ABS – Page 67 – Digital Finance Analytics (DFA) Blog

Unemployment Stays at 6.3% (Trend) – ABS

The ABS released the Labour Force data for February, today. Australia’s estimated seasonally adjusted unemployment rate for February 2015 was 6.3 per cent, compared with 6.4 per cent for January 2015. In trend terms, the unemployment rate was unchanged at 6.3 per cent.

The seasonally adjusted labour force participation rate decreased to 64.6 per cent in February 2015 from 64.7 per cent in January 2015.

The ABS reported the number of people employed increased by 15,600 to 11,652,400 in February 2015 (seasonally adjusted). The increase in employment was driven by increases in both full-time (up 10,300) and part-time employment (up 5,300). Seasonally adjusted employment increased for both males (up 9,300) and females (up 6,300) in February 2015.

The ABS seasonally adjusted aggregate monthly hours worked series increased in February 2015, up 13.0 million hours (0.8%) to 1,620.8 million hours.

The seasonally adjusted number of people unemployed decreased by 15,800 to 777,300 in February 2015. The decrease was driven by those looking only for part-time work, down 18,600.

The seasonally adjusted underemployment rate was 8.6 per cent in February 2015, a decrease of 0.1 percentage points from November 2014 based on unrounded estimates. Combined with the unemployment rate of 6.3 per cent, the latest seasonally adjusted estimate of total labour force underutilisation was 14.9 per cent in February 2015, a decrease of 0.1 percentage points from November 2014.

Note that The February 2015 data incorporates estimates rebenchmarked to the latest population estimates and projections. Commencing from the May 2015 issue this will be a regular quarterly process which will ensure that the Labour Force series reflect the most up to date population benchmarks. So further tweaks to the data have been made, making series comparisons difficult.

First Time Buyer Investors On The March

The ABS published their Housing Finance to January 2015. Total lending for housing (both investment and owner occupied lending) lifted the stock 0.6% to $1.37 trillion. Investment rose 0.8% and owner occupied loans rose 0.5% in the month. Investment loans are close to 34.5% of all loans, a record.

Looking at the changes in volumes by type, we see that the purchase of existing dwellings is rising, but refinancing, construction of new dwellings and purchase of new dwellings are down.

Looking across the states, momentum is rising in just two states, NSW and TAS. All other states are slowing.

Turning to first time buyers, using the revised ABS data (method changed last month) and DFA survey data, we see that whilst first time buyers for owner occupation fell slightly (14.3% to 14.2% of all owner occupied loans), an additional 4,000 loans were written by first time buyers going direct to the investment sector. Much of this is centered on Sydney. As a result the cumulative first time buyer count is rising, with more than 21% of all loans effectively to first time buyers. You can read more analysis on this important trend here.

This is another reason why no further assistance should be offered to “help” first time buyers into the market. It would be a waste of money.

GDP Trend Down to 0.4% In December Quarter

The ABS data shows that in trend terms, GDP increased 0.4% in the December quarter 2014. This gives an annual read of 2.3% in trend terms. We need policy changes to get industry to invest and grow. we cannot rely on household expenditure and property speculation to do the job. This gives weight to lower interest rates further, but only if the property sector can be controlled first.

Gross value added per hour worked in the market sector grew 0.1% and the Terms of trade fell 1.9%. In seasonally adjusted terms, GDP increased by 0.5% in the December quarter, giving an annual rate of 2.5%. The Terms of trade decreased 1.7%, and Real gross domestic income increased 0.2%.

In seasonally adjusted terms, the main contributors to the increase in expenditure on GDP were Net exports (0.7 percentage points) and Final consumption expenditure (0.6 percentage points). The main detractor was Changes in inventories (-0.6 percentage points).

In seasonally adjusted terms, the main contributors to GDP growth were Construction and Health care and social assistance each contributing 0.1 percentage points to the increase in GDP. The main detractor to growth in GDP was Professional, scientific and technical services (-0.1 percentage points).

Capex On The Slide

The ABS data released today shows the continued fall in mining expenditure, and no counterbalancing movement in other sectors. Total new capital expenditure trend estimate was $37,693 m, down 3.9% YOY.

