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Friday, 30 September 2016

Slowing credit growth masks inner suburb boom

Investor credit slows

The latest Financial Aggregates figures from the Reserve Bank of Australia (RBA) for August showed the growth in investor credit slowing to +4.6 per cent, the lowest annual result in the nearly seven years since November 2009.

The considerably larger owner-occupier sector has by and large plugged the gap, with credit growth for homebuyers rising at a rate of +7.6 per cent over the year to August. 

Overall credit growth was up by +5.8 per cent over the year, a bit behind broad money growth of +6.3 per cent. 

Disappointingly, business credit growth was soft in the month of August, taking annual growth back to +5.7 per cent.

Housing sectors blurred

Over the past year some $44 billion has been conveniently reclassified by loan purpose from investor to owner-occupier, although the net value of switching has been adjusted for in the rates of credit growth.

Whatever the true story is in terms of the split of investors versus homebuyers, the bigger picture is that total housing credit outstanding increased at a rate of +6.5 per cent, up to $1.58 trillion in August. 

And throwing in the business sector, this takes the total credit sloshing around the joint up to $2.6 trillion. 

The composition of credit remains remarkably skewed to housing, hitting a record 61.1 per cent of the pie. 

The wrap

Housing credit growth is slowing in aggregate, but it's slowing from a very high base. In fact, there's now nearly $1.6 trillion of housing credit in total. 

Despite the  apparent 'slowdown' in the rate of growth, a number of different data sources have shown that the big capital city inner suburban housing markets are booming. 

The reasons behind the inner suburban housing market boom are arguable. 

Personally, I've long believed it's mainly a lifestyle thing as the city population grows and travel times increase - as well as that international students and foreign money tend to gravitate towards the inner cities (all the more so as the dollar declines). 

I mean, it literally took me 45 minutes to get out of Kingsford Smith the other day.

And as for Parramatta Road...well, it's an absolute Barry Crocker. 

In short, like many people I'd rather live in an overpriced apartment on the harbourside or at Bondi beach than in an overpriced house out west. And that's pretty much it! 

US jobless claims at 43-year lows

Thanks Obama...

US initial jobless claims, seen to be a proxy for lay-offs, were up a notch from 251,000 to 254,000, but have now been chugging along under 300,000 for 82 consecutive weeks according to the latest Department of Labor figures. 

That's the longest such streak since 1970.

The 4-week moving average of 254,000 is the lowest level in my lifetime (since November 1973, in fact, when a reading of 233,000 was recorded).


Thursday, 29 September 2016

Net worth increases to $8.9 trillion

Record wealth

Land and dwellings drove the gains in household wealth this quarter, increasing by $112 billion, more than erasing declines in the preceding quarter of $58.5 billion. 

Financial assets also increased in the June quarter, up by $90.8 billion, largely driven by improving superannuation and pension fund balances. 

Australian household net worth increased by 2.7 per cent over the quarter and 5 per cent over the financial year to $8.89 trillion.

Cash and deposits increased to $997 billion or 22.4 per cent of financial assets, suggesting some reticence to spend and invest.

Of superannuation and pension assets, cash holdings are well above their long term averages.

After accounting for household liabilities of more than $2 trillion, this takes the average net worth per capita close to ~$369,000. Incredible by anyone's measures.

Australians have never been wealthier. Almost nobody in the world has for that matter.

Residential assets

Not all residential property assets are owned by households, of course, but around $5.74 trillion worth are. 

Thanks to interest rate cuts in May and August, the interest payable to income ratio declined to 10.3 per cent, and will decline again in the next quarter too. This index is now a third below the June 2008 peak of 16.4 per cent.

Finally, the ratio of mortgage debt to residential property assets declined to 28.6 per cent. 

However, with fewer first homebuyers buying for cash and more incumbent owners drawing equity, this ratio is certain to rise over the next decade. 

The ratio of total debt to total assets declined to 20.1 per cent.

The wrap

You can easily see the disruptive impact the macro-prudential controls had on the housing market towards the end of 2015 and in early 2016. 

By June 2016, dwelling prices were rising again, and this has continued into the September quarter. 

