– December 2020 INSIGHTS BY THE CURVE TEAM –
- Three different vaccines for Covid-19 showed very encouraging results, which means Australia will likely begin rolling out vaccines from the beginning of next year.
- GDP for Q3 and employment data for October were very strong.
- Victoria’s re-opening continues to offer an immediate upside to the economy.
- The RBA made no change to monetary policy and continue referring to an uneven and drawn-out recovery.
Australian Economic Highlights
- Growth bounced back in the third quarter. GDP increased 3.3% over the quarter, leaving the economy 3.8% lower than this time last year. There is much scope for further improvements, with Victoria still nearly 10% smaller than last year and household savings at 18.9%.
- Following a sharp fall in Q2 of 1.9%, Inflation recovered to record a 1.6% rise for Q3. Unwinding of childcare subsidies and rising petrol prices contributed to the rise. The annual rate remains muted at 0.7%. Wages remain subdued and are expected to remain that way as long as there is slack in the labour market. The RBA view a recovery in wages as the primary means to have inflation reach the 2-3% target band.
- The Employment data continues to be much stronger than expected, especially in November. 180 000 jobs were gained for the month despite a negative read being expected. The participation rate is only a tick below pre Covid levels, meaning the unemployment rate of 7% is a fairly good indication of the state of employment. A measure of the effective unemployment rate, which accounts for the participation rate and those working zero hours but still counted as employed under JobKeeper payments has unemployment at 8.3%.
- The ANZ Job ads continue to surge, rising 13.9% for November. This follows a 11.9% rise in October. Victoria’s re-opening is fuelling the recovery.
- Business confidence has surged over the past two months, sitting at 12 after being -3 in September. November in particular saw a jump, rising from 3 to 12. Business conditions likewise improved to be 9 after being 2 in October and 0 in September. The employment index won’t budge, remaining at -5, meaning there was no improvement from October. The other improvements likely reflect the re-opening of Victoria and positive vaccine news.
- Consumer confidence increased by 2.5% for November to be 107.7. This is the highest read since 2013. Hopefully the read will flow on to higher levels of consumption. The unemployment index remains softer than desired. The read does not account for the positive vaccine news from last month.
- After stalling in August, Retail sales picked back up in October. Victoria’s slow re-opening was the impetus, as Victorian sales rose 5.1%. The rest of the country rose a more modest 0.3%.
- New housing finance continues to be strong, up 0.7% for October. Overall approvals are now up 23.3% for the year with owner occupied approvals up 31.2%.
- Australia’s trade surplus improved markedly in October despite expectations of a neutral read. Exports were up 5.4% on the back of rising metal ore prices. Imports only rose 0.6%, which left the trade balance at $7.5 billion, up from $5.8 billion.
- Building approvals were up 3.8% in October. The government’s homebuilder scheme continues having an effect, with overall building approvals up 14.3% on last year.