Here come the backpackers

Backpackers to return

A new $7 million advertising campaign has been launched to bring back the backpackers to Australia.

Source: Aus Gov

I'm too data-jiggered to dig out the old visa charts, but the record high for backpacker visas was over ¼ million.

After a few days driving the east coast - a timely reminder of what a superb country Australia is for travellers - I reckon we'll top that figure in the not-too-distant future. 

Credit was flowing in late 2021

Credit gap opens

Credit growth was strong in December, with back-to-back strong months of business lending taking business credit growth up to 8.4 per cent for the 2021 calendar year (following negligible growth in 2020).

Credit growth in the economy overall increased to 7.2 per cent, for the strongest annual result in 13 years. 

Housing credit growth increased to 7.4 per cent for the year, recording steady results over the last couple of months of the year. 

The growth in housing credit continues to be dominated by owner-occupiers, although the investor cohort has picked up some momentum, albeit from record low credit growth.

It's hardly much to stress about, given the average Aussie household is now almost four years ahead on their mortgage repayments, while households are sitting on an unprecedented almost $½ trillion in savings. 

The housing credit impulse is also cooling. 

The January figures will show housing prices up 21 per cent year-on-year, but annual price growth for property will evidently fade from there, while new listings are now on the rise. 

We'll still have to see how January plays out, given everything that's happened since Christmas, but the stimulus was certainly working its magic late into 2021. 

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Edit: Household credit to income is essentially unchanged since 2005; while net of deposits, the ratio has declined comfortably.  

(h/t Stuart Wemyss).

Source: RBA

Reaching for yield?

Rising rates

I discussed the hot topic of inflation and rising mortgage rates here on ausbiz TV (or click on the image below): 

Inflation back in the target band

Inflation stirs a bit

Muchos excitement on the social media as annual underlying inflation increased to 2.63 per cent for the trimmed mean measure (and 2.68 per cent for the weighted median). 

So inflation is, for now, well and truly back in the target band, after a long hiatus. 

Headline inflation came in at 3½ per cent.

On a cumulative basis inflation has been very low over the past 5 or 6 years, leading many commentators to call for a lowering of the target to 2 per cent (though not so much today, I note!).

Tradables inflation was high at 4.9 per cent in 2021; while non-tradables inflation was considerably lower at 2.8 per cent. 

The ABS measure for rental prices picks up the capital cities, and possibly lags a little, coming in at only 0.4 per cent in 2021, far lower than in previous cycles. 

The wrap

Overall, this was a strong reading, with inflation driven by fuel, food, and in particular new dwelling costs (up by another 4.2 per cent in Q4, after a 3.3 per cent increase in Q3).

The Reserve Bank may not be in a rush to hike though, given that annual wages growth is 2.2 per cent, and expectations for pay rises are still anchored at low levels. 

Fiscal support will also be wound back over the next year or two, and it's not yet clear how the economy will track when the massive fiscal support is withdrawn. 

In any case much of the inflation relates to supply chain issues in 2021, which will be mostly resolved later in 2022 - certainly for food and new dwelling costs - so hiking interest rates while real wages are negative possibly wouldn't serve much useful purpose. 

Still, stock markets didn't like it much, the XJO being down over -3 per cent at 6,923 (public holiday tomorrow, so there will be no rising from the dead today).  

The regional renaissance & how to invest like a futurist

Futurist investing

Hugely insightful from futurist Steve Sammartino on this week's podcast here (or click on the image below):

You can also tune in at Spotify, Apple, Youtube, etc.  

Unemployment rate fell to 4.2pc (before Omicron)

Employment breaches new highs

Employment increased +64,800 in December, to 13.24 million, pushing total employment to above 2019 levels. 

The survey period was only until December 11, however, so this statistical release doesn't capture the potentially deleterious impacts of Omicron (i.e. the reported numbers for January could be poor). 

The employment surge in the December quarter was largely related to New South Wales adding back +230,000 jobs upon reopening, and Victoria added back +114,000 jobs, on a net basis. 

There isn't much doing elsewhere now. 

The participation rate missed expectations, staying pat at 66.1 per cent, and a little below where it was in the middle of last year.

The net result spat out an unemployment rate of just 4.2 per cent, which is the lowest unemployment rate since 2008, and spare capacity in the labour force declined. 

Hours worked in December were a solid (if unspectacular) +3.7 per cent higher than a year earlier, partly one assumes due to nurses and healthcare staff working long hours right now. 

The wrap

Overall, this was a pretty strong result for December, which has gotten a few commentators rather excited about surging wages, inflation, and of course monetary tightening.

Bill Evans of Westpac thinks the Reserve Bank could hike as soon as August this year, but let's see - it's kind of hard to assess when the city is half shut.  

The next inflation data is due out in only five days from now, and will of course be watched closely by analysts. 

Wages growth at the last count was only 2.2 per cent, and inflation has been tracking below target for so long that it seems odd to me that folks are getting quite so excited about a possible spike in inflation, but here we are. 

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For reference:

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There's been some strange debate over the past few days on social media about weather hospitalisations have peaked in New South Wales, are about to peak imminently, or would for some reason continue to rise in linear fashion.

Given the decline in growth rates - not to mention the unmissable behavioural change visible around the city - it was surely the former.

Whatever, today's numbers were very pleasing for NSW. 

ICU numbers may also be on the way down already in Victoria.

5.8 million boosters and counting should hopefully keep a lid on serious cases from here, mutations notwithstanding. 

Australia has now delivered well over 47 million vaccination doses...and counting. 

HomeBuilder boost works through

HomeBuilder hits the mark

There were many, many sceptics about the government's HomeBuilder boost. 

