<p>A landmark former orphanage site in Surrey Hills could be transformed into a new residential community under plans lodged by <a href="https://www.apartments.com.au/developers/antipodean-land-developments">Antipodean Land Developments</a> that would deliver 76 apartments and townhouses while restoring some of the suburb's most significant heritage buildings.</p>

<p>The burgeoninng Melbourne-based developer has submitted plans for the 9,158 sqm site at 1 Kent Road and 24 Durham Road, home to the former St Joseph's Home for Destitute Children, a historic institutional complex dating back to the late 19th century. The proposal seeks to adaptively reuse several heritage buildings while introducing two new four-storey residential buildings set within extensive landscaped grounds.</p>

<p>Designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a> and Kerstin Thompson Architects, the project has been conceived as a contemporary residential village embedded within a restored heritage precinct. The development team describes the design approach as "The Village in the Garden," with new buildings positioned among mature landscaping by OCULUS and significant heritage structures.</p>

<p><img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="44ec8c1b-c0b6-44ae-859e-5811b3e6a023" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design%20%281%29.png?VersionId=p.p1_KFh4iQoV4nisdnPfQBAsWNi7m79" /></p>

<p>The proposal would deliver 76 dwellings comprising a mix of apartments and duplex-style residences, significantly increasing housing supply on one of the largest privately held residential landholdings in Surrey Hills. The development includes 127 car spaces, 24 bicycle spaces and more than 1,000 sqm of communal amenity, with the existing chapel building earmarked for conversion into resident facilities.</p>

<p>According to the planning submission, the project centres on the restoration and adaptive reuse of the site's most significant heritage assets, including the original c.1889 St Joseph's building, the chapel designed by architect Augustus Andrew Fritsch, and the historic brick perimeter walls and entry gates. The proposal also incorporates the retention of other contributory buildings including the former infirmary and school building.</p>

<p>Tract Consultants, in the planning report accompanying the application, said the scheme had been shaped through extensive heritage analysis and design development.</p>

<p>"The shared vision for the Site by the project team has culminated in a scheme which successfully breathes life back into a historic site while delivering upon the objectives of Victoria's Housing Statement in a carefully curated and contextually responsive manner."</p>

<p><img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="7263b7d8-95ea-400f-9531-6ca7d22c3c33" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design%20%282%29.png?VersionId=4cR1tiWOsDpgxEOwZi5vVFcyvvOsYkIE" /></p>

<p>The proposal is being assessed under Victoria's Significant Residential Development with Affordable Housing pathway. As part of the application, three per cent of the project's residential development cost would be contributed to the Social Housing Growth Fund. The development would also provide a diverse mix of one, two and three-bedroom residences targeting a broader range of buyers than typically found in Surrey Hills' detached housing market.</p>

<p>Sustainability initiatives include an anticipated 66 per cent BESS score, natural cross-ventilation to 80 per cent of apartments, 28 per cent deep soil landscaping and a canopy cover outcome exceeding local planning requirements. The proposal also sets aside more than 1,083 sqm for communal indoor and outdoor resident amenity spaces.</p>

<p><img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="33fad46f-fe26-4d0a-acfd-6b776e1c6a3d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design.png?VersionId=D9F6WVSyYCtGvSUmith35LRp6R7PQkw_" /></p>

<p>Planning documents describe the property as one of the largest underutilised residential sites in Surrey Hills, arguing it presents a rare opportunity to introduce "missing middle" housing in an established inner-eastern suburb while preserving and revitalising a significant heritage precinct.</p>

<p>Antipodean Land Developments has built a reputation for design-focused residential projects across Melbourne, particularly in the medium-density sector. Previous developments include Neighbourhood in Brunswick East, delivered with Breathe Architecture, and Balfe Park Lane, designed by Kerstin Thompson Architects.</p>

<p>They've been very active in site acquisition as they build out their future development pipeline. They recently launched Thornubury House, 45 apartments above a mix of commercial, retail, and food and beverage tenancies, and have plans for a boutique project in Fitzroy and another <a href="https://www.apartments.com.au/news/vic/antipodean-plan-apartments-for-deepdenes-missing-middle-on-whitehorse-road">"missing middle" project</a> on Deepdene's Whitehorse Road.</p>


Joel Robinson

First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills

<p>Developer <a href="https://www.apartments.com.au/developers/auyin-property-development">Auyin</a> is the latest to turn to the Victorian Government's Development Facilitation Program in an effort to secure approval for its long-planned, mixed-use project in Elsternwick.</p>

<p>In 2018, Auyin lodged plans with Glen Eira City Council for a 14-storey building, however Council approved a reduced eight-storey scheme. A subsequent VCAT appeal in 2019 upheld the eight-storey height limit.</p>

<p>The project was later amended to nine storeys, but Auyin is now seeking to revive something closer to its original vision. The developer argues that the planning context has evolved significantly over the past decade, particularly within the Elsternwick Activity Centre, where higher-density development has increasingly been encouraged along Glen Huntly Road.</p>

<p>The proposal would transform the 1,239 sqm site at <a href="https://www.apartments.com.au/new-apartments/7-12-horne-street-elsternwick-vic-3185">7-15 Horne Street</a>, opposite Elsternwick Railway Station, into a 13-storey residential and retail development designed by CBG Architects, with 40 apartments</p>

<p>The site currently comprises three commercial properties.</p>

<p><img alt="First look: 13-storey mixed-use tower planned for Elsternwick activity centre" data-entity-type="file" data-entity-uuid="5f465dd4-509b-4082-a669-0253b313914b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/elsternwick%20podium.png?VersionId=72frWi0SmQ5AVJ3ARRhX5ILUYObhTm7x" /></p>

<p>The proposed apartment mix comprises 25 two-bedroom and 15 three-bedroom residences above 200 sqm of retail space at ground level. Residents would have access to a 90 sqm wellness facility, a 351 sqm communal indoor and outdoor terrace on the third level, and extensive landscaped areas throughout the development. A publicly accessible 135 sqm plaza would be created on the north-east corner of the site, providing seating, landscaping, and a new gathering space adjoining Horne Street.</p>

<p>The design adopts a four-storey podium that references the finer-grain character of the surrounding streetscape, with the upper tower recessed behind generous setbacks on all boundaries.</p>

<p><img alt="First look: 13-storey mixed-use tower planned for Elsternwick activity centre" data-entity-type="file" data-entity-uuid="e637e763-2abc-4c34-a0aa-5c7ad36fae18" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/elsternwick%20open.png?VersionId=J1AoOpZgTyaF.KeeFSX6lMjEScX8KKRi" /></p>

