IS THE ECONOMIC STORM OVER?

Alan Rai, Principal Economist

WHAT TYPE OF ‘ECONOMIC STORM’? PERHAPS NOT THE ONE YOU’RE THINKING

• China-driven mining investment downturn – Worse, economically, than April 2015 or Pasha

Bulker storms

PRESENTATION OUTLINE

• Economy’s ‘pulse’ improving – Lower unemployment – Improved confidence

• Can/will this be sustained?

• Businesses need to continually innovate to be competitive – ‘Think global, act local’

REGIONAL ECONOMY A ‘pulse check’

UNEMPLOYMENT

Construction sector leading the way

FALLING…BUT REMAINS HIGH

0

5

10

15

20

0

5

10

15

20

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul

Hunter Youth

Hunter

Source: ABS

NSW

2010 2011 2012 2013 2014 2015

% %

• Record low interest rates – Helps construction sector – 50% chance of another cut

by year-end

• Lower Australian dollar – Helps our exporters and import-competitors

STORM RECOVERY TOOLS

LOWER A$

20% more price-competitive globally than a year ago

HELPING OUR EXPORTERS

60

70

80

90

100

110

0.7

0.8

0.9

1

1.1

1.2

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul

Basket of currencies (RHS)

US$ per A$ (LHS)

Source: RBA 2010 2011 2012 2013 2014 2015

US$ Index

CONSTRUCTION SECTOR SHELTER FROM THE STORM

200

400

600

800

1000

1200

200

400

600

800

1000

1200

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul

Hunter building approvals (p.a.)

Source: ABS

Residential

Non-residential

2010 2011 2012 2013 2014 2015

$m $m

Growth in both detached and higher-density housing

RESIDENTIAL INVESTMENT SYDNEY VS THE HUNTER

Clearer skies in Sydney (to date)

1000

2000

3000

4000

5000

12000

24000

36000

48000

60000

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan

Dwelling approvals (p.a.)

Source: ABS

NSW (LHS)

Hunter (RHS)

2010 2011 2012 2013 2014 2015

No. No.

Lower unemployment (recently) helps too

HOUSE PRICES CLOSE TO HOME BOOSTED BY LOW INTEREST RATES

90

100

110

120

130

140

90

100

110

120

130

140

Jun Dec Jun Dec Jun Dec Jun Dec Jun

Sources: HRF; Pricefinder; REINSW

2011 2012 2013 2014 2015

Lake Macquarie LGA

Newcastle LGA

Hunter Balance

Index Index

Job losses lowers buying intent, even when rates fall

DRIVERS OF HOUSE PRICES NOW WORKING IN UNISON

0

3

6

9

12

40

50

60

70

80

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan

Good time to buy property in next 3 months?

Sources: ABS; HRF; RBA

Share of households responding 'yes'

(LHS)

Unemployment (RHS)

2010 2012 2013 2014 2015

Mortgage rate (RHS)

2011

% %

Unemployment likely to continue falling

HUNTER’S UNEMPLOYMENT LOOKING AHEAD

0

0.03

0.06

0.09

0.12

0.15

30

35

40

45

50

55

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan

* Value above (below) zero indicates increase (decrease) in employment Source: HRF

Firms citing lack of sales as their primary concern

(LHS)

Change in hiring intentions (RHS)*

2010 2011 2014 2013 2012 2015

% Index

ECONOMIC OUTLOOK

Contrast with confidence at national level

GREAT(ER) EXPECTATIONS

-0.2

-0.1

0

0.1

0.2

0.3

0.4

-0.2

-0.1

0

0.1

0.2

0.3

0.4

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan

Outlook for next 12 months

Businesses

Consumers

Source: HRF 2010 2011 2012 2013 2014 2015

>0: optimistic, <0: pessimistic Index Index

• China’s property and financial markets

ECONOMIC HEADWINDS POTENTIAL STORMS ON THE HORIZON?

• Ελλάδα!

ECONOMIC HEADWINDS STORMY TIMES

0

6

12

18

24

30

0

6

12

18

24

30

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul

Financial market volatility*

* Standard deviation of intra-month daily prices Sources: Google Finance; HRF; RBA

ASX-200

A$

2013 2014 2015

Index Index

Australia indirectly impacted by ‘Grexit’ via financial markets – not direct trade links

• Strengthening pulse – Lower unemployment – Higher confidence – Will the beat get stronger?

• No time for complacency – ‘Think global, act local’

HUNTER’S ECONOMIC PULSE

POST-STORM ECONOMIC RECOVERY

ICT ADOPTION Enabling a ‘think global, act local’ mindset

CONTEXT FAILING TO INVEST…IS INVESTING IN FAILURE

• Online, globally-connected economy – ICT: cost-effective method of global reach

• ICT doesn’t guarantee success – But no presence is virtual guarantee of failure

‘THE INTERNET OF THINGS’ CONSUMERS INCREASINGLY ONLINE

Sharpest rise been in social media usage

0

20

40

60

80

100

Buying goods andservices

Banking Accessing social media

Hunter residents’ internet use

2009 2011 2013 2015

Source: HRF

%

TO PROMOTE…GO REMOTE ADVERTISING ON WEBSITES

Interesting findings…so what?

0

20

40

60

80

Yes No No website

Hunter businesses’ advertising on websites

2009 2011 2013 2015

Source: HRF

%

STRATEGIC IMPLICATIONS WHAT DO OUR FINDINGS MEAN FOR BUSINESSES?

• Integrated multi-platform online presence – Website and social media presence – Platforms are integrated with each other – Visually-engaging and stimulating content

STRATEGIC IMPLICATIONS WHAT DO OUR FINDINGS MEAN FOR BUSINESSES?

• Responsive websites (and Google)

• Invest in search engine optimisation

• Facilitate online payments

KEY BARRIERS WHY IS HUNTER ICT INVESTMENT NOT HIGHER?

• Cost, lack of knowledge & resources – Don’t have to ‘go it alone’

• ICT is an investment, not an expense – Not investing is setting up for failure

Delivering insights that move the Hunter forward Thank you