It does not bode well. Business confidence remains low, and given that household debt is still high, we do not expect housing, and households to fill the gap. We are effectively running out of runway as mining investment trails off. So, housing is the only game in town. Given the data now, it is much more likely we will see interest rates lower for longer than previously anticipated. However, the continued reliance on unproductive lending for housing in not a recipe to drive business investment. We need some new thinking on how to stimulate business investment. Our surveys suggest that it is not interest rates which is the problem, so cutting further wont help much. APRA needs to step up here, turn to tap down on housing lending, and make business lending more likely. The details of the ABS data are summarised below.

The trend volume estimate for total new capital expenditure fell 0.8% in the December quarter 2014 while the seasonally adjusted estimate fell 2.2%.
The trend volume estimate for buildings and structures fell 1.5% in the December quarter 2014 while the seasonally adjusted estimate fell 2.6%.
The trend volume estimate for equipment, plant and machinery rose 0.9% in the December quarter 2014 while the seasonally adjusted estimate fell 1.3%.
This issue includes the fifth estimate (Estimate 5) for 2014-15 and the first estimate (Estimate 1) for 2015-16.
Estimate 5 for 2014-15 is $152,656m. This is 8.6% lower than Estimate 5 for 2013-14. Estimate 5 is 0.4% higher than Estimate 4 for 2014-15.
Estimate 1 for 2015-16 is $109,799m. This is 12.4% lower than Estimate 1 for 2014-15.

Funds Under Management Now $2.5 Trillion

ABS released their funds management data to December 2014. The managed funds industry had $2,489.9b funds under management (including some changes to the data capture and revisions), an increase of $57.6b (2%) on the September quarter 2014 figure of $2,432.3b. The main valuation effects that occurred during the December quarter 2014 were:

the S&P/ASX 200 increased 2.2%
the price of foreign shares, as represented by the MSCI World Index excluding Australia, increased 0.8%
A$ depreciated 6.7% against the US$.

At 31 December 2014, the consolidated assets of managed funds institutions were $1,958.5b, an increase of $48.8b (3%) on the September quarter 2014 figure of $1,909.7b. The asset types that increased were:

overseas assets, $29.6b (8%)
shares, $14.6b (3%)
short term securities, $8.6b (10%)
bonds, etc., $4.3b (4%)
derivatives, $0.8b (65%)
other non-financial assets, $0.2b (2%).

These were partially offset by decreases in:

other financial assets, $3.4b (11%)
deposits, $3.2b (1%)
land, buildings and equipment, $1.5b (1%)
loans and placements, $1.0b (2%)
and units in trusts, $0.2b (0%).

At 31 December 2014, there were $503.9b of assets cross invested between managed funds institutions whilst the unconsolidated assets of superannuation (pension) funds increased $54.4b (3%), public offer (retail) unit trusts increased $4.5b (2%), life insurance corporations increased $4.3b (2%), cash management trusts increased $0.8b (3%), and common funds increased $0.2b (2%). Friendly societies were flat.

Wage Growth Still Slow

The ABS released their wage price index to December quarter 2014, showing continued slow wage growth. The Private sector index rose 0.6% and the Public sector rose 0.7%. The All sectors quarterly rise was 0.6%, which marks the ninth consecutive All sectors quarterly increase between 0.6% and 0.7%.

The Private sector through the year rise to the December quarter 2014 of 2.4% was smaller than the Public sector rise of 2.7%. Through the year, All sectors rose 2.5%. The CPI is now down to 1.7%, so wages are running slightly ahead.

In original terms, wages rose 0.6% in the December quarter 2014 for All sectors. The Private sector rose 0.5% in the December quarter 2014, smaller than the Public sector rise of 0.7%. The All sectors through the year rise was 2.6%. The Private sector rose 2.5% and the Public sector 2.7%.

The largest quarterly rise of 0.7% was recorded by Victoria, South Australia and Western Australia. Tasmania recorded the smallest quarterly rise of 0.3%. Rises through the year ranged from 1.7% for the Australian Capital Territory, to 2.8% for Victoria and the Northern Territory.

In the Private sector, the quarterly rise for South Australia of 0.7% was the largest quarterly rise of all states and territories. The smallest quarterly rise was 0.3%, recorded for Tasmania and the Australian Capital Territory. Rises through the year in the Private sector ranged from 2.0% for Western Australia to 2.7% for Victoria, South Australia and Tasmania. Wages growth in Western Australia continued to ease in the December quarter 2014. For the fourth quarter in a row the quarterly growth was smaller than the same quarter the year before.

