ABS – Page 38 – Digital Finance Analytics (DFA) Blog

Trend unemployment rate remains at 5.5 per cent

The monthly trend unemployment rate remained at 5.5 per cent in October 2017, according to figures released by the Australian Bureau of Statistics (ABS) today. This reflects the continued strength in employment growth in the Australian labour market.

Monthly trend full-time employment increased for the 13th straight month in October 2017. Full-time employment grew by a further 16,000 persons in October, while part-time employment increased by 4,000 persons.

“Full-time employment has now increased by around 289,000 persons since October 2016, and makes up the majority of the 347,000 person net increase in employment over the period,” Chief Economist for the ABS, Bruce Hockman, said.

“Over the past year, trend employment increased by 2.9 per cent, which is above the average year-on-year growth over the past 20 years (1.9 per cent).”

The labour force participation rate remained at 65.2 per cent for a second month, the highest it has been since April 2012.

The trend monthly hours worked increased by 3.5 million hours (0.2 per cent), with the annual figure also showing strong growth (3.1 per cent). This is consistent with the continued growth in full-time employment.

Mr Hockman added: “Over the past year, the states and territories with the strongest annual growth in employment were Queensland (4.6 per cent), ACT (3.1 per cent), Tasmania (3.0 per cent) and Victoria (2.8 per cent).”

Trend series smooth the more volatile seasonally adjusted estimates and provide the best measure of the underlying behaviour of the labour market.

The seasonally adjusted number of persons employed increased by 4,000 in October 2017. The seasonally adjusted unemployment rate decreased by 0.1 percentage points to 5.4 per cent and the labour force participation rate decreased to 65.1 per cent.

Wages Growth Stalls Again

The seasonally adjusted Wage Price Index (WPI) rose 0.5 per cent in the September quarter 2017 and 2.0 per cent over the year, according to figures released today by the Australian Bureau of Statistics (ABS). This was below consensus expectation, and continues the slow grind in household income, for many falling below the costs of living. Those in the public sector continue to do better than those in the private sector.

The WPI, seasonally adjusted, has recorded quarterly wages growth in the range of 0.4 to 0.6 per cent for the last 13 quarters (from the June quarter 2014).

ABS Chief Economist Bruce Hockman said: “Annual wages growth increased marginally to 2.0 per cent in the September quarter 2017. The higher wage growth in the September quarter was driven by enterprise agreement increases, end of financial year wage reviews and the Fair Work Commission’s annual minimum wage review.”

Seasonally adjusted, private sector wages rose 1.9 per cent and public sector wages grew 2.4 per cent through the year to the September quarter 2017.

In original terms, through the year wage growth to the September quarter 2017 ranged from 1.2 per cent for the Mining industry to 2.7 per cent for Health care and social assistance and Arts and recreation services.

Western Australia recorded the lowest through the year wage growth of 1.3 per cent and Victoria, Queensland and Tasmania the highest of 2.2 per cent.

Housing Lending – Down the Gurgler?

The latest housing finance data from the ABS confirms what we already knew, lending momentum is on the slide, and first time buyers, after last months peak appear to have cooled. With investors already twitchy, and foreign investors on the slide, the level of buyer support looks anemic. Expect lots of “special” refinance rates from lenders as they attempt to sustain the last gasp of life in the market.

Here is the count of new FTB loans by selected states. Clearly those new incentives (some would say bribes) did not hold up for long, as underwriting standards have tightened partially offsetting the potential benefits. . Of course these are original numbers, so they are not corrected for seasonal variations, but the direction seems clear across multiple states, even Victoria, which has been driving the demand recently.

So, no surprise that we see the number of new loans to first time buyers down 6.3%, or 630 on last month. The number of non-first home buyer commitments decreased 8.0% so the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 17.4% in September 2017 from 17.2% in August.

We also see a fall in fixed loans, down 14%. The DFA sourced investor first time buyers also fell again, down 4%.

Here is the first time buyer tracker, down overall.

