Race to the bottom

The big job search

There's been some evidence of positions being filled more quickly in Victoria and South Australia, but this is now being more than offset by elongated job searches elsewhere, including in Queensland. Western Australia, Tasmania, and the Northern Territory.

At the capital city level there's some evidence that roles are being filled quicker in Melbourne and Sydney, but not so elsewhere (and certainly not regionally). 

In Greater Sydney the participation rate has continued to trend higher for both genders since 2011, to the extent that even robust jobs growth hasn't been able to stop the annual average unemployment rate rising for a 4th consecutive month to 4.23 per cent. 

While Melbourne is still recording steady improvements there's no compelling evidence that NAIRU and the desired wage acceleration is getting any closer. 

If anything full employment is now elusively pulling further away with about 715,000 unemployed persons in July equating to a trend unemployment rate of 5.3 per cent and drifting higher.

Race to the bottom

It seems that banks have seen enough to take a view on the trajectory of interest rates, to the extent that we'll now see more and more mortgages with a 2-handle.

Some 'lit' fixed rates are now available all the way out to five years..

Via the St George dragon:

Source: St George

This is significant, not only because the headline rates are low, but also because when combined with a serviceability buffer of 250 basis points there is now some more capacity for owner-occupier borrowers. 

My simple if stylised analysis shows that mortgages written at a rate of lower than 4¾ per cent can be treated a bit more favourably under the revised 250 basis points buffer.