<p>A key element of the proposal is the reconfiguration and widening of the surrounding laneways. Vehicle access would be retained from Lois Lane, with upgraded pedestrian connections linking Ross Street and Horne Street. The development would provide 58 residential car spaces, two retail car spaces, and 52 bicycle spaces across two basement levels and ground-floor facilities.</p>

<p>Architecturally, the building draws inspiration from the established character of Elsternwick Village. The façade combines dark charcoal brickwork, textured concrete, bronze-toned metal detailing, and extensive planting integrated into podium and tower levels. The design also incorporates a chamfered corner treatment and publicly accessible plaza intended to strengthen pedestrian activity around the station precinct.</p>

<p>Elsternwick's last new development completion was&nbsp;EVA Elsternwick by Pitard late last year. <a href="https://www.apartments.com.au/developers/milieu-property">Milieu</a> is working away on its nature-led neighbourhood, <a href="https://www.apartments.com.au/new-apartments/elsternwick-gardens-by-milieu-8-gordon-street-elsternwick-vic-3185">Elsternwick Gardens</a>, on Gordon Street, with its first stage expected to complete next year.</p>


First look: Auyin seeks mixed-use apartment project in growing Elsternwick Activity Centre

<p><a href="https://www.apartments.com.au/new-apartments/otium-parkdale-123-125-como-parade-east-parkdale-vic-3195">Otium Parkdale</a>, the 13-residence boutique development by&nbsp;<a href="https://www.apartments.com.au/developers/huxtable-property">Huxtable Property</a>, has entered its final stages of delivery, with completion expected within the coming month and more than half of the residences sold.</p>

<p>The Como Parade East project is nearing the finish line at a time when opportunities to purchase new apartments in <a href="https://www.apartments.com.au/developments/parkdale-vic-3195">Parkdale</a> remain exceptionally limited. Fewer than 10 per cent of dwellings in the bayside suburb are apartments, making developments like Otium a relatively rare addition to a market traditionally dominated by detached housing.</p>

<p>[smartcode_project:default project_id=134974 project_image_fid=5427]</p>

<p>The three-level development comprises 13 residences, including ten two-bedroom apartments and three larger three-bedroom homes, all positioned above a secure basement car park.</p>

<p>Designed by <a href="https://www.apartments.com.au/architects/almeida-architects">Almeida Architects</a> with a strong connection to its coastal surroundings, Otium combines red brick, exposed concrete and dark metal detailing with integrated landscaping and greenery. Expansive glazing, generous balconies and terraces have been incorporated throughout the design to maximise natural light and reinforce indoor-outdoor living.</p>

<p>Inside, the residences feature engineered European oak flooring, natural and reconstituted stone benchtops, Bosch kitchen appliances, ducted heating and cooling, lift access and secure entry systems. The larger three-bedroom residences on the upper level have been designed with house-like proportions, while the two-bedroom apartments prioritise functionality, flexibility and low-maintenance living.</p>

<p>[smartcode_project:default project_id=134974 project_image_fid=5421]</p>

<p>The project is now in its final stages, with <a href="https://www.apartments.com.au/builders/labco">Labco</a> completing the remaining landscaping and external finishing works following the completion of the residences' interiors.</p>

<p>Otium's location within the heart of Parkdale continues to underpin its appeal. Residents will be just steps from local cafés, restaurants, shops and the newly elevated Parkdale Station, while the beach is less than a kilometre away.</p>

<p>With the project tracking ahead of schedule, buyers can currently secure a residence with a five per cent deposit and benefit from settlement terms of up to eight months. The advanced stage of construction also provides buyers with the opportunity to walk through the near-complete residences and experience the quality and finishes firsthand ahead of completion.</p>

<p>[smartcode_project_cta:default project_id=134974]</p>


Otium Parkdale enters final month before completion as rare apartment opportunity nears sellout

<p>A new boutique apartment development is entering the market in <a href="https://www.apartments.com.au/developments/chermside-qld-4032">Chermside</a>, with Brisbane-based developer <a href="https://www.apartments.com.au/developers/ausdev">Ausdev</a> bringing 33 residences to a well-connected pocket of Brisbane's north.</p>

<p><a href="https://www.apartments.com.au/new-apartments/parkdrive-apartments-chermside-25-sammells-drive-chermside-qld-4032">Parkdrive Apartments</a>, at 25 Sammells Drive, will comprise a mix of one- and two-bedroom residences positioned within walking distance of Westfield Chermside, The Prince Charles Hospital, and Bradbury Park.</p>

<p>Established in 1989, Ausdev has a long-standing presence across both development and construction, with Parkdrive Apartments representing its latest residential project in Brisbane's northern suburbs.</p>

<p>[smartcode_project:default project_id=152125 project_image_fid=363778]</p>

<p>The development has been designed around open-plan living and natural light, with residences featuring stone benchtops, timber cabinetry, BOSCH appliances, and private balconies that extend the living areas outdoors.</p>

<p>Kitchens are positioned as the centrepiece of the homes, incorporating natural material palettes and integrated appliances, while bathrooms have been designed with a focus on functionality and understated finishes.</p>

<p>Residents will have access to a communal barbecue and entertaining area on Level 3, providing shared outdoor space within the development. Secure parking and lift access are also incorporated into the building.</p>

<p>The project will deliver a limited collection of 33 apartments, with one-bedroom residences priced from $749,000.</p>

<p>[smartcode_project:default project_id=152125 project_image_fid=363782]</p>

<p>Beyond the building itself, the location places residents within easy reach of several of Chermside's key amenities. Bradbury Park is around 350 metres away, while Westfield Chermside is approximately 1.3 kilometres from the site. The Prince Charles Hospital is located within 750 metres, and the Chermside Bus Interchange is around 1.5 kilometres away, providing connections across Brisbane.</p>

<p>Parkdrive Apartments adds to the growing residential pipeline in Chermside, a suburb that continues to evolve as a major retail, healthcare, and transport hub for Brisbane's north.</p>

<p>[smartcode_project_cta:default project_id=152125]</p>


Ausdev introduces boutique Parkdrive Apartments to Chermside's growing centre

<p><a href="https://www.apartments.com.au/developers/skymark-group">Skymark</a>'s boutique Cronulla development Solis has secured a 10-year Latent Defects Insurance policy through Resilience Insurance, providing buyers of the 16-residence building on Ewos Parade with structural and waterproofing protection that extends a decade beyond the building's completion.</p>

<p>Currently under construction and due for completion in late 2027, <a href="https://www.apartments.com.au/new-apartments/solis-cronulla-8-ewos-parade-cronulla-nsw-2230">Solis</a> is one of a small number of new developments in the Sutherland Shire to carry Resilience LDI coverage, a distinction that carries increasing weight as buyer confidence in the off-the-plan sector continues to be shaped by how developers stand behind their product.</p>

