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Inward bound

As the economy and especially hiring have picked up, so too has immigration, with long term arrivals into Australia hitting a record high 777,440 over the year to September, for a year-on-year increase of +5.5 per cent. 

Lots of Aussies head overseas too, of course, though ABS research has found that long term departees commonly end up back in Australia pretty quickly. 

Short-term arrivals also hit a record high of 8.72 million over the year to September.

Although the pace of growth here appears to be slowing, the Aussie dollar is now declining again after a brief interlude, which should spur tourism faster, higher, and stronger in 2018.

Oh, and there's the Commonwealth Games boost to come next year too.

Uni corn

Drilling deeper into the figures, unsurprisingly education arrivals are at an all-time high.

The next big international student intake won't show up until the February 2018 figures, but 2017 has been a record year for enrolments, and no doubt a lucrative one.

If you've felt that the inner city centres have become busier in recent years, then you'd be right, with the international student phenomenon being largely an urban trend. 

The Reserve Bank's Luci Ellis highlighted in a barnstorming speech on economic rationalism this week how so many recent migrants arrive on student visas and then end up staying Down Under.

This is a boon for education exports, and then later represents a demographic dividend by providing a stream of qualified workers of a young age. 

The Ellis speech was an absolute corker and essential reading, showing how immigration can raise participation and average living standards, as well as explaining where future growth in the economy will come from.

Finally, annual short-term visitors from China boomed to 1,347,400, which is +13 per cent higher than a year earlier. 

Very strong numbers all round, and the next few years should now be characterised by a welcome surge in transport and infrastructure projects. 

Wanna be startin' somethin'

Northern Powerhouse

We all know that employment growth since the peak of the resources construction boom in 2012 has been all about Sydney and Melbourne.

Until now!

Queensland is suddenly off to the races, with trend employment growth blazing +4.62 per cent higher across the year to October, by far its strongest annual result since before the financial crisis. 

Of course, it's harder for the most populous states to record such a large percentage increase, but even so, this has suddenly become too big a move to ignore. 

Some questions we've not had to ponder too often in Queensland since 2007 include: where, why, & what are the new jobs? And will it continue?

Where? Pretty much all around the state, as I've looked at here previously (Queensland is the one mainland state where employment is not excessively capital city focused). 

Queensland is also coming from a relatively low base, after a rough trot, and much of the hiring has been part time in nature. 

The likely drivers of the upturn might range from a surge of Chinese visitors and the dollar-driven tourism industry, the commodity price rebound creating jobs upstate, a slew of public sector and NDIS hiring, and perhaps some late spillover or multiplier from the now-fading residential construction bonanza.

Agriculture exports have been strong, so that's another possible bright spot, plus some increased aggregate demand creating services jobs as interstate migration has picked up.

Just from driving around various parts of SEQ, there are evidently an awful lot of roads being built right now, while there are several significant infrastructure projects underway or about to commence in Brisbane.

SEEK...& ye may find

We'll get more detailed numbers in due course on the historic hiring.

But what of next year, will Queensland jobs growth be sustained or sustainable as we count down to the Commonwealth Games? 

The answer looks to be a qualified "yes".

SEEK's job advertisements data for October 2017 just showed Queensland ads pumping 19 per cent higher than a year earlier, which tends to be a decent leading indicator for hiring.

Notably, some of the most improved industries nationally included those which Queensland is heavily exposed to.

Early days, of course, but every good upswing had to start somewhere!

This is how we do

Lucky 13

Another pretty good result for the Aussie economy, with total employment notching a 13th consecutive gain, the best stretch in 23 years. 

Headline employment growth was pretty modest, but there was another significant swing towards full time positions - with the economy adding +236,000 full time jobs since the beginning of the calendar year - and the previous month's result was also revised up, keeping the strong trend intact.

In fact, total employment was a massive +355,700 higher over the year to October 2017 for an increase of +3 per cent, way ahead of the growth in the working age population. 

The annual trend in hours worked was a solid +3.1 per cent growth, the strongest in 7 years.

And the unemployment rate continues to fall, down to a 57-month low of 5.4 per cent.

Hard to argue with those numbers. 

Magnetic north

Queensland added another +12,600 jobs in the month to see total employment lead the nation at +90,500 over the year, just ahead of New South Wales at +88,500. 

