Bentleys: WA Economic Update November 2016

Welcome to

Bentleys key client

Economic Update

Presented by Bankwest

1st of December 2016

Alan Langford

Chief Economist

Bankwest

Accountants AdvisorsAuditors

10-Year Government Bond Yields

Jan 80 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Nov 16

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

months

pe

r c

en

t p

er

an

nu

m

Australia

US

Australia only - 2016

J F M A M J J A S O N D1.8

1.9

2

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

days

sources: RBA, Fed, Bloomberg


90-Day Bank Bill and 3-Year Swap Yields

Jan 70 75 80 85 90 95 00 05 10 Nov 161

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

months

per

cen

t p

er

an

nu

m

swaps only, daily - 2016

J F M A M J J A S O N D

1.6

1.7

1.8

1.9

2

2.1

2.2

2.3

days

source: RBA

bills

swaps


Spot $US 62% Iron Ore Price

1980 85 90 95 00 05 10 15 20210

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

160

170

180

years (a)

$/t

on

ne

weekly spot since 2010

Jan 10 11 12 13 14 15 Nov 163040

506070

8090

100110120

130140150

160170

180190200

weeks

$/t

on

ne

source: Bloomberg

sources: IMF, budget paper number 3

(a) actual and IMF forecasts are calendar years,

WA Budget forecasts are financial years ending June

actual

IMFforecasts

WA Budget

forecasts


Australian Iron Ore Exports

65 70 75 80 85 90 95 00 05 10 15 210

50

100

150

200

250

300

350

400

450

500

550

600

650

700

750

800

850

900

950

30

40

50

60

70

80

90

100

110

120

130

140

150

160

170

financial years ending June

volume (mt) real $A price (a)

solid lines are actual data; dotted lines and iron ore

trade in 2016 are Bureau of Resources and Energy

Economics (BREE) March 2016 forecasts/projections.

(a) notional nominal export prices derived by dividing

total value by volume, then converted to real by deflating

nominal prices by 2000 tax-change-adjusted CPI

real price

(right scale) volume

(left scale)

iron ore trade - 2016 (mt)

Aust: 846

Brazil: 393

Ukraine: 52

Canada: 34

exports imports

China: 1023

EU: 136

Japan: 131

Korea: 67

BREE AUDUSD

assumptions

15-16: 0.73

16-17: 0.74

17-18: 0.73

18-19: 0.72

19-20: 0.72

20-21: 0.72

2011

source: BREE


US Natural Gas and WTI Oil Prices ($US)

Jan 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Dec 1710

20

30

40

50

60

70

80

90

100

110

120

130

140

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

months

oil ($/barrel) gas (a)

gas

oil

Source: US Energy Information Agency (EIA). Solid

lines are actual, dotted lines are EIA forecasts

(a) wellhead until 1996, Henry Hub since

1997, both measured in $/million btu

source: Bloomberg

NYMEX gas futures weekly, 2014-2016

Jan 14 Jul 15 Jul 16 Nov 161.5

2

2.5

3

3.5

4

4.5

5

5.5

6

6.5

weeks

$/m

btu


Perth CBD Office Vacancy Rate

Jan 90 92 94 96 98 00 02 04 06 08 10 12 14 Jul 160

2

4

6

8

10

12

14

16

18

20

22

24

26

28

30

32

34

half-years (January/July)

per

cen

t

source: Property Council

Jul 08

(0.3%)

Jul 10

(10.6%)

Jan 93

(31.8%)

Jul 04

(13.9%)


WA's Population Growth Rate

75 80 85 90 95 00 05 10 15 20

0.75

1

1.25

1.5

1.75

2

2.25

2.5

2.75

3

3.25

3.5

financial years ending June

per

cen

t

actual

Budget

forecasts

sources:ABS catalogue 3101.0; WA state budget paper number 3

13

09

03

89


Trend Residential Building Approvals (000)

Jan 85 89 91 93 95 97 99 01 03 05 07 09 11 13 Sep 161

1.2

1.4

1.6

1.8

2

2.2

2.4

2.6

2.8

3

8

9

10

11

12

13

14

15

16

17

18

19

months

WA rest of Australia

WA(left scale)

rest of

Australia(right scale)

source:ABS catalogue 8731.0


Residential Rental Vacancy Rate - Perth

Mar 80 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Sep 160.5

1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6

6.5

7

7.5

8

8.5

9

quarters

per

cen

t

average since 1980

(3.4 per cent)

source: REIWA


3-Bedroom House Rents - Perth

Mar 82 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Sep 1650

75

100

125

150

175

200

225

250

275

300

325

350

375

400

425

450

475

500

2

2.5

3

3.5

4

4.5

5

5.5

6

6.5

7

7.5

8

8.5

9

9.5

10

quarters

rent ($/week) yield (% pa)

rent(left scale)

yield(right scale)

