Overview:

• Australia’s population continues to grow very rapidly (+1.6% y/y), with growth again underpinned by strong net overseas migration. The increase of nearly 400,000 in the four quarters to June 2017 sees Australia’s population on track to hit 25 million in late 2018. That growth is nearly two Hobarts or three Toowoombas or Darwins.
• The growth in the population is an important underpinning to overall economic growth, ensuring demand for housing and infrastructure spending, the latter set to be an important source of Australian economic growth over the next few years, with NSW already recording strong infrastructure spending growth.
• Victoria’s population growth remains the standout among the states (+2.3% y/y), supported by overseas and interstate migration, though growth in NSW and the ACT also remains very strong. Tasmania is also benefiting from increased interstate migration from the mainland, while SA and NT continue to lose residents to other states, constraining their population growth rates.
• The big change in state population growth in recent years is the pick-up in population growth in evidence in QLD – and what looks like a possible bottoming in population growth in WA. QLD appears to be benefiting from increased flows out of NSW, a traditional flow that was reduced due to a weak labour market in QLD. The improvement in QLD employment prospects in recent times, coupled with once-again significant house price differentials should continue to support this pick-up.
• There are only a few events this week in Australia – today’s just released MYEFO mid-year update on Australia’s budget revealing better tax revenues from stronger employment and higher commodity prices and slower spending growth. That’s more good news for the Government. Tomorrow sees the Minutes from the RBA December Board meeting, though with very little change in the post-Board Statement, it would be a surprise to see much new in the Minutes. RBA Governor Lowe recently said there was no strong case for any early change in monetary policy, though NAB expects the RBA to move rates up around half a percent in the second half of 2018 as the unemployment rate falls more noticeably.
• This is the last AMW for 2017 – AMW will return on 15 January. Australian events over the Christmas break include: 21 Dec (detailed November labour force data including the industry composition of employment growth in recent quarters –though these are very volatile), 29 Dec (Credit for November); 5 Jan (Trade Balance, which should bounce back a little due to stronger iron ore volumes and higher coal prices); 9 Jan (Building Approvals – will the current improvement continue?) and 11 Jan (Retail Sales). The iPhone boosted US and UK retail sales in November, so this will likely also be a factor in Australia, though we suspect the ABS is also missing some on-line spending, which works in the other direction.
• NAB would like to wish those readers celebrating holidays a safe and happy festive season and we look forward to your support again in 2018.

For full analysis, download the report:

• Australian Markets Weekly: 18 December 2017 (PDF, 120kb)

For further FX, Interest rate and Commodities information visit nab.com.au/nabfinancialmarkets