NSW job vacancies +19.4pc to new record

Vacancies rise to 4-year high

The ABS reported that Job Vacancies improved over the year to August 2016, ticking up by 4.5 per cent in the quarter to a total of 177,300.

Vacancies are now at a 4-year high, which bodes well for hiring. 

This represents an annual increase of +15,800 positions or +9.8 per cent.

It has become marginally easier for unemployed persons to find work on this metric, with there now being 4.1 persons per job vacancy in trend terms, well down from more than 5.1 persons per vacancy two years ago.

Where and what?

The state of New South Wales is on fire, with job vacancies booming +19.4 per cent higher over the year to an unprecedented 69,400.

Victoria (+16.5 per cent over the year to August) and Queensland (+7.8 per cent) also netted solid annual results (these data aren't seasonally adjusted). 

Mirroring what we've seen elsewhere the largest quarterly gains were in professional, technical, and scientific roles (+4,400), while there were also improvements in accommodation and food, and healthcare and social assistance. 

The wrap

An annual improvement of just under 10 per cent over the year to August to a 4-year high. 

A solid result, which suggests that market for jobs is in pretty decent nick. 

Wednesday, 28 September 2016

4 years on, mining cliff approaches nadir


Engineering Construction Activity, largely accounted for by resources projects, crashed 25.9 per cent lower over the year to June 2016.

Work done for the private sector was down by an utterly spectacular 37.4 per cent!

Fortunately, there have been some public sector works, with activity here up by +15.7 per cent over the 2016 financial year.

That's helped to cushion the blow just a little bit. 

The monster crunch was almost entirely driven by the mega projects in Western Australia moving into their production phase - Gorgon, Roy Hill etc. - in part helping to explain why WA has been having such a tough time of it. 

On the positive side there are probably now only one or two quarters of significant declines to come before activity is back at some kind of 'normal' level. 

State versus state

At the state level we can see that activity is rising again in New South Wales and Victoria, and has been for about 18 months. 

More interestlingly activity is now also up in Queensland, a resources state which took its medicine earlier than WA as its LNG and coal construction projects reached completion. 

Although it doesn't matter so much at the national level, the Northern Territory still faces a precipitous decline as the Inpex/Ichthys spend winds up.

Elsewhere, in the southern states activity levels are fairly flat (I think probably in the ACT too, but the available data are incomplete). 

Quarterly activity in WA of $6.5 billion evidently may have some way to fall yet, but overall the end of the mining cliff is now much nearer than the beginning. 

The outlook

The figures show that quarterly engineering construction activity peaked four years ago in September 2012.

It's impossible to get an accurate read on the work commenced, since there are holes in the data (and the figures that are captured are necessarily lumpy and prone to peaks and troughs). 

However, the big picture is that work commenced has returned to some kind of normality.

In summary, the mining cliff is about 80 per cent or more baked in.

Living standards have...increased

Goldilocks, permabears

Everything is never 'just right' - a fact of life!

A lot of people have gripes with neoliberalism. So be it.

Nonetheless, GDP growth in Australia surged by an above trend +3.3 per cent in the year to June 2016.

Even in per capita terms - adjusting for population growth - GDP was up by a very solid +2.0 per cent. 

In other words, despite a global financial crisis, GDP per capita is at a record high. Never been this high before!

Living standards and real wages are at their highest ever level. 

Of course, GDP isn't the perfect measure of living standards (wait until the next time it's falling again, though, and let's see if it's a discredited measure then...).

With GDP growth so strong, people have been at pains to point out weak income growth.

For the record national income and real disposable income also rebounded last quarter to new highs.

For balance people might also note that real net disposable income per capita growth soared by an incredible average of +3.1 per cent per annum over a 17-year period before stagnating from around 2008.

So in fact we have become much better off as a nation over any meaningful period of time. 

Some of this boom was productivity driven, and some by favourable demographic shifts which increased the share of population in work. 

And of course, the improved terms of trade helped a lot too. Alas, commodity prices can’t go up for ever!

Household wealth is tracking at around record highs too, as the ABS will confirm tomorrow, in part because capital city property prices are also at a record high on a weighted average basis. 

