by Alan Thornhill
There is already a “middle age bulge” in the Australian population.
But don’t get angry.
The Productivity Commission, which identified it, was talking of a statistical development in the national population, not any weight you – or I – might have put on.
Specifically, it was thinking of the ageing of Australia’s post war baby boomers and the implications this has for our national finances.
As we all know, only too well, ageing is something that happens far too fast.
So it makes a lot of sense to think about these things, sooner rather than later.
That’s what makes the Commission’s report, which was released today, so valuable.
And while your correspondent, an old reporter, understands the temptation very well, this report probably did deserve to be greeted with something a little better than the negative headline it received, in some places.
One, of course, was the “Work Till You Drop” banner it received in Sydney’s Daily Telegraph.
Yes. The report does say that it might be necessary to raise the qualifying point, for the Age Pension, from 65 to 70.
That would easily qualify as “a courageous decision” for any Federal government, on Sir Humphrey’s definition.
A “courageous decision” of course, is one that will cost you the next election.
Meanwhile, though, a quiet look at this report might well be worthwhile.
It looks, as well as anyone can, at the next 50 years.
And the Commission sees many positive, as well as a few negative developments, ahead.
It calculates, for example, that Australia will probably have a population of 38 million by then, some 15 million more than it had only last year.
And it says baby girls, born last year, will live to an average age of 94.4.
For boys, the comparable figure is 91.6.
So our children – and grandchildren – can expect to live longer than us.
Surprisingly, perhaps, the Commission also calculates that the biggest impact on Federal finances will be on health spending, not age pensions.
In 2011-12, that took a 4.1 per cent bite out of Australia’s gross domestic product.
By 2059-60, the Commission says, that figure will rise to 7 per cent.
The Age pension, on a similar comparison, costs 2.7 per cent of GDP now.
But that will rise to 3.7 per cent.
Make no mistake.
We are talking about billions of dollars, here.
Aged care costs, similarly calculated, will rise from 0.8 per cent of GDP, to 2.6 per cent.
And this money will have to be raised, somehow, if no changes are made.
Raising the age of eligibility for the Age Pension is just one of the suggestions the Commission makes, to ease the problems an ageing population might well present.
And the Australian population is, indeed, ageing.
In fact, the Commission, predicts that Australia will have an extra 4 million people aged 75, or more, by 2060.
This has implications for the nation’s Pharmaceutical Benefits Scheme and the Superannuation system, as well as the Age Pension and other health spending.
The 339 page report is among the Commission’s best.
Those with internet access will be able to download it, quite easily.
If that’s too much, a 19 page summary, which the Commission calls an “overview” might suit you better.
Either way, it’s a good read.
by Alan Thornhill
Australian wages are still rising, despite the relatively flat economy.
The Bureau of Statistics reported today that the nation’s wage price index rose by 0.5 per cent, on seasonally adjusted figures, in the September quarter, after a 0.7 per cent rise in the June quarter.
Wages rose by 2.7 per cent in the 12 months to the end of September.
However prices are still rising, too.
The bureau also reports that prices, measured on its Consumer Price Index, rose by 2.2 per cent, in the 12 months to the end of September.
by Alan Thornhill
Australians are spending again, notably on clothes, shoes and other personal items.
House prices are rising, too, particularly in Sydney.
Both developments are evident in figures the Bureau of Statistics released today.
The bureau noted that the price of established homes in Sydney surged by 3.6 per cent in the September quarter.
That was almost twice the average rise – of 1.9 per cent – on average over all eight capital cities.
These rises took Sydney house prices to levels 11.4 per cent higher than those seen 12 months earlier, while the eight capital average rose by 7.6 per cent over the year.
The bureau also reported that retail sales rose by 0.8 per cent in the three months to the end of September, following a rise of 0.5 per cent in the previous quarter.
That left turnover in the September quarter of this year 2.9 per cent higher than that seen 12 months earlier.
All of these figures are seasonally adjusted.