More broadly, the flow of new loans was down $19 million or 0.06% to $33.1 billion. Within that, investment lending flows, in trend terms, fell 0.52% or $62.8 million to $12.1 billion, while owner occupied loans rose 0.32% or $47.7 million to $15.0 billion. So investment flows were still at 44.6% of all flows, excluding refinances.

Refinances comprise 17.9% of all flows, down 0.07% or $3.9 million, to $5.9 billion.

Looking in more detail at the ABS trend categories, OO lending flows for construction of new dwellings rose 0.4%, by $8.3 million to $2 billion, purchase of new dwellings rose $15 million or 1.29% to $1.2 billion; and purchase of OO existing dwellings rose 0.2% or $23 million to $11.8 billion. Investment new construction fell 1.57% or $16.5 million to $1.0 billion, purchase of housing by individuals for investment rose 0.14% or $13.9 million to $10.1 billion and investment property by other borrowers fell 5.9% down $60m to $950 million.

Finally, the original housing stock data shows that total ADI lending for housing rose 0.32%, or $5 billion to $1.57 trillion. Within that owner occupied stock rose rose 0.35% or $3.7 billion to $1.05 trillion and investment property lending rose 0.17% of 0.9 billion to $558 billion.

ABS Revises CPI Weightings, Will They Lead the Measure Lower?

The Australian Bureau of Statistics has now released their paper which describes the changes that will be made to the Consumer Price Index (CPI) and Selected Living Cost Indexes (SLCIs) as a result of the introduction of the 17th series expenditure patterns.

There are quite a number of technical changes, as well as different weights for specific items. Housing and power costs for example will be higher. From 2018, the CPI will be re–weighted annually in December quarters

This is likely to lead to a lower headline CPI rate, perhaps by around 0.25% or more (DFA estimate), though there are various offsetting adjustments, so we cannot be sure. More noise in the numbers!

The first publications based on the 17th series will be in respect of the December quarter 2017, which are due to be released on 31 January 2018 (CPI) and 7 February 2018 (SLCIs).

Australia has produced indexes of retail price inflation going back as far as 1901. Prior to the introduction of the CPI in 1960, there were five series of retail price indexes compiled by the (then) Commonwealth Bureau of Census and Statistics. Since 1960, the Australian Bureau of Statistics (ABS) has maintained a program of periodic reviews of the CPI to ensure that it continues to meet community needs. The main objective of these reviews is to update the household expenditure information used to set the item weights in the CPI, but they also provide an opportunity to reassess the scope and coverage of the index.

The SLCIs, incorporating the Pensioner and Beneficiary Living Cost Index (PBLCI) and the Analytical Living Cost Indexes (ALCIs) have also been reviewed as part of the 17th series. These indexes are produced as a by-product of the CPI, with weights also derived from the Household Expenditure Survey (HES).

The 17th series review is a minor review of the CPI and SLCIs, consisting of an update of the upper level (expenditure class) weights in line with the latest HES, and a simple examination of structures and methodologies.

This information paper provides an overview of the changes to the CPI and SLCIs that will be introduced with the 17th series from the December quarter 2017. It describes the household expenditure data used to calculate the weights and the ways in which some of the data have been adjusted to align with CPI and SLCI requirements. The paper also presents the updated weighting patterns and some background on the major shifts in weights between the 16th and 17th series. There are no changes to the classification structure or publications in respect of the 17th series.

They also continue to explore options for a more frequent and timely monthly measure.

Retail Turnover Remains Sluggish In September

More evidence that many households are under financial pressure.

Australian retail turnover was relatively unchanged (0.0 per cent) in September 2017, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures.

The trend estimate for Australian retail turnover was relatively unchanged (0.0 per cent) in September 2017 and relatively unchanged (0.0 per cent) in August 2017. Compared to September 2016 the trend estimate rose 2.0 per cent.