Overall, a pretty good effort through a global financial crisis. 

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Stamp duty bonanza continues

The number of property transfers may be somewhat beyond their peak in New South Wales.

But as noted here previously the median price of transfers is much higher than before, particularly in Sydney. 

And since duties are raised based upon transaction prices, the NSW Government stamp duty bonanza continues apace. 

The Office for State Revenue reported transfer duty revenues of a rip-snorting $8.7 billion in the year to August 2016.

The initial August result was a little below the prior year final comparative, but will in all likelihood be revised up as results wash through. 

In any case, the year-on-year change doesn't matter all that much since nobody ever expected or forecast stamps to be this high in the first place. 

It's a massive windfall, and the NSW budget coffers runneth over, in turn funding an infrastructure boom. 

Tuesday, 27 September 2016

Confidence in financial conditions surges to post-GFC high

High plateau...

Consumer confidence jumped +5.1 points or +4.4 per cent according to ANZ-Roy Morgan.

The reading of 120.6 is well ahead of the long run average since 1990 of 112.8, while the 4-week average has consolidated at a strong level. 

Household confidence in financial conditions compared to a year ago was up by +5.4 per cent to a post-financial crisis high.

Full report from ANZ-Roy Morgan here.


A stormy-looking view over one of the most dynamic and exciting Boroughs for property investors.

Free copy of my book for the first person to email me where this pic was taken from yesterday...


Mining cliff approaches nadir

Tomorrow I'll update my analysis of Engineering Construction Activity for the June quarter.

In the March 2016 quarter engineering construction had declined by another 14.9 per cent in trend terms over the year to $23.7 billion. 

Four long years after construction activity peaked at $34 billion per quarter in June 2012 - driven by a range of resources mega projects - the figures will show that we're now getting somewhere quite close to the bottom.

In fact, depending upon where you live in the country, the bottom many already be in.

The figures will show that New South Wales bottomed out in September 2014, and after scraping along the bottom for a while activity has been rising steadily as infrastructure takes over from mining as the driver of growth. 

New South Wales had a significant number of black coal mining projects under consideration or construction through the peak of the mining boom around the Hunter Valley, Newcastle, Wollongong, Mudgee, Lithgow, and elsewhere - including Bengalla, (Wesfarmers, Rio Tinto), Ravensworth North, Ulan West (both Xstrata), Mount Arthur (BHP Billiton), Narrabri Stage 2 (Whitehaven Coal), and a whole raft of others. 

Victoria never had any such such great surge from resources projects, with activity remaining relatively speaking fairly steady throughout the entire period. 

And indeed engineering construction activity in Victoria too has been rising steadily since Q3 2014.

In Queensland the retracement still has a bit of a way to run. Engineering activity is already down by two-thirds since September 2013 as Gladstone's massive multi-billion-dollar LNG projects transition to production.

The main declines still to come relate to Ichthys in the Northern Territory and projects in the Pilbara such as Roy Hill and Gorgon transition to their respective production phases, with the available data lagging somewhat. 


The LNG boom was supposedly to create property hotspots in Karratha, Gladstone, Dalby, Chinchilla, and so on.

Instead, what it created in the Pilbara from a real estate perspective was a temporary insanity, an unsustainable explosion in rents, over-development, and finally an epic crash. 

Louis Christopher of SQM Research posted the below chart for Karratha yesterday, showing house prices down by another 60 per cent over the last three years. 

Source: SQM Research

Asking rents for houses in Karratha have fallen even further, down by 64 per cent over three years. 

In Queensland, Gladstone has followed a similar - if less severe - trajectory.

Monday, 26 September 2016

Chinese buyers...where to from here?

Wall of capital?

Chinese capital has a huge role to play in Australia's housing market over the next few years, for better or for worse. 

But there are some looming obstacles. 

New South Wales recently introduced a 4 per cent stamp duty surcharge for non-resident buyers, with a 0.75 per cent land tax. 

Harsh, yes, but not as onerous for apartment buyers as the 7 per cent stamp duty surcharge that became effective from 1 July in Victoria, while Queensland has also introduced a 3 per cent surcharge. 