<p>Latent Defects Insurance, which entered the Australian market in 2022 when Resilience Insurance was approved to offer the cover, protects buyers against major structural or waterproofing defects for ten years post-completion. Unlike traditional statutory warranties, it operates as a first-resort policy, if a covered defect arises, the insurer responds directly, without the buyer needing to pursue the builder or developer through a lengthy claims process.</p>

<p>Resilience Insurance CEO Corey Nugent has noted that the product addresses something fundamental to the new apartment market.</p>

<p>"The overarching feedback from prospective buyers in the new development space is that they want more confidence and assurances around the quality of the build," Nugent says.</p>

<p>"Resilience Insurance Latent Defects Insurance not only gives them complete peace of mind for 10 years, but it shows the developer they are buying from is standing by their product."</p>

<p>[smartcode_project:default project_id=150499 project_image_fid=370898]</p>

<p>For Solis, the Resilience LDI policy adds a meaningful layer of accountability to an already considered project. The development comprises nine two-bedroom and seven three-bedroom residences, including one dual-level three-bedroom apartment, across a five-storey building on Ewos Parade, positioned between Shelly Beach and South Cronulla.</p>

<p>Garden apartments connect directly to private landscaped courtyards, while upper-level homes capture beach views to the east from level four and above.&nbsp;</p>

<p>All 16 residences include at least one balcony or courtyard, and select apartments on the upper floors feature bar areas and secondary flexible living spaces.</p>

<p>Hiba Sander, Managing Director of Skymark, says Solis offers a rare balance, nestled between the quiet beauty of secluded beaches and the lively charm of South Cronulla's esplanade.</p>

<p>"It's a place to choose your pace and live gracefully, seaside'," Sander says.</p>

<p>[smartcode_project:default project_id=150499 project_image_fid=370900]</p>

<p>The architecture, designed by <a href="https://www.apartments.com.au/architects/ida-design-group">IDA Design Group</a>'s Michael Trinh, draws from the natural erosion patterns of <a href="https://www.apartments.com.au/developments/cronulla-nsw-2230">Cronulla</a>'s sandstone headlands, translating the organic forms of the coastline into soft curves, pavilion-style massing, and a material palette chosen for longevity in a salt-tinged environment.&nbsp;</p>

<p>Textured natural stone, soft renders, and timber-look battens reference the tones of the surrounding cliffs, while the building has been oriented to maximise natural light and passive ventilation, with primary living spaces facing north and east to capture morning sun and sea breezes.</p>

<p>"At Solis, our aim was to create architecture that feels quietly confident, grounded in natural materials like stone and timber, and elevated by light and landscape," Trinh says.&nbsp;</p>

<p>"The buildings are designed to sit gently within their coastal surrounds, with expansive glazing and abundant greenery creating a seamless dialogue between inside and out."</p>

<p>[smartcode_project:default project_id=150499 project_image_fid=370897]</p>

<p>Interiors by <a href="https://www.apartments.com.au/architects/hot-black">Hot Black</a> carry the same material language through to every room. Kitchens feature integrated Gaggenau appliances, sculpted stone benchtops, and Lo &amp; Co joinery, while bathrooms feature natural stone, timber, and brushed metal finishes.&nbsp;</p>

<p>Hot Black Founder and Design Director Sophie Safrin describes the intent as one of considered restraint: "At Solis, every detail has been thoughtfully considered to create a timeless coastal retreat, calm, refined, and effortlessly liveable. From natural finishes to seamless indoor-outdoor flow, Solis offers a quiet elegance that's deeply connected to its surroundings.</p>

<p>The landscape, designed by Julian Brady of <a href="https://www.apartments.com.au/landscape-architect/sitedesignstudios">Site Design Studios</a>, treats green space as an integral part of the resident experience rather than an afterthought.&nbsp;</p>

<p>"Gentle curves and layered native plantings mirror the ebb and flow of the ocean," Julian Brady says, "creating a serene connection between architecture and place."&nbsp;</p>

<p>Coco Republic has provided bespoke furniture packages tailored to the project's coastal palette.</p>

<p>[smartcode_project:default project_id=150499 project_image_fid=370899]</p>

<p>Skymark has an established track record in the Sutherland Shire, with a portfolio spanning Cronulla, Woolooware and Burraneer that includes Isla, Sylva, Bask, Shells, Sula and Mist. Securing LDI on Solis reflects a broader shift in how the developer is positioning its buildings to buyers, at a time when Resilience Insurance expects the policy to become mandatory in New South Wales by 2028.</p>

<p>Sales at Solis are launching soon through Ray White Projects, with an official event scheduled for 11 June. Enquire for more information.</p>

<p>[smartcode_project_cta:default project_id=150499]</p>


Skymark takes out 10-year Resilience Insurance LDI at Solis Cronulla

Labour Market

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<p>The rapidly improving labour market is likely to spur confidence and housing affordability, adding upward pressure to already strong house prices, according to Archistar chief economist Dr Andrew Wilson.</p>

<p>His comments come after the Australian Bureau of Statistics unveiled a sharp fall in jobless rates for February, to near-pre-COVID levels.</p>

<p>[smartcode_project:default project_id=27070]</p>

<p>“The unemployment rate has fallen sharply over February and is now remarkably within striking distance of pre-COVID shutdown levels, less than a year from the commencement of the pandemic.</p>

<p>“The ABS reports that the national unemployment rate seasonally adjusted fell sharply by 0.5% over February to 5.8% - the lowest rate since the pre-covid result of 5.2% recorded over March 2020.</p>

<p>“The number employed nationally has now almost recovered to pre-covid levels to be now down by just 1800 since March 2020."</p>

<p>[smartcode_project:default project_id=7758]</p>

<p>Dr Wilson noted all states reported falls in the jobless rate over February with QLD the best performer falling by 0.8%. NSW and VIC reported the lowest jobless rates at 5.6%.</p>

<p>“Capital city housing markets have recorded strong buyer demand this year so far with prices rising sharply – particularly in Melbourne and Sydney.," he said.</p>

<p>“And concerns over the possible significant negative impact on the economy of the tapering of the Job Keeper allowances at the end of this month will also likely to be to be misplaced – again.”</p>
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The rapidly improving labour market is likely to add upward pressure to already strong house prices, according to Archistar chief economist Dr Andrew Wilson.

