Professionals Gosford BI-ANNUAL REGIONAL ECONOMIC DEVELOPMENT BRIEFING (30/10/19)
Robert Rennie, Westpac’s Head of Financial Market Strategy Group, described a volatile global economy at November’s economic briefing.USA is undertaking very big deregulation especially for business, flavoured by protectionism.Therefore US consumers anticipate price rises. Mr.Rennie does not consider that Trump’s potential impeachment by the House will have much economic effect, but in the Senate (where a successful vote would require a 2/3rds majority: unlikely) impeachment would become a disruptive circus because of what may be revealed. Leading Democrat Presidential candidate,Elizabeth Warren (a former bankruptcy law academic), proposes significant extra taxes on both capital and income, plus re-regulation. (Note that this briefing was held just before Michael Bloomberg emerged as a possible Democrat candidate.) Westpac rates a US recession at 30-40% risk and firming.
Australia’s growth rate will rise in 2020/2021 (2.7% in 2021). Rate cuts will continue in the US through to late summer, with fewer cuts in Australia during 2020. Westpac thinks there is sufficient liquidity in the US and growth with continue (although weakly). Financial markets are being kept healthy globally by the central banks. Some western manufacturers are leaving China for nearby countries (eg Vietnam) with cheaper labour, which is a commercially healthy response.
Trade surpluses out of Australia are healthy, especially of LNG (although others note the impact of that export market on local gas prices). An oversupply of dwelling units will emerge up to Q3 or Q4 in calendar 2020. House prices in Melbourne and Sydney are rising again, but it is patchy elsewhere (and new Sydney unit values have dived). Dwelling approvals are now dropping in those cities in response to the forthcoming unit oversupply. Consumer confidence has decreased for more than a year and continues to drop. After February 2020, RBA is unlikely to drop interest rates to less than 0.5% because it is ineffective –monetary easing is almost done.
Anticipate low interest rates here for a long time. As a result, RBA is now targetting measures to address un/employment (now 5.2-5.3%): their target is 4.5%. Underemployment is a problem in Australia but the statistics are unreliable/absent. Without population growth Westpac says we are in recession due to a long period with no wage growth, and stagnating productivity gains. “Unconventional monetary measures” are available to RBA, with some working overseas, but some have not been effective. Expect a modest weakening of A$/US$ to mid 2020, down to 66c. Westpac believes that the national and NSW budget surpluses should be spent on infrastructure projects to stimulate the economy (as RBA has been saying). Their recommendation to businesses in a time of weak confidence is to find ways for existing customers to spend more with you. (As a consumer, test whether you find yourself spending more with your existing suppliers.)
China’s slowdown has further to go (GDP probably 6.6% down to 5.8%), but while their manufacturing sector drops, their service sector (eg tertiary education, financial services –both currently strong offshore) is strengthening.
Population statistics:
- 2018: 342,047 estimated residents in 1680 sq km
- 2019 forecast was 346,459
- 2036 forecast is 414,615 (a 19.67% change from 2019)
- annual FY increase varied irregularly from a low of 0.71% (2013) to a high of 1.91%(2008); 2017/18 varied 0.78% (2653 additional people)
- from 2016-2026 the age structure is forecast to change: 10.2% increase under workingage; 7.2% increase in working age, and 25.9% increase in population of retirement age
- we are a middle-aged and ageing population compared to Greater Sydney: in 2016 thelargest age group was 50-54 years (6.6% of the population); however in 2026 thelargest group will become the 5 to 9 year olds (perhaps new families leaving Sydney’shigh rise and/or expensive living for a better quality of life)
- from 2016-2026, the largest increase in age group is forecast to be 75-79 year olds (tobecome 4.5% of the population)
- in 2016, the dominant household type was “couple families with dependent children”; in2026, the largest forecast increase will be to “couples without dependents”, which will bereplaced by 2036 with a large forecasted increase in lone person households
- a large socio-economic shift occurs from the south (higher measures on all indicators) tothe north (lower) (qualifications, income etc.)
- those statistics also show disadvantage compared to Greater Sydney (particularly forincome levels >$2000 per week)
- 2016: 122,211 households in 144,592 dwellings (perhaps reflecting private dwellingssuch as holiday houses unoccupied on Census night, which were 11.9% here comparedto Greater Sydney’s 7.3% unoccupied)
- higher density dwellings tend to service young adults and smaller households, with lowerdensity (eg detached housing) serving families: compared to Greater Sydney in 2011(where 44% of dwellings were medium or high density), Central Coast had 21.7% ofsuch dwellings
- between 2011 and 2016 there was a nett reduction of 106 in the category of caravans,cabins and houseboats as dwellings (perhaps reflecting the redevelopment of some largecaravan parks for more permanent dwelling types)
- between 2011 and 2016 roughly the same number of separate houses vs mediumdensity dwellings were added (about 2,173 of each), plus 310 high density dwellings (egunits)
- in 2017/18 the following regional industries employed most people (irrespective of hoursworked or security of tenure): health care and social assistance (19.8%), retail trade(12.5%), construction (10.2%), accommodation and food services (8.8%), educationand training (8.2%), then others.