Meanwhile, banks and brokers fearing investigation have become extremely reluctant to lend to non-resident buyers declaring only foreign income. 

With a record volume of apartments due for completion over the next two years, and many of these having been bought off the plan by overseas buyers, one way or another one feels that something has to give. 


At this juncture it feels like it could go either way.

We know that Australia (and particularly Melbourne and Sydney) is a favourite destination for Chinese capital. 

Across the drink, Vancouver recently introduced a monster 15 per cent tax on non-residents which has turned Chinese investors away and is pushing that housing market south.

This could in turn lead more Chinese buyers to look at Australia as the destination for their fleeing capital.

Although prices have gotten more expensive in Australia for local buyers, thanks to foreign exchange movements this is not so for the Chinese. 

Unit prices may have increased by 41 per cent over the last four years in Sydney, for example, but when translated into CNY prices have not moved up at all in real terms. 

Sting in the tail

Year-end approaches

Auction clearances limped over the line at the end last year as the regulator intervened in the smoking hot markets. 

That was particularly so in Sydney, where by the end of 2015 the odds of making a sale at auction were no better than a game of Two-up, without even the beer for compensation.

However, a couple of mid-year interest rate cuts have helped to breathe life back into the market of late.

Super Saturdays

Sydney's clearance rate was well up from 71.7 per cent the corresponding weekend last year to a dizzying 84.4 per cent, albeit on lower volumes, according to CoreLogic.

Even with the help of Super Saturday, the Eastern Suburbs has remained particularly short of stock, and prices are flying. 

The lack of willing sellers in the east is something of a conundrum - either the four year boom has exhausted the supply of vendors, or excessively high stamp duty is resulting in 'asset lock-in'.

Or maybe after all this time people have just forgotten that prices move in two directions. 

Melbourne's clearance rate of 79.1 per cent was also well up from the same weekend last year, when the clearance rate was 72.7 per cent. 

These two markets accounted for well over 2,000 of the 2,445 auctions held, so on a weighted average basis the clearance rate was strong at 78.3 per cent, well up from 69.7 per cent this time last year. 

This is also getting somewhat close to the record-breaking clearance rates seen in the frenzied middle of 2015.

Source: CoreLogic

This weekend was a pretty big test for the market.

Nest weekend won't be, however, due to far more important issues taking precedence in Melbourne at 1400 AEST next Saturday. 

Yes, ageing UK rocker Sting will be performing live at the MCG. 

Oh, and there's a game of footie as well. Go Swannies! 

Sunday, 25 September 2016

When construction winds down

Value added

Australia's GDP increased to $1.67 trillion in financial year 2016, measured in seasonally adjusted Chain Volume Measures terms, now tracking at just above $420 billion per quarter.

Following on from yesterday's post, a quick look here at industry gross value added (GVA).

Having accounted for just over 5 per cent of industry GVA three decades ago, mining's share has swelled to 8.9 per cent as export volumes begin to ramp up.

Finance and insurance also now accounts for 8.9 per cent of industry GVA, up from just 4.9 per cent in 1986.

You can click on the chart to expand it (or use the touch screen, if you have one of those, of course).

On the other hand, manufacturing is shrinking as a share of the pie, declining from a share of 11.1 per cent at the beginning of this chart to just 5.8 per cent in 2016.

Construction wind-down

The latest figures show that the contribution of construction to GDP has remained solid at 7.6 per cent, tracking at around $32 billion per quarter.

A decade ago construction was contributing only $13 to $14 billion per quarter

This suggests that the planned 'hand-off' from resources to residential construction was generally a success between 2012 and 2016. 

However, this does also mean that as residential construction eventually winds down there will be quite a hole in domestic demand to be plugged by something other than rising mining export volumes.

Given the respective skill-sets of all those construction workers, tradies, and project managers, the answer should be: infrastructure and non-residential construction, as I looked at in a bit more detail here

Indeed, the unprecedented stamp duty windfall from Sydney's property boom is already funding a range of infrastructure projects in Sydney and New South Wales. 

But what about the gaping gulf left behind in the resources regions? 