jchancellor

Low unemployment to add upward pressure on house prices

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<h3 class="post-title entry-title"><a href="https://petewargent.blogspot.com.au/2016/11/labour-market-weakness-under-hood"></a></h3>
<div id="post-body-5100146898223249015" class="post-body entry-content">Let's begin with the good news, because I'm in a jolly good mood and don't want to spoil it.<br><br>It won't take long anyway, as there isn't really that much good news to report!<br><br><div>The unemployment rate ticked down to 5.35 percent in original terms, the lowest in well over three years.</div>
<div> </div>
<div>In seasonally adjusted terms the unemployment rate of 5.58 percent was the lowest in 42 months, and well below the 6.32 percent seen in January 2015 (click the graphics to expand, as always!).<br><br>
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<div>Drilling the trend line through the figures, the unemployment rate of 5.6 percent looks healthy enough. </div>
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<div>In New South Wales the trend unemployment rate has continued to decline to just 4.89 per cent, the lowest figure in nearly six years, while Victoria and Queensland are also moving in the right direction.<br><br>The trend hasn't caught up but Queensland's seasonally adjusted unemployment rate dropped to 5.8 per cent. Bonzer.</div>
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<div>Tasmania and Western Australia are heading the other way. </div>
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<br><div>Although not charted here due to their respective small sample sizes, the unemployment rates in the Northern Territory (3.5 per cent) and the ACT (3.4 per cent) are low. </div>
<br>OK, that's great. Now brace for the not-so-cheerful news....<br><br><div><strong><span style="text-decoration: underline;">"Jobs and growth?" Maaate...</span></strong></div>
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<div>Hiring is usually strong at this time of year, and total employment increased by about +78,800 over the last two months.</div>
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<div>After accounting for seasonality, however, this month's increase was only +9,800, although that figure did at least include a vast swing back to full-time employment of +41,500. </div>
<div> </div>
<div>This all sounds cool until we revisit what happened last month, which was a big seasonally adjusted drop in employment, while full-time employment is nearly 90,000 lower than at the beginning of the year.</div>
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<div>Looking through the noise, the trend in employment growth now looks poor. </div>
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<br><div>Another way to look at this is to view the annual trend employment change, which has dropped to +108,100, or an a trend annual increase of only +0.9 percent. </div>
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<br><div>The annual rate of employment growth is at its lowest level in 23 months and is now below the rate of population growth, and categorically 'not good enough'!</div>
<div> </div>
<div>Victoria has now cruised to the top of the employment growth charts, with Victoria (+107,300) and New South Wales (+46,100) accounting for more than all of the net employment growth over the past year.<br><br>Employment in Tasmania dived by -3,400 in October to be -4,300 lower than a year ago. </div>
<div> </div>
<div>Queensland employment fell by -16,900 in the month, and by -46,000 over the year. This month's result was a rogue statistic due to the sample rotation from September, though there's no question that employment in aggregate has weakened in the Sunshine State, led by resources-related job losses in locations such as Townsville. </div>
<div> </div>
<div>I'll look at the Queensland figures by region in more detail next week. </div>
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<br><div>Shadow Treasurer Scott Emerson highlighted that 67,600 jobs had been lost in Queensland since the beginning of the year and that "anyone who sees today's result as good news doesn't understand how tough it is to find a job in Queensland".</div>
<div> </div>
<div>He's right about the second part, but clearly he didn't read the commentary on the incoming sample and cocked up his numbers by calculating them from the end of January rather than the beginning. Maybe that was deliberate. Oh well, at least his job doesn't require strong numeracy skills! </div>
<br><strong><span style="text-decoration: underline;">The wrap</span></strong><br><div> </div>
<div>While the unemployment rate superficially looks positive, the participation rate is well down and now at the lowest level since early 2006. </div>
<div> </div>
<div>Despite a much improved monthly result, total hours worked - as useful an indicator as any when looking at a volatile survey - increased by only +0.9 per cent over the year to October, and less in trend terms. </div>
<div> </div>
<div>And despite the wild swing back to full-time employment this month, it's important to see through the monthly noise and understand that much of the growth in jobs has been part-time in nature over recent times.</div>
<div> </div>
<div>Therefore, we have the weakest nominal wages growth on record, some of the weakest non-tradables inflationary pressures on record, and weak employment growth across recent months. </div>
<div> </div>
<div>Sounds like the easing cycle isn't over to me, but markets remain tentative for now, and job vacancies figures have admittedly been solid enough.<br><br>I will just note that when the labour force report prints solidly most commentary states that it must be somehow wrong, yet when the figures are weaker (as they are now) they are instantly taken at face value!<br><br>Something to bear in mind if the headline figure snaps back up next month...</div>
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<div class="post-footer"> 
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
</div>
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pwargent-M4siyDbqQY

