Melbourne economy outlook

Are you sure about that?
Australia GDP per capita | 1960-2017 | Data | Chart | Calendar | Forecast

 

^ yes sure:

The population boom’s hidden secret

And more:

https://www.google.com.au/url?sa=t&...CDYwBg&usg=AFQjCNFkxtdY5Os6hb5cH0-iGS4zribisg

 

I think we'll see that 'uber moment' come through a lot of industries much sooner than expected

 

Unemployment increased from 5.5 to 5.6 at the same time as an increase in the participation rate (a higher % of people actively looking for work). The F-T jobs actually increased significantly with a reduction in P-T jobs to leave a smaller net increase in jobs created. Unemployment has dropped significantly over the last couple of years (from low to mid 6's to current even with population growth) as economy has/does transition from mining to other industries. Underemployment (PT people looking for more hours) would appear to be the only area of slack in the Aus economy before we start to see solid wages growth.

Melb/Victoria specific economy - education is actually a very significant 'export' industry. Both secondary & tertiary with world std Uni of Melb & Monash uni. Housing has been very strong with population booming & tourism also increasing. Worlds most livable city & sporting capital will gain attention for both tourists & immigrants.

On the ground speaking with various recruiting agencies they are reporting extremely strong demand for good candidates with people being snapped up very quickly for new positions.

With some infrastructure spending also taking place (roads/rail) Vic economy continues to look very strong.

For OP if you currently have property in Vic (without knowing your location & personal circumstances) it would appear holding would be a good option.

Good luck

 

Double like.

I do enjoy an intelligent discussion, well done all.

 

More info?

 

The only thing fueling the economy is house prices, which in turn fuels other parts of the economy, which then fuels house prices again. All the statistics point this out. We're in a positive feedback loop. Problem is when you enter a negative loop there's nothing fundamental underlying all this. It's like a share price that keeps going up but the company never delivers earnings. In fact I saw the most telling statistic the other day, but it doesn't really matter since everyone's formed their view anyway.

The time for high debt punting is behind us now. Those doing it now may be in a lot of trouble around the corner.

 

I, for one; would like to hear it!

 

Please tell

My view is that market sentiment is changing, because the lending environment is tightening and interest rates are rising this will impact on all property markets in Australia. No one rings a bell when we hit peak.

 

Government spending increase since 2014 is a massive contributor to the economy. Governments love infrastructure because it supports a lot of jobs for the $ spend. Andrews has boosted infrastructure spend from an average of $5bn/year to $10bn/yr until 2018, and 8-9bn in 2019/2020. This has timed with the residential construction boom, which combined have supported more than 200,000 new jobs. this has allowed massive population growth, and as you mention, a positive loop that hypes itself.

Not only is the residential boom going to slow, government spending will also start cooling from around 2019. the only reason it was able to get so high was mass privatisation ($9.8bn for the port, $2.2bn for the land registry office), combined with increased tax revenues from residential property sales (one of the largest contributors to state revenue).

IMO all signs point to a cooling state economy in 2019/2020. If it so happens that the federal government also cool spending (which they should have started doing a while ago), VIC could be in for some serious trouble. Much like Perth has discovered, population growth that is supported by jobs growth (and when you look at the age demographic moving to melbourne, this is 100% the case), a change in jobs can lead to a massive change in population. WA went from >80,000 people a year to <20,000.

If the federal government does not cool spending, all they can do is keep issuing more bonds to pay their expenses. given international markets are now upping interest rates, for aussie bonds to remain attractive they will also have to up return rates. this means residential interest rates will go up. so the only way to avoid recession is for wages to start significantly rising to prepare people for (A) higher rates, or (B) more private cash circulation when government spending cools. If you dont believe wages can rise significantly, you are potentially staring down the barrel of recession conditions for VIC.

 

A jobs revolution is clearly coming- advancements in AI, 3D printing, sharing/gig economy, robotics, AR/MR, autonomous driving, etc.. feels to me like it's now at an inflection point, and I feel major disruption within the next 5-10 years.. sounds extreme, but the rate of change will never be as slow as it is today...just a few years ago I wasn't able to summon a car to my doorstep within a couple of minutes by a click of a button..

whist there will be the creation new jobs (huge demand for those with STEM backgrounds) i think it's naive to think this won't have a profound impact on the employment of large numbers of the workforce.. I had a quick think about industries that would be heavily affected, but it's pretty much everything, maybe easier to think of an industry that won't be?! but struggling there too!

