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Stateometer: housing trouble

Weakness in Australia’s housing market continued to weigh on Australia’s economic momentum in the September quarter, according to the latest ANZ Stateometer.

All states and territories across the country except Tasmania and the Northern Territory decelerated and recorded growth at a below trend rate.

This slowing brings into doubt the 3.25 per cent year-end growth rate forecast by the Reserve Bank for the June quarter 2019.

"This slowing brings into doubt the 3.25 per cent year-end growth rate forecast by the Reserve Bank for the June quarter 2019.” - Cherelle Murphy & Jack Chambers

The loss of momentum is consistent with ANZ Research’s forecast for the Australian economy to grow 2.9 per cent, down from 3.4 per cent in the previous corresponding period. 

The loss of momentum is consistent with ANZ Research’s forecast for the Australian economy to grow 2.9 per cent, down from 3.4 per cent in the previous corresponding period.

Despite this forecast, growth is still sufficient to reduce spare capacity in the labour market. As such, ANZ Research expects it will be accompanied by slightly stronger wages growth and a modest pick-up in inflation.

A drag

Every Australian state except Tasmania experienced a drag to momentum from the housing component of the index. The labour market also became less positive for all states and territories except Victoria and the Northern Territory.

Trade was a highlight. The mining states of Western Australia and Queensland recorded stronger positive contributions as resource prices, export volumes and the $A/$US exchange rate moved in their favour.

In New South Wales and Victoria, which are less commodity intensive but have large service sectors, trade momentum also picked up, suggesting a further boost to tourism and education exports.

There are many factors suggesting ongoing solid growth for the Australian economy: consumer and business confidence, higher building approvals in some commercial segments, an upbeat outlook for private business investment and a solid pipeline of public sector infrastructure.

The tightening of credit market conditions remains a negative factor that together with a poorer outlook for house prices is pulling back demand in this important sector, especially in New South Wales and Victoria. 

The ANZ Stateometer is a set of composite indices which measure economic performance across Australia’s states and territories.

The index for each jurisdiction extracts the common trend across 37 economic indicators using principal components analysis. The economic indicators are all monthly data series and cover business and household activity, the labour market, the housing market and trade.

Developments across this diverse country are rarely uniform and we hope these geographically specific indices help you to see through the haze of state by state data and more intuitively piece together the state of the national economy.

Cherelle Murphy is a Senior Economist & Jack Chambers is an Economist at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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