global thermal coal prices profit squeeze USD/tonne th percentile production cost Newcastle USD/tonne Source: Westpac Economics, Bloomberg, AME Jul-5 Jul-7 Jul-9 Jul-11 Jul

18 Net effect of resources sector will be a growth drag. ppts Resource exports Net resource investment ppts. 3. Resource sector, total *Assumes mining investment has 5% import share Source: ABS; BREE; Treasury; Westpac

19 7 5 If we turn off demographics from Jan 9 % % participation rate (lhs) pr simulation unemployment rate (lhs) ur simulation esti if no recent dip Sources: ABS, Westpac Economics 3 Dec-97 Dec-1 Dec-5 Dec-9 Dec-13 19

20 Weak employment growth persists 58 % % Sources: ABS, Westpac Economics labour market weaker than unemp rate suggests employment to population ratio (lhs) unemployment rate, trend (rhs) 5 Dec-91 Dec-95 Dec-99 Dec-3 Dec-7 Dec-11

21 Unemployment rate to stay high in 1/ % % unemployment rate (lhs) forecasts to Dec 15 peak ½% mid Sources: ABS, Westpac Economics 3 Oct-97 Oct-1 Oct-5 Oct-9 Oct

22 Households perception of jobs turning again % inverted Sources: Westpac-MI, ABS, Westpac Economics *represented as deviation from 1 year average % 3mth unemploy. expectations 3mth ave* (lhs leading mths) trend full-time employment (rhs) Dec-98 Dec-1 Dec- Dec-7 Dec-1 Dec-13

23 How the business surveys compare to employment %yr Sources: ABS, Westpac Economics employment (lhs) NAB composite (rhs) 5=long run Dec-93 Dec-97 Dec-1 Dec-5 Dec-9 Dec-13 3

24 Confidence, job loss fears & business conditions index consumer sentiment consumer unemployment expectations* business conditions index Source: Melbourne Institute, Westpac Economics re-based to Jan-7 =1 *index inverted and scaled to be on the same basis as consumer sentiment 5 5 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 7

25 Business: confidence & conditions net bal. Sources: NAB survey, Westpac Economics net bal Q1, Howard elected Sep mth, Abbott elected Confidence Quarterly avg Conditions Dec mth Confidence: + Conditions: Dec-89 Dec-93 Dec-97 Dec-1 Dec-5 Dec-9 Dec-13-5

26 Queensland Confidence is still shaky 13 % consumer business % Qld Australia Sources: NAB, Westpac Economics

27 Capacity utilisation, at low levels net balance % of GDP Capacity utilisation (lhs) Investment, % of GDP * (rhs) * Non-mining investment, nominal downturns Historic avg Capacity U. 8. Sources: ABS, NAB, Westpac Economics 75 Mar-88 Mar-93 Mar-98 Mar-3 Mar-8 Mar

28 CAPEX plans by industry % chg, yr avg % chg, yr avg Mining History in real terms, 3 Manufacturing Services Total Expectations in nominal (calculated using avg. realisation ratios) 3-3 Sources: ABS, Westpac Economics Financial years 1 13f 1f -3 8

29 Non-tradable inflation not reflecting wages, for now 8 %yr Sources: ABS, Westpac Economics %yr 8 - non-tradables (lhs) tradables (lhs) - - Dec-1 Dec-3 Dec-5 Dec-7 Dec-9 Dec-11 Dec-13-9

30 Soft labour market, wage pressures ease 3 % chg, qtrs % chg, qtrs ann Trend full-time employ (lhs) WPI (rhs) Sources: ABS, Westpac Economics - Sep-1 Sep- Sep-7 Sep-1 Sep

31 Household incomes: subdued growth to continue %ann *real labour income total income after tax & interest massive policy boost to disposable incomes %ann Westpac forecast Sources: ABS, Westpac Economics - Jun-7 Jun-8 Jun-9 Jun-1 Jun-11 Jun-1 Jun-13 Jun-1 Jun

32 Qld consumers under pressure % ann *real Sources: ABS, Westpac Economics labour income consumption period averages % ann - - Sep-1 Sep-5 Sep-9 Sep

33 Household savings rate % income Sources: ABS, Westpac Economics Latest: 1.8% Post 8 avg: 1.3% % income - - Jun-89 Jun-93 Jun-97 Jun-1 Jun-5 Jun-9 Jun

34 Australian household: debt to income ratio total (gross) debt housing debt total debt net of cash & deps* trend since Jun-7 *direct holdings only, Sources: ABS, RBA, Westpac % 1pts since peak.8%

35 Capital city dwelling prices 3 % mth growth rates, annualised * all dwellings, composite of all measures, annualised, seasonally adjusted % Sydney Melbourne Brisbane Perth -1 Sources: ABS, RP Data-Rismark, APM, Residex, Westpac Economics - Jan-8 Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1-35

36 Brisbane-GC: dwelling prices vs labour incomes 5 index Brisbane-GC dwelling prices Qld labour income per capita* index Sources: RP Data-Rismark, ABS, Westpac Economics Dec-95 Dec-98 Dec-1 Dec- Dec-7 Dec-1 Dec-13 3

37 House price expectations by state index index NSW Vic Qld Source: Westpac-Melbourne Institute. Jan-9 Jan-11 Jan

38 Dwelling prices: Sydney, Melbourne, Brisbane index Sydney Melbourne Brisbane *all dwellings, Dec = 1 Sources: RP Data-Rismark, Westpac Economics Dec- Dec- Dec- Dec-8 Dec-1 Dec-1 index +1% +9% +5%

