Australia’s multi-speed economy
Payrolls & wages; Business survey
Business survey: The NAB business confidence index improved from -14.2 points to -8.0 points in August (The long-term average is +5.0 points). The business conditions index fell from -0.3 points to -5.8 points. (The long-term average is +5.2 points).
Survey of payrolls & wages: The Bureau of Statistics (ABS) reported that between August 8 to August 22, payroll jobs rose by 0.3 per cent with wages up by 0.2 per cent.
The business survey has broad implications for investors and the economy. The payroll and wage data helps government with decisions on assistance measures for households and businesses.
What does it all mean?
• Looking across all the latest survey results, understandably business conditions are weakest in Victoria. But the surprise is that there are soft conditions in Queensland, and to some extent the ACT. Still, Tasmania, Western Australia and South Australia are showing encouraging trends.
• Overall, national readings on the economy are losing usefulness because there is a disparity of results across state and territory economies. The same can be said for industries. Some industries are showing encouraging signs – notably the biggest employers. The Bureau of Statistics note that Health care and social assistance; Retail trade; Professional, scientific & technical services; and Education & training (accounting for 41 per cent of jobs) “were back to over 96 per cent of the payroll jobs recorded in mid-March.”
• Some analysts still be believe that the Reserve Bank should be ‘doing something’ – cutting rates or buying bonds. But it remains clear that Aussies don’t want to take on more debt. If assistance is required it should come from targeted measures provided by governments.
Key COVID-19 dates (source: ABS)
• 22 March: Prime Minister announces Stage 2 lock down changes, which are progressively implemented
• 30 March: Prime Minister announces JobKeeper program
• 8 July: Stay at Home restrictions commence for metropolitan Melbourne and Mitchell Shire
• 12 July: Early Childhood Education and Care Relief Package ceased
• 20 July: Altered eligibility for JobKeeper payments for child care providers in place
• 5 August: Stage 4 restrictions in metropolitan Melbourne and stage 3 restrictions in regional Victoria commence
What do the reports and figures show?
Payroll and wages
• The Australian Bureau of Statistics (ABS) has released the 10th edition of a new survey: “Weekly Payroll Jobs and Wages in Australia”.
• In the period from August 8 to August 22, payroll jobs rose by 0.3 per cent with wages up by 0.2 per cent.
• Payrolls across state and territories: NSW (+0.7 per cent); Victoria (-0.7 per cent); Queensland (+0.3 per cent); South Australia (+1.1 per cent); Western Australia (+0.7 per cent); Tasmania (+1.3 per cent); Northern Territory (+0.3 per cent); and ACT (+0.1 per cent).
• Between the week ending March, 14, 2020 (the week Australia recorded its 100th confirmed COVID-19 case) and the week ending August 22, 2020:
Payroll jobs decreased by 4.2 per cent; and
Total wages paid decreased by 5.2 per cent.”
• Across states and territories from March 14 to August 22, employment changes were: NSW (-3.2 per cent); Victoria (-7.9 per cent); Queensland (-3.2 per cent); South Australia (-2.8 per cent); Western Australia (-1.0 per cent); Tasmania (-4.1 per cent); Northern Territory (-1.1 per cent); and the ACT (-4.0 per cent).
• By industry, employee jobs fell most from March 14 to August 22 in Accommodation & food services (down 21.1 per cent) from Arts & recreation services (down 14.3 per cent). In the Financial and insurance services sector, jobs lifted by 1.9 per cent. Jobs also rose 3.7 per cent in Electricity, gas, water & waste services; rose 0.7 per cent in Health care and social assistance; and rose 2.7 per cent in Public administration and safety.
• Wages fell most between March 14 and August 22 in Mining (down 17.7 per cent), followed by Accommodation & food services (down 13.9 per cent).
• The ABS noted: “In mid-March, the four industries with the largest share of payroll jobs (41 per cent) were Health care and social assistance; Retail trade; Professional, scientific & technical services; and Education & training. By 22 August, these industries were back to over 96 per cent of the payroll jobs recorded in mid-March.”
• The ABS also reported for the period March 14 and August 22:
Payroll jobs: Those worked by people aged 70 and over decreased by 10.9 per cent and those worked by people aged 20-29 decreased by 6.6 per cent;
Total wages: Payments to people aged under 20 increased by 22.4 per cent and payments to people aged 60-69 decreased by 8.0 per cent.
National Australia Bank Business Survey – August 2020
• The business confidence index improved from -14.2 points to -8.0 points in August (The long-term average is +5.0 points). Confidence had previously hit record lows of -65.7 in March.
• The business conditions index fell from -0.3 points to -5.8 points. (The long-term average is +5.2 points). Conditions had previously hit record lows of -34.1 in April.
• The rolling annual average business confidence index fell from -13.6 points to -14.2 points. The rolling annual average business conditions index eased from -6.6 points to -7.1 points.
• The survey was conducted in the period August 18-31, 2020 across 540 firms.
• Key Components: The index of trading conditions eased from +1.2 points to -1.7 points; employment eased from ‑2.4 points to -13.1 points; profitability fell from +1.3 points to -2.8 points; forward orders rose from -6.5 points to ‑10.3 points; stocks improved from -9.0 points to -7.3 points; exporter’s sales increased from ‑13.6 points to ‑19.2 points.
• Inflationary indicators: The monthly reading of labour costs fell at a 0.8 per cent quarterly rate in August after falling 1.0 per cent in July. Purchase costs were up 0.1 per cent (July: -0.7 per cent). Final product prices fell at a 0.2 per cent quarterly rate (July: -0.3 per cent). Retail prices were up 0.4 per cent (July: +0.4 per cent quarterly rate).
• Capacity fell – from 76.9 per cent to 76.1 per cent (81 per cent is the long-term average).
• The proportion of firms reporting that they did not require credit eased from near 55 per cent to 50 per cent.
• NAB noted “Conditions fell sharply in mining, manufacturing and recreation & personal services in the month, while wholesale saw a more modest decline. Construction, retail and finance, business & property services saw an improvement. Overall, conditions remain most favourable in retail, followed by wholesale. Conditions are negative in all other industries, with mining, construction and recreation & personal services the weakest.”
• “Conditions declined in all states except NSW which edged higher. Interestingly, weakness was evident not just in Victoria, but also in Queensland, Tasmania and South Australia, where conditions fell sharply. Western Australia saw a more modest decline. Overall, conditions are weakest in Queensland and Victoria, while Tasmania and Western Australia are the only two states in positive territory.”
What is the importance of the economic data?
• The ABS data Weekly payroll jobs and wages “provides indicative information on the economic impact of the COVID-19 coronavirus on employees, including changes in employee jobs, changes in total wages, and changes in average weekly wages per job.”
• The monthly National Australia Bank business survey is valuable in providing a timely reading about the health of Corporate Australia. Key indicators of business conditions such as orders, employment, profitability and capacity use are covered together with a gauge on confidence levels.
What are the implications for investors?
• There are a range of timely surveys of the economy. That is the good news. But some effort is still necessary to take away the key results.
• And the results indicate that conditions vary markedly across states, territories, regions and industries.
• While Victorian businesses will likely need more support to survive the next few months, the same cannot be said for other states. Still, border closures remain an issue. The latest survey data shows that more tourism-dependent Queensland is not showing the same favourable economic outcomes as Western Australia, Tasmania and South Australia.
Published by Craig James, Chief Economist, CommSec