Labour market: weakness under the hood

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<p><span>'Tis an odd thing, by but the </span>Detailed Labour Force<span> figures are so often overlooked or ignored by market commentary, though fortunately not by everybody. Here's ex-Reserve Bank boffin and now ANZ market economist Justin Fabo.</span></p>
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<p><span><img src="/images/2015/10/26/Fabo.jpg" alt=""></span></p>
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<div>Indeed so, the employment data has improved significantly for Brisbane over the year to September 2015. Let's take a look at the latest figures in 3 short parts.</div>
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<p><strong><span style="text-decoration: underline;">Part 1 - Large states</span></strong></p>
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<div>Most employment growth over the last 12 months has taken place in Sydney (+68k) and Melbourne (+55k)...but lookee here, because hey presto, regional New South Wales is now creating jobs again (+55k)!<br><br>Regional New South Wales has seen jobs created particularly in Newcastle &amp; Lake Macquarie, the Hunter Valley and the Illawarra. On the other hand regional Victoria has seen total employment decline.</div>
<p><a href="/images/2015/10/26/LF1.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2015/10/26/LF1.jpg" alt=""></p>
<p><span>Looking at employment growth cumulatively in the two most populous states, we can see that the outlook in regional New South Wales has certainly improved, although the most employment is still created in the Greater Metropolitan area. </span></p>
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<p><span>Better still, the total figures reported for regional unemployment now seems to be declining again after a worrying surge through 2014.</span><br><br><span>This represents evidence that at least some of the fallout from mining and construction contract layoffs is now in the rear view mirror, at least from an employment perspective. While aggregate demand may still be in declining in some mining regions, many of those contracted for the construction phase of mining projects have now returned to the capital cities. </span></p>
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<p><span><img src="/images/2015/10/26/LF3.jpg" alt=""></span></p>
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<p><strong><span style="text-decoration: underline;">Part 2 - Brisbane bounce</span></strong><br><br></p>
<div>The other location which created a material number of jobs over the past year was Brisbane (+34k).<br><br>In fairness - while not charted here due to immateriality - Hobart's small labour market has also been picking up very nicely (+3k).<br><br>Not so much doing elsewhere.</div>
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<div><span>Piecing the jobs growth data together, over the past year the growth in employment has been almost entirely accounted for by Greater Sydney (30 per cent), Greater Melbourne (25 per cent), Greater Brisbane (15 per cent), and regional New South Wales (24 per cent).</span></div>
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<strong><span style="text-decoration: underline;">Part 3 - Unemployment dispersion</span></strong><br><br><div>The dispersion of unemployment rates across Australia continues.</div>
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<div>Amazingly enough Hobart recorded an unemployment rate of just 4.9 per cent in September, a remarkable turnaround as the Aussie dollar has depreciated, evidently boosting the local economy.<br><br>Unemployment has also declined steadily in Greater Brisbane (5.4 per cent) and Melbourne (6.3 per cent).<br><br>Meanwhile in Greater Sydney unemployment remains relatively low (5.3 per cent), though the Sydney result has been skewed higher by rising unemployment rates on the Central Coast, and in Blacktown.</div>
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<div>On the other hand, Perth (6.1 per cent) and Adelaide (7.6 per cent) have unemployment rates that remain in a clear uptrend.<br><br>Smoothing the original data on a rolling annual basis reveals the dispersion more clearly, with Hobart, Brisbane, and Melbourne showing the greatest improvement.</div>
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<div>I've been concerned about unemployment rates in a number of regional centres of the last year or two, so it has been pleasing to see the reported unemployment rates falling sharply in cities such as Geelong (4.8 per cent), Newcastle (5.1 per cent), the Hunter (7.3 per cent), though unemployment rates remain too high for comfort in a number of Queensland regions.</div>
<br><div>Greater Brisbane's unemployment rate has ticked down to 5.9 per cent on a 12mMA basis after some elevated readings at the beginning of 2015, despite an unemployment rate of above 9 per cent in Logan-Beaudesert.</div>
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<p><img src="/images/2015/10/26/LF7.jpg" alt=""></p>
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<p><span>On the other hand Greater Adelaide's unemployment rate is now tracking consistently at around 7.6 per cent or above, and has ticked up to 7.3 per cent on a 12mMA basis. </span></p>
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<p><span><img src="/images/2015/10/26/LF8.jpg" alt=""></span></p>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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Brisbane looking up: Pete Wargent

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<p>EXPERT OBSERVATION</p>
<p class="textspacebefore">The October Labour Force Survey surprised with a 19.0k decline in employment; the market median was for a 15k gain while the lowest forecast in the range was +7k.</p>
<p class="textspacebefore">And just a day earlier there was a disappointing update on wages.</p>
<p class="textspacebefore">While the rise in the September quarter Wage Price Index (WPI) was on market expectations at 0.5% it was below our forecast as we had been hoping that a combination of stronger wages growth in Victoria and the 3%yr rise in the minimum wage would have fed through to broader wage increases. That it has not, and now with signs the labour market is weakening, our forecast for a trend rising in unemployment suggests this is about as good as it will get for wages.</p>
<p class="textspacebefore">Wednesday saw the release of the wages update and while there were some signs of (fading) wage pressure, particularly in Victoria, we were disappointed to see that these wage pressures had not spread further. In the last year the average quarterly rise in the WPI was 0.6% but this is a soft 0.6% with rounding as the quarterly prints were 0.5% (Q4 2018), 0.6% (Q1 2019), then 0.5% in Q2 and Q3.  In September the annual rate eased a touch to 2.2% from 2.3%, a pace it had held for previous four quarters and was, at best, a very modest acceleration from the low of 1.9% in 2017.</p>
<p class="textspacebefore">It is true that public sector wages are running a bit faster; in the quarter the annual pace eased to 2.5%yr from 2.6%yr in the June quarter, which was the fastest pace since December 2015. However, the weight for public sector wages is not large enough to change the overall picture, with private sector wages matching total wages - the annual pace for private wages easing to 2.2%yr from 2.3%yr in the June. The 2.4%yr pace in March 2019 was the fastest pace of private sector wage inflation since December 2014. </p>
<p class="textspacebefore"><img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/OctNov2019/LFWagesPubPriv.JPG" alt=""></p>
<p class="textspacebefore">The state data did reveal some insights into wage dynamics but it also highlighted some significant questions. Much has been made of higher wage inflation in Victoria and how that it is associated with larger pay rises in the public sector, particularly for health workers. While it is true that health workers wage inflation is running faster in Victoria than the national average (4.3%yr vs 2.1% nationally and 3.0%yr NSW), this does not explain why construction, wholesale, accommodation &amp; food services, transport, media, and professional &amp; scientific services are also running at a faster pace than those industries' national averages.</p>
<p class="textspacebefore">In the end, Victorian private sector wages are running above the national average at 2.5%yr. Compare this to the 2.1%yr pace in NSW, 2.0% in Qld and 1.8% in WA. The only state with a faster pace of private sector wage inflation was SA at 2.6%yr.</p>
<p class="textspacebefore">As such, Westpac argues that the recent lift in wage inflation in Victoria was more to do with a tightening of labour market conditions there than outsized public sector wage gains. Victorian underutilisation fell almost 3ppt from early 2017 to early 2019. With a lag of around 6 months, this tightening in the labour market should lead a lift in wage inflation and, as expected, it did so from June 2017 with wage inflation lifting from 1.9%yr to a peak of 2.6%yr in June 2019.</p>
<p class="textspacebefore"><img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/OctNov2019/LFWagesUnderState.JPG" alt=""></p>
<p class="textspacebefore">The real question in our mind is why NSW wages have not responded in the same way they have in Victoria. Underutilisation was never as high in NSW as it was in Victoria (14% vs. 16%) and it has fallen to an even lower level currently (12% vs. 13%) and yet the best wages could do in NSW was lift from a low of 1.9%yr in 2016 to a peak of 2.3%yr in March 2019.</p>
<p class="textspacebefore">With wages in NSW responding to earlier tight labour market conditions, and growth turning, employment growth has started to soften, and with robust participation, unemployment is expected to drift higher both nationally and, in particular, in NSW.</p>
<p class="textspacebefore">This puts at risk Westpac’s current forecast of wage inflation drifting modestly higher from here -  peaking around 2.4%yr in 2020/2021, and given how well contained wage inflation is across the nation, and between sectors, this modest uplift  now looks optimistic. Note that the RBA recently lowered their forecast for the WPI in the November SMP (released prior to this week's WPI print). The RBA sees annual wages growth holding at just 2.3% through the forecast horizon.</p>
<p class="textspacebefore">The wage update was followed by the October Labour Force survey which highlighted the risk of softer employment growth, and rising unemployment (and underemployment). The 19.0k decline in employment was a significant surprise (market median +15k) as was that most of this decline was accounted for in NSW (–10.3k).</p>
<p class="textspacebefore">However, the more meaningful data point was the 0.1ppt rise in the unemployment rate to 5.3%. While participation eased as you would expect with a weak employment print, 66.0% from 66.1%, the unemployment rate still bumped up to 5.3% (5.32% at two decimal places) from 5.2%.</p>
<p class="textspacebefore">Our expectation has been for the unemployment rate to rise. That is despite an easing in the female participation rate, but that easing will be insufficient to offset the softer growth in employment.</p>
<p class="textspacebefore"><img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/OctNov2019/LFWagesPartRate.JPG" alt=""></p>
<p class="textspacebefore">Further pressure on the unemployment rate will come from a still robust participation rate amongst males.</p>
<p class="textspacebefore">Overall the interaction between our employment growth forecasts and participation outlook points to a lift to 5.6% in the unemployment rate by mid 2020.</p>
<p class="textspacebefore">Of further significance in the October Labour Force Survey was the jump in the underemployment rate to 8.5% (8.52% at two decimal places) from 8.3%. It was 8.54% back in August and the October update strengthens the trend drift higher in underemployment. This month there was a contraction in both full-time and part-time employment (–10.3k full-time and –8.7k respectively) driving a 0.2% decline in hours worked. This highlights a fundamental weakness in the report that is driving underemployment higher.</p>
<p class="textspacebefore"><img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/OctNov2019/LFWgesWunemp.JPG" alt=""></p>
<p class="textspacebefore">This trend drift higher in underemployment, and the slower pace of gains in hours worked compared to total employment (1.4%yr vs. 2.0%yr), reinforces the observation of the broader slack in the labour market slack beyond the 5.3% unemployment rate.</p>
<p class="textspacebefore">We do, however, acknowledge the month to month volatility in the labour force survey and while the October update was weaker than anticipated, it was not enough to change our view that the labour market is softening gradually which will drive a modest rise in unemployment and underemployment. Our leading indicators of employment are suggesting that the annual pace should be somewhere around 2.0%yr. The current pace is 2.0%yr and it is our forecast for it to slow to around 1%yr in mid-2020.</p>
<p class="textspacebefore">The Australian economy is a long way away from the RBA’s full employment aim of 4.5% and if the RBA wants to use monetary policy to drive the economy in that direction, it has a lot more work to do. However, the gradual pace of the deterioration will allow the RBA time to monitor the economy before having to act again.</p>
<p class="textspacebefore">In our view, while rate cuts along with the Government’s tax offset payments should help to support demand, we think it will be insufficient to get economic growth moving back to trend or above in 2020. As such we see employment growth continuing to moderate in early 2020 and expect that the resulting decline in participation will provide only a partial offset. We hold to our view that unemployment is likely to hit 5.6% by mid-2020 and see clear downside risks to our forecast for a modest lift in wage inflation.</p>
<p><em><strong>JUSTIN SMIRK</strong> is ‎a senior economist for Westpac </em></p>
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j.ballantyne1990-6AQqhLzZaK