Notably, Australia’s department stores, which have been suffering from flat sales – or worse – saw their fortunes improve in the September quarter, when their sales rose by 2.8 per cent.
The bureau reported that retail turnover increased in all States and Territories except Western Australia, in the September quarter.
Turnover in WA fell by 0.2 per cent in that time.
House prices in Melbourne rose by 1.9 per cent in the September quarter and 6.8 per cent over the year.
In Canberra, though, where the Abbott government is planning to slash 12,000 from the Federal public service, house prices fell by 1.2 per cent in the quarter and rose by just 0.6 per cent over the year.
by Alan Thornhill
Self funded retirees have faced some of Australia’s steepest increases in living costs, over recent months.
The Bureau of Statistics reports that their living costs rose by 1.5 per cent in the three months to the end of September.
This rise was almost twice that – of 0.8 per cent – seen in the living costs of employed Australians over the same time.
But age pensioners also saw a substantial rise – of 1.3 per cent – in their cost of living in this time.
The overall cost of living, for all Australians, rose by 1.2 per cent in this period, on the consumer price index scale.
by Alan Thornhill
Skilled building workers are in demand again.
A new report, by the Housing Industry Association, showed that the availability of skilled building workers “fell moderately” over recent months.
The association’s Chief Economist, Harley Dale, said this indicates an improvement in the demand for labour.
He said the surplus of skilled workers, which had lasted for more than two years, now appears to have “passed its peak.”
“…we have seen a first round new home building recovery taking hold and conditions have improved for a revival in renovations activity from a ten year low,” Dr Dale said.
“A moderate improvement in demand for skilled labour in the latest Trades Report update is consistent with this environment for residential building,” he added.
“…and we should see further improvements in labour demand in coming quarters.”
by Alan Thornhill
The Reserve Bank Governor, Glenn Stevens, has dismissed fears that Australia is heading for another housing bubble.
Addressing investors in Sydney today, Mr Stevens noted that some commentators have been warning of “worrying dynamics” in the property market.
However he said: “My own view, thus far, has been that some rise in housing prices is part of the normal cyclical dynamic, that it improves the incentive to build.”
And he added: “ a price rise reversing an earlier decline probably isn’t something to complain about too quickly.”
Mr Stevens said too that credit growth at present is moderate – and does not suggest that a bubble is developing in the housing market.
“… credit growth, at between 4 and 5 per cent per annum to households, and less than that for business, does not suggest that rising leverage is so far feeding the price rise,” he said.
“Hence it has been a little too early to signal great concern.”
But Mr Stevens did have some reservations.
“There are, however, two caveats,” he said.
“The first is that, notwithstanding the above comment, credit growth may pick up somewhat over the period ahead.
“So this is an area to which we will, naturally, pay close attention,” he said.
“Secondly, while overall credit growth remains low at present, borrowing is increasing quite quickly in some pockets,” Mr Stevens added.
“Investor participation in housing in Sydney, in particular, is becoming noticeably stronger,” he said.
“Over the past year, the rate of finance approvals for this purpose has increased by 40 per cent.,” Mr Stevens said.
He noted, too, that the overall net worth of Australians had increased by 15 per cent, or more than $800 billion, since the end of 2011.
by Alan Thornhill
The Reserve bank is leaving the door open for further cuts in interest rates.
This became clear today, when the bank published the minutes of its August 6 meeting, at which its marker cash rate was cut by 25 basis points.
That has led to two successive weekly rises in consumer confidence. (See earlier story)
In its minutes today, the bank said: “On balance, with (domestic) growth expected to remain below trend for longer and inflation to remain within the target even with the effects of a lower exchange rate, members concluded that a lower level of the cash rate would better contribute to achieving sustainable growth in demand consistent with the inflation target.”
And it added: “Regarding the communication of this decision, members agreed that the Bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further. ”
It also said recent information had suggested that the Australian economy was growing at a below trend pace.
“Indicators of consumer spending had been soft.
