Demographic trends remain growth supportive

• This week, we focus on the latest demographic trends for Australia (full chart pack attached). While population growth has slowed, at 1.4% y/y, growth remains elevated by historical and international standards and provides a sound underpinning for GDP growth. Population growth remains strongest in the non-mining states of Victoria (nearly 2% y/y – nearly 115,000 new Victorians in the past four quarters) and NSW (1.3% y/y – or 103,000). Strong net overseas migration continues to underpin population growth in these states. And while net overseas migration to WA and QLD has slowed as the mining boom eased, this trend appears to now have stabilized. The other trend worth noting is a strengthening in net interstate migration to Victoria and Queensland. More people are leaving WA, while the traditional flow of population from NSW to Queensland seems to be picking up again possibly reflects house price differentials.

• On population ageing, the number of deaths has been rising (158K in the past year), along with stronger growth in numbers in the 65-74 year old category. That said, immigration and stronger births (304,000 in the past four quarters) mean that growth in the important 25-34 year old age category is broadly matching retirements. There is also strong growth in the very young (0-14).

• The past week saw the Bank of Japan introduce another variant to its QE program – this time QQE with Yield Curve Control (targeting both the slope and the broad level of 10-year yields to ensure the negative impacts of its negative interest rate policy are contained). Other central banks also seem to be stepping up the rhetoric that fiscal policy should play a greater role in supporting growth. That said, the Fed preferred to wait for further information on progress toward its inflation and employment mandates, despite noting that the case for tightening had strengthened in recent months, with 3 dissenters for an immediate tightening. The RBNZ also seems intent on cutting interest rates further, most likely at its November meeting, in spite of continuing strong data.

• This week seems relatively quiet on the data front both internationally and especially in Australia. The main focus will be on the first Presidential debate (today), a raft of Fed speakers over the week and the OPEC meeting in the early part of the week. Australia has public holidays on Friday (Victoria) and next Monday (NSW). The following week is likely to be more important for markets with the release of the US ISMs, the latest non-farm payrolls report along with Australian retail sales and building approvals data. The RBA is expected to leave rates unchanged in October (and by NAB until mid-2017).

For full analysis, download report:

• Australian Markets Weekly:  26 September 2016(PDF, 115kb)
• Population Q1 2016 (PDF, 1MB)

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

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