In the Public sector, Western Australia recorded the largest quarterly rise of 1.5%, with Tasmania recording the smallest quarterly rise of 0.2%. Western Australia and the Northern Territory both recorded the largest through the year Public sector rise of 3.5%. For the second quarter in a row, the smallest through the year rise for the Public sector was recorded by the Australian Capital Territory (1.4%). Commonwealth government employee pay changes are most evident in the wages growth reported for the Australian Capital Territory. Public sector wages growth in other states and territories is mostly driven by regularly scheduled State and Local government pay increases.

By Industry, Information media and telecommunications recorded the largest All sectors quarterly rise of 1.2%. The smallest quarterly rise for All sectors of 0.2% was recorded by Accommodation and food services.

The All sectors through the year rises for the December quarter 2014 ranged from 1.9% for Professional scientific and technical services to 3.4% for Education and training and Arts and recreation services.

In the Private sector, Information media and telecommunications recorded the largest quarterly rise of 1.3%. Public administration and safety recorded the smallest rise of 0.1%. Rises through the year in the Private sector ranged from 1.9% for Professional scientific and technical services to 3.9% for Arts and recreation services.

In the Public sector, Education and training recorded the largest quarterly rise of 1.2%. The smallest quarterly rise of 0.4% was recorded by Professional scientific and technical services and Electricity, gas, water and waste services. Rises through the year in the Public sector ranged from 3.4% for Education and training to 1.5% for Professional scientific and technical services, the equal smallest through the year rise in this industry since the commencement of the Wage Price Index.

Mortgage Securitisation On The Rise

The ABS today released the data for Australian Securitisers to December 2014. We see two interesting points, first the value of mortgages being securitised has risen (up 4.8%), and second, a greater share are being purchased by Australian investors (all but 7.2%). We discussed recently the rise on securitisation, and the implications. We know the securitised mortgage pools have been securitised by both the banking sector, and non-banking sector. Investors who buy mortgage back securitised paper are of course leveraged into housing at a second order level.

At 31 December 2014, total assets of Australian securitisers were $136.5b, up $4.8b (3.6%) on 30 September 2014.

During the December quarter 2014, the rise in total assets was due to an increase in residential mortgage assets (up $5.2b, 4.9%) and cash and deposits (up $0.3b, 7.1%). This was partially offset by decreases in other loans (down $0.6b, 3.9%).

Residential and non-residential mortgage assets, which accounted for 83.0% of total assets, were $113.3b at 31 December 2014, an increase of $5.2b (4.8%) during the quarter.

At 31 December 2014, total liabilities of Australian securitisers were $136.5b, up $4.8b (3.6%) on 30 September 2014. The rise in total liabilities was due to the increase in long term asset backed securities issued in Australia (up $4.3b, 4.3%) and loans and placements (up $3.0b, 18.4%). This was partially offset by a decrease in short term asset backed securities issued in Australia (down $1.5b, 33.0%) and asset backed securities issued overseas (down $1.1b, 10.4%).

At 31 December 2014, asset backed securities issued overseas as a proportion of total liabilities decreased to 7.2%, down 1.1% on the September quarter 2014 percentage of 8.3%. Asset backed securities issued in Australia as a proportion of total liabilities decreased to 77.5%, down 0.7% on the September quarter 2014 percentage of 78.2%.

Note the ABS says revisions have been made to the original series as a result of improved reporting of survey data. These revisions have impacted the assets and liabilities reported as at 30 September 2014 and 30 June 2014.

Lending Growth In December Only Supported By Housing

The ABS published their lending finance data for December. Only Housing Lending increased. All other categories declined. We know that investment housing lending grew the fastest.

Comparing December, with November, the total value of owner occupied housing commitments excluding alterations and additions rose 0.9% in trend terms, and the seasonally adjusted series rose 3.8%.

The trend series for the value of total personal finance commitments fell 0.1%. Revolving credit commitments fell 0.4%, while fixed lending commitments rose 0.1%. The seasonally adjusted series for the value of total personal finance commitments fell 2.5%. Revolving credit commitments fell 5.2% and fixed lending commitments fell 0.4%.

The trend series for the value of total commercial finance commitments fell 2.9%. Revolving credit commitments fell 5.1% and fixed lending commitments fell 2.2%. The seasonally adjusted series for the value of total commercial finance commitments rose 0.4%. Revolving credit commitments rose 4.3%, while fixed lending commitments fell 0.9%.

The trend series for the value of total lease finance commitments fell 3.8% in December 2014 and the seasonally adjusted series fell 11.2%, following a fall of 6.7% in November 2014.