Household disposable income lifted in response to the recent tax cuts but households remain risk-averse, with consumption still falling and extra income going straight to debt repayment — reflected by a jump in the Saving ratio below.
Housing prices are recovering despite high levels of mortgage stress in the outer suburbs but building approvals for new housing continue to fall. Construction expenditure is likely to follow.
GDP growth is falling, while corporate profits (% of GDP) remain in the doldrums apart from the mining sector.
Low household disposable income and corporate profit growth in turn lead to low business investment (% of GDP).
Low investment leads to low job creation. Job vacancies and job ads both warn of declining employment growth.
Cyclical employment growth is expected to slow in line with the fall in the Leading Indicator over the past year.
We maintain a bearish outlook for the Australian economy, though Mining continues to surprise to the upside.