In seasonally adjusted terms, there were rises in food retailing (0.6 per cent), department stores (2.1 per cent), and cafes, restaurants and takeaway food services (0.3 per cent). There were falls in other retailing (-1.7 per cent), household goods retailing (-0.4 per cent), and clothing, footwear and personal accessory retailing (-0.7 per cent) in September 2017. This follows a seasonally adjusted fall of -0.5 per cent in August 2017.

In trend terms, there were falls in WA, NT and ACT. NSW had a 0.1% rise compared to last month.

In seasonally adjusted terms, there were rises in New South Wales (0.2 per cent), Queensland (0.3 per cent), South Australia (0.7 per cent), Tasmania (0.6 per cent), and the Australian Capital Territory (0.1 per cent). There were falls in Western Australia (-1.3 per cent), and the Northern Territory (1.7 per cent). Victoria was relatively unchanged (0.0 per cent).

Online retail turnover contributed 4.4 per cent to total retail turnover in original terms.

In seasonally adjusted volume terms, turnover rose 0.1 per cent in the September quarter 2017, following a rise of 1.5 per cent in the June quarter 2017. “The main contributor to the quarterly volume rise was food retailing (0.9 per cent) but there was also rises in clothing, footwear and personal accessory retailing (0.7 per cent) and other retailing (0.4 per cent),” said Ben James, the Director of Quarterly Economy Wide Surveys. “A fall in Household goods retailing (-1.6 per cent) offset these rises.”

Dwelling approvals rise 1.8 per cent in September

The latest ASB data shows that the number of dwellings approved rose 1.8 per cent in September 2017, in trend terms, and has risen for eight months.

Dwelling approvals increased in September in the Australian Capital Territory (7.9 per cent), Northern Territory (6.5 per cent), Tasmania (4.5 per cent), New South Wales (3.4 per cent), Western Australia (2.0 per cent), South Australia (1.5 per cent) and Victoria (0.7 per cent), but decreased in Queensland (0.5 per cent) in trend terms.

In trend terms, approvals for private sector houses rose 0.7 per cent in September. Private sector house approvals rose in Queensland (1.8 per cent), South Australia (1.2 per cent), Victoria (0.6 per cent) and New South Wales (0.5 per cent), but fell in Western Australia (0.9 per cent).

In seasonally adjusted terms, dwelling approvals increased by 1.5 per cent in September, driven by a rise in private dwellings excluding houses (2.6 per cent), while private house approvals rose 0.6 per cent.

The value of total building approved rose 1.3 per cent in September, in trend terms, and has risen for nine months. The value of residential building rose 1.5 per cent while non-residential building rose 1.0 per cent.

“The value of non-residential building approvals have risen for the past eight months, in trend terms, reaching a record high in September 2017.” Bill Becker, the Assistant Director of Construction Statistics at the ABS, said.

“The strength in non-residential building has been driven by approvals in Victoria, where a number of office and education buildings have been approved in recent months.”

Household Debt Grinds Higher

The ABS published some revisions to their Household Income and Wealth statistics.

Two data series stood out for me. First, more households are in debt today, compared with 2005-6, and second more households have debts at more than three times their income.

Here is the plot of the proportion of households with debt, by income quintile. In 2003-4, 72.9% of all households had debt, and this rose to 73.6% in 2015-16, up 0.7% across the series.

But, those on lower incomes have borrowed harder, with 50% in the bottom income range borrowing, compared with 44.6% in 2003-4, a rise of 5.4%. The second lowest saw a rise of 2.2%, up from 64.5 to 66.7. On the other hand, the highest quintile saw a fall from 91.8% in 2003-4 to 89.2% in 2015-16, down 2.6%.

The ABS also said that in 2005-6 the proportion of households with debt more than three times income was 23.9%, while in 2015-16 it was 27.2%, up 3.3%.

This underscores the issue we face, debt is higher, and more lower income families are more stretched. Sure, net worth may be higher now, but the debt (mostly mortgage debt) is the problem. As we saw last week, most of the growth in wealth is associated with home prices. Should they reverse, then this looks very wobbly.

