No. 149 Issued quarterly

CR

ICO

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ovid

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0109

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SSN

220

7-57

39

HUNTER REGIONECONOMIC INDICATORS

60%

SOCIAL MEDIA

2016*51%

2017** June

BUSINESS USE OF

BUSINESS

2017*2016*0.11 0.18

next threemonths

* September -1 = worse ranging to +1 = better

PERFORMANCE

Note: Change in ABS definition of the Hunter Region and new time series now excludes Gloucester and Great Lakes LGAsHunter Balance includes Upper Hunter Region plus Cessnock, Maitland, Port Stephens and Dungog LGAs

SEPTEMBER QUARTER 2017

newcastle.edu.au/hrfc

5.5%

JOBS

UNEMPLOYMENT

2016*5.6%

2017** September

RESIDENTIAL

2016*$483,941

2017*$472,593* September quarter - median prices

DWELLINGS

NEW HOUSING APPROVALS

2,5142,7002016* 2017** September- annualised

0.18 0.29* September -1 = worse ranging to +1 = better

2017*2016*

CONSUMER next three

monthsCONFIDENCE

• Labour market performance upbeat - unemployment rate lower in September and strengthening jobs growth, with full-time employment trending up.

• Business conditions at a multi-year high with stronger conditions occurring in tandem across industries, states and territories.

• Housing market momentum slows with residential building approvals down over the year; Sydney and Melbourne housing markets have softened.

• Wage growth sluggish, and evidence of consumer caution continues, despite stronger employment growth. Retail sales dropped 0.6 per cent in August.

National economy - Mixed results

Hunter economy - Business buoyant and confidence renewed• Employment rose slightly in the September quarter.

Unemployment rate was steady at 5.5 per cent (3-month moving average), slightly above the state average, with youth rate rising to 11.6 per cent.

• Housing market cooled as prices declined across most LGAs and new housing approvals fell.

• Business performance remains strong and forward indicators suggest further improvement.

• Key indicators of household spending improved. Most measures in line with five-year averages but well below pre-GFC readings.

• Renewed business and household confidence in the regional economy, confidence returns to highs of 2009-2010.

Page 2 Sept Quarter 2017 newcastle.edu.au/hrfc

Employment in the Hunter fell slightly (-0.8 per cent) in the three months to September, reversing a rise in the June quarter. Employment stayed relatively flat across NSW, rising 0.3 per cent. While full-time employment contracted in the Hunter, part-time employment grew, reversing the trend of previous quarters. State-wide full-time jobs grew, substituting for part-time jobs which contracted in the quarter. The Hunter has had stronger full-time jobs growth than NSW over the year to September, 7.4 per cent compared to 4.3 per cent. This growth has been offset by part-time job losses. Nationally, employment continues to accelerate with a welcome pick up in full-time jobs. Increases in labour force participation, however, have moderated the impact on unemployment. Buoyant business activity is expected to be a positive signal for both investment and employment. Improved hiring intentions, locally and nationally, provide grounds for optimism.

Nationally, indicators of consumer spending continue to be weak. While the rate of price growth for key necessities, such as electricity, gas and health costs, increased, overall inflation remains low. A low inflation outlook may underpin an ongoing low wage and low inflationary environment. Business indicators are buoyant however, and data suggests capital expenditure intentions are improving. Higher levels of public investment in recent years have had beneficial spill-overs in private investment in other parts of the economy. Evidence of economic strengthening has been provided by employment growth, particularly full-time job growth over the year to date. Further tightening of the labour market may provide the basis for an eventual lift in wage growth and inflation. Global growth has strengthened, particularly in advanced economies, although there is emerging uncertainty over US economic policy – the extent of business tax cuts and trade policy changes. A low Australian dollar (AUD) will likely improve export volumes in coming quarters.

The Hunter region’s unemployment rate stayed relatively steady at 5.5 per cent (3-month moving average), although it had increased slightly from 5.1 per cent in the June quarter. It remained above the state average of 4.8 per cent, which also stayed relatively steady over the quarter. The slight rise in the Hunter unemployment rate is largely due to the wind-back in full-time job growth. There was a particularly large drop in full-time employment recorded for August while it appeared to revert to trend in September. Recent falls in Hunter labour force participation softened the impact of employment losses on unemployment rates. Youth unemployment, at 11.6 per cent, remains more than double the Hunter overall rate. Nationally, underutilisation remains high at 14.1 per cent, despite falling 0.2 percentage points in the three months to August given strengthening full-time jobs growth. It may act to dampen wage growth in the short term.

