Credit growth calming

Credit growth eases

Credit growth missed expectations slightly, coming in at 0.6 per cent for January, and 7.6 per cent for the year. 

Broad money growth for the month was...well, broadly flat.

Housing credit growth remained solid at 0.6 per cent in January, still being driven largely by owner-occupiers over the past year, although investors are now joining in. 

Housing credit growth was 7.7 per cent over the year, but if you look a bit more closely the rate of change is slowing.

Indeed, the 0.67 per cent growth for the month of January was itself a little below the 0.71 per cent in December. 

In turn, the housing credit impulse suggests that annual price growth in the housing market will continue to fade from here. 

Flatter February

On that point CoreLogic will report Sydney prices being down slightly in January, while Melbourne was essentially flat as more supply comes online. 

Brisbane will still do around 2 per cent price growth for the month, pre-flooding of course, and Adelaide about 1½ per cent price growth.

Brisbane has now outperformed Sydney since the 2019 election, with housing price growth of 43 per cent since May 2019. 

Hopefully there will be some better weather on the way now as the wet stuff heads south.

CapEx misses; Europe in turmoil

Capex fizzer

Private new capital expenditure rebounded only by a tiny 1.1 per cent in the December quarter, to $33.3 billion.

This essentially only reversed the -1.1 per cent decline in investment in Q3, and it also comfortably missed the market median forecast for a 2.5 per cent increase.

CapEx investment plans for next year looked decent enough, though quite a bit can change between now and then, of course.

Ukraine pain

Stocks around many parts of the globe are crashing about -5 per cent lower on horrible Ukraine invasion news, while Russia's Moex index was down by a record -28 per cent as the Russian economy will suffer from economic sanctions. 

The price of Brent crude has, meanwhile, soared to over $100 for the first time in 8 years. 

Bitcoin was down -8 per cent, while the gold price has spiked towards $2,000, which probably says something about which of the two is the genuine safe haven asset. 

Remember when the Fed was going to be forced to hike 50 basis points in March? 

Imminent interest rate hikes appear to be melting away, like the wings of Icarus in the sun...

More grown-up analysis, as always, from James Foster here. 

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Continued good news on the Omicron variant, as ICU cases have dropped to under 150, with only 47 ventilator cases now remaining in Australia. 

Wages growth...another fizzer

Wages disappointing...again

Quarterly wages growth was once again surprisingly soft in the December quarter at just 0.65 per cent. 

The headline wage price index again missed expectations, rising just 2.3 per cent over the year. 

Wages growth is back up to the weak levels seen pre-COVID. 

Private sector wages growth was awfully weak for the year at just 2.38 per cent.

And public sector wages growth was even softer, at only 2.09 per cent. 

After headline inflation, of course, real wages growth was deeply negative. 

At the state level, only Tasmania showed a decent result, with 3 per cent wages growth over the year, while Queensland recorded a tidy +0.8 per cent for the December quarter. 

Wages growth of just 2.0 per cent in Western Australia suggests that Australia may not be near full unemployment, given an unemployment rate in that state of just 3.7 per cent. 

The wrap

There were some wages pressures in the retail trade sector, and in accommodation and food, but since the borders are open now to temporary visa holders the supply of labour into these sectors will likely now ramp up again. 

Some folks tried to portray 0.65 per cent as strong result - presumably to back up their previous calls for imminent interest rate hikes - but overall, the figures showed a small improvement and modestly broader-based signs of wages growth. 

Lagging, maybe, but far from strong at this stage. 

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As always, the king of analysis James Foster elucidates further here. 

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Construction figures saw a wide miss on the expected 2.5 per cent growth for Q4, recording a negative result, while Q3 was also revised back into negative territory.

Probuild is reportedly heading into administration, which will leave thousands of apartments incomplete. 

Construction insolvencies have been artificially low for a couple of years, but two years of disruptions and delays - combined with rising materials costs (and now borrowing costs) - is sending more building and construction firms under.

I noticed earlier that The Ribbon is still unfinished, with no activity in evidence.

Cursed project, it seems - it was taken over from Grocon...who also went bust. 

Is investing in property an art or a science?

Property Pod

This week I discuss with Michael Yardney whether investing in property is an art or a science?