CPI and Uncertainly

Interesting speech from RBA’s Guy Debelle, highlighting issues around measuring an number of economic factors. He calls out CPI as one area of uncertainly, especially as the ABS does a quarterly report (unlike many other countries who publish monthly) and the changes in weightings which will impact ahead. There is a lot of noise in the data…!

For inflation – which is also published quarterly in Australia – we won’t get an official read on the current rate until the December quarter Consumer Price Index (CPI) is released in late January, three months from now. In most other countries, the CPI is published monthly, so the wait to get an assessment on current inflation is not so long elsewhere.

More timely and more frequent estimates of output and inflation are not unambiguously desirable. There is clearly a trade-off between timeliness and accuracy. But, in the case of inflation, a more frequent estimate would help to identify changes in the trend in inflation sooner; it probably comes with more noise, but we have ways to deal with that. Any reading on inflation always contains varying degrees of signal and noise about the ‘true’ inflation process. At the moment, we need to wait three more months to gain a better understanding as to whether any particular read on inflation is signalling a possible change in trend or is just noise. That is one of the reasons why the RBA has long advocated a shift to monthly calculation of the CPI.

That said, we do not depend solely on GDP and the CPI to assess the current state of the economy. We spend a lot of time and effort piecing together information from a large number of other sources. These include higher frequency and more timely data, including from the ABS, but also from a wide range of other data providers. The information we obtain from talking to people, particularly through our business liaison program, is also invaluable.

The question then arises as to how we can filter the information we receive from all these different sources to gain an overall picture about inflation and the state of the overall economy. Take GDP as an example. Some of the data released before the national accounts, such as monthly retail sales and international trade, feed directly into the calculation of GDP. So we have a direct read on those. We ‘nowcast’ other components of GDP using data that are more timely. Let me illustrate for household consumption. We get a good measurement of consumption of goods by looking at monthly retail sales and sales of motor vehicles and fuel. But there is very little timely information on household consumption of services, so the nowcast of this component relies more on statistical relationships. Some of these relationships are pretty weak, so we also supplement this with information on sales from our regular discussions with our business liaison contacts. This then gives us an estimate of consumption for the quarter. To get a preliminary nowcast for GDP growth for the quarter, we aggregate our best estimate for each of the relevant components. We then ask ourselves whether this estimate is consistent with other information that we have, such as the monthly labour market data, as well as predictions from our macro forecasting models.

The nowcast can be then updated with new information as it comes to hand. That said, my observation from a couple of decades of forecasting is that your first estimate of GDP (three months out) is often the best, and that additional information is often noise rather than signal.

Measurement uncertainty

Aside from when data are published, uncertainty about the present also arises from how things are measured. This takes two forms. First, there is the methodology used to actually measure the variable in question. Second, there are the revisions to data after they were first published.

On the first, a good example is the CPI. The CPI measures prices for a large number of items purchased by households. When aggregating these to calculate the overall consumer price index, each item is assigned a weight based on its average share of household expenditure. That is, the aim is to weight each price by the amount households spend on it, on average, in the period in question.

Obviously, these weights can change through time. But the weights used in the CPI are only updated each time the ABS conducts a Household Expenditure Survey, which, in recent times, has been every five or six years.

In between each household expenditure survey, a number of things can happen. First of all, some new goods and services can come along that weren’t there before. One example you might think of is a mobile phone. Though it’s not quite that straightforward, as before mobile phones, households spent money on landline phone bills and on cameras. So often these ‘new’ goods are providing similar services to something that was there before. Nevertheless, the ABS needs to take account of these new goods coming in, as well as some old items dropping out.

Secondly, households adjust their spending in response to movements in prices and income. In practice, households tend to substitute towards items that have become relatively less expensive, and substitute away from items that have become relatively more expensive. But the expenditure weights in the CPI are only updated every five or six years. Over time, the effective expenditure weights in the CPI become less representative of actual household expenditure patterns. That is, they are putting more weight on items whose prices are rising than households are actually spending on them. This introduces a bias in the measured CPI – known as substitution bias – which only is addressed when the expenditure weights are updated. Because households tend to shift expenditure towards relatively cheaper items, infrequent updating of weights tends to overstate measured CPI inflation.

