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Brisbane & Sydney petrol prices hit 4-month low

Biggest lift in job ads in 18 months
Weekly petrol prices; ANZ Job Ads; Participation, Job Search & Mobility

Petrol: According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 2.0 cents in the past week to 140.5 cents a litre. Over the week, unleaded pump prices fell to four-month lows in Brisbane and Sydney.

Job advertisements: ANZ job advertisements rose by 4.6 per cent in June – the biggest monthly gain in 18 months – after falling by 8.2 per cent in May. But ads were down by 9.1 per cent over the year to 159,717.

Underemployment: 12.7 million Aussies were employed in February 2019. But 1.1 million (8.2 per cent of total) Aussies sought more hours of work (underemployed), with most (1.0 million) in part-time work.

Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. The job advertisements data is a leading indicator of the job market and therefore important for consumer-focussed stocks and companies such as SEEK.

What does it all mean?

• Motorists in Brisbane and Sydney should fill up before the State of Origin decider on Wednesday evening. Unleaded pump prices have begun lifting off 4-month lows in both cities.

• The discounting cycle has ended so drivers are well advised to jump on to real time fuel apps, such as MotorMouth, and shop around for the best deals on fuel. Average prices at the bowser are expected to lift towards $1.50 a litre in the next week.

• And some respite from elevated petrol prices is on the way for beleaguered Melbourne motorists. Pump prices rose by almost 22 cents last week, but prices have begun easing back below $1.50 a litre. Drivers should hold-off filling up if they can in order to take advantage of the discounting cycle next week.

• Developments in global crude oil markets can also influence the pump prices paid by Aussie motorists. Last week, the Brent crude oil price fell by 3.5 per cent to US$64.23 a barrel and the Nymex oil price shed 1.6 per cent to US$57.51 a barrel – the first weekly loss since mid-June. That said, the Singapore benchmark gasoline price rose for a fourth consecutive week to US$72.25 a barrel.

• Concerns about global economic growth and demand for crude oil re-intensified last week after a raft of poor factory activity gauges were released. The pessimism overshadowed the deal by OPEC, Russia and its allies to extend supply cuts in an attempt to provide further support for the oil price.

• In a promising development, job ads rebounded in June. The number of vacancies lifted by 4.6 per cent – the biggest monthly gain since January 2018. But this followed a huge 8.2 per cent fall in May – the biggest drop in ads since January 2010.

• With the Federal election and public holidays out of the way, it’ll be interesting to see whether leading indicators of jobs growth stabilise, especially after recent interest rate cuts.

What do the figures show?

Petrol prices

• According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 2.0 cents in the past week to 140.5 cents a litre. The metropolitan price rose by 2.7 cents to 139.9 cents a litre and the regional price rose by 0.5 cents to 141.6 cents a litre.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 10.2 cents to 128.2 c/l), Melbourne (up by 21.8 cents to 152.2 c/l), Brisbane (down by 12.9 cents to 133.5 c/l), Adelaide (up by 18.0 cents to 148.8 c/l), Perth (up by 1.6 cents to 138.2 c/l), Darwin (down by 1.6 cents to 141.9 c/l), Canberra (down by 0.3 cents to 143.0 c/l) and Hobart (flat at 151.7 c/l).

• The smoothed gross retail margin for unleaded petrol fell from 15.42 cents a litre to 15.36 cents a litre last week (24-month average: 12 cents a litre).

• The national average diesel petrol price fell by 0.1 cents a litre to 147.9 cents a litre over the week. The metropolitan price fell by 0.1 cents to 146.7 cents a litre with the regional price down by 0.1 cents to 148.8 cents a litre.

• MotorMouth records the following average retail prices for capital cities today: Sydney 130.2c; Melbourne 147.8c; Brisbane 132.8c; Adelaide 161.4c; Perth 127.9c; Canberra 142.9c; Darwin 141.6c; Hobart 151.6c.

• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 128.2 cents a litre, up by 0.8 cents over the week. The terminal gate diesel price stands at 134.5 cents a litre, down by 0.4 cents over the past week.

• Last week, the key Singapore gasoline price rose by US75 cents or 1.1 per cent to US$72.25 a barrel. In Australian dollar terms, the Singapore gasoline price rose by 97 cents or 1.0 per cent last week to $102.92 a barrel or 64.73 cents a litre.

Job advertisements

• ANZ job advertisements rose by 4.6 per cent in June – the biggest monthly gain in 18 months – after falling by 8.2 per cent in May. But ads were down by 9.1 per cent over the year to 159,717. Ads hit 7-year highs in May 2018.

Underemployment

• According to the Bureau of Statistics: “Over one million Australians were underemployed in February 2019. That is, they wanted to work more hours and were available to work those extra hours. This was 8.2 per cent of the total labour force, up from 7.6 per cent in 2009.”

• And “Forty-six per cent of underemployed workers in 2019 reported that they had been working insufficient hours for a year or longer – with the median duration of underemployment now at 39 weeks, up from 26 weeks back in 2009. However, while underemployment increased over the last decade, in the last year it fell 26,000 to 1.1 million in 2019.”
What is the importance of the economic data?

• Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.

• The monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.

• The Australian Bureau of Statistics releases Participation, Job Search and Mobility data each February. The data is useful in gauging the strength of the job market.

What are the implications for interest rates and investors?

• The Reserve Bank is expected to assess incoming economic data over the coming months before deciding the next move for the cash rate. But there has been enough positive data in recent weeks to indicate that the Reserve Bank won’t rush with another rate cut.

• The job market is central in Reserve Bank thinking on rates. Leading indicators of jobs growth and measures of spare capacity in the labour market will be closely monitored by policymakers. Job ads growth weakened at the beginning of the year and the number of Aussies wanting to work more hours (i.e. underemployment) has edged higher in recent months.

• In fact, in a sign of lifting spare capacity in the labour market, almost half of all underemployed Aussies have indicated that they have been working insufficient hours over the past year.

• With this in mind the Reserve Bank will also be closely watching consumer spending trends. It is hoped that lower mortgage rates and tax cuts will encourage households to spend.

Ryan Felsman, Senior Economist, CommSec