Beautiful one day; southern equity the next

Queenslander!

What's that you say?

Everyone's moving to Queensland?

So they are!

Here's the incomparable Cameron with the stats.

Where are they coming from?

Sydney mainly...

Source: Kusher/CoreLogic

...and Melbourne...

...and pretty much everywhere else too.

This is a rational response to a price signal, with south-east Queensland offering great affordability and lifestyle.

This is a powerful trend because these interstate migrant-settlers bring equity.

There's a potential counter-point to this, being the higher than usual number of net overseas departures in the lead-up to Christmas.

I'd say you should hold your horses on that, because with so many temporary visas now on issue - especially to international students - the overseas movements are likely becoming more seasonal and we'll probably see a reversion in the March quarter. 

I looked at the trends in a bit more detail here. 

Low wages growth? How and why to value yourself

It's been a tough period for employees, with wages growth grinding past record lows.

Here's why and how to value yourself, so others will too.

Commodities echo-boom tentatively ramps up

Job searches shorten

The median duration of job search in Australia was 17 weeks in May 2018, another modest improvement on the 18 weeks seen a year earlier. 

The year-on-year decline was helped by Sydney, where the annual average job search duration is down to 12.8 weeks, as well as Melbourne, where it is now down to 13.4 weeks.

Although not unexpected given the surge in labour supply from interstate, the average search duration in Brisbane has been stretching out lately.

There was a bit of more uplifting news for Perth in the monthly figures, with the 17-week median job search duration back in line with the national average, and well down from 20 weeks a year earlier.

The beginning of brighter days ahead?

Commodities echo-boom

It's now well over half a decade since the peak of resources construction in 2012, and the engineering construction activity figures for the March 2018 quarter will confirm a small rebound from the nadir when they are reported on Wednesday this week.

As I looked at in more detail here, Australia has already experienced a renewed surge in mineral exploration, driven by Western Australia, Queensland, and New South Wales, in that order.

To date, the surge in exploration spend and metres drilled has been driven mainly by gold and a range of base metals. 

Meanwhile, solid global demand for commodities has helped to lift annual mining company gross operating profits to record levels at $110.6 billion.

Notably, the as the mega projects exports ramp up and reserves are exploited, a new wave of capital investment and drilling will eventually fall due for the bulk commodities and LNG. 

Some of this is already imminent, with Santos GLNG set to invest $900 million in upstream developments across Gladstone's gas fields in 2018.

With iron ore exports still hammering along, BHP recently announced that it is set to invest about $5 billion in the South Flank iron ore project, while Fortescue Metals Group is set to tackle a new mine, 'Eliwana', at an estimated cost of $1.3 billion.

Employment recovery

It's interesting to look at how some of the struggling labour markets around the traps have fared over recent years. 

Geelong's deteriorating labour market in 2014 in the face of a raft of industry closures was quickly arrested in 2015, partly through public sector initiatives, and the region is now faring well on Melbourne's coat-tails.

The Hunter Valley also bounced back reasonably quickly as coal prices surged, aided by its proximity to Newcastle and Sydney. 

For the more disparate resources-influenced regions, the downturn has been less forgiving for longer. 

Townsville appears to be through the worst now, although its recovery was partly thwarted by the Yabulu Refinery closure announcement.

Meanwhile, mining employment is back in demand in Queensland, with a 46 per cent year-on-year increase in SEEK job advertisements reported for the sector in May 2018.

This is likely to even more beneficial for regions such as Mackay, where unemployment has already declined very rapidly from the 2015 peak, which is great to see!

To date, much of the resources hiring has been operational in nature, rather than relating to capital investment. 

But that could be about to change.

Although nobody wants to get too excited at this stage, this would be hugely positive news from Perth to the Pilbara, and from Gladstone to the Galilee Basin.

Stock of IO loans quickly reduced

IO curbs effective

In August 2017 I attempted to estimate the value and timing of forced interest-only ('IO') resets as a result of tighter lending standards. 

Since that time many rational borrowers have elected to switch to principal and interest (P&I) loans to benefit from the more attractive mortgage rates on offer. 

APRA's quarterly ADI figures showed that the flow of new IO loans was under 16 per cent for a second consecutive quarter. 

This dynamic combination has had a marked impact on the stock value of outstanding IO loans, declining by $93.2 billion of 16.1 per cent year-on-year.

As a share of ADI residential term loan exposures IO loans have therefore been reduced to 31 per cent as at March 2018, well down from close to 39 per cent a year earlier. 

Most borrowers appear to be handling the switch comfortably.

Those most impacted are likely to be portfolio investors, although many of this cohort built their portfolios over a long period of time, building equity and cashflow in doing so. 

Some may have to sell a property or two in order to reduce debt. 

The share of higher loan-to-value (LVR) ratio lending continued to tighten in the March quarter, having already declined considerably since 2014. 

The latest figures relate to the first three months of 2018, so it's difficult to know whether the Royal Commission had any further impact over the following period through to June.

It's interesting to note that the major lenders have lost some market share over time.

Yet bank share prices saw a punchy rebound this week, possibly relating to a short squeeze, or more likely a pervading sense of relief as the media loses its appetite for daily stories from the Royal Commission. 

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Sydney unemployment rate falls to 4.2pc

Manufacturing picks up

Construction employment declined a bit over the three months to May 2018.

As detailed in our free sample report for fund managers and investors, the looming and potentially sharp downturn in construction jobs from century-highs as a share of total employment is a key risk in Australia. 

