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August 2020
The pace of change at the moment is still hard to keep up with. The treasurer’s statement was released on 23 July and the associated forecasts outlined challenging days ahead. GDP growth is expected to be -0.25% in FY20 followed by -2.50% in FY21 while dwelling investment is forecast to be -10.0% in FY20 and declining further through FY21 to 16.0%. However, these forecasts only lasted one week as Victoria went into lockdown. This has stalled the recovery which was starting to emerge in the June data. For instance people employed (full and part time) grew +210,000 in June compared to a decline in May of -264,000. Similarly, for our industry softwood sales grew an annual basis in June and reflected some changes in product mix combined with reasonably steady prices. However, given this volatility we need to remain cautious in assessing the outlook.
TOP FIVE
1 | -1.9%

(CPI headline rate June quarter. However the measures of underlying inflation which remove volatility such as the trimmed mean was more moderate with a decline of  -0.1%)
 
$8.726billion | 2

(Value of building work done March quarter 2020 New Houses a change of +2.1% on the previous quarter reflecting the pull forward of work by builders during the period)


3 | 170,484

(Dwelling approvals year-ending June 2020 down from 185,940 year–ending June 2019 a change of -8.3%)
 
$508.42 per m3 | 4

(Softwood weighted average price Structural Untreated group Eastcoast June quarter and change of +0.1% over the previous quarter)

5 | 3,025,679M3

(Softwood timber sales year-ending June 2020 an increase over the previous year of +4.3%)
 


Nimble housing sector hangs tough as economy grinds down

Our political leaders continue to impress upon us it is difficult to look too far ahead when dealing with such a contagious virus as COVID 19. Having reached zero cases on 9 June in Victoria the expectation was the worst was behind us. However, at the time of writing, here in Melbourne we have gone into full Lockdown with many parts of the economy closed and daily case numbers peaking in the 700’s. By comparison elsewhere in Australia a number of states have not experienced any cases of community transmission for several weeks which is great news.

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Softwood Timber Sales on the rise as Structural Prices Get a Lift

Sales of domestic sawn softwood products lifted 4.3% year-ended June 2020, rising to 3.025 million m3. The result, the first time in 16 months the annualised total has been above 3.0 million m3 requires some close consideration because it defies some expectations and appears driven by a number of factors, some short and others longer term.

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Housing approvals hanging on, but Victorian powerhouse likely to be thumped


At 170,487 dwelling approvals for the year-ended June, Australia’s residential housing market is hanging on in the midst of the pandemic, but approvals are still 8.3% lower than they were the prior year. After a sustained period of approvals in Victoria providing the impetus to national stability, current conditions and latest data suggest that role has ended.

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Sales beat forecasts in June quarter: sawn softwood


Sawn softwood sales in the June quarter were higher than forecast for all of the grades for which forecasts are prepared by ABARES, for FWPA. Underscoring the challenges of forecasting in the current era, ABARES has forecast three of the four grades will experience increased sales in the September quarter, with more variable results in subsequent quarters.

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Monthly financing looks sound, but there’s more to consider


Housing finance data for June defied the pandemic, with the total value of loans lifting 6.2%. That solid result, fuelled in part by some recovery, and in the main by a lot of stimulus, has driven performance that needs a closer level of examination. The role of first home buyers and investors in the market might well represent increasingly divergent opportunities and risks.

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Prices deflate, but hang on, there’s a bounce to come in the current quarter

Headline inflation, measured by the Consumer Price Index (CPI) was recorded at -1.9% in the June quarter, marking a remarkable period, if only because it is so irregular. However, dig a little deeper and we can see that inflation was driven lower by some pandemic related events, that are expected to be short term. So short term in fact that prices growth is expected on a broad basis in the current quarter, if not for every sector.

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Challenging jobs outlook for second half of 2020


June’s apparent employment recovery was something to be pretty pleased about at the start of July, even though the nation knew it was all a bit sketchy. Still, 210,800 new jobs and ‘only’ 69,300 additional unemployed persons was something to hang onto and evidence if nothing else that the Australian economy knows how to recover, when it can do so.

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Retail sales up again, but it’s a wild ride

Retail sales continued their roller coaster ride in June, with monthly sales reportedly up 2.7%, and annualised sales up a stonkering 11.7%. Doubtless, the current situation in Victoria is likely to be a drag on sales in July and August, but the actual outcome remains somewhat uncertain, for the next couple of months, until in fact the stimulus begins to wear off the economy. Then, the worries will really hit the retail high street!

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Export logs exploded in June

Australia’s exports of softwood logs exploded to a new monthly record in June, as a combination of factors delivered a result that was not unexpected, but was nonetheless very significant. Log exports drove the value of monthly wood product exports up significantly in June, flattening out what was becoming a fast-declining situation, due to falling hardwood chip exports.

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Import value lifts to AUD1.824 billion year-ended June

Australia’s total imports of wood products were valued at AUD1.824 billion year-ended June, up a very modest 0.9% on the prior month, and still down a sizeable 13.4% on the prior year. The sole driver for the increased value of imports was sawn softwood products.

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