upper hunter economic update - march 2015
TRANSCRIPT
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