However, there was an offsetting strong increase in manufacturing and public sector employment in the quarter. 

Manufacturing employment being on the rise again might be something of a surprise given auto industry closures, but manufacturing is quite a broad term, incorporating food manufacture for overseas consumers, for example. 

And this dynamic has helped to keep the annual average number of unemployed persons declining, albeit glacially, down to 723,900 from 768,400 at the September 2015 peak. 

Sydney's unemployment rate declined again to just 4.2 per cent in May, taking the annual average unemployment rate for the harbour city down to 4.49 per cent - that's the lowest rate since 2008, and hardly the dynamics typically associated with a protracted housing market downturn. 

At the other end of the spectrum Hobart's unemployment rate leapt to 7.3 per cent in May.

Hopefully that's an anomalous blip, rather than a surfeit of interstate migrants heading to Tassie without a job (it rarely pays to read too much into a solitary month of original figures)!

Volume measures show tightening

One final point of interest here is that although it is often reported (and how!) that the underutilisation rate in the labour force has been elevated for some time in Australia, when you look at the amount of extra work sought by Aussies, the volume measure has been gradually declining over the past three years. 

This is arguably at least as important than the headline rate of how many heads want more work, because although there are people in the serious position of wanting a full time job but only able to find part time work, equally there are also many part-timers that wouldn't mind finding a few extra hours. 

This more instructive (but almost never reported) measure of underutilisation has declined across each of the past three years from 7.88 per cent in May 2015, to 7.35 per cent in May 2018, in original terms.

It's a glacial improvement, then - but it's an improvement nonetheless!

Regulatory foot remains on lender throats

Throttled

The regulatory slowing of mortgage lending maintained its firm stranglehold in the first quarter of 2018, with interest-only lending remaining at just 15.7 per cent of new residential term loans by value (a far cry from 45.6 per cent at the September 2015 peak). 

Both the stock and flow of interest-only loans has been significantly reduced by the introduced macroprudential measures. 

Tighter loan-to-value (LVR) ratios also continued to be applied in Q1, with just 6.8 per cent of new residential lending at LVRs of 90 per cent or greater in the March 2018 quarter. 

Our detailed analysis of the latest mortgage lending trends, including findings from liaison with brokers, will be loaded into the monthly reports for subscribers. 

Population growth quicker than previously estimated (slowing from higher-highs)

Population growth rate: slowing from higher-highs

A somewhat confusing set of figures from the ABS today, with a final rebasing of population estimates from the 2016 Census shaving nearly 20,000 off the estimated resident population of Australia, leaving the population clock now at just a tick over 24,950,000.

That means that the population clock is now projected to hit 25,000,000 in August 2018, a little bit later than scheduled.

Interestingly, through, the latest revised figures also showed that the growth in the estimated residential population was quicker during the first half of last year than previously reported, peaking at 408,179 over the year to June 2017, before easing back a bit to 387,969 (or 1.6 per cent) by the end of the calendar year. 

There was an unusually high number of international departures in the March quarter.

It remains to be seen if this dynamic is sustained, but it seems likely to relate to the high number of international students we are now seeing in Australia.

In effect, with more than 2 million temporary visas on issue, Australia's 'resident' population is becoming more seasonal (we are seeing this impact a lot in rental markets these days).

The revised numbers showed that net overseas migration into the three most populous states was pacier than previously reported in the early part of last year, with immigration into Sydney temporarily sending New South Wales off the top of the charts (literally so in this case).

Annual immigration into Western Australia has now increased steadily for four consecutive quarters, with the three most populous states now easing, if you take these figures at face value. 

The auditor in me has a sneaking suspicion that there might be a cut-off issue with some of these numbers - however, it does seem that the pace of immigration could be slower this year than last, for a range of reasons as better explored by Signor Pascoe at the SMH and the New Daily.

Points north

The latest estimates showed a whopping 7,733 upping sticks on a net basis for Queensland over the 3 months to Xmas 2017 alone, the highest quarterly number since the heady days of 2005.

Moving to Queensland - you can't get more aspirational than that!

Over the year to December 2017, net interstate migration to the Sunshine State exceeded 22,500, the highest in more than a decade and mainly at the expense of New South Wales. 

At least Sydney has a high number of young migrants coming in, which helps to keep a lid of the ageing of the population.

Western Australia and South Australia continue to lose significant headcount interstate, however, largely to Melbourne where the labour market is thriving, which is a troubling trend for these states.

Population growth in the Australian Capital Territory quickened to 2.2 per cent, the fastest rate since 2012, while the Northern Territory has seen its resident population growth slow to all but zero. 

Queensland in focus (filling up)

The revised numbers for Queensland show a bit of a dichotomy, with the estimated growth in the resident population both slowing and yet quite a bit quicker than previously reported.

With residential construction activity in Queensland already nosediving by a third from the peak, this in turn accounts for the five consecutive declines in Brisbane's vacancy rates. 

Incidentally, you can see these impacts for yourself in inner-city Brisbane, with previously untenanted tower blocks now sporting furniture on 100 per cent of balconies, not that you can easily make this out from my casually snapped Polaroids. 

The wrap

Today's release showed population growth still tracking at around 1.6 per cent or 388,000 in 2017, but having slowed from higher-highs (if you can get your head around all of that).

Over calendar year 2017 the annual growth in Australia's estimated resident population was greatest in Victoria (143,400), New South Wales (116,800) and Queensland (81,500) respectively. 

Recently reported trends suggest that total population growth might be trimmed back a little from these levels, perhaps towards 350,000 or 1.4 per cent.