Troubling, and this may be leading to an exodus of regional workers. 

Good health? (4-4-2)

Operation ouch

Earlier this year, a very close family member had a medical operation, and had to be be put under general anaesthetic, a bit of a troubling time for all of us. 

I have to say the staff at Brisbane's Mater Hospital were wonderful, and extremely professional.

It was particularly reassuring when the anaesthetist explained to me in a sober fashion the risks and the odds of complications.

Despite the obvious gravity of the situation, I couldn't help but calculate for myself with a wry smirk some odds of my own: that as an anaesthetist there was a thirty per cent chance he would own a negatively geared investment property.

Alas, the chap was rather too busy handling life-saving operations, and the right moment to enquire of him never seemed to present itself!

Overall, the standard of care in Australia's heath service is simply out of this world. In fact, after a week of outstanding care, I think most of us were trying to think of ways in which the stay could extended for a little while longer.

Having been privileged enough to live in a developing country quite recently - which has no health system at all to speak of, but with the option to 'medivac' myself back to Australia in case of emergency (an option sadly unavailable to locals) - we really don't know how lucky we are Down Under.

A more recent and characteristically underwhelming experience in Britain's National Health Service reminded me just how many light years ahead Aussieland is in this regard.

I mean, it's 2016 and the NHS still can't even manage to install computers (they had a crack a few years ago, tipping a lazy £12 billion or so into a system that was ultimately unworkable and scrapped).

I've recently been reading a book on Prime Minister Tony Blair's terms in power in the UK - despite unloading tens of billions of Chancellor Gordon Brown's precious pre-crisis pounds into the NHS, the organisation is still a shambles, and you can lose entire days of your life stuck in British waiting rooms.

Don't get me wrong, the NHS nurses are an amazing bunch, quite possibly the closest thing there is to angels in Great Britain. And the doctors and consultants, often brought in from overseas, are undoubtedly highly qualified.

But even the greatest nurses and hired specialists could only ever operate within the system that has existed - a bit like telling Diego Maradona he's coming to England to play under Mike Bassett* in a 4-4-2 formation, alongside Geoff Thomas and Andy Sinton. Ain't gonna work!

Even to a complete dunderhead like me it's obvious that the NHS needs to be privatised and sorted out by market forces, but realistically as an employer of 1.2 million heads the service in its present form is worth too many votes for the pollies to risk such a shakedown, so we're probably stuck with it.

No, although perhaps few of us realise it, Australia's health service is comparatively speaking a modern marvel. 

Mining employment now retracing

Moving swiftly on to the Aussie Detailed Labour Force figures for the August quarter, it will be a tough gig for Australia to record such a high level of employment growth as it has been over the next 18 months as mining employment sinks back towards its long run average. 

Although the retracement in mining investment may now be around 80 per cent done, the drop-off in mining-related employment probably still has quite some way to fall.

Total year-on-year employment growth of +179,400 or +1.5 per cent is tracking back towards the long run average, and is now only slightly ahead of the rate of population growth at +1.4 per cent.

Mining employment declined by a further -21,300 over the past year to 211,300, to be 23 per cent below where it was the peak of the mining boom in 2012. 

The stand-out secular trends over the past three decades have been the addition of a thunderous +987,000 workers in healthcare and social assistance - an obvious growth sector as the population bith grows and ages - and the shedding of -170,000 manufacturing positions on a net basis. 


Of course, people love to whinge that Australia doesn't make anything any more. All we do is just dig up red dirt can coal, and ship it to China, while simultaneously buying expensive houses from each other.

It's not strictly speaking true. For one thing, manufacturing still accounts for 886,800 employees.

The Reserve Bank tackled a related issue in a speech last week, where it noted that nearly 80 per cent of employment is now in the services sector (compared to just 1.7 per per cent in mining), with growth in non-routine and cognitive positions likely to represent the future.

In fact since 2010, about 95 per cent of net new employment has been in the services sector (but, of course, all these news jobs must be for baristas and real estate agents!).