EMPLOYMENT

UNEMPLOYMENT RATES

WAGES GROWTH AND PRICE INFLATION

3,300

3,600

3,900

240

280

320

300

260

3,750

3,450

Hunter (LHS)

‘000 ‘000

NSW (RHS)

Source: ABS Labour Force Survey

SepSepSepSep2011 201720152013

0

5

10

15

20

SepSepSepSepSepSepSep2011 20172015201420132012 2016

Source: ABS, Labour Force Survey

%

NSW

Hunter

Hunter young people*

* Aged 15 to 25

0

1

2

3

4

5

2010

GDP

Inflation

Wage price index

2017201420132012 20162011 2015Source: ABS

% annual growthNATIONAL ECONOMYMIXED RESULTS

HUNTER EMPLOYMENTSTABILISING?

UNEMPLOYMENTSTEADY

3-month moving average

3-month moving average

newcastle.edu.au/hrfc Page 3 Sept Quarter 2017

The Hunter’s median house price declined by 4.1 per cent over the quarter, dampening annual growth to 2.4 per cent. This was a significant slowing in the annual rate to below the five-year average, suggesting that the local market is beginning to cool. Newcastle LGA’s median house price declined from its June peak, as did all other Hunter LGAs with the exception of Muswellbrook. Annual growth remains strong in Newcastle, however, at 9.1 per cent, and in Lake Macquarie, 4.0 per cent. Across the Hunter Balance, prices fell by 5 per cent over the quarter, with the largest falls in median house prices in Dungog and Singleton LGAs. Annualised residential building approvals (new houses) have fallen 7 per cent from September 2016, compared to a fall of 12 per cent for NSW. Nationally, regulatory actions have produced a marked slowdown in investor borrowing. Sydney prices fell slightly (less than 1 per cent) over the past three months, and Melbourne price growth slowed.

The 2016 Census shows that, between 2011 and 2016, the Hunter region added around 8,500 jobs, the net result of job growth and losses concentrated in several industries. Job growth was strongest in the health care and social assistance sector, which added 6,500 jobs across the Hunter region. Construction, education and training, and accommodation and food services also experienced strong growth. These sectors grew more quickly than the rest of the Hunter overall, where employment grew 3 per cent over the five-year period (compared to 8 per cent for NSW in total). Job losses were substantial in manufacturing, which lost 8,900 jobs over the five-year period, followed, to a lesser extent, by wholesale and retail trade. Employment held relatively steady in most other industries. The impact of these recent labour market changes is likely to be evenly distributed. Particular attention may need to be directed to location and skill mismatches for workers and communities dealing with the consequences of this transition.

-9,000 -4,500 0 4,500 9,000Source: ABS, Census 2011 and 2016

Health Care & Social AssistanceConstruction

Education & TrainingAccommodation & Food

Public AdminAdministrative Services

MiningFinance & Insurance

AgricultureArts & Recreation

Other ServicesReal Estate ServicesInformation & TelecommunicationsTransportProfessionalElectricity etc.Retail TradeWholesale TradeManufacturing

300

370

440

510

580

650‘000

Source: HRF Centre, REINSW

SepSepSepSepSepSepSep2011 2012 2013 2014 2015 2016 2017

Hunter Balance

Lake Macquarie LGA

Newcastle LGA

MEDIAN HOUSE PRICES

HOUSE PRICESSOFTENING

LABOUR MARKET TRANSITIONWINNERS AND LOSERS

Low and slowing levels of multi-factor productivity are a concern for advanced economies, including Australia. There is evidence that digitally mature businesses are more productive and competitive than firms that make relatively basic use of digital technology. Hunter businesses have increased their uptake of digital technologies since 2014, including having a dedicated website and taking orders online. Sixty per cent of the region’s businesses surveyed (largely SMEs) used social media to advertise their business in 2017, outperforming SMEs nationally. From 2016 to 2017, there was a 22 per cent decrease in the proportion of businesses who feel they do not need to increase their knowledge of ICT. However, despite 83 per cent of Hunter consumers purchasing goods and services over the Internet in the previous 12 months, only 22 per cent of businesses report accepting online payments for goods and services.

