Each quarter, David Robertson, Head of Economic and Market Research for Bendigo and Adelaide Bank, keeps us updated on the state of the ACT economy with a quarterly market update drawing on statistics from the Reserve Bank of Australia (RBA), Australian Bureau of Statistics (ABS), and Real Estate Industry of Australia (REIA).
April to June, 2019 quarter
The highly anticipated election is over, and the new financial year is finally upon us after a bit of a shaky end for global markets in the final quarter of 2018-2019.
Although Australia is settling into the incumbent Coalition government retaining the reigns for another three years, global instability is clearly impacting our domestic economy.
We’re seeing lower levels of business and consumer confidence across the board, and although the ACT has performed well this past financial year compared with other capital cities, it’s not immune to a downturn.
It may well just be a slow patch rather than an impending recession. But before we go speculating, let’s see how the ACT finished the last financial year…
Since the election, we’ve seen two Reserve Bank of Australia (RBA) interest rate cuts – the first back-to-back cuts since 2012 – moving us again to our lowest interest rate on record. Combined with tax cuts, a low Australian dollar, and removed concerns about capital gains and negative gearing, this appears to have added some stability to the housing market.
As at June 30, Canberra’s housing prices were down about 1 per cent from their peak, but still finished the year relatively strong – up 1.5 per cent year on year.
This is a great result compared to Sydney’s housing market which finished the year down 10 per cent, and Melbourne down 9 per cent. Hobart was the only capital city to rival Canberra with a positive increase in market values.
It’s a bit early to tell if the rate and tax cuts will have a significant impact, but the signs look promising with a noticeable rise in auction clearance rates already occurring across the board.
ACT retained its position as number one in the country for the lowest unemployment rate, which finished the year at 3.4 per cent compared to the national average of 5.2 per cent.
It will be interesting to see what happens in the new financial year, as one of the reasons for rate changes cited by the RBA is they believe wage growth will continue to stagnate. Lifting wages growth will require the unemployment rate to decrease to around 4.5 per cent, so we may see more incentives rolled out to boost employment numbers as we head into 2020.
The Wage Price Index (which measures the change in wages from one quarter to the next) was at 2.3 per cent year on year, and 2.2 per cent for ACT. This is above the inflation rate but still pretty low.
Population growth in the ACT was up over1.8 per cent year on year, ahead of the national rate of 1.63 per cent. This was second only to Victoria which finished the year up 2.2 per cent.
This is good news for local jobs and the economy – but may be bad news for commuters with a new report from the University of Melbourne showing average commute times in Canberra since 2002 have increased 65 per cent (the highest increase in the country)!
Looking at the ACT budget papers out a few months ago, the ACT’s Gross State Product of 4.25 per cent is forecast to slow to around 3 per cent this financial year. But it’s still well above Australia’s GDP growth of 1.8 per cent, due to above trend numbers on retail spending, housing finance, and so on.
Consumer and business confidence
Consumer and business confidence is low and Australia is obviously facing challenges which will undoubtedly see pain shared around the country.
But overall the ACT report card is solid, and the tax and rate cuts – and a lower Aussie dollar – may help to insulate the ACT economy from offshore headwinds and the slightly slower growth outlook for the rest of the country.
I guess we’ll find out in spring!