The economic update presented by HRF Senior Research Fellow Jenny Williams at the Upper Hunter Economic Breakfast in March 2015.

1. Light at the end of the tunnel?
Jenny Williams – Senior Research Fellow

2. THE BIG PICTURE

3. COMMODITY PRICES FALLING
FORECAST TO FALL FURTHER
0
20
40
60
80
100
120
140
160
180
Dec-1989 Dec-1994 Dec-1999 Dec-2004 Dec-2009 Dec-2014
$A Trade Weighted
Index
Terms of Trade
Index
SOURCE: HRF; RBA
Base year = 100
Terms of Trade and Trade Weighted Index

4. DRIVING DOWN THE $A
MAKING OUR EXPORTS CHEAPER
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
0
20
40
60
80
100
120
140
160
180
$A / $US
(LHS)
Terms of Trade
Index 2012/13=100
(RHS)
SOURCE: HRF; RBA
Terms of Trade and Exchange Rate
… and our imports more expensive

5. TRANSITION TO NON-MINING INVESTMENT
SLOW
Estimates
National Accounts
SOURCE: Reserve Bank of Australia

6. LOW INTEREST RATES REGIME
HOW LOW CAN THEY GO?
0.0
0.2
0.4
0.6
0.8
1.0
1
2
3
4
5
6
Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14
Likelihood of interest rate fall by July 2015
0.25% fall
Sources: HRF; RBA
Variable-rate mortgage
(%; LHS)
Probability of
fall (RHS)
Probability
%

7. PETROL PRICES FALLING
BOOSTING HOUSEHOLD BUDGETS
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
0
20
40
60
80
100
120
140
160
180
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Crude oil*
(LHS)
SOURCE: HRF; Australian Institute of Petroleum; US Federal Reserve Bank
$US a
barrel
$A a litre
Muswellbrook ULP
(RHS)
Sydney ULP
(RHS)
Singleton ULP
(RHS)
*West Texas Intermediate
2014 2015
Oil and petrol prices

8. UPPER HUNTER
ECONOMY IN 2014

9. 2014 IN RETROSPECT
A DIFFICULT YEAR
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
DEC 02 DEC 04 DEC 06 DEC 08 DEC 10 DEC 12 DEC 14
SOURCE: HRF business surveys
IncreaseDecrease
Forward orders
Performance
Business conditions indexes

10. LABOUR MARKET
STEADYING?
2,800
3,200
3,600
4,000
90
105
120
135
FEB 05 FEB 07 FEB 09 FEB 11 FEB 13 FEB 15
* Includes Cessnock, Maitland, Port Stephens and Dungog with three Upper Hunter LGAs
SOURCE: HRF; ABS Monthly Labour Force Survey
Estimated number employed
3 month average
‘000 ‘000

11. UNEMPLOYMENT
STILL RISING
0
5
10
15
20
25
FEB 05 FEB 07 FEB 09 FEB 11 FEB 13 FEB 15
Newcastle/Lake Mac Hunter balance*
NSW Youth - Hunter balance
%
* Includes Cessnock, Maitland, Port Stephens and Dungog with three Upper Hunter LGAs
SOURCE: HRF; ABS Monthly Labour Force Survey
Unemployment rates

12. Wonderful world of work or just
wishful thinking?

13. OPPORTUNITIES
FOR WORK
Long term: Taking the
long way home
• Some responders were still optimistic about future
prospects even if opportunities did not exist now locally
• Even if work took them away, a number of focus group
participants expressed a desire to want to return to the
Hunter one day
• Diversification that leads to retention
of skills in the Hunter is key to
avoiding a skills shortage or
“brain drain” locally.

14. For those who felt that there were not opportunities
locally for young people, we wanted to know what
those opportunities were:
• Design
• Engineering and science
• Arts
• Media
• Information Technology
OPPORTUNITIES
FOR WORK
What are we missing?

15. WORK
EXPERIENCE
Where is improvement
needed?
• Increase work experience opportunities in the Hunter
• Raise awareness of existing work experience options
• Improve communication between businesses and
schools about work experience options

16. SHORT TERM OUTLOOK

17. RESIDENTIAL BUILDING
DRIVER OF TRANSITION TO NON-MINING INVESTMENT
… but not in the Upper Hunter
15,000
25,000
35,000
45,000
55,000
150
250
350
450
550
Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14
Upper Hunter NSW
SOURCE: HRF; ABS Building Approvals
Number of dwelling approvals
(annualised)

18. UPPER HUNTER HOUSING MARKET
WEAKER
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14
SOURCE: HRF; Real Estate Institute of NSW
Newcastle
Upper Hunter Shire
Muswellbrook
Singleton
Median house prices

19. COAL PRODUCTION
REACHED ITS PEAK?
0
3
6
9
12
15
18
0
30
60
90
120
150
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14
$US/
Tonne
Million
Tonnes/
month
SOURCE: HRF; Coal Services Statistics; Indexmundi
Thermal coal spot
price (LHS)
Hunter
(RHS)
Gunnedah
(RHS)
Upper Hunter coal production and
global prices

20. LIGHT AT THE END
OF THE TUNNEL?

21. HOUSEHOLD CONSUMPTION
SUBDUED
0.0
0.1
0.1
0.2
0.2
0.3
0.3
0.4
0.4
DEC 04 DEC 06 DEC 08 DEC 10 DEC 12 DEC 14
IncreaseDecrease
DecemberJune
Source: HRF household surveys
… but still positive
Index of spending expectations
(next 3 months)

22. BUSINESS AND CONSUMER CONFIDENCE
SUBDUED
0.0
0.1
0.1
0.2
0.2
0.3
0.3
0.4
0.4
Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14
SOURCE: HRF business and household surveys
Business performance
Household finances
IncreasingDecreasing
… but still positive
Index of expectations
(next 12 months)

23. DECLINING $A
EXPORTS MORE COMPETITIVE
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
Sales over the preceding 12 months
2011 2012 2013 2014201020092008
* Wine with a minimum price of A$50 per litre.
SOURCE: HRF; Australian Grape and Wine Authority
Premium wine*
(RHS)
All wine
(LHS)
$m $m

24. Delivering insights that move the Hunter
forward
Thank you