After several years of stagnation Queensland has recorded enormous employment gains in percentage terms, a huge synchronised upswing across the state taking the trend in annual employment growth up to a colossal +4.62 per cent. 

Many of the new jobs have been part time positions on a net basis, but Queensland was the only state to see its participation rate jump in October (from 65.5 per cent to 65.8 per cent), and unlike other states employment growth has not only been focused on the capital city. 

South Australia's unemployment rate has improved from around 8 per cent in 2015 to under 6 per cent. Jobs growth has been solid if relatively modest in the state, while declining participation and interstate migration to Melbourne and elsewhere have likely helped to pull down the unemployment rate a little.

In New South Wales the unemployment rate continues to trend down, now to a post-financial crisis low of only 4.71 per cent (and just 4.6 per cent in seasonally adjusted terms). 

Despite this, wages growth in New South Wales is still only tracking at +2.1 per cent.

Sco-Mo crows

This was a modest headline result, but with quite a few snippets of good news in the underlying figures.

If experiences overseas are a worthy indicator, then it'll take a while for unemployment to fall enough to see meaningful wages growth returning, but clearly things have been moving in the right direction. 

After a series of dire polling, Treasury's Scott Morrison was lightning quick to put out an upbeat announcement to note that upbeat jobs figures, um, do not need to be announced:

"Talking about jobs is not something we have to announce. It is just what we do."

Way to go, Sco-Mo...Katy Perry would be proud!

Of borrowers & buffers

Panel beater

I've been busy at the 1,600-strong UBS European Conference 2017, held at the Landmark London in Marylebone, and have learned a tremendous amount from a range of experts, while the Rt Hon David Davis MP also aimed to reassure the City about the forthcoming Brexit. 

I was thrilled to partake in a panel presentation on consumer indebtedness in Anglo-Saxon countries.

On the panel with me were the Chief US Economist of UBS, and the legendary one-time Sydneysider James Aitken, who's been over in the Smoke for some 18 years now. 

Completing the panel was Mathias Drehmann from the Bank for International Settlements (BIS) in Basel, which was a tremendous privilege for me. 

The BIS and Drehmann have produced some terrific research papers over the past decade and more, some of which continue to be discussed regularly in Australian financial circles today. Drehmann's extensive work has shown how the impacts of new mortgage borrowing are often felt 4 to 5 years after the loans are initially taken out.

Exceptionally different here...

It was especially enlightening for me to spend some time later chatting with the personable Drehmann, who originally hails from Stuttgart, a city where I studied in the Oberstufe back in the 1990s. 

Australia has been something of a puzzle for Drehmann and the BIS, for its models on debt service ratios (DSRs) have implied that Australia should have experienced financial instability or banking crises since 1980. 

It was fascinating to discuss why this has not proven to be the case. At least part of the answer comes down to semantics, and how exactly one defines a 'systemic crisis'. After all, in 1989 two of Australia's banks experienced stress and received capital injections from the government. 

And then in late 2008, while Australia avoided a technical recession, authorities were forced to take a number of measures to shore up the banking system, such as enhancing deposit insurance, introducing debt guarantees, and intervening in the capital markets through the purchase of mortgage-backed securities.

Even so, Australia has maintained a gross level of household debt since at least 2006 that is higher than many other developed countries have been able to sustain. 

At your service

Population growth, and Australia's highly urbanised demographics are two factors which are regularly mentioned in explaining high household debt, although we also know from international experience that population growth tends to be pro-cyclical.

The Reserve Bank of Australia (RBA) has found some merit in larger cities being able to cope with more leverage. The BIS itself found that Korea has been able to sustain exceptionally high debt service ratios compared to other countries, and its largest city Seoul has a population more than double that of Sydney. 

In Drehmann's relatively decentralised home country of Germany, on the other hand, debt service ratios have typically been much lower, and home ownership rates have been lower too.

The BIS acknowledges the limitations of its approach in using aggregate numbers for countries, and necessarily adopts a macro or helicopter view (Drehmann was intrigued to learn more about the very Australian concept of loss-making investment loans, for example). 

While debt service ratios can serve as useful early-earning indicator for crises, history doesn't always rhyme or act as a reliable guide to financial stability, since the relevant data typically only stretch back to 1980, there is more debt around today, and the distribution of debt has changed. 

Of borrowers & buffers

The RBA has dedicated a good deal of time analysing Australia's household debt, and has highlighted a wide range of factors in both causing the run-up and then sustaining consumer indebtedness.

