While Melbourne and Sydney contend with a housing market correction that threatens to derail parts of the Australian economy, figures in other performance areas are picking up, which may serve to help overall.
Underemployment levels, which represent the number of people who want more hours of work each week but are unable to source them, fell by 0.3%, bringing the figure down to an adjusted 8.1% for the season. Although still considered high compared to historical standards, the current underemployment rate suggests that the Australian job market is beginning to tighten.
A knock-on effect is showing wage growth, which is now increasing in some states. None have seen a more pronounced recovery than Victoria, and Westpac Analyst Justin Smirk said that this is due in part to a stronger job market influenced by a reduction in underemployment.
Unemployment in Victoria has fallen to 4.8%, while underutilization, which combines underemployment and unemployment, has managed to climb well above record-low levels seen toward the end of 2015.
Smirk suggested that historical analysis could display positive trends in the Victorian economy, as “Victorian wages have been responsive to improvements in underutilization.” This “significant improvement” should, therefore, lead to “a pick-up in Victorian wages inflation.”
Property market analyst Pete Wargent also noted strong job figures in Victoria. He suggested that indicators in the Victorian economy are showing signs of long-term growth.
Even when accounting for “potentially rogue season-adjusting figures,” Victorian wage growth should reach 3.5%, according to Wargent.
Victoria’s unemployment rate is now the second-lowest of all Australian states, just 0.1% above New South Wales, which sits at 4.7%.
The positive upturn is partially due to higher immigration than that seen in most Australian states. Wargent believes that an influx of skilled workers has allowed Victoria’s job market to strengthen, leading to the upturn in wage growth displayed in the last few months.
As the labor market performs best where there are higher levels of immigration, Victoria’s figures may be intriguing to those in Parliament who are against encouraging the migration of workers from overseas, as this seems to be having a positive effect on the economy at present.
The increase in available labor is also adding demand in these areas of the Australian economy. One aspect that appears to be at odds with this trend is the decrease in the housing market seen in Sydney and Melbourne.
This housing correction is occurring due to a recent history of overvaluing as well as the Royal Commission inquiry into widespread financial misconduct unearthing questionable mortgage lending practices. There is not yet a stable estimation of how this will affect the economy.
With investor lending under an increasingly watchful eye, the scrutiny has naturally led to a drop in the number of mortgages offered on the basis that they once were. That said, a decrease in house prices does not typically correlate with increased immigration, a tighter job market and a rise in wage growth.
The positive trends seen in Victoria are now set to replicate across the board as forecasts suggest that a general 3% national wage growth is on the cards. However, the RBA is expecting that this process will not happen overnight and will rely on economic and political stability not undermining it in the meantime.