For the full details, download the full report: Australian Markets Weekly 12 November 2018

• The weekend’s preliminary weekly CoreLogic clearance rates for Sydney and Melbourne of 48.4% and 48.3% respectively, suggest that when Thursday’s final weekly rates are released, they’ll not be far from 42.5%/45.5%. The resale market remains soft, as buyers stay away. Further, auction volumes continue to run at the low end or below, recent year turnover ranges for this time of the year.
• CoreLogic’s high frequency resale hedonic prices unsurprisingly continue to decline. So far in the month, Sydney prices are down 0.4%, Melbourne prices are down 0.2%; taking Sydney to down 7.5% y/y and Melbourne to down 5.0% y/y. These are still small declines relative to previous rises and defy media headlines of collapse.
• This week we also take a wider look into housing developments. We summarise how the current cycle is playing out in terms of prices, activity and prospective demand.  It’s hard to deny the resale market seems soft and the dwelling construction pipeline looks likely to shrink in coming months as building approvals continue to fade.
• The wheels are now in motion for dwelling investment to become a drag on Australia’s economic growth in 2019. NAB’s forecast of 2.7% y/y GDP growth for 2019 incorporates a 5.3% y/y decline in dwelling investment, following our expectation of a 2.7% rise over 2018.
• This week the market will be paying close attention to a trio of important releases. First is the NAB Business Survey for October tomorrow, followed by the Wage Price Index for Q3 on Wednesday and the Labour Force report for October on Thursday.
• After a rise last week and at times testing 0.73, the AUD opens this week closer to 0.72, pulled back by a risk-averse session on Friday night and some renewed demand for the USD. While market sentiment will no doubt be important, this week’s key Australian wages and unemployment releases could have an important influence.
• Wages will again by dissected to gauge whether there is any evidence that wages are edging higher, NAB (and the market) looking for annual growth to rise from 2.1% to 2.2% (2.3%). The NAB Business Survey and the Labour Force release provide their own slants on growth momentum into the December quarter and the degree of spare capacity. NAB expects above-market employment growth (+25k vs mkt: +20k), coming with an unemployment rate we expect to remain steady at 5.0% aided by significant sampling rotation effects (exiting sample having a 5.6% unemp. rate).
• Offshore, Wednesday’s trio of Chinese October economic activity releases will be dissected both from the point of view of any tariff impacts as well as early flow through of policy stimulus. In the US, Fed Chair Powell is speaking on Wednesday, offering the opportunity to reflect on the emergence of inflation and the growth outlook with the Mid Term elections concluded. US CPI and Retail Sales are also due.

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