How it started...

How it's going...

Clearly detached house building has really taken off, and all around the country, in response to the stimulus, possibly adding around 50,000 homes which wouldn't otherwise have been built. 

Unit construction has been far steadier through this cycle.

Melbourne's unit market is in a bit of a hole still - at least in part due to migrants heading to Noosa and the Gold Coast - but things are looking up in Sydney and south-east Queensland.  

Dwelling commencements for both houses and units both fell sharply by 16.3 per cent in the September quarter, mainly due to shutdowns and related disruptions. 

Job ads rolling over

Job ads decline

The high watermark for job adverstisements has passed, with online ads dropping 2.5 per cent to 254,600 in December. 

Activity is still very high, mind you, and remained close to the highest level since October 2008 at above 250,000.

Source: LMIP

The sharpest monthly declines were recorded in the ACT (-9 per cent), Victoria (-5.8 per cent) and New South Wales (-3.7 per cent).

Queensland and Western Australia remained solid. 

Regional recruitment activity remained strong in December, although anecdotally many regional business have been hurting too lately, in part due to a lack of patronage from holiday makers.

If you follow my Twitter feed, you'll have seen some of the photos of Sydney this week, and the City is clearly very quiet as many office-based businesses have reverted to working from home practices. 

It does look as though the peak is just about in for virus hospitalisations in New South Wales and Victoria, though, and the booster rollout is gathering some decent pace, so things will likely look considerably brighter in February.

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(Elizabeth Street, and Martin Place).

Investing in commercial vs residential prpperty

Commercial investing

A brief article to complement our podcast this week, on the pros and cons of investing in commercial property versus residential.

Check it out here (or click on the image below):

This is why it's time to take a look at commercial property

Commercial property pod

This week's podcast, featuring Steve Palise - considers what types of commercial property investment might be worth a look.

Tune in here (or click on the image below):

You can also tune in at Apple podcasts, Spotify, etc. 

Lending rebounds in November

Lending up

Lending for housing increased 6.3 per cent in November, well ahead of survey expectations.

The dollar value of lending to investors continues to trend higher, to the highest level since 2015, which is probably just as well given that asking rents have been surging. 

The rebound was in part driven by the reopening in Sydney and Melbourne. 

First homebuyer numbers remained relatively elevated. 

It was a pretty strong release, overall, but it's not likely to signify a renewed boom in lending, given that interest rates are expected to rise from here. 

Canberra and Darwin vacancy rates increase

Rental vacancies up a bit

Vacancy rates increased a little in Canberra and Darwin in December, according to SQM Research.

Vacancies were steady in the three largest capital cities. 

Nationally the vacancy rate of 1.6 per cent (57,558 vacancies) was well below the 2.2 per cent (76,665 vacancies) seen a year earlier. 

Vacancy rates fell again in Sydney CBD, and in Melbourne CBD to 5.7 per cent. 

Rents increased 0.8 per cent for houses in the month, and by 1.2 percent for units in the month. 

Get set for pay rises++

Job vacancies at all-time high

A welcome break from the endless jabbering on coronavirus case numbers and absurd immigration rules shows job vacancies tearing to an all-time high of 396,100 in November, for a thumping 59 per cent year-on-year increase. 

Job vacancies in November were absolutely miles above their pre-pandemic levels. 

New South Wales saw an all-comers record of 120,900 job vacancies, while Victoria wasn't too far behind at 106,000, with substantial year-on-year increases seen across the board. 

The massive stimulus has kept demand ticking over, in some sectors of the economy at least, and we've basically never seen anything like this before.

The labour force has shrunk a little in recent months due to lockdowns to 13.8 million, so you can't read too much into the below chart, which has a bit of an artificial ring to it right now given ongoing disruptions.

But at face value if the job vacancies were to be taken up in due course the unemployment rate would drop like a stone to under 3 per cent, inevitably resulting in strong pay rises. 

I get that all this is divisive issue - heck, people on my Twitter feed are calling for permanent border closures, the construction of quarantine camps, lockdowns for the unvaccinated, making unvaccinated people pay for their own healthcare, and goodness knows what else.

Whatever, it's a personal blog: Australia needs to get the borders open as soon as practicable so that business and supply chains can function properly. 

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OK then, just a short note on the unmentionable.

The booster stroll-out gathered a little pace today, with a further 242,629 boosters delivered in 24 hours, taking the total of boosters to 4.1 million. 

In total, some 44¾ million doses have been delivered up until January 11. 

Mercifully the case fatality rate of the Omicron strain has proven to be considerably lower, as has been evidenced elsewhere in the world. 

The latest figures for Australia show a CFR for COVID-19 falling to just 0.2 per cent at the last count, down from 3.3 per cent a year earlier.

Sydney unit supply dries up

Unit approvals fizzle

Only 757 units were approved in Sydney in November - with Delta disruptions probably a factor - as low as we've seen for a monthly total in about a decade. 

I think we'll end up with a unit shortage in Sydney, and sooner than people expect (so does Tim Reardon, Chief Economist of the HIA). 

Perth's boom in detaching housing construction appears to be rolling over, and perhaps the same holds true in Brisbane and Adelaide as the government stimulus effect fades. 

Overall, though, it was still a solid enough release with 16,448 approvals in November, seasonally adjusted.

Over the year to November, there were more than 229,000 dwellings approved, which is a very strong annual number...albeit now fading. 

Most likely dwelling construction will fade through 2022, thus in time becoming a headwind for the economic recovery. 

You can find more comprehensive details,  as ever, from data king James Foster here. 

In Sydney today myself, and staying in town for a couple of weeks - my first visit in a YEAR.