upper hunter economic update - march 2015

Light at the end of the tunnel?Jenny Williams – Senior Research Fellow

THE BIG PICTURE

COMMODITY PRICES FALLINGFORECAST TO FALL FURTHER

0

20

40

60

80

100

120

140

160

180

Dec-1989 Dec-1994 Dec-1999 Dec-2004 Dec-2009 Dec-2014

$A Trade WeightedIndex

Terms of TradeIndex

SOURCE: HRF; RBA

Base year = 100Terms of Trade and Trade Weighted Index

DRIVING DOWN THE $AMAKING OUR EXPORTS CHEAPER

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

0

20

40

60

80

100

120

140

160

180

$A / $US(LHS)

Terms of TradeIndex 2012/13=100

(RHS)

SOURCE: HRF; RBA

Terms of Trade and Exchange Rate

… and our imports more expensive

TRANSITION TO NON-MINING INVESTMENTSLOW

Estimates

National Accounts

SOURCE: Reserve Bank of Australia

LOW INTEREST RATES REGIMEHOW LOW CAN THEY GO?

0.0

0.2

0.4

0.6

0.8

1.0

1

2

3

4

5

6

Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14

Likelihood of interest rate fall by July 20150.25% fall

Sources: HRF; RBA

Variable-rate mortgage(%; LHS)

Probability of fall (RHS)

Probability%

PETROL PRICES FALLINGBOOSTING HOUSEHOLD BUDGETS

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

0

20

40

60

80

100

120

140

160

180

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Crude oil*(LHS)

SOURCE: HRF; Australian Institute of Petroleum; US Federal Reserve Bank

$US a barrel

$A a litre

Muswellbrook ULP(RHS)

Sydney ULP(RHS)

Singleton ULP(RHS)

*West Texas Intermediate

2014 2015

Oil and petrol prices

UPPER HUNTER ECONOMY IN 2014

2014 IN RETROSPECTA DIFFICULT YEAR

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

DEC 02 DEC 04 DEC 06 DEC 08 DEC 10 DEC 12 DEC 14

SOURCE: HRF business surveys

Incr

ease

Dec

rea

se

Forward orders

Performance

Business conditions indexes

LABOUR MARKETSTEADYING?

2,800

3,200

3,600

4,000

90

105

120

135

FEB 05 FEB 07 FEB 09 FEB 11 FEB 13 FEB 15

* Includes Cessnock, Maitland, Port Stephens and Dungog with three Upper Hunter LGAsSOURCE: HRF; ABS Monthly Labour Force Survey

Estimated number employed 3 month average

‘000 ‘000

UNEMPLOYMENTSTILL RISING

0

5

10

15

20

25

FEB 05 FEB 07 FEB 09 FEB 11 FEB 13 FEB 15

Newcastle/Lake Mac Hunter balance*NSW Youth - Hunter balance

%

* Includes Cessnock, Maitland, Port Stephens and Dungog with three Upper Hunter LGAsSOURCE: HRF; ABS Monthly Labour Force Survey

Unemployment rates

Wonderful world of work or just wishful thinking?

OPPORTUNITIES FOR WORKLong term: Taking the long way home

• Some responders were still optimistic about future prospects even if opportunities did not exist now locally

• Even if work took them away, a number of focus group participants expressed a desire to want to return to the Hunter one day

• Diversification that leads to retention of skills in the Hunter is key to avoiding a skills shortage or “brain drain” locally.

For those who felt that there were not opportunities locally for young people, we wanted to know what those opportunities were:

• Design• Engineering and science• Arts• Media • Information Technology

OPPORTUNITIES FOR WORK

What are we missing?

WORK EXPERIENCEWhere is improvement needed?

• Increase work experience opportunities in the Hunter

• Raise awareness of existing work experience options

• Improve communication between businesses and schools about work experience options

SHORT TERM OUTLOOK

RESIDENTIAL BUILDINGDRIVER OF TRANSITION TO NON-MINING INVESTMENT

… but not in the Upper Hunter

15,000

25,000

35,000

45,000

55,000

150

250

350

450

550

Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14

Upper Hunter NSW

SOURCE: HRF; ABS Building Approvals

Number of dwelling approvals(annualised)

UPPER HUNTER HOUSING MARKETWEAKER

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14

SOURCE: HRF; Real Estate Institute of NSW

Newcastle

Upper Hunter Shire

Muswellbrook

Singleton

Median house prices

COAL PRODUCTIONREACHED ITS PEAK?

0

3

6

9

12

15

18

0

30

60

90

120

150

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

$US/Tonne

MillionTonnes/month

SOURCE: HRF; Coal Services Statistics; Indexmundi

Thermal coal spot price (LHS)

Hunter(RHS)

Gunnedah(RHS)

Upper Hunter coal production and global prices

LIGHT AT THE END OF THE TUNNEL?

HOUSEHOLD CONSUMPTIONSUBDUED

0.0

0.1

0.1

0.2

0.2

0.3

0.3

0.4

0.4

DEC 04 DEC 06 DEC 08 DEC 10 DEC 12 DEC 14

Incr

ease

Dec

rea

se

DecemberJune

Source: HRF household surveys

… but still positive

Index of spending expectations (next 3 months)

BUSINESS AND CONSUMER CONFIDENCESUBDUED

0.0

0.1

0.1

0.2

0.2

0.3

0.3

0.4

0.4

Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14

SOURCE: HRF business and household surveys

Business performance

Household finances

Incr

easin

gD

ecre

asin

g

… but still positive

Index of expectations (next 12 months)

DECLINING $AEXPORTS MORE COMPETITIVE

0

30

60

90

120

150

0

500

1000

1500

2000

2500

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul

Australian Wine ExportsSales over the preceding 12 months

2011 2012 2013 2014201020092008

* Wine with a minimum price of A$50 per litre.SOURCE: HRF; Australian Grape and Wine Authority

Premium wine*(RHS)

All wine (LHS)

$m $m

Delivering insights that move the Hunter forward 

Thank you