source: REIWA


Median House Price - Perth

Mar 80 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Sep 1625

50

75

100

125

150

175

200

225

250

275

300

325

350

375

400

425

450

475

500

525

550

575

quarters

Pri

ce (

$000)

average annual growth:

since 1980:

houses: 7.4%

inflation: 4.1%

in 10 years to Dec 2015:

houses: 5.8%

inflation: 2.9%

quarterly % change since 2012

Mar 12 13 14 15 Sep 16-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

quarters

pe

r ce

nt

85% cumulative rise in

3 years to 2006, during

which time the CPI rose

by 10%, and average

weekly earnings

grew by 21%

source: REIWA

Jun 15: 549

Sep 15: 533

Dec 15: 540

Mar 16: 530

Jun16: 532

Sep16: 515

$000


ABS House Price Indices (a) - Annual % Change

Jun 87 90 92 94 96 98 00 02 04 06 08 10 12 14 Jun 16-10

-5

0

5

10

15

20

25

30

35

40

45

50

55

quarters

per

cen

t Sydney

Perth

source: ABS catalogue 6416.0

(a): old and new indices spliced

29-year average annual %changes:

Perth: 7.0%

Sydney: 7.6%


Real Household Consumption - Annual Growth

Mar 87 89 91 93 95 97 99 01 03 05 07 09 11 13 Jun 16-1

0

1

2

3

4

5

6

7

8

9

10

quarters

per

cen

t

trend

estimates


WA

rest of

Australia

resources/population

boom Mark1 ...

... and Mark2

WA only quarterly growth

Mar 12 13 14 15 Jun 160

0.25

0.5

0.75

1

1.25

1.5

1.75


WA's Share of National Population and Household Consumption

Sep 83 87 89 91 93 95 97 99 01 03 05 07 09 11 13 Jun 168

8.25

8.5

8.75

9

9.25

9.5

9.75

10

10.25

10.5

10.75

11

11.25

quarters

per

cen

t

consumption (a)

population (b)

sources:ABS catalogues 5206.0; 3101.0

(a): trend estimates to Jun 2016

(b): to March 2016


Real Gross State Product Growth and WA's Share of GSP (a)

91 93 95 97 99 01 03 05 07 09 11 13 16-2

-1

0

1

2

3

4

5

6

7

8

9

10

9

10

11

12

13

14

15

16

17

FYs ending June

growth (bars) WA's share (line)


rest of Australia's growth (bars)

WAgrowth (bars)

(a) WA's share is derived

from current prices

WA's share

(line)


Real Household Disposable Income Per Capita Growth (%)

91 93 95 97 99 01 03 05 07 09 11 13 16-6

-4

-2

0

2

4

6

8

10

90

95

100

105

110

115

FYs ending June

growth WA as % of Australia

WAgrowth (bars) left scale

Australia growth (bars) left scale

nominal WAas %

of Aust (line) right scale



Real Household Disposable Income Per Capita (a)

90 92 94 96 98 00 02 04 06 08 10 12 14 1625

30

35

40

45

50

55

FYs ending June

$000

WA

Australia

(a) nominal income deflated

by all groups CPI for Perth and

weighted average of 8 capitals

respectively

sources: ABS catalogues 5220, 6401.0


Trend Unemployment Rates

Jan 80 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Oct 162

2.5

3

3.5

4

4.5

5

5.5

6

6.5

7

7.5

8

8.5

9

9.5

10

10.5

11

11.5

months

per

cen

t

WA

Australia


WA Aust

Oct 15: 6.3 6.0

Sep 16: 6.3 5.6

Oct 16: 6.4 5.6


Trend Full-Time Employment Ratios

Jan 80 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Oct 1667

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

months

per

cen

t


full-time employment as a

percentage of total employment

WA

rest of

Australia


Australian Dollar Against US Dollar

Jan 84 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Nov 160.45

0.5

0.55

0.6

0.65

0.7

0.75

0.8

0.85

0.9

0.95

1

1.05

months

$U

S p

er

$A

daily - 2016

J F M A M J J A S O N D0.68

0.69

0.7

0.71

0.72

0.73

0.74

0.75

0.76

0.77

0.78

days

Jul 08

Feb 09

'banana republic'

GFC

peak to trough fall in late 2008 was similar to

Paul Keating's mid-1980s 'banana republic'

decline - but what took two and half years back

then took less than three months in the wake

of Lehman Brothers collpapse sources: RBA, Bloomberg

Fed first flags

intention to taper


Australian Dollar Against Chinese Renminbi

Jan 84 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Nov 161.5

2

2.5

3

3.5

4

4.5

5

5.5

6

6.5

7

months

ren

min

bi p

er

$A

daily - 2016

J F M A M J J A S O N N4.5

4.6

4.7

4.8

4.9

5

5.1

5.2

days

source: RBA


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Bentleys: WA Economic Update November 2016