Australian wages run out of puff just as the labour market starts to soften: Justin Smirk

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<p>The unemployment rate has remained unchanged at 5.2% according to the recent figures from the ABS.</p>
<p>The figure is in line with market expectations.</p>
<p>The RBA are trying to drive the unemployment rate down to 4.5%, however the RBA <span>believe it needs to below 5% in order for the economy to see adequate wage growth.</span></p>
<p><span>The number of unemployed persons edged higher, from 697,000 to 701,700.</span></p>
<p>The unemployment rate crept up slightly from 5.19% in May to 5.24% in June. It is now at its highest level in 10 months.</p>
<p>The unemployment rate dropped in Perth, however saw a rise in Victoria, Queensland, South Australia and Tasmania.</p>
<p>To see the state by state breakdown, <a href="https://www.propertyobserver.com.au/images/2019/7/18/ABS%20Unemployment%20figures.jpg" target="_blank">click here</a>.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/18/ABS%20Unemployment%20figures.jpg" alt=""></p>
<p>There were forecasts from economists that there would be around another 9,000 jobs added, following on from the increase of 45,300 jobs in May. </p>
<p>There were only 500 jobs added.</p>
<p>Full time jobs rose by 21,100, but part-time jobs fell by 20,600.</p>
<p>The trend participation rate increased to 66 percent over the month.</p>
<p class="p2"><span>ABS Chief Economist Bruce Hockman said, "Australia's participation rate was at 66 per cent in June 2019, which means nearly two of every three people are currently participating in the labour market. "</span><br><br><span>"The participation rate for 15 to 64 year olds was even higher and closer to four out of every five people, " Hockman said.</span></p>
<p class="p2"><span>CommSec economist Ryan Felsman said the Reserve Bank is expected to hold for now.</span></p>
<p class="p2"><span>"The Reserve Bank is expected to ‘sit pat’ for now, assessing incoming economic data over the coming months before deciding the next move for the cash rate," Felsman said.</span></p>
<p class="p2"><span>"But the Board stands ready to act, “if needed” to support the economy and job market. </span></p>
<p class="p2"><span>"The end-of-month June quarter inflation data release is the next test."</span></p>
<p class="p2"><span> </span></p>
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wdavis-8cCN98p7xp