The ABS will very shortly update the expenditure weights in the CPI. Because of substitution bias, history suggests that measured CPI inflation has been overstated by an average of ¼ percentage point in the period between expenditure share updates. While we are aware of this bias, we are not able to be precise about its magnitude until the new expenditure shares are published, because past re-weightings are not necessarily a good guide. It is also not straightforward to account for this in forecasts of inflation. However, from a policy point of view, the inflation target is sufficiently flexible to accommodate the bias, given its relatively small size.

Going forward, the ABS will update the expenditure shares annually, rather than every five or six years. This will reduce substitution bias in the measured CPI.

National Accounts 2016-17 Highlights Reliance On Property

The ABS released their National Accounts for 2016-17. Overall, we see why the RBA cut rates to let property prices run hot. Without property, the economy would have been shot. But of course, getting back on a more even keel is now much more difficult and much of household wealth is attached to inflated property prices; and rates are likely to rise.

In summary:

growth was 2%, the lowest since 2008-9
wages rose 2.1%, the weakest since 1991-2
household consumption was the strongest growth driver at 1.22pp
growth in household expenditure as measured in current price terms was 3.0%, the lowest on record
the household saving ratio was at its lowest point (4.6%) in nine years
households borrowed an additional $990 billion over the 10 year period from 2006-07, mainly mortgages
the value of land and dwellings owned by households increased by $2,930 billion over the same period
land and dwellings owned by households increased by $621 billion through 2016-17
despite slow wage growth, household gross disposable income plus other changes in real net wealth increased $456.6 billion, or 32.6%, in 2016-17, largely due to a $306.5 billion appreciation in the value of land held by households.

Here is the ABS summary data:

The Australian economy expanded by 2.0% in chain volume terms in 2016-17. This is the 26th consecutive year of economic growth, but the lowest rate of growth since 2008-09.

Optimal growing conditions saw the agriculture industry make a robust contribution to economic growth, largely on the back of a bumper wheat crop and higher meat sales, which returned the highest annual income to farmers on record. Mining was the beneficiary of elevated commodity prices, but the industry’s growth in volume terms was subdued. Most of the expansion in mining came from oil and gas extraction, reflecting additional capacity coming online. Service-based industries also contributed to growth, highlighting the economy’s transition to service delivery.

Household consumption expanded moderately in volume terms. Gross fixed capital formation fell for the fourth successive year, albeit only marginally, despite continuing strength in dwelling investment in 2016-17. New engineering construction continued to slide as the impact of the recent mining construction boom fades.

Weak wage growth resulted in compensation of employees rising 2.1%, the weakest annual rise since 1991-92. This, combined with a fall in social assistance benefits received by households during the year, caused the household saving ratio to fall to 4.6%, its lowest level since 2007-08.

Price pressures in the domestic economy remained weak throughout 2016-17. Subdued domestic prices and wages drove the weakest annual rise in household consumption, in current price terms, on record. The terms of trade grew for the first time in 5 years, reflecting elevated prices received for key export commodities such as coal and iron ore. These prices boosted mining company profits, real net national disposable income, and overall export revenues, which sharply narrowed the current account deficit.

The Australian economy’s overall financial position improved during 2016-17, borrowing less in net terms from the rest of the world in any year since 2001-02. In current prices Australia’s net worth at 30 June 2017 is estimated at $11,377 billion.

AUSTRALIAN ECONOMY GROWS BY 2.0%

Australian Gross Domestic Product (GDP) grew by 2.0% in the 2016-17 year. This represents a 0.1pp upward revision from the annualised 2016-17 GDP estimates published in the June quarter national accounts. GDP per capita increased 0.4% as the Australian population grew by 1.5%.

