The great reopening
Job ads; Consumer confidence; Dwelling starts
SEEK reported a 6 per cent lift in September job ads – the first gain in five months.
Consumer confidence fell 1.5 per cent in October, but was near levels last seen in 2017.
Dwelling starts soared by 23.2 per cent in the June quarter – the biggest lift in 20 years.
• ‘Double vax’ has been a game-changer for the economy. The NSW economy is reopening after hitting the 70 per cent double vax target. New freedoms will present at 80 per cent. The ACT lockdown will end on Friday. And Victoria is fast approaching its own 70 per cent target. Confidence levels are lifting. We saw that in yesterday’s weekly consumer survey.
• Today’s monthly reading on confidence was a little less positive, but this highlights the mixed Covid/vax experience across the country and the fast moving changes in the economy.
• But clearly consumers and businesses are focussed on the reopening plans of our two biggest states. And the hope is reopening could lead to greater mobility across regions, states and territories.
• Reopening also means jobs are being created. SEEK reported a 6 per cent monthly lift in national job ads to be up almost 25 per cent on 2019. A 20 per cent plus lift in job ads was recorded in NSW alone in September.
• The problem now is where to find staff, especially in hospitality and tourism where job ads in NSW have soared by 130 per cent. Nationally, the number of applicants for each job vacancy has fallen for eight straight months and is down 45 per cent on the year.
• Tomorrow’s job figures for September are now really ancient history. While jobs may have been technically ‘lost’ in NSW, Victoria and ACT in the month, the reality is that reopening economies are experiencing job shortages not losses. Foreign borders are likely to stay closed for some time yet, and that may mean more businesses apply to ‘sponsor’ foreign workers if the dearth of skilled staff continues.
• There are still some bumps in the road to be navigated in the next few months. But if vax take-up rates continue to lift, the economy could be facing boom-like conditions around Christmas and the New Year. And that may mean that the supply chain price pressures experienced in the US and Europe become an issue in Australia.
• Certainly activity in the home building sector is buoyant. Dwelling starts (commencements) rose by 23.2 per cent in the June quarter – the biggest quarterly rise in 20 years. The number of starts was the biggest on record (64,596).
• Surprisingly the lift in starts was driven by apartments (units, townhouses), up 46 per cent, with free-standing or detached houses up 13 per cent. House starts were also at record highs for the quarter (41,276).
• The lift in starts means that home building activity will be strong for at least the next 6-9 months. It could be longer as there are only so many builders to go around. Then there is the question of the cost and availability of materials like timber.
• But it’s worth noting that the number of dwellings under construction (211,686), while at 2-year highs, is still short of the all-time high of 231,504 set in March quarter 2018. However, the number of houses being built (88,446) is a record.
• Looking out further, in 9-12 months’ time the hope is that demand for homes by migrants will lift with the opening of foreign borders. So the outlook for building trades, material providers and related retail stores looks positive through to 2023.
• In other data out today, there were 26,980 overseas arrivals in August (a monthly decrease of 47,880 trips). And departures totalled 37,180 (a monthly decrease of 49,840 trips). Provisionally there were 20,860 arrivals in September and 31,760 departures.
• The data is not of interest now, but should be in 2022.
Published by Craig James, Chief Economist, CommSec