Unemployment rate meets forecasts and remains at 5.2%

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<p class="article-details">EXPERT OBSERVER</p>
<p class="article-details">The RBA cut the cash rate to 1% and signalled that they will continue to adjust monetary policy if needed.</p>
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<p>As we expected, the Reserve Bank Board lowered the cash rate by 25bps to 1.00% at its July meeting. The motivation for this move is very much focussed on the labour market as was clearly indicated by the Governor’s recent speech.</p>
<p>In the decision statement, he pointed out that employment growth has been strong, the labour force participation rate is at a record level, the vacancy rate remains high, and there are reports of skill shortages in some areas. On face value, this would not be consistent with a concern about the labour market. But the Governor is now clearly focussing on spare capacity in the labour market, and that is measured by the unemployment rate, the underemployment rate, and wages growth. He believes that the Australian economy should be making more progress in reducing spare capacity and therefore a lower cash rate is consistent with that belief.</p>
<p>As we highlighted in our report last week, it seems likely that the RBA growth and inflation forecasts for 2020 that will be released in the August Statement on Monetary Policy, which will follow the August Board meeting, will be unchanged from the May forecasts of 2.75% for GDP growth and 2% for underlying inflation. This further emphasises the importance of the labour market in driving the policy response in June and July.</p>
<p>The critical final paragraph in the Governor’s Decision Statement leaves open the possibility of further stimulus. He notes that the Board “will continue to monitor developments in the labour market closely and adjust monetary policy if needed”. However, the degree of urgency that was certainly detected in the Governor’s recent speech and the June Board minutes appears to have eased. Consequently we remain comfortable with our view that there will be no follow up move in August.</p>
<p>Readers will be aware that Westpac was the first forecaster in the Bloomberg survey to call the cash rate below 1% (May 24). We predicted a final cash rate move to 0.75% by November, but highlighted that there were downside risks to 0.75%. Last week, we also noted that with the likely decision to cut in July, these downside risks had intensified. For now, we remain comfortable with our forecast that the next rate cut will occur in November, by which time the growth, inflation and labour market environment will not have improved sufficiently to satisfy the RBA. Indeed, by the November Statement on Monetary Policy, we expect that the RBA will have to lower its growth and inflation forecasts and raise its unemployment forecast for 2020, requiring a further policy response.</p>
<p>Critical issues between now and November will be evidence around the path of the unemployment rate, and the impact of this recent movement in the cash rate on financial conditions and the profile of the Australian dollar. The task of lowering the Australian dollar has recently been impacted by headwinds associated with general rate cuts by other major central banks around the world. However, without the RBA cuts, the Australian dollar may well have unhelpfully lifted.</p>
<p>As we noted last week, the intense focus on the labour market - where monthly updates are available - changes the historic pattern of policy adjustments. This has been exemplified in the June and July movements, and means that every month, certainly out to the end of 2019, will be live for policy. Issues that will also provide the RBA with reasons for caution will be around fiscal policy developments, particularly implications for household disposable income; the response of the housing market to the two rate cuts; and whether the consumer responds to tax cuts and lower rates with a robust spending appetite over the course of the second half of 2019.</p>
<p><strong>Conclusion</strong></p>
<p>When Westpac originally forecast two rate cuts in 2019 back in February, markets were only positioned for one cut by March 2020 and most major forecasters were still calling rates higher or on hold. We are therefore pleased to see that the forecast has proved to be correct. We were also the first forecaster to nominate a terminal cash rate lower than 1% (May 24), and that outlook has now been embraced by the market and most other forecasters. However with policy now in play at every Board meeting between now and the end of the year, uncertainties around specific timing are inevitable.</p>
<p>Our current view of one more cut this year by November has downside risks for potentially two, and developments over the next few months will determine that outcome. If the RBA were to lower the cash rate to 0.5% and still be dissatisfied with the excess spare capacity in the labour market then we expect that they will consider putting pressure on governments to loosen fiscal policy, as well as exploring other alternative policies that the RBA itself can embrace.</p>
<p><em>BILL EVANS is the Chief Economist at Westpac</em></p>
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July RBA cut was primarily for the labour market: Westpac's Bill Evans

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<p>The RBA Governor Philip Lowe has said the labour market is key to the three key objectives that the RBA has held for the last six decades.</p>
<p>Speaking at the Committee for Economic Development of Australia (CEDA) event, Lowe cited the three broad monetary policy objectives when the Reserver Bank Act was passed 60 years ago.</p>
<p>They were the stability of the currency, the maintenance of full employment and the economic prosperity and welfare of the Australian people.</p>
<p>"These objectives have remained unchanged since 1959," Lowe said.</p>
<p>He said that where other nation's will have focused solely on inflation, Australia have had a three aim approach.</p>
<p>He added however that from operational perspective the flexible inflation target is the centre piece of the monetary policy framework.</p>
<p>"The target – which has been agreed to with successive governments – is to deliver an average rate of inflation over time of 2–3 per cent.</p>
<p>"Our focus is on the average and on the medium term."</p>
<p>Lowe said it was obvious to see the labour markets connection with the second objective, full employment, however it was important in the other two objectives.</p>
<p><span>"Trends in the labour market have a major bearing on inflation outcomes, so they are important for the first element of our mandate [the stability of our currency] as well.</span></p>
<p>"The labour market is, of course, also central to the third objective in our mandate – our collective welfare," Lowe said.</p>
<p>"It is stating the obvious to say that for many Australians, having a good job at a decent rate of pay is central to their economic prosperity. </p>
<p>"The RBA is seeking to achieve the lowest rate of unemployment that can be sustained without inflation becoming an issue.</p>
<p>Lowe suggests there is still spare capacity in the labour market.</p>
<p>"Over recent times there has been a gradual accumulation of evidence which has led to lower estimates," Lowe said.</p>
<p>"While it is not possible to pin the number down exactly, the evidence is consistent with an estimate below five percent, perhaps around four and a half percent.</p>
<p>"Given that the current unemployment rate is 5.2 per cent, this suggests that there is still spare capacity in our labour market.</p>
<p>In the 1960s, less than one in ten workers worked part time (below). Today is it one in three.</p>
<div class="image-graph"><img src="https://www.rba.gov.au/speeches/2019/images/sp-gov-2019-06-20-graph1.gif" alt="Graph 1: Part-time Workers"></div>
<div class="image-graph">Around three million people work part time because they want to, not because they can't find a full-time job, according to the ABS.</div>
<div class="image-graph"> </div>
<div class="image-graph">"Most people who are working part time do so because they are studying or have caring responsibilities, or for other personal reasons," Lowe noted.</div>
<div class="image-graph"> </div>
<div class="image-graph">"So we should not think of part-time jobs as being <cite>bad</cite> jobs, and full-time jobs as being <cite>good</cite> jobs."</div>
<div class="image-graph"> </div>
<div class="image-graph">On the cash rate cut, Lowe said the decision was not in response to a deterioration in the economic outlook since the previous update was published in early May.</div>
<div class="image-graph"> </div>
<div class="image-graph">"Rather, it reflected a judgement that we could do better than the path we looked to be on."</div>
<div class="image-graph"> </div>
<div class="image-graph">To read Philip Lowe's full speech at CEDA, <a href="https://www.rba.gov.au/speeches/2019/sp-gov-2019-06-20" target="_blank">click here</a>.</div>
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jrobinson-rf4aSBido9

The labour market is fundamental to the RBA's three key objectives: RBA Governor Philip Lowe

