Hunter economic update - February 2015

The Hunter’s Economic Green ShootsDr Alan Rai – Principal Economist

HUNTER ECONOMY’S

PERFORMANCE

• Still feeling the effects of

end of mining boom

– unemployment remains high

• But green shoots exist!

– Lower A$: boosts our exporters

(e.g. wine; coal; tourism)

• Other green shoots:

– low (maybe lower) interest rates

– lower oil and petrol prices: the Hunter is a net oil importer

• Improving business and consumer confidence

UNEMPLOYMENT

HRF’s YOUnite summit: employment; engagement; education

SOMEWHAT STEADIER

0

5

10

15

20

0

5

10

15

20

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul

Unemployment rates (%)

Hunter Youth

Hunter

Source: ABS

NSW

2010 2011 2012 2013 2014

HOUSE PRICES IN…?

All Hunter LGAs…

90

100

110

120

130

90

100

110

120

130

Jun Dec Jun Dec Jun Dec Jun Dec

June 2011 = 100

Sources: HRF; REINSW

2011 2012 2013 2014

Rest of Hunter: most affected by mining downturn

HOUSE PRICES CLOSE TO HOME

90

100

110

120

130

90

100

110

120

130

Jun Dec Jun Dec Jun Dec Jun Dec

Median house prices

Sources: HRF; REINSW

Lake Macquarie

LGA

Newcastle

LGARest of the

Hunter

Port Stephens LGA

2011 2012 2013 2014

Time for audience

participation!

HOW LOW CAN IT GO?

0.4

0.8

1.2

1.6

2

40

80

120

160

200

Apr May Jun Jul Aug Sep Oct Nov Dec Jan

Fuelling our economy

WTI

(LHS)

Sources: Australian Institute of Petroleum; HRF; US Federal Reserve Bank of St Louis

2014 2015

A$/

litre

Current ULP price: $1.10/litre (50c fall since April 2014)

LOWER PRICE OF BLACK GOLD

0.4

0.8

1.2

1.6

40

80

120

160

Apr May Jun Jul Aug Sep Oct Nov Dec Jan

Petrol and oil prices

Sydney ULP

(RHS)

Crude oil

(LHS)

Newcastle ULP

(RHS)

Sources: Australian Institute of Petroleum; HRF; US Federal Reserve Bank of St Louis

2014 2015

US$/barrel

A$/litre

HOW DO LOWER OIL PRICES

IMPACT THE HUNTER?

• Negative impact on oil & gas sectors

– but, these are small employers in the Hunter

• Negative impacts offset by positive impact on

consumers and other businesses

– 50c fall in ULP price: ~2% cut in personal income tax rates!

– lower input costs for Hunter businesses and a chance to

boost profitability

Pro Con

Consumer $30/week better off Lower employment in energy sector

Businesses Lower cost of inputs Hurts energy producers (e.g. LNG)

Time again for

audience participation!

Clue: ages very gracefully

EXPORTS OF…?

0

30

60

90

120

150

0

500

1000

1500

2000

2500

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul

2011 2012 2013 2014201020092008

Hunter brands target the premium end

IN VINO VERITAS

0

30

60

90

120

150

0

500

1000

1500

2000

2500

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul

Australian Wine Exports ($m)

2011 2012 2013 2014201020092008

* Wine with a minimum price of A$50 per litre.

Sources: Australian Grape and Wine Authority; HRF

Premium wine*

(RHS)

All wine

(LHS)

Lower $A: inbound travel cheaper vs. outbound travel

TOURISMANOTHER BENEFICIARY OF A LOWER $A

0

0.5

1

1.5

2

2.5

3

0

2

4

6

8

10

12

2006 2007 2008 2009 2010 2011 2012 2013 2014

Visitors to the Hunter Region

Number of people

(million, LHS)

Expenditure

($bn, RHS)

Source: Destination NSW

Confidence boosters: lower oil prices; lower $A

CONSUMER’S ANIMAL SPIRITSIMPROVING

0

0.1

0.2

0.3

0.4

0.5

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

Improving consumer sentimentExpectations for future finances

Source: HRF

Next 3 months

Next 12 months

Source: HRF

HRF’s business & consumer surveys: a unique Regional asset

BUSINESS PERFORMANCESTRENGTHENING

-0.1

0

0.1

0.2

0.3

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

Better business performance

Source: HRF

>0: improving, <0: worsening

Prior three months

Next 12 months

Source: HRF

GREEN SHOOTS ARE EVIDENT

• Lower AUD: a green shoot

– will help our manufacturers

and exporters (e.g. wine,

tourism)

• Other green shoots:

– low interest rates (for

borrowers)

– lower oil and petrol prices: the Hunter is a net oil importer

– improving business and consumer circumstances

• BUT: unemployment remains high

– especially for our young people

– Our YOUnite summit (Feb 25) looks at the “three E’s”

Delivering insights that move the Hunter forward

Thank you