“Borrowing for housing had picked up, as had dwelling prices, and there had been an increase in leading indicators of dwelling construction.
“But to date this had been moderate rather than strong,” the bank added.
It said employment growth is continuing, but at a pace below the rate of growth of the labour force.
So unemployment had tended to rise.
“Inflation remained low and, allowing for the effects of the introduction of the carbon price, was around the bottom of the target range.
“Wages growth was slowing,” the bank said.
“The revised staff forecasts were for below trend output growth over the coming year or so, before growth was expected to pick up partly because of the effects of the recent exchange rate depreciation,” it added.
by Alan Thornhill
The Reserve Bank cut its cash rates to a new low today, shortly after new data showed the price of established homes, in Australia’s capitals, had hit new heights.
The Bank’s Governor, Glenn Stevens, announced that its cash rate would fall by 25 basis points, to 2.5 per cent, from tomorrow.
He did so after new preliminary data from the Australian Bureau of Statistics showed that the price of established homes, in the nation’s capitals, accelerating.
Mr Stevens noted that: “In Australia, the economy has been growing a bit below trend over the past year.
“This is expected to continue in the near term as the economy adjusts to lower levels of mining investment,” he said.
Politicians, too, have entered the debate.
The Shadow Treasurer, Joe Hockey, said that any rate cut today should be seen as a “sign of weakness” in the Australian economy.
However the Finance Minister, Penny Wong, rebuked Mr Hockey for that, saying it is ludicrous that he should be saying, in the lead up to an election, that Australians should be paying higher interest rates.
The National Australia and Commonwealth Banks said they would cut their standard variable home loan rate by the full 25 basis points.
The NAB said this would save its customers an average $62.50 a month in interest.
The Bank of Queensland and ING have also passed on the cut in full.
The ANZ is to announce its decision on Friday.
Westpac later went one better, announcing that it will cut its standard variable mortgage rates by 28 basis points.
The Bureau’s figures showed that the price of established houses in the nation’s capital cities rose at more than twice the general rate of inflation in Australia over the past year.
And a Housing Industry Association economist, Diwa Hopkins, said: “This takes prices to a new all-time high.”
The figures, just released by the Bureau of Statistics, show that the price of these houses rose by 5.1 per cent in the 12 months to the end of June.
The Bureau reported that the price of established houses prices rose by 2.4 per in the June quarter alone.
Australia’s headline inflation rate, for the 12 months to the end of June, was also 2.4 per cent.
Ms Hopkins said: “These price developments signal increased activity in the housing market, with lower interest rates an obvious contributor.
“Another likely contributor is improved confidence.”
“While still delicately poised, confidence has mainly tracked higher in financial year 2012/13,” she said.
Pessimism had been quite entrenched, over the previous 12 months.
The Bureau reported that the price of established houses in Perth rose by 3.4 per cent in the June quarter and 11 per cent over the year.
The comparable figures, for other cities, were:
Sydney – 2.7 per cent up for the quarter and 6.1 per cent up over the year.
Melbourne – 2.4 per cent up for the quarter and 3.3 per cent up for the year.
Brisbane – 1.9 per cent up for the quarter and 3.7 per cent up for the year.
Adelaide – 0.3 per cent up for the quarter and 0.6 per cent up for the year.
Hobart – 1.0 per cent down for the quarter but 1.2 per cent up for the year.
Canberra – 1.0 per cent up for the quarter and 2.6 per cent up for the year.
Darwin – 2.9 per cent up for the quarter and 7.7 per cent up for the year.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
Friday December 6
The Dow Jones index fell 68.26 points to 15,821.50
Nelson Mandela dies
ACCC puts a cap on the fuel shopper dockets offered by Coles and Woolworths.
Qantas shares placed in trading halt
|Aud To Usd||0.9062||N/A||N/A|
|Bhp Blt Fpo||36.750||-0.030||-0.08%|
|Anz Bank Fpo||30.990||-0.200||-0.64%|
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