GDP and GDP per capita, Volume measures

CONSUMPTION DRIVES ECONOMIC GROWTH IN 2016-17

Economic growth in 2016-17 was largely driven by consumption. Government consumption contributed 0.8pp to GDP growth, while household consumption contributed 1.2pp to growth. Gross fixed capital formation made no contribution to growth, with the impact of public sector capital expansion being cancelled out by the decline in private works. Net exports contributed 0.1pp.

CONTRIBUTIONS TO GDP(E) GROWTH, Volume measures

Contributions may not add to GDP growth due to the statistical discrepancy.

HOUSEHOLD CONSUMPTION WEAK IN CURRENT PRICE TERMS

While household consumption contributed solidly to GDP growth in volume terms, growth in household expenditure as measured in current price terms of 3.0% is the lowest on record.

HOUSEHOLD FINAL CONSUMPTION EXPENDITURE, Current prices

MINING INVESTMENT CONTINUES TO FALL

In 2016-17, mining investment fell by 23.7%. This was the fourth consecutive fall in mining investment, with the level of investment now 58.1% lower than it was in 2012-13. The impact the fall in mining investment has had on GDP has been partially offset by investment in dwellings, which grew 5.2% in 2016-17.

Private sector gross fixed capital formation for non-mining industries grew 2.2% in 2016-17. Investment in non-mining is 15.1% higher than in 2012-13, with the strength being led by the information, media and telecommunications industry.

PRIVATE CAPITAL INVESTMENT, Current prices

SERVICES AND AGRICULTURE DRIVE GROWTH IN 2016-17 AS THE COMPOSITION OF AUSTRALIAN GROSS VALUE ADDED (GVA) CONTINUES TO SHIFT

In 2016-17, good growing conditions resulted in a large increase in the output of the Agriculture industry, contributing 0.4 percentage points to the yearly GDP growth in chain volume terms, the largest contribution from Agriculture in ten years. Health Care and Social Assistance, Professional Scientific and Technical Services and Financial and Insurance Services industry all contributed at least 0.3 percentage points to GDP growth this year.

This is consistent with the longer term trend being observed with these three industries along with Mining and Construction making up the largest share of the overall economy in 2016-17. This is in contrast to the 1996-97 year in which Manufacturing, Financial and Insurance Services and Public Administration and Safety were the top three contributors.

INDUSTRY SHARES OF GVA – Selected industries, Current prices

GVA at basic prices of industries as a proportion of total GVA at basic prices

COMPENSATION OF EMPLOYEES SHARE OF TOTAL FACTOR INCOME FALLS

In 2016-17, the compensation of employees (COE) share of total factor income fell to 52.8%. This share is still higher than the lowest level recorded, but continues the long term decline from 57.1% in 1984-85. The series has been more volatile in the past 7-8 years with swings in the terms of trade impacting overall factor income.

The profit share (based on gross operating surplus) of total factor income was 26.5% for the 2016-17 year. This increase is due to the higher profits received by the mining industry this year due to the increase in the terms of trade. The current year share is less than the peak of 28.9% in 2008-09 but still higher than the 22.0% share observed in the mid-1980s. The profit share of total factor income should not be interpreted as a direct measure of ‘profitability’ for which it is necessary to relate profits to the level of capital assets employed.

WAGES SHARE OF TOTAL FACTOR INCOME

PROFITS SHARE OF TOTAL FACTOR INCOME

CHANGES TO INDUSTRY COMPENSATION OF EMPLOYEES OVER TIME

The industry share of COE has changed significantly over time. The Health Care and Social Assistance and Professional, Scientific and Technical Services industries had the largest proportion of total COE in 2016-17. The Manufacturing industry made up the highest share of COE in 1996-97 but this share has now fallen to 7.3%.

INDUSTRY SHARES OF COE – Selected industries, Current prices

HOUSEHOLD SAVING RATIO DECLINES

The household saving ratio was at its lowest point (4.6%) in nine years in 2016-17. This fall in net saving as a proportion of net disposable income can be attributed to slower growth in COE as well as a reduction in social assistance benefits received. The result this year is not isolated, and continues the downward trend seen in the past five years.

