Australian Markets Weekly: 20 November 2017

Medley: labour market, state GSP, housing, and Amazon.

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Overview:

  • Labour markets remain under close focus by central banks and economists. Last week’s local wages and employment/unemployment reports reflected still overall healthy employment markets but benign wages growth. The Wage Price Index recorded no growth acceleration, even with the Minimum Wage rise taking effect.
  • This week, in a medley of reports, we delve further into the state of the labour market, state economic growth for 2016-17, and cooling Eastern seaboard housing markets. Amazon is also expected to launch locally, quite possibly this week.
  • Labour demand indicators continue to run at generally high levels, suggestive that trend employment growth will continue for the next one to two quarters at levels that should exert downward pressure on the unemployment rate over time. This is complemented by NAB’s analysis of SEEK data that shows declining candidate availability (relative to positions).
  • Despite increase employment and high vacancy levels, wages growth remains low. There is though evidence that salaries for new jobs on offer are rising. It’s unclear whether this is an early lead that salaries more broadly will rise or whether other factors are at play is not known. To date, reports suggest employers are “holding out for longer” rather than “paying up” other than selectively, and even facing a lack of suitable staff.
  • The Statistician released the State national accounts on Friday. This brought into focus again the current East-West growth divide. For 2016-17, growth was above average in NSW and Victoria, while the WA economy contracted.
  • This weekend’s auction and price data from CoreLogic points to still cooling housing markets in Sydney and Melbourne. Sydney’s auction clearance rate was likely still below 60% and Melbourne’s in the 60s. Prices are cooling.
  • Consumers, retailers and suppliers will also be alert to an announcement from Amazon on its local kick off as early as this week with speculation it could be as early this Friday, also known as Black Friday in the US, the day after Thanksgiving.
  • This week, the market’s focus turns to a speech from RBA Governor Lowe tomorrow night titled “Some evolving questions”. The market will be especially alert to any thoughts from the Governor, including after last week’s wages data. Wednesday’s Construction Work Done is likely to be distorted by the inclusion of two major imported LNG facilities, technically boosting Construction, but not GDP.
  • Offshore, it’s a week shortened by Thanksgiving Day in the US, with interest in the Fed Minutes and a Yellen speech. The market has priced in an almost certainty for a December hike but that’s where divergences emerge between the market and the Fed own “dot plots” (2½ hikes for the market versus four from the Fed). The ECB is also releasing its 26 October Minutes when it was disclosed that the decision to leave further open-ended bond buying was not unanimous.

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