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<p>EXPERT OBSERVATION </p>
<p>The minutes of the April monetary policy meeting of the Reserve Bank Board have provided the clearest signal yet that the Bank would be prepared to cut the cash rate.</p>
<p>Firstly, the final section “Considerations for Monetary Policy” states “a lower level of interest rates could still be expected to support the economy through a depreciation of the exchange rate and via reducing required interest payments on borrowing, freeing up cash for other expenditure”.</p>
<p>The Board even sets out the conditions for a rate cut, “members also discussed the scenario where inflation did not move any higher and unemployment trended up, noting that a decrease in the cash rate would likely be appropriate in these circumstances”.</p>
<p>Recently the latest quarterly breakdown of employment by industry printed for the year to February.</p>
<p>We have considered this industry breakdown to try to find some insights into the RBA’s “tension” between the GDP and Employment Reports.</p>
<p>For a start it is reasonable to separate out the employment data into “cyclical” and “non-cyclical” sectors.</p>
<p>We have looked at “non-cyclical” covering: public administration; education and training; health care; and utilities.</p>
<p>Cyclical sectors are considered to be the other thirteen including: construction; manufacturing; retail and wholesale trade; accommodation; transport; finance; mining; real estate; recreation; and media.</p>
<p>The “non-cyclical “group has increased as a proportion of total employment from 27.9% in February 2008 to 31.9% in February 2019. That 4% increase in share represents 510,000 jobs in today’s workforce.</p>
<p>The cyclical group has fallen as a proportion of the workforce from 64.6% in February 2008 to 59.4% in February 2019.</p>
<p>It is important to note that “public administration” has increased by 18% over the last year but we assess that a considerable part of that increase has been due to reclassification of health and education workers from “private” to “public”.</p>
<p>Because we are including public; education; and health in the noncyclical category the reclassification does not distort the results.</p>
<p>Finally we have one remaining category – “professional services”.</p>
<p>This group represents 8.7% of total employment covering: management consulting; computer system design; accounting services; legal services; and engineers.</p>
<p>This category represents 8.7% of total employment having increased from 7.4% in February 2008.</p>
<p>Consider Table 1 to assess whether there has been any evidence of the impact of the slowdown in growth in the economy on employment.</p>
<p>The table uses the six month annualised growth rate for jobs in the three categories (using a two quarter average to smooth the series).</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/19/New%20Project%207.jpg" alt=""></p>
<p>The following observations are relevant:</p>
<ul>
<li>As noted by the RBA, overall momentum in the jobs market has held fairly steady over the last 18 months despite the slowdown in economic growth (2.6% in the six months to February 2018 to 2.2% in the last six months).</li>
<li>However, momentum in the “cyclical” sectors has slowed markedly from 2.9% in the six months to February 2018 to –0.4% in the six months to February 2019.</li>
<li>Momentum in the “non-cyclical” sectors has lifted considerably from 1.5% to 5.6% over the same period.</li>
<li>The professional services sector has been booming. So the “puzzle” about the labour market is not as opaque as might be expected.</li>
</ul>
<p>Non-cyclical jobs (dominated by government) have been strong and this sector is increasing as a proportion of total employment.</p>
<p>Cyclical sectors are slowing markedly and are falling as a proportion of total employment.</p>
<p>Given the lags and the cautious outlook for growth, employment in these sectors is likely to continue to slow.</p>
<p>It is not clear whether the “professional services” sector best fits in the cyclical or the non-cyclical categories.</p>
<p>Certainly, strong government spending in the infrastructure space is likely to explain a considerable part of the success of this category; the sharp lift in government regulations is also supporting this sector.</p>
<p>Furthermore, there is also likely to be a structural element to the success of this sector as companies embrace technology to boost productivity and substitute labour.</p>
<p><strong>Conclusion</strong></p>
<p>The Board of the RBA has nominated the labour market as the key for the policy outlook.</p>
<p>We are disappointed that ongoing low inflation and the persistent need to lower growth forecasts seems to be out-weighed by the employment “story”.</p>
<p>Our analysis points to a marked slowdown in jobs growth already being well underway in the cyclical sectors of the economy.</p>
<p>We expect that eventual recognition of these facts will keep the RBA on track for our expected first rate cut in August.</p>
<p><em><strong>Bill Evans</strong> is Chief Economist at Westpac.</em></p>
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Cyclical jobs are slowing, complicating the RBA’s employment puzzle: Bill Evans

The state of the labour market: Guy Debelle, RBA deputy governor

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<p>EXPERT OBSERVER</p>
<p>As expected, the Board of the Reserve Bank decided to leave the cash rate unchanged at 1.50%.<br><br>There were very few changes in the Governor’s statement from the statement on August 7.</p>
<p>The Governor confirmed the central growth forecast for GDP growth to average “a bit above 3 per cent” in 2018 and 2019. Positive business conditions were noted but once again, “one continuing source of uncertainty is the outlook for household consumption”.</p>
<p>The rhetoric around the labour market was a little more upbeat. The unemployment rate at 5.3% was described as “the lowest level in almost six years”. Reports of skill shortages were noted and while wages growth was described as quite low, “it has picked up a little recently”. However despite that more positive assessment, the forecast for the unemployment rate remains unchanged to settle at 5 per cent “over the next couple of years”.</p>
<p>Since the last Board meeting, the Australian dollar had fallen from around USD 74.40 to USD 71.90. Furthermore, the Trade Weighted Index (TWI) had fallen from 63.5 to 61.8 (down 2.6%). This unusually large move prompted extra commentary on the AUD. It is still described as remaining within the two year range, but “it has depreciated against the USD along with most other currencies”. The move against the USD is around 3.3% compared to 2.6% for the TWI. It is a little surprising that the commentary seems to attribute all the weakness in the AUD to USD strength.</p>
<p>Since the August Board meeting, Westpac has increased its standard variable mortgage rate by fourteen basis points. It is interesting that the Governor continues to describe rates as “some lenders have increased mortgage rates by small amounts”.</p>
<p>The commentary around the housing market is unchanged with Sydney and Melbourne markets continuing to ease and housing credit growth declining to an annual rate of 5 ½ per cent.</p>
<p>The closing paragraph in the Governor’s statement is unchanged with the key commentary “further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual”.</p>
<p><strong>Conclusion</strong></p>
<p>Since the last Board meeting, Westpac extended its public forecasts to 2020. We expect the RBA to keep the cash rate on hold over the extended period. It is our view that the global economy, where growth appears to have peaked in 2017, will be slowing through 2020, particularly as the US economy slows under the weight of  further rate increases from the Federal Reserve and a curtailment of the fiscal stimulus..</p>
<p>The normal RBA policy of raising the cash rate at a time of strong global growth has been replaced in this cycle with other ways to tighten financial conditions. These have included macroprudential policies around banks’ mortgage books, and the rise in wholesale funding costs which has impacted the borrowing costs of banks, corporates, and in some cases, households.</p>
<p><em>BILL EVANS</em><em> is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.</em> </p>
<p> </p>
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