Dr Alan Rai's presentation on the December 2014 quarter economic update. Presentated at HRF's Hunter Economic Breakfast on February 13 at Wests New Lambton.

1. The Hunter’s Economic Green Shoots
Dr Alan Rai – Principal Economist

2. HUNTER ECONOMY’S
PERFORMANCE
• Still feeling the effects of
end of mining boom
– unemployment remains high
• But green shoots exist!
– Lower A$: boosts our exporters
(e.g. wine; coal; tourism)
• Other green shoots:
– low (maybe lower) interest rates
– lower oil and petrol prices: the Hunter is a net oil importer
• Improving business and consumer confidence

3. UNEMPLOYMENT
HRF’s YOUnite summit: employment; engagement; education
SOMEWHAT STEADIER
0
5
10
15
20
0
5
10
15
20
Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul
Unemployment rates (%)
Hunter Youth
Hunter
Source: ABS
NSW
2010 2011 2012 2013 2014

4. HOUSE PRICES IN…?
All Hunter LGAs…
90
100
110
120
130
90
100
110
120
130
Jun Dec Jun Dec Jun Dec Jun Dec
June 2011 = 100
Sources: HRF; REINSW
2011 2012 2013 2014

5. Rest of Hunter: most affected by mining downturn
HOUSE PRICES CLOSE TO HOME
90
100
110
120
130
90
100
110
120
130
Jun Dec Jun Dec Jun Dec Jun Dec
Median house prices
Sources: HRF; REINSW
Lake Macquarie
LGA
Newcastle
LGA
Rest of the
Hunter
Port Stephens LGA
2011 2012 2013 2014

6. Time for audience
participation!

7. HOW LOW CAN IT GO?
0.4
0.8
1.2
1.6
2
40
80
120
160
200
Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Fuelling our economy
WTI
(LHS)
Sources: Australian Institute of Petroleum; HRF; US Federal Reserve Bank of St Louis
2014 2015
A$/
litre

8. Current ULP price: $1.10/litre (50c fall since April 2014)
LOWER PRICE OF BLACK GOLD
0.4
0.8
1.2
1.6
40
80
120
160
Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Petrol and oil prices
Sydney ULP
(RHS)
Crude oil
(LHS)
Newcastle ULP
(RHS)
Sources: Australian Institute of Petroleum; HRF; US Federal Reserve Bank of St Louis
2014 2015
US$/
barrel
A$/
litre

9. HOW DO LOWER OIL PRICES
IMPACT THE HUNTER?
• Negative impact on oil & gas sectors
– but, these are small employers in the Hunter
• Negative impacts offset by positive impact on
consumers and other businesses
– 50c fall in ULP price: ~2% cut in personal income tax rates!
– lower input costs for Hunter businesses and a chance to
boost profitability
Pro Con
Consumer $30/week better off Lower employment in energy sector
Businesses Lower cost of inputs Hurts energy producers (e.g. LNG)

10. Time again for
audience participation!

11. Clue: ages very gracefully
EXPORTS OF…?
0
30
60
90
120
150
0
500
1000
1500
2000
2500
Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul
2011 2012 2013 2014201020092008

12. Hunter brands target the premium end
IN VINO VERITAS
0
30
60
90
120
150
0
500
1000
1500
2000
2500
Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul
Australian Wine Exports ($m)
2011 2012 2013 2014201020092008
* Wine with a minimum price of A$50 per litre.
Sources: Australian Grape and Wine Authority; HRF
Premium wine*
(RHS)
All wine
(LHS)

13. Lower $A: inbound travel cheaper vs. outbound travel
TOURISM
ANOTHER BENEFICIARY OF A LOWER $A
0
0.5
1
1.5
2
2.5
3
0
2
4
6
8
10
12
2006 2007 2008 2009 2010 2011 2012 2013 2014
Visitors to the Hunter Region
Number of people
(million, LHS)
Expenditure
($bn, RHS)
Source: Destination NSW

14. Confidence boosters: lower oil prices; lower $A
CONSUMER’S ANIMAL SPIRITS
IMPROVING
0
0.1
0.2
0.3
0.4
0.5
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14
Improving consumer sentiment
Expectations for future finances
Source: HRF
Next 3 months
Next 12 months
Source: HRF

15. HRF’s business & consumer surveys: a unique Regional asset
BUSINESS PERFORMANCE
STRENGTHENING
-0.1
0
0.1
0.2
0.3
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14
Better business performance
Source: HRF
>0: improving, <0: worsening
Prior three months
Next 12 months
Source: HRF

16. GREEN SHOOTS ARE EVIDENT
• Lower AUD: a green shoot
– will help our manufacturers
and exporters (e.g. wine,
tourism)
• Other green shoots:
– low interest rates (for
borrowers)
– lower oil and petrol prices: the Hunter is a net oil importer
– improving business and consumer circumstances
• BUT: unemployment remains high
– especially for our young people
– Our YOUnite summit (Feb 25) looks at the “three E’s”

17. Delivering insights that move the Hunter
forward
Thank you