Having worked in the mining myself through the resources boom (I probably got out a bit too soon in hindsight - the boom continued all the way through until 2012, defying Deloitte's repeatedly gloomy forecasts) and then later in real estate, I'm probably not the best-placed person to make the counter-arguments.

But tourism and the education of international students have become Australia's latest two boom industries, boosted as the dollar returns from the stratosphere.

As is so often the case in these arguments, the truth lies somewhere betwixt and between.

It's true that mining and real estate are actually both relatively small employers in absolute terms.

In fact since the peak of the mining boom in 2012 rental, hiring, and real estate hasn't created a single new job on a net basis.

Yet indirectly these two industries account for a huge volume of economic output, as well as stamp duty revenues for state governments...not to mention national income in the case of resources exports.

Despite the annihilation of mining construction jobs since 2012, total construction employment actually increased by +21,300 in the year to August. That's all those cranes you can see on the skyline, the apartment super-boom, which is property-related work.

Residential construction employment is probably looking a bit peaky now, although the non-residential sector still has some gas in the tank.

The challenge since 2012 has been that the multiplier effect of all those mines and gas projects being constructed over a decade of excess has gone massively into reverse. Which explains why so many resources regions are in disarray, and wages growth and inflation have been so soft.

Another example worthy of note: over the past year by far the most jobs were created in the professional, scientific, and technical sector at +76,700, but digging deeper into the numbers about a quarter of those positions were in architecture or design (i.e. also real estate, if indirectly).

On a less upbeat note, for reasons that aren't entirely clear, employment in retail trade appears to have soiled itself, at least temporarily. Hopefully this miserable trend will not persist! 

Over recent times many of the new positions created in Australia have also been part time in nature which is keeping wages growth low, and inflationary pressures even lower. 

The one overriding positive point to note is that after four long years of decline, but no recession, both resources investment and employment will eventually stop falling at some point in the not too distant future.


*(Warning: contains explicit language).

Saturday, 24 September 2016

Weekend reads: Must-see articles of the week

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Friday, 23 September 2016



The Detailed Labour Force figures confirmed that Greater Sydney had the lowest unemployment rate in August 2016 at 4.7 per cent, while Greater Brisbane has also been trending down nicely on this measure. 

In truth, though, these headline unemployment rates mask under-utilisation across most employment markets.

It's not that hard to see why employment growth is slowing in Australia. The Sydney jobs market, which was firing, has lost its fizz of late.

Brisbane, too, is not creating as many jobs as it was, while Perth, Hobart and Darwin are in negative territory year-on-year (as are several of the 'rest of state' markets, including regional Western Australia, Tassie, and the NT Outback). Not that great.

Overall then, year-on-year employment growth has sagged to +182,500, with a high share of that work being part time in nature. 

The net new jobs that have been created have been in Melbourne, regional New South Wales and Victoria, Sydney, and Brisbane. 

Regional struggles

Lest you think otherwise, I don't have any personal gripes with Townsville. 

It's merely that this data series doesn't provide figures across that many sub-regions, and Townsville provides a useful snapshot of the trends that have played out across many resources regions. 

Total employment here is 27 per cent below the 2010 peak, largely thanks to a combination of the mining downturn and a drought.

There are 15,600 unemployed folks in the Townsville region, and the unemployment rate is 14.5 per cent. 

Resources regions will recover eventually from the collapse in investment. In fact, I expect the nadir in mining investment will be reached within the next 18 months. 

But it will take time for the slack in Australia's labour force to be taken up, and potentially a very long time.

Impossible to say what will happen for sure, but if I was a punter I'd have a few bucks on the cash rate being in a range of 1 to 2 per cent for the next three years, maybe more.

Cooling towers


Residex uses a slightly different methodology to some other indices, but its latest update is another tick in the cooling market box in August, as new supply comes online.

Sydney's median houses price is now up by just +1.2 per cent from a year ago, and unit prices +3.8 per cent.

House prices in a number of markets are now some way below their cyclical peak.

Residex full report is here.

Skyscraper boom

Population boom

Victoria's population growth has exploded, the state's headcount increasing by a thunderous +38,808 in the first three months of 2016 alone.