Stuff like this amazes me - and reminds me it's real, full autonomy - driving at night, in the rain;

 

well you are right they did privatise the port (selling to who?) - good old commie chinese. And what makes you sure the water companies won't go at some stage as well to fund more spending on infrastructure -this is still going to happen - building the metro tunnels and it will only be finishing in the next 4-5 years . railroad crossing projects (reservoir and clayton hasn't even started). all these alone already generated thousands of jobs alone.

As you know the electrical grid companies aren't own by the aussies, smart meter rollouts maintenance, traning all require staff. With a 2bn tender won for the NT pipeline, where are all the engineers coming from, (most of the planning of the project and the hiring will come from melbourne) with ground staff hired locally. You do realize the parent company is the among the largest top 10 company in the world in terms of asset size , and it's funds are huge and is actively looking for tenders all the time after being turned down for the ausgrid by FIRB. their R&D alone dwarfs even some of the biggerst corporations here with 100K of PHDs looking at new innovations in engineering etc. which means opening new R&D in melbourne where their HQ is in terms of installing pipes, training etc - all these require staff . Also All of these are private funds not buying bonds from the market by the governemnt. they're not banks.

With all these new apartments towers being build, there is also a boom in new hotels from mandarin oriental of collins st, crown casino new hotel tower off queensbridge, marriot in docklands, mantra hotel, redevelopment of QVM (by onselling part of it from a developer) - there will be chefs, receptionist, cleaners, maintenance workers (plumbers, fire engineers, plasterers, painters, engineers etc). there is only 8 hours in a wokring day - so either new individuals need to be hired or a lot of ppl will be doing OT. And again last i check crown and the likes of mandarin oriental aren't government funded.

There is the education sector, new courses being introduced all the time- make no mistake melbourne unlike brisbane or perth has already a big pipeline of years and years and years of international students paying anything from 20-100K per year in courses per student due to their twinning programs with campuses in asia. This was around since the 90s. overseas governments already have established their scholarship programs in the likes of engineering medicine, accounting etc. No wonder crappy suburbs like clayton peaked up

New "private" hospitals, epping, holmesglen and healthscope, northpark (from radiologist, surgeons, sonographers, physiotherapist, pharmacist, nurses) who are going to be taking these jobs? my friend moved from canberra and is fully booked as a sonographer for the last 6-7 months. With a population growth, Ppl do get sick and there will be more emergencies, there do require more doctors etc and ppl on standby. atm victorian hospitals in general are shortstaffed whether public or private.

unfortunately, your comparision to WA is a different, there is no big mining like WA in melbourne, and it requiredI investment in infrastructure . Also there is also a lot of take up in innnovation ideas. like the sharing economy is really taking up - uber, ubereats, airtaskers, pethomestay, airbnb, i see ppl on these bikes all the time (delivering take outs) everytime i go out. this clearly shows a vibrant economy as there is spending. If it was dead quiet i would be worried.

the way ppl make it sound is like we are all taking refugees who have no skills and we don't have any spending or any jobs by the private sector. Do you even realize how many milkbars, restaurants are being openned and bought up as a way into melbourne by migrants? Melbourne is evolving and will become bigger with more investment and more spending. Whether this is a good thing that causes congested roads - it is happening.

 

All that investment yet unemployment in Victoria is still 6%+.The standard of living in Australia is deteriorating and jobs are much harder to secure compared to 10 years ago. I'm not anti-immigration and as an economist I realise the importance of population growth towards boosting GDP. However, I'd argue that Australia currently has too much migration and the average Australian (especially the youth) are being left behind.

 

Although only a minor indication of market sentiment, the last two weeks since FHB change has seen Melbourne clearance rate take off to 77% and now over 80% from this weekend.

Great if you are holding Melbourne property, the boom continues & no sign of a collapse or recession here.

 

10 years ago we were importing workers left, right and centre. A lot of the workforce moved to the mining states. True, that's not the case now. But jobs are much easier to get than they were, say, 6 or 7 years ago. Unemployment is low.
However, I do agree that the current increased levels of immigration are causing inequality - a taboo topic, unfortunately. Not the refugees. Moderates have got to get on board with this - the sooner the better.
Great for property owners anyway.

 

Over 80% clearance rate this weekend in Melbourne? Mind sharing the source?

 

There are lots of projects, but looking solely at the macro-economics of it - the total quantity of money being spent - it will be decreasing towards the end of this decade. 2017/2018 is peak spending from both government and construction, and both industries accept that. The pace of growth has now ended and it flat-lining for a short while, and jobs data is reflecting that.

Spending should be high because we are at a high point in the economic cycle. the concern, which has been raised by the RBA and Fed, is that once things are not growing at the pace they have been, consumer sentiment will stall. that may lead to a decrease in consumer spending, and rising interest rates are not going to help the cause at all. We are still at economic peak and have a good year or two to run, but there is no outlook beyond that. Typically that is where a government would start to ramp up its stimulus campaign, but since the GFC the fed has averaged $40-50bn/year loss so they are already at peak stimulus - they can't afford to increase that and if anything, with global interest rates (cost of debt) now on the rise, they should be looking to cool lending.

The RBA is well aware of this, and that is why they are saying that wage growth is about all that can save us now. Australia has not known a rising interest rate money market for a good decade, and even a 0.5% rise means 33% higher cost of debt. that's the same as going from 7% to 9.5% as it did around the GFC days. It is said that to be in line with the rest of the world, we would need a 200% increase in our cash rate. Clearly not possible with house prices where they are, so that means Australia will be at a disadvantage in the international money market. Our economy cannot "boom" when we can't afford to keep up with the rest of the world.

WA's story is the same as VIC now, the difference is magnitude. Construction phase transitions to operations. VIC is spending record levels on new construction, both government and private. Both of these are set to cool, to the tune of multi-billions of dollars. given the still-rising population, that is a lot less $$ being spent per head count in the state.

Side note, water is very, very complicated to privatise because it can't really be made a competitive market and the source itself is not owned in the same way that power generators can own gas and coal, or wind generators and solar generators lease land. about the only way it would be is if private companies set up desal plants and sold to the government owned water distributor, which is relatively pointless because the government doesnt actually sell anything in the process. They would only do that if they were up against the wall cash strapped, in which case they have bigger problems to worry about.

 

@JL1 So from all these macroeconomic analysis - you obviously predicting a massive fall so you can buy in or just analysing? similar to GFC days - I remember my days from my research at investment firm ( my manager would always ask "what are the conclusions" - so with your assumption that will be no more spending in the private section(no one is going to be building hotels, hospitals, redev shopping malls) and gov will forget the plan 2050 - all this will push down prices put the brakes on spending in the economy and VIC will end up like WA (like port hedlands). so everyone should sell now I presume?

WA is nothing like VIC seriously (you're comparing an apple with a banana) - there is so many other projects in the pipeline that hasn't even started and many in planning stages. Do you think it is so simple to project billion dollar expenditure projects without proper due diligence legal wise, finance wise and to have a 10 year project plan of how many billions is going to be spend year X, Y,Z ? Common folks like us won't even know what is happening. i only happen to be in one industry which is spending big in vic (talking billions ) so privy to some knowledge. The magnitude of overseas investment in vic is something that is not even looked at (talking commercial buy ups and projects). Forget education, forget healthcare.

I would be more inclined to see what projects and infra are being planned statewide and how it would be panned out across the years. Maybe have a read - of what the strategic view is - actually all this info the infra being put into sunshine and st albans was in the planning website years before, I read it before it happened and even myself looking at macroeconomics and worrying abt state of affairs missed that oppourtunity. Difference btw actually making millions than overanalysing which was me by the way.

http://www.planmelbourne.vic.gov.au...3/Plan_Melbourne_2017_Implementation_plan.pdf

Planning

I used to work for one of the major water authorities in Melbourne - they have been tendering and putting up documents for privatisation for years mate (it is not necessarily the gov - but more the execs pushing for it) they just haven't had the right pitch yet to make it through. Just go to the UK, Even thames water are going through the motions now being sold.

it is not necessarily spending also - things like vibes, new stadiums, new tourist attractions can also all lead to positive outcomes. I watch a lot of basketball - was reading this- not sure if you are familiar with lebron james , who played for the Cleveland cavaliers -- went to the Miami heat and came back to Cleveland. just coming back to Cleveland - just coming back boosted the local economy, ticket sale, promotions, advertisements and actually turned business who were once struggling as the excitement was in town.

 

https://s3-ap-southeast-2.amazonaws.com/budgetfiles201718.budget.vic.gov.au/Overview.pdf

page 6, government infrastructure investment chart:

2015/16 = $4.8bn
2016/17 = $9.3bn
2017/18 = $10.1bn
2019/20 = $10.1bn
2020/21 = $8.4bn

A $5bn increase (100%) of government spending = artificial boom = keynsian stimulus.
A $1.7bn fall in government spending = not stimulus.

I didn't say no spending, i just said less.

Dwelling approvals by year:

http://www.abs.gov.au/ausstats/meis...CA2581510082564A&0&May 2017&03.07.2017&Latest

2013: 49,261
2014: 60,397
2015: 68,189 (28,931 to May)
2016: 67,425 (26,859 to May)
2017 (to May): 25,274

That looks like a peak to me.

WA and VIC are alike from the standpoint of simple market economics - the difference is the magnitude. To think that VIC is immune to the fundamental nature of economic cycles is quite a statement. The topic is the economic outlook for Victoria, and two of its major revenue streams will be winding back spending at the end of this decade. I'm not sure what to read into that other than slowing economic growth.

 

What artificial boom keynsian stimulus? Were we in a recession in 2015/16 - VIC is building highways, doing this tunnel upgrades, railroad crossing as comprehensive studies were done years ago before any of this started (well I was one who took part in the study) - there were done as a necessity to reduce congestion, increase productivity, promote ACZ (activity centre zones), redevelop older aging suburbs, rebuild infrastructure . If we didn't do anything with this population wise - you will going to end up like Jakarta, kuala lumpur with 3 hours plus traffic jams. Social housing being renewed - disadvantaged old and poor ppl do need a place to live (not necessarily a stimulus)

It is too easy to generalise that the spending is to spur artificial boom (but that would only apply if we were in a recession in the first place. IMHO All these are necessities and part of the Melbourne 2050 plan.

I saw that expenditure before that projection is only 5 years. And that does not even include private funds being used. We're not in brunei where the only expenditure has to come from government spending though. there is also a 30 mil case study for the Tullamarine rail link - things take time to occur mate to materialize.

Simple market economics applies to all states - the microeconmic approach diff is what is driving the spending not how much I would say as we are not in a recession yet. We are not Dubai building twin towers, highest tower, biggest shopping malls, 16 lane highways when it is not even congested and relying on more infrastructure to show that we are the greatest and booming economically.

As for dwellings wise - you do realize some apartment towers in Melbourne can have nearly 300 dwellings in one apartment tower docklands and southbank? and some of these apartments have not moved in price or gone backwards since 2009 (more than 7 years ago) . it is a peak dwellings for sure "no question about it" but how many dwellings were apatrments vs landed dwellings is more appropriate question.

I am not making a statement that the "vic economy" is immune to economy slowdown (just thinking how plausible or logical it is to say Melbourne will end up like Perth or there will be situations that will reflect things like in port hedland in Victoria). in fact the manufacturing industry basically removed all the jobs vanished from the state as really it is too expensive to produce cars here than say "Thailand" . In fact I thought it would slow economy growth in geelong but even that didn't slow geelong. Renewal of hospitals universities plus moving of some gov agencies helped fuel geelong along . Also - 1 billion in the federal budget for regional rail and specifc projects just a couple months ago was announced. (maybe you might say it is a stimulus) so obviously money still would be spend. (and hence this is new expenditure) I would be worried if nothing was spend. There are cycles no doubt and vic is definitely not immune.

IMHO - I think "high level generalisation" is not accurate. Even today Northern Gas Pipeline is signing up it's second customer. The significance of this is huge as an full capacity it could supply the whole markets of Brisbane and Sydney while creating jobs in multiple states (NT, VIC, QLD). Every state either way will need to spend money on infrastructure over time whether it is practical to build the tallest building in the world or building freeways or highways that connects suburbs, increases productivity, enabled interchange of services and goods or even renewable energy. We're not in the days of the "great depression" yet.