39 Time to buy a dwelling by state 17 index NSW Vic Qld WA index Source: Melbourne Institute, Westpac Economics *smoothed 5 Jan-8 Jan-1 Jan-1 Jan-1 Jan-9 Jan-11 Jan

40 Housing affordability: Brisbane improving 5 55 % Brisbane National repayment-based measure deteriorate improve % f/c to Dec national trend since *measure based on servicing mortgage of 75% median dwelling price and avg wage, estimates to Jan-13, smoothed; Sources: RP Data-Rismark, REIA, ABS, RBA, Westpac Economics 15 Jan-93 Jan-98 Jan-3 Jan-8 Jan

41 Value of finance approvals by segment AUDbn/mth value of housing finance 'upgraders', ex-refinancing investor finance FHBs year to Nov AUDbn/mth Investors +3%yr +5%yr %yr Sources: ABS, Westpac Economics Nov-93 Nov-97 Nov-1 Nov-5 Nov-9 Nov-13 1

42 Housing finance by state: investors*.5 $bn $bn NSW Vic Qld NSW: +5%yr WA SA Tas Sources: ABS, Westpac Economics.5 Nov-8 Nov-1 Nov-1 Nov-8 Nov-1 Nov-1.

43 Investor yields: Brisbane back above Sydney %pa 3yr fixed rate variable mortgage rate Sources: REIA, Westpac Economics investor housing boom Sydney Brisbane %pa *median rent on bdrm unit as % of median unit price 3 Mar-93 Mar-9 Mar-99 Mar- Mar-5 Mar-8 Mar-11 Mar

44 Brisbane rental market tight 7 % vacancy rates % 7 Sydney Melbourne Brisbane 5 5 national avg since *qtly, seasonally adjusted by Westpac Source: REIA, Westpac Economics Sep-88 Sep-93 Sep-98 Sep-3 Sep-8 Sep-13 1

45 House price relativities back in Qld s favour 3 st devns Regional Qld vs Melbourne Brisbane vs Melbourne Brisbane vs Sydney Regional Qld vs Sydney 3-8 st devns Qld less affordable Qld more affordable *ratio of simple median all dwelling price, shown as std devns from long run average Sources: RP Data- Rismark, Westpac Economics -3-3 Jun-9 Jun-93 Jun-9 Jun-99 Jun- Jun-5 Jun-8 Jun-11 Jun-1-5

46 Dwelling approvals: Brisbane areas ' Brisbane - inner Gold Coast *smoothed, annualised Brisbane - satellite Brisbane - outer ' Sources: ABS, Westpac Economics Sep-1 Sep- Sep-7 Sep-1 Sep

47 Dwelling approvals: Qld 3 5 ' Brisbane Gold Coast Sunshine Coast rest of Qld (rhs) ' Sources: ABS, Westpac Economics *smoothed, annualised Sep-1 Sep- Sep-7 Sep-1 Sep-13 7

48 Prime yields steady; despite increase in bond rates 1% 1% 8% % % Prime office Prime Retail Prime Industrial 1yr bond 3 year swap Raw data: CB Richard Ellis Pty Ltd Sources: RBA Analysis: Westpac Property Average since 1 year bond 5.3% 3 year swap 5.% % Dec-99 Dec-1 Dec-3 Dec-5 Dec-7 Dec-9 Dec-11 Dec

49 Brisbane office vacancy CBD at new high, Gold Coast recovering? % vacant Source: PCA OMR /1 CBD Non CBD Gold Coast Jan-9 Jan-91 Jan-9 Jan-93 Jan-9 Jan-95 Jan-9 Jan-97 Jan-98 Jan-99 Jan- Jan-1 Jan- Jan-3 Jan- Jan-5 Jan- Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 Jan-1 9

50 Future supply generally low, but building from 15 & high in Brisbane in 1 % vacant/added to stock.% 1.% 1.% 8.%.%.% Total vacancy rate Under construction/site works due to complete in Jan CBD Source: PCA /1Analysis Westpac property Non CBD 5

51 Commodity prices: more falls in index bulks* (lhs) exchange traded* (rhs) Sources: Westpac Economics, Bloomberg, ABS * bulks includes iron ore and coal; exchange traded includes rural, crude oil, base metals & gold Westpac forecast % 5% index % 1% 3 1 Dec- Dec- Dec- Dec- Dec-8 Dec-1 Dec-1 Dec-1 Dec-1 51

52 AUD: lower in 1 but still not much help USD fair value band* AUD/USD actual & forecast *based on commodity prices, yr swap spread, and external debt USD f/c latest: Sources: RBA, Westpac Economics. Jan-91 Jan-95 Jan-99 Jan-3 Jan-7 Jan-11 Jan

53 MSCI P/E ratios 15 points deviation from long-run average points 15 1 Australia US Europe expensive Source: Bloomberg (MSCI indexes) cheap Jan-9 Jan-99 Jan- Jan-5 Jan-8 Jan-11 Jan

54 Key messages Global growth is likely to remain weak in 1 taking pressure off rates FED tapering to pause in 1; tightening not late 15. Unemployment rate to drift up to.5% as businesses constrain jobs growth; confidence to remain weak despite low rates inflation scare might temper investors in property market, Brisbane catch up. Expect more rate cuts in second half of 1- RBA on hold for now. Weak business conditions; slowing mining spend; weak world growth; job growth; constrained consumer 1 growth to.3%. Weak world economy likely to weigh on business confidence and consumers through job insecurity election not circuit breaker. Brisbane housing market looks poised for a strong uplift, especially with investors.. 5

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