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

Get Invested podcast: the year ahead

The year ahead

I joined Bushy Martin on the Get Invested podcast to discuss the investment outlook for the year ahead.

Tune in here - from around the 27 minute mark (or click on the image below):

Here come the tourists

Borders reopen

The Macquarie Macro Strategy chart via Justin Fabo below suggests that immigration levels spiked back in December, due to the return of international students and working holiday visa holders. 

The December figures were likely skewed higher by a record number of Australian residents returning to the country, having previously been effectively locked out by quarantine rules. 

The actual number of new visitors to Australia did increase, but there's probably a long way for this increase yet to return before things are back to pre-COVID norms.

Rental market pressures

Reserve Bank of Australia research has previously underscored that a large proportion of new migrants to Australia tend to rent their first home, before later transitioning to home ownership. 

International students also comprise a large proportion of new migrants, and tend to be less likely to be in a position to purchase than the average household, thus adding to the pool of rental demand.

Property research group SQM Research reported that rental vacancies dropped quickly from 57,558 to 47,977 in January, representing a sharp drop in the national vacancy rate from 1.6 per cent to just 1.3 per cent (which is well below the 2 per cent seen a year earlier).

This is the lowest national vacancy rate in 16 years.

The national vacancy rate did get lower once before over this side of the Millennium, in 2006-7 as Australia's mining boom years saw the economy dally with full employment. 

Source: SQM Research

Rental vacancies have reportedly continued to fall in February. 

Borders reopen to tourists

Tomorrow the international borders will finally reopen to tourists - except for Western Australia, which will follow suit on March 3 - for the first time in 23 months, meaning that there's a two-year backlog of travellers waiting to get in (minus those dissuaded by vaccination requirements and testing rules). 

14 airlines will be operating flights in and out of Australia effective Monday, so many Australians will be heading overseas too, of course. 

According to Sydney Airport, via the AFR, 35 of 44 airlines that stopped flights will be fully operational by the end of March. 

Rental vacancy rates were already at extremely tight levels across much of the country in January, though not yet in Sydney (16,357 vacancies) and Melbourne (17,112 vacancies), representing vacancy rates for those cities of 2.1 per cent and 2.7 per cent respectively. 

Most new arrivals into Australia tend to head to Sydney and Melbourne, in that order.

Over the past two years the number of temporary visa holders in Australia has crashed by more than ¾ million from a pre-COVID high of 2.4 million in 2019 to a recent low of 1.6 million. 

Melbourne's property market has quite a bit more slack, given vacancy rates only fell from 3.2 per cent to 2.7 per cent in January. 

Vacancy rates in Sydney CBD, on the other hand, are already back below pre-COVID levels, and have been falling quickly.

The current trajectory suggests Sydney may  be heading for a rental property shortage before the end of this financial year, as full employment hoves into view for Australia for the first time since 2008. 

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A promising week for serious COVID-19 instances in Australia saw ICU cases drop to 190 (down 33), and ventilator cases drop to 74 (down 14). 

Hospital cases fell by 543 over the course of the week.

Sick note

Hours work plunged 9pc in January

The cities were extremely quiet in January, as many Aussies worked from home or were signed off on sick leave. 

Full-time employment fell 17,000 in January, according to the ABS survey, offset by an increase in part-time jobs.

Employment fell back in New South Wales, Victoria, South Australia, and Tasmania, although on a seasonally adjusted basis there was an increase in Canberra, leading to a fairly flat result overall.

The unemployment rate increased, but only marginally from 4.16 per cent to 4.19 per cent. 

Hours worked plunged 8.8 per cent in the month, to be lower than a year earlier. 

In summary, loads of people were off sick in January, and it was a soft result. 

Job ads highest since 2008

Jobs ads still rising

Job advertisements declined a little in January in Tasmania, South Australia, and the ACT. 

However there were sharp increases in the four most populous states. 

Total job ads therefore increased 10,900 or 4.4 per cent to 259,000, to be up 54 per cent from a year earlier. 

Source: LMIP

More importantly, the January labour force figures will be out tomorrow.

There's a wide range of forecasts, but after a jump in employment last month forecasts for January are for a flat result...but let's see.