Widely respected business and financial commentator, Peter Switzer, has conducted his monthly economy check with some good results recorded.

Mr. Switizer predicts that the official cash rate will see a rise in mid 2018 based on; how quickly the economy can achieve 3% growth, inflation to be above 2%, and wages starting to rise. Other leading economists are banking on a 2019 rise.

Unemployment has fallen to 5.6%, compared to 6.3% in 2015. Full time jobs have grown by 115,400 positions in the last two months, which is the strongest back-to-back gain in 29 years.

Capital city home prices grew by 1.5% and is up 10.5% for the year as per the CoreLogic Home Value Index.

The Commonwealth Bank Manufacturing Purchasing Managers’ Indexshows expansion has slowed but still growing as the reading remains over 50.  The rate reduced by 1.8 points to 54.4 in July.

The weekly ANZ/Roy Morgan consumer confidence rating grew by 3.3 points (2.9%) to a 5-month high of 118.4 in the week to July 30.  A 4-year high was observed in the respondents’ views to economic conditions over the next 12 months.

After a 0.4% rise in May, private sector credit rose by 0.6% in June. After recent 3-year lows, annual credit growth was up from 5% to 5.4%. This is on the back of regulators trying to reduce interest-only lending.

Loans for renovationshit 7-year highs but personal loans attained a 14½-year low in May, while annual lending to purchase land hit record highs.

Business credit grew by 0.9% in June to be 4.4% higher than a year ago. A positive sign for business investment which has been struggling of late.

Approvals by local councils to build new homes jumped by 10.9% in June, after falling by 5.4% in May. Another sign that housing construction is not in free fall as some have previously indