1. society
2. work
3. unemployment

30 March 2015
Australian Markets Weekly
A weekly outlook for Australia, key global economies and markets
Building boom continues
Chart 2: Australia’s growth outlook
Sport and real estate are usually two of the first topics for
discussion on Monday mornings. Australia’s resounding defeat
of NZ in yesterday’s Cricket World Cup is all over the press as
you’d expect and top of mind this morning. Commiserations
this morning to the Black Caps and their supporters. The Kiwi
cricket team had their best World Cup, only stumbling in
the final match in the face of a stellar bowling attack. A big
congrats to the Australian cricket team that played superlative
cricket just at the right time, bringing Australia’s World Cup
win to five.
But it’s the stories of continued foreign interest in the local
real estate market that has this writer’s professional attention
this morning in a week populated with key data on Australia’s
housing market. The press has examples of ever-lofty prices
being still paid for particular properties together with new
apartment developments that is getting more press coverage
at the start of this week.
Chart 1: Victoria’s development switch to high rise
Source: NAB, Macrobond
What caught this writer’s eye in the local press this morning
was a story of a new apartment/ hotel development in
suburban Box Hill. (Box Hill is 20km from the CBD for those
interstate readers not that familiar with Melbourne’s suburban
geography). Development approval has been given for
Key markets over past week
AUD
AUD/CNY
AUD/JPY
AUD/EUR
AUD/NZD
Last
0.7724
4.80
92.1
0.710
1.025
% chg
week
-2.0
-1.0
-1.5
-1.1
-0.2
RBA cash
3y swap
ASX 200
WTI oil
Gold
Source: Bloomberg
National Australia Bank Research - March 2015
bp / %
chg week
Last
2.25
0
2.05
-5
5,841
-1.9
48.6
2.5
1,197.2
0.7
Source: NAB, Macrobond
Melbourne’s tallest suburban high-rise comprising a 36- and
26-story dual tower development, the press reporting that
the local Council is expected to soon approve this 115m twin
towers development. If approved, there’s another sizeable
addition to Victorian apartment building approvals in April a
trend that’s already apparent through the ABS data to January.
Such new developments are adding to an already enlarged
pipeline of residential dwelling approvals with another
monthly update coming in the ABS’s release of February
Building Approvals this Wednesday. National approvals rose
very strongly in January and while some monthly payback
is tipped, stories such as the above can only add support to
the view that dwelling investment will be playing its part to
support the economy and employment growth in 2015 and
2016. Be mindful too that for the past four months, building
approvals have been consistently stronger than expected, the
consensus of economists’ expectations underestimating the
further rise in approvals.
NAB’s Australian economy forecast of 2.9% GDP growth over
the course of 2015, picking up to 3.3% growth through 2016
encompasses 11.2% growth in dwelling investment through
this year, and 6.9% forecast through 2016. Such growth
contributes 0.5% points to growth through this year and 0.4%
through 2016.
Allied to the building approvals data for February, this week
also sees release of the March month house price report from
CoreLogic RP Data.
This past weekend’s report revealed a further 0.2% rise for the
five capitals (the monthly report also includes the remaining
three state/territory capitals), bringing the movement over
the past month to a still hefty 1.2%, a similar figure likely in
Wednesday’s monthly report.
| 1
Sydney is still leading out front with prices up an estimated
2.7% for March, bringing the year to date rise for Sydney to
5.7%. Melbourne prices, while down 0.2% in the latest week
have risen 0.6% in net terms through the past month and a
cumulative 3.5% so far this year. Other capital city prices have
been mixed-to-lower this year, testimony to the disjointed
nature of capital city dwelling price developments.
January growth had been driven by slightly stronger business
credit growth (+0.8% m/m and 5.5% y/y), but in February the
focus will remain on the housing story. Overall housing credit
increased 0.6% in January and 7.1%yoy, with owner-occupied
housing credit up 0.5% (5.7%yoy) and investor lending up
0.8% (for annual growth of 10.1% which APRA has guided
should not be exceeded).
Ahead of the house prices and building approvals data on
Wednesday comes HIA new home sales are released tomorrow
as well as the RBA credit data, both for February.
Meanwhile, as for the detail of building approvals data on
Wednesday are forecast to ease 3% in February after the
7.9% rise in January, which had been boosted by a 19.6%
surge in approvals to build apartments (mainly in QLD and
SA). Approvals for houses also recorded a second consecutive
slight uptick in January (+0.4% m/m). As we outlined above,
don’t be surprised if this release again surprises on the strong
side.
Tax Reform Paper
Tax reform is also getting plenty of airplay today, Federal
Treasurer Hockey this morning releasing a Tax Discussion Paper
(you can see it here) that forms the basis for another review
and reform of Australia’s tax system, with a Government’s
stated goal to deliver “lower, simpler and fairer taxes” through
a “comprehensive and transparent national conversation
between the community and the Government”.
The process now is that this discussion paper opens the
door for submissions from any interested parties with views
outlined in an options (green) paper due in the second half of
2015, before “Government then sets out its reform proposals
in a white paper, and takes them to the next election in 2016”.
Submissions are due by Monday 1 June 2015.
Revised US rate views
Also enclosed with the Weekly is a paper from our US economy
specialist Tony Kelly outlining a revised Federal Reserve rate
forecast track. NAB expects that while the first increase in the
fed funds rate is still expected in June, the risk of it being later
has risen.
More importantly than the start date NAB has revised its fed
funds rate projections to have a slower rate of increase in 2015
and 2016, and we expect the tightening cycle to end lower at
3.50% (3.75% previously).
Chart 3: Market priced for more RBA easing
Source: NAB, Macrobond
More on this week key releases
It’s been a quiet couple of weeks, but now the local data flow
heats up ahead of the RBA Meeting on 7 April. Private credit
growth is being released tomorrow and we look for a 0.5%
increase in February, after the solid 0.6% growth in January.
National Australia Bank Research - March 2015
Along with the CoreLogic RP Data house price report for
March comes NAB’s Consumer Anxiety Report on Wednesday,
while on Thursday the NAB’s Online Retail Index for February
is due, ahead of the retail sales data on 7 April.
February international trade is released on Thursday, where
we expect to see a large increase in the deficit. From -$980m
in January, we expect to see a 2% rise in imports, and a 1% fall
in exports, leading to a bigger deficit of -$1800m.
China PMI and US payrolls due
For China, after the downside surprise on the flash HSBC
manufacturing PMI this week, the official manufacturing and
non-manufacturing PMIs on Wednesday will be noteworthy.
The official manufacturing index is seen slipping to 49.7
from 49.9 in February (the HSBC version, recall, fell to 49.2
from 50.7). The final HSBC manufacturing PMI will be out
Wednesday and their Services reading on Friday.
For the US, it’s the usual ultra-keen market interest in the
monthly US employment data, out on Good Friday, and
complicated by the fact that a number of markets will be closed,
potentially adding to market volatility in those markets that
are open. As well as headline non-farm payroll employment
(expected at +250K) and the unemployment rate (expected to
be unchanged at 5.5%), there will also be keen interest in the
average hourly earnings component, seen rising by 0.2% (and
consistent with annual growth being steady at 2.0%).
After what seems like an endless stream of FOMC speakers,
we are due to hear from a few more in the coming week, the
most interesting will be those we haven’t heard from since the
FOMC such as George (non-voter, hawk) and of course Janet
Yellen speaking early this Saturday morning local time (06:45
AEDT), though the clear message on the rates outlook from
here speech on Friday is, as my colleague Ray Attrill has noted
is S-L-O-W. Her speech comes after the release of the March
payrolls report.
[email protected]
| 2
Calendar of Economic Releases
Time
Country Economic Indicator
Period
Monday, 30 March 2015
JN
Industrial Production MoM
Feb P
UK
Net Consumer Credit
Feb
EC
Economic Confidence
Mar
GE
CPI MoM/YoY
Mar P
US
Personal Income/Spending
Feb
US
PCE Deflator MoM/YoY
Feb
US
Pending Home Sales MoM
Feb
Tuesday, 31 March 2015
NZ
Building Permits MoM
Feb
NZ
HLFS Revisions
AU
ANZ Roy Morgan Weekly Consumer Confidence Index
Mar-29
US
Fed VC Fischer speaks on Monetary Policy and Stability in Georgia (V)
AU
HIA New Home Sales MoM
Feb
NZ
ANZ Business Confidence
Mar
AU
Private Sector Credit MoM/YoY
Feb
NZ
Household Credit YoY
Feb
GE
Unemployment Rate
Mar
UK
GDP QoQ/YoY
4Q F
EC
CPI Estimate YoY
Mar
EC
CPI Core YoY
Mar A
US
Fed's Lacker Speaks on the Economic Outlook in Richmond (Alt)
CA
GDP MoM/YoY
Jan
US
Fed's Lockhart Gives Welcome at George Conference (Alt)
US
S&P/CS 20 City MoM SA
Jan
US
Chicago Purchasing Manager
Mar
US
Consumer Confidence Index
Mar
US
Fed's George Speaks in New York (NV)
Wednesday, 1 April 2015
AU
AiG Perf of Mfg Index
Mar
AU
CoreLogic RP Data House Px MoM
Mar
AU
NAB Consumer Anxiety Report
1Q
JN
Tankan Large Mfg Index
1Q
AU
Building Approvals MoM
Feb
CH
Manufacturing PMI
Mar
CH
Non-manufacturing PMI
Mar
JN
Markit/JMMA Japan Manufacturing PMI
Mar F
CH
HSBC China Manufacturing PMI
Mar F
GE
Markit/BME Germany Manufacturing PMI
Mar F
EC
Markit Eurozone Manufacturing PMI
Mar F
UK
Markit UK PMI Manufacturing SA
Mar
US
ADP Employment Change
Mar
US
Fed's Williams Moderates Panel on Financial Stability (Alt)
CA
RBC Canadian Manufacturing PMI
Mar
US
Markit US Manufacturing PMI
Mar F
US
ISM Manufacturing
Mar
US
Fed's Lockhart Leads Panel on Banks and Monetary Policy (Alt)
Thursday, 2 April 2015
NZ
Dairy Auction
NZ
QV House Prices YoY
Mar
AU
TD Securities Inflation MoM/YoY
Mar
NZ
ANZ Commodity Export Prices
Mar
AU
Job vacancies
Feb
AU
Trade Balance
Feb
AU
NAB Online Retail Sales Index
Feb
CA
Int'l Merchandise Trade
Feb
US
Initial Jobless Claims
Mar-28
US
Trade Balance
Feb
US
ISM New York
Mar
US
Factory Orders
Feb
Friday, 3 April 2015
Good Friday Easter Holiday
CH
HSBC China Services PMI
Mar
US
Fed's Kocherlakota Gives Welcome Remarks at DC Conference (V)
US
Change in Nonfarm Payrolls
Mar
US
Unemployment Rate
Mar
US
Average Hourly Earnings MoM/YoY
Mar
Sunday, 5 April 2015
AU
Daylight Saving Ends, -1hr to GMT+10:00
NZ
Daylight Saving Ends, -1hr to GMT+12:00
NAB
Forecast
Consensus
Previous
GMT
AEDT
3.7%
0.8B
102.1
0.9%/0.1%
0.3%/-0.2%
-0.5%/0.2%
1.7%
23.50
8.30
9.00
12.00
12.30
12.30
14.00
10.50
19.30
20.00
23.00
23.30
23.30
1.00
-3.8%
21.45
21.45
22.30
23.15
0.00
0.00
0.30
2.00
7.55
8.30
9.00
9.00
12.00
12.30
12.50
13.00
13.45
14.00
19.00
8.45
8.45
9.30
10.15
11.00
11.00
11.30
13.00
18.55
19.30
20.00
20.00
23.00
23.30
23.50
0.00
0.45
1.00
6.00
45.4
0.3%
22.30
23.00
9.30
10.00
49.4
52.4
51.9
54.2
230K
12
7.9%
49.9
53.9
50.4
49.2
52.4
51.9
54.1
212K
55.1
52.8
48.7
55.3
52.9
23.50
0.30
1.00
1.00
1.35
1.45
7.55
8.00
8.30
12.15
13.00
13.30
13.45
14.00
14.30
10.50
11.30
12.00
12.00
12.35
12.45
18.55
19.00
19.30
23.15
0.00
0.30
0.45
1.00
1.30
-1288M
-8.8%
6.4%
0.0%/1.3%
7.3%
2.6%
-980M
23.00
23.30
0.00
0.30
0.30
0.30
12.30
12.30
12.30
13.45
14.00
early AM
10.00
10.30
11.00
11.30
11.30
11.30
23.30
23.30
23.30
0.45
1.00
13.00
1.45
12.30
12.30
12.30
12.30
12.45
23.30
23.30
23.30
23.30
-1.50%
0.9B
103
0.4%/0.2%
0.3%/0.2%
0.2%/0.3%
0.7%
Actual
111.4
0.5%/6.3%
0.5%/6.3%
6.50%
0.5%/2.7%
-0.30%
0.70%
1.80%
34.4
0.6%/6.2%
4.80%
6.5%
0.5%/2.7%
-0.30%
0.70%
0.3%/2.8%
0.7%
52.8
96.5
-3.0%
-1800M
14
-4.0%
49.7
-1.80B
-$41.0B
0.5%
0.9%
45.8
96.4
-2.45B
282K
-$41.8B
63.1
-0.2%
52
253K
5.5%
0.2%
295K
5.5%
0.1%/2.0%
Upcoming Central Bank Interest Rate Announcements
Australia, RBA
Japan, BoJ
UK BOE
Europe ECB
Canada, BoC
US Federal Reserve
New Zealand, RBNZ
7-Apr
8-Apr
9-Apr
15-Apr
15-Apr
29-Apr
30-Apr
2.25%
0.0%-0.1%
0.50%
0.05%
0.0%-0.1%
0.50%
0.05%
0%-0.25%
3.50%
0%-0.25%
3.50%
2.25%
0.0%-0.1%
0.50%
0.05%
0.75%
0%-0.25%
3.50%
GMT: Greenwich Mean Time; AEDT: Australian Daylight Saving Time
National Australia Bank Research - March 2015
| 3
Global Markets Research
Group Economics
Peter Jolly
Global Head of Research
+61 2 9237 1406
Alan Oster
Group Chief Economist
+61 3 8634 2927
Australia
Economics
Ivan Colhoun
FX Strategy
Ray Attrill
Interest Rate Strategy
Skye Masters
Head of Interest Rate Strategy
+61 2 9295 1196
David de Garis
Senior Economist
Emma Lawson
Senior Currency Strategist
+61 2 9237 8154
Rodrigo Catril
Interest Rate Strategist
+61 2 9293 7109
Credit Research
Michael Bush
Equities
Peter Cashmore
Products and Markets, Hong Kong
Christy Tan
Chief Economist Markets
+61 2 9237 1836
+61 3 8641 3045
Head of Credit Research
+61 3 8641 0575
Global Co-Head of FX Strategy
+61 2 9237 1848
Senior Real Estate Equity Analyst
+61 2 9237 8156
Head of Markets Strategy/Research Asia
+852 2822 5350
Simon Fletcher
Senior Credit Analyst – Fls
+61 2 89237 1076
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National Australia Bank Research - March 2015
| 4