BUSINESS INFORMATION & COMMUNICATIONS TECHNOLOGY USE

5 YEAR* EMPLOYMENT GROWTH, HUNTER REGION

BUSINESS ICT USEPRODUCTIVITY DRIVER

* 2011-2016 (excludes not stated or not classified)

Source: HRF Centre Hunter Pulse Business Surveys* Questions not asked in 2014

80%

60%

40%

20%

0%Social media

2014

20162015

2017

Dedicated website

Take orders for goods & services

online

Accept payment for goods & services

online*

Mobile optimised website*

The region’s business performance and confidence reached new highs in September quarter 2017. The business performance index (composite of profitability, trading and hiring) is at a decade high. Capital expenditure intentions are well above their five-year average, as are forward orders for the last three months. Short and long-term business confidence measures are at renewed highs. This reflects positive movement in expectations of hiring, trading, profitability and forward orders. One in four Hunter businesses indicated in September that they will moderately increase employment in the coming quarter. Nationally, business conditions have strengthened, also at a multi-year high. Capital expenditure intentions, previously slow to budge, are rising. Growth in business investment in recent years has been in the services sector, including health, information, media and telecommunications, and in infrastructure spending, particularly public investment.

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4 Capital expenditure (last 12 months)

Business confidence (next 12 months)

Forward orders (last 3 months)

SepSepSepSepSepSepSep

Source: HRF Centre Hunter Pulse Business Surveys

Index

2011 2012 2013 2017201620152014

BUSINESS PERFORMANCE AND CONFIDENCE

Business and household confidence in the regional economy strengthened further in September, suggesting that the renewed confidence evident from late 2016 has been sustained. Business confidence in the Hunter economy for the next quarter, and year, is back to readings not seen since 2009-10 during the beginning of the expansionary phase of the mining investment boom. Household confidence in the regional economy over the short-term, which has wallowed in, or close to, negative territory since 2011, shows that currently optimists substantially outnumber pessimists. Household and business optimism is likely to have sprung from improvements in the labour market, strong performance of the region’s housing market, and a recent rally in thermal coal markets. However, household debt, underemployment, and rising costs of necessities all pose challenges to the regional outlook in 2018. Housing market entrants will welcome declines in the region’s house prices. However, as wealth effects and construction activity have, to an extent, supported consumption and jobs, a weakening may stymie economic activity.

12-MONTH REGIONAL OUTLOOK

-0.3

-0.1

0

0.1

0.3

0.5

0.4

0.2

-0.2

Business long-term outlook

Household long-term outlook

SepSepSepSep2011 2013 20172015Source: HRF Centre Hunter Pulse Surveys

Index

newcastle.edu.au/hrfcThe information herein is believed to be reliable and accurate. However, no responsibility or liability for the contents, or any consequence of its use, will be accepted by Hunter Research Foundation Centre or by the staff involved in its preparation. © HRFC 2017: Apart from any use as permitted under the Copyright Act, no part may be reproduced by any process without the permission of the publishers.

Household expectations of personal finances in the next 12 months, a leading indicator of consumer spending, showed a welcome improvement in the September quarter. It moved well above the five-year average for September. Short-term expectations worsened, however, though remain above five-year averages. Reported household spending over the last three months also improved, in line with the five-year average. Predictions for spending over the next three months improved from very low readings in the previous two quarters, although still below averages for the last five years. Relative to pre-GFC behaviour, Hunter consumers’ reported spending illustrates continued caution. This mirrors national trends and contrasts with the sustained upward trend in business performance and confidence in the region. Further tightening of the labour market may place upward pressure on wages and spur increased consumer activity in the coming year.

CONSUMER SPENDING AND CONFIDENCE

0.10

0.20

0.30

0.40

0

Personal finances (next 12 months)

Consumer spending (last 3 months)

SepSepSepSep2017201520132011

Source: HRF Centre Hunter Pulse Household Surveys

Index

BUSINESS PERFORMANCENEW HIGHS

CONSUMER ACTIVITY RECENT IMPROVEMENT, BUT CAUTION CONTINUES

REGIONAL OUTLOOKCONFIDENCE SUSTAINED

<0 = worsening and >0 = improving

<0 = worsening and >0 = improving

<0 = worsening and >0 = improving