HOUSEHOLD SAVING RATIO

GDP CHAIN PRICE INDEX GROWTH DRIVEN BY STRONG EXPORT PRICES

The GDP chain price index grew by 3.8% in 2016-17. Strength in export prices (specifically coal and metal ore) drove this result. The domestic final demand chain price index rose 0.8% in 2016-17, which is the lowest reading of domestic price pressure since 1996-97.

CHAIN PRICE INDEXES

MARKET SECTOR MULTIFACTOR PRODUCTIVITY INCREASES

Market sector multifactor productivity (MFP) grew 0.6% in 2016-17. This result reflects a 1.9% increase in GVA and a 1.3% increase in labour and capital inputs. On a quality adjusted hours worked basis, MFP rose 0.3%, reflecting changes in labour composition. These changes were due to educational attainment and work experience.

On an hours worked basis, labour productivity grew 1.0%. On a quality adjusted hours worked basis, labour productivity grew 0.5%.

MARKET SECTOR PRODUCTIVITY, Hours worked basis

LOW INTEREST RATES ENTICE HOUSEHOLDS TO INVEST IN DWELLINGS AND LAND

Interest rates have been at historically low levels for a number of years, which has reduced the pressure on households in terms of the proportion of income spent paying interest on mortgages. Interest on dwellings accounted for 3.7% of total gross household income in 2016-17, compared to 5.3% in 2006-07.

Households borrowed an additional $990 billion over the 10 year period from 2006-07, while the value of land and dwellings owned by households increased by $2,930 billion over the same period. Land and dwellings owned by households increased by $621 billion through 2016-17, boosted by the recent additions in dwelling stock.

In 1988-89, the value of dwellings and land held by households was 5.1 times the value of household borrowing. By 2006-07 this ratio was at 3.3, and it has been reasonably stable since. In 2016-17, land and dwellings owned by households covered their borrowing 3.1 times.

HOUSEHOLD INTEREST PAYABLE ON DWELLINGS – Relative to total gross household income, Current prices

HOUSEHOLD LAND AND DWELLING ASSETS – Relative to loans, Current prices

HOUSEHOLD INCOME AND WEALTH

Despite slow wage growth, household gross disposable income plus other changes in real net wealth increased $456.6 billion, or 32.6%, in 2016-17. This was largely due to a $306.5 billion appreciation in the value of land held by households.

Living standards and economic wellbeing are supported by wealth as well as income. Gross disposable income grows at a fairly constant rate over time, but its rate of growth has slowed in recent years. However, households reap gains and incur losses from holding assets, such as land, dwellings, equities and accumulated saving, which also bears on consumption patterns.

HOUSEHOLD INCOME AND WEALTH, Current prices

CPI Higher In September

The Consumer Price Index (CPI) rose 0.6 per cent in the September quarter 2017, the latest Australian Bureau of Statistics (ABS) figures reveal. This follows a rise of 0.2 per cent in the June quarter 2017.

The most significant price rises this quarter are electricity (+8.9%), tobacco (+4.1%), international holiday travel and accommodation (+4.1%) and new dwelling purchase by owner-occupiers (+0.8%). These rises are partially offset by falls in vegetables (-10.9%), automotive fuel (-2.3%) and telecommunication equipment and services (-1.5%).

The CPI rose 1.8 per cent through the year to September quarter 2017 having increased to 1.9 per cent in the June quarter 2017.

Chief Economist for the ABS, Bruce Hockman, said “Utilities prices rose strongly in the September quarter 2017. The most significant rises relate to electricity and gas prices, with increases in wholesale prices being passed on to consumers. Increases in wholesale prices have been observed across the National Electricity Market (NEM), with the most significant rises this quarter in electricity being observed in Adelaide; Sydney; Canberra and Perth.”