In fact, total population growth in Victoria has accelerated away to such an extent that even in the face of record apartment approvals and a surge in dwelling starts vacancy rates in Melbourne have been tightening

A chart of the ratio of population growth to dwelling completions explains why - on this metric dwelling completions are actually tracking below their long run average. 

Throw in the number of potentially empty apartments owned by non-resident Chinese investors and the head-scratching equation is solved.

Of course, there is a record number of apartments presently under construction in Australia, so Melbourne's supply will catch up to demand eventually, probably in 2017 (at least in aggregate, though the supply delivered will be horribly mismatched). 

In New South Wales too, after years of under-building the ratio of population growth to completions was still tracking above the long run average by March 2016. 

However, with interstate migration to Queensland picking up, by today in September we have probably now some way closer to crossing the supply/demand rubicon for this Sydney property market cycle.

In previous cycles when the ratio sank below 1.5 the Sydney market was flooded with supply. 

Thursday, 22 September 2016

Young workers are flocking to Melbourne in DROVES

Immigration rebounds

Young people from home and abroad are migrating to Melbourne in droves.

Net overseas migration accelerated into New South Wales and Victoria according to the ABS Australian Demographic Statistics for March 2016, helping total quarterly population growth to surge to +107,497 in only the first three months of the calendar year. 

Perhaps just as significantly, net overseas migration has stopped declining in Queensland and Western Australia. 

Indeed, WA has now recorded four consecutive quarters where net overseas migration has exceeded the corresponding prior year figure. 

On the other hand South Australia is struggling to attract immigrants, with a year-on-year decline in net overseas migration of 18 per cent in the March quarter.

There was also a moderate decline in Tasmania, the Apple Isle never having attracted a high absolute level of immigration.

Pastures new

An implication of the stabilisation of the immigration rate is that net interstate migration becomes relatively more important in determining Australia's demographic trends. 

Of the people movements between the big three states, one in three moves north from New South Wales to Queensland, ostensibly for a warmer climate and relatively inexpensive housing (and why wouldn't you? Having taken the plunge myself, it's one of the better decisions you can make from a lifestyle perspective!).

Queensland's annual net interstate migration is picking up as expected at this stage in the cycle, increasing from just +5,594 in December 2014 to +10,118 by March 2016, meaning that total annual population growth is now rising again in the Sunshine State. 

Despite this, by far the most noticeable relocation trend over the past decade has been the unprecedented rise of Melbourne as a destination for young Australians. 

While regional population growth in Victoria ex-Geelong has slowed to a near standstill, Greater Melbourne is positively booming. 

Annual net interstate migration into Victoria has ripped to a previously unimaginable +14,529. Wowsers!

The underlying figures reveal what is driving this trend of relocation to Victoria and why - in a nutshell the answer is 20 to 29 year old workers seeking superior employment opportunities. 

Perhaps thanks to the state's historically high under-utilisation rate, relative to the size of its incumbent population South Australia experienced an alarming net interstate outflow of -5,887, the highest annual figure in two decades and a brain drain which looks set to threaten the record high set in 1995. 

Population growth by state

Totting this little lot up we can see that annual population growth is now increasing where net interstate migrants are flowing, namely in Victoria and Queensland. 

The three most populous states snaffled up well over 85 per cent of the total population growth over the year to March, with around four-fifths of that growth taking place in the respective capital cities, and New South Wales and Victoria capturing a record high two-thirds of the total at precisely 66.6 per cent.

Looking at the estimated resident population by state shows that while New South Wales soared past 7.7 million in Q1 2016, Victoria is actually increasing its population at a faster pace of +1.9 per cent per annum, sending its total headcount blazing beyond 6 million in the March quarter.

Projecting these trends forward Melbourne will eventually overtake Sydney to become Australia's most populous capital city, although that will take some time and the harbour city's mantle remains safe for quite a while yet.

It's evident here that population growth in the resources states has taken on a far less bullish trajectory since the mining investment boom peaked in 2012. 

As resources investment fades and international students become a key driver of population growth, the Productivity Commission expects that the inner capital cities will become major beneficiaries of immigration.

And this may be no bad thing given the record number of new apartments falling due for completion over the next couple of years.