The GDP data has shown what was expected, namely a contraction in the economy during the March quarter of -0.3%. This is mainly the result of the bushfires as the COVID 19 restrictions only came into force in late March. The June quarter is therefore likely to be significantly worse. Given the lags in data it is still interesting to observe that the value of new housing construction work done in the March quarter was steady at $8.5 billion. Anecdotally builders have pulled work forward so the issue will be what is backfilling the pipeline. At this stage housing approvals for April suggest we have not fallen off a cliff yet. Export markets have also continued to be strong through March although this may reflect the closure of the NZ industry during this period.
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-0.3% (GDP March quarter seasonally adjusted an annualised rate of 1.4%)
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$8.5020 billion (value of work done New Houses in March Qtr 2020 a change of -0.3% on the previous Qtr Seasonally Adjusted)
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173,802 (Dwelling approvals year-ending April 2020 down from 194,762 year-ending April 2019 a change of –10.8% and a MoM change of +0.8%)
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2,872,956m3 (Softwood timber sales April 2020 year-ending a decline of -5.34%)
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1,334,124m3 (AHECC 4403.22 pine logs <15cm March 2020 year-ending and increase of 131% over the March 2019 year-ending)
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Recession we could not avoid
Australia slipped into recession at some point in the last few months, with the March quarter economic growth data showing the economy contracted by 0.3%. One quarter of negative growth is not a recession, but the June quarter is certain to be negative, meaning Australia – like the rest of the world – is now in the midst of a deep recession.
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Soft March quarter supported by summer renovations
The value of building work done in the Mach quarter was down for most sectors, but the value of work on alterations and additions grew for the third successive quarter. It is important not to have rose coloured glasses about the pre-pandemic economy, so we note that the modest growth in work on summer renovations does not diminish the fact that overall, building work was continuing to soften in the March quarter.
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Little logs do big export business
Australia’s exports of softwood logs continued over recent months, but the pattern of exports has changed, with larger logs (>15cm) less likely to be exported and smaller logs (,15cm) filling the gap. That was most evident in March 2020, with annualised exports of smaller dimension logs lifting 8.6% compared with the prior month, to a new record 1.401 million m3.
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April housing approvals ‘yada yada’: real housing story lies elsewhere for now
Despite expectations of a major fall in dwelling approvals in April, the pipeline of commitments fed more supply into the market, with a total 15,294 dwellings approved, on a seasonally adjusted basis. Down just 1.8% compared with March, the April result fed into a year-ending total of 173,802 approvals, up 0.3% compared with the prior month.
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Sawn softwood import prices hold up in March as volumes decline
Imports of sawn softwood fell 47.5% over the year-ended March, tumbling to 475,109 m3. Over the same period, the average price of sawn softwood products tracked 6.9% higher to AUDFob543/m3 year-ended March 2020. However, most of the price growth was recorded in late 2019, with the 2020 trend pointing down. In March, the average import price was AUDFob530/m3, down 8.8% on the prior month.
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Employment softens as expected: underemployment rife throughout country
April 2020 saw almost 600,000 less people in jobs than a month earlier, as employment fell 3.1% compared with a year earlier. At the same time, the number of unemployed people lifted 104,500, to 823,300 people, almost 17% higher than a year earlier. As a consequence of different situations, the Participation Rate – those in or seeking work – fell sharply, to 63.5%, feeding a very steep rise in underemployment.
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Wages growth projections out the window
The pandemic means, among many other things, that Australia’s wages growth projections will not be met in 2020 or likely for some time into the future. The issue with low wages growth is that it directly impacts the capacity of households to contribute – by way of extra spending – to economic growth. That includes spending and growth required for us all to recover from the worst effects of the pandemic.
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Retail sales belted on the high street and online
After the panic-fuelled spike in retail sales in March, households took to the retail sector with a hammer, smashing almost one-fifth (17.5%) of retail sales out of the economy and pretty much guaranteeing the recession is in full swing. After the prior month’s rise of 8.5%, the April result was no surprise, causing annualised sales data to record a massive 7.5% fall.
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