If you had to distil their arguments down to just two points, then you'd probably highlight borrowers and buffers.

Since 2002, the increase in household debt in Australia has been overwhelmingly attributable to households in the fourth and fifth income quintiles, typically the borrowers with the most ability to service the debt.

And, secondly, a factor specific to Australia is the popularity of offset accounts: in aggregate households have buffers with some 2½ years of scheduled repayments at current interest rates. 

A challenge for Australia is that the growth in household disposable incomes was absolutely hammering along at about 7 per cent per annum through the 2000s, but since 2012 annual growth has been tracking at closer to only 3 per cent, with few signs of improvement to date.  

To end on another cautionary note, Aitken presented some fascinating statistics on loan defaults and historic crises, showing that non-performing loans at the margin can trigger significant stress.

Even in some of the most acute of downturns, most borrowers kept up their repayments.

Snail's pace

Australian crawl

Ah, mate.

Wages grew by just +0.48 per cent in the September 2017 quarter, to be +2.01 per cent higher over the year.

Superficially this looks like a bit of an improvement, and at least it can be said that wages are growing a bit ahead of the rate of inflation. Just. 

And including bonuses the annual increase was a slightly more upbeat +0.7 per cent for the quarter, and +2.2 per cent for the year. 

However, the result this quarter was pumped up by the minimum wage increase, and you can see in the chart below that a number of industries (such as accommodation & food) how this inflated the quarterly numbers. 

Over the year the industries with the most robust wage price growth included healthcare & social assistance (+2.7 per cent), arts & recreation services (+2.7 per cent), and education & training (+2.4 per cent).

On the other hand wages growth in the mining sector (+1.2 per cent) remains very low, as it does in professional, scientific, & tech services (+1.5 per cent). 

Annual wage price growth in the private sector remains super-low at just +1.86 per cent, with wage price growth in the public sector some way higher at +2.37 per cent. 

The public sector index has outpaced the private sector since the peak of the resources construction boom. 

Resources states slow

At the state level Queensland, Victoria, and Tasmania each recorded wages growth of +2.2 per cent, while New South Wales (+2.1 per cent) also recorded reasonable growth. 

However, there were considerably weaker results in Western Australia (+1.3 per cent) and the Northern Territory (+1.4 per cent). 

Western Australia recorded the fastest pace of wages growth through the mining boom, but is now coming back to the pack. 

The wrap

Overall, while it's positive to note annual wages growth moving a bit higher and ahead of the rate inflation, in reality this was a very soft result which missed expectations, having been puffed up by the minimum wage increase.

Not much in the way of pre-Xmas cheer to be found here! 

Hurts so good

Good times roll

"You've never had it so good", in terms of Australian business conditions at least, suggests the National Australia Bank. 

Business conditions soared from +14 to +21 in October, the highest ever reading according to NAB's Business Survey. 

Trading conditions and profitability were positively through the roof.

"An extremely strong result" reported NAB's Alan Oster.

Hobart plumbs lowest vacancies on record

Hobart stretched to break point

Hobart notched the lowest vacancy rate on record for any capital city at just 0.3 per cent in October 2017. 

With just 75 listings meeting the criteria for an a vacancy (of being advertised online for three weeks or more) it's not surprising that rents have been taking off.

And while there's been talk of land release to ease the pressure in Hobart, there's no imminent sign of matters improving for tenants.

Meanwhile the previously stagnant Adelaide market is also beginning to look at a bit tight, with the vacancy rate declining to just 1.4 per cent in October, and the vacancy rate in Canberra ticked down to 0.8 per cent.

In Sydney and Melbourne the rental markets look to be in relative equilibrium, with some sub-regional variations. 

The resources capital cities look to have turned the corner now.

In Perth the vacancy rate of 4.1 per cent was well down from 4.9 per cent a year earlier, while Darwin (2.5 per cent) also saw a much tighter result than a year ago (3.2 per cent). 

Even Brisbane appears to have entered a bit of a downtrend despite its inner city apartment glut, although there does tend to be a seasonal spike over the Christmas period. 

Overall the national vacancy rate of 2.1 per cent or 67,781 vacancies was lower than a year earlier at 2.3 per cent or 74,368 vacancies, with dwelling starts now set to decline and strong population growth having absorbed most of the increase in rental stock to date. 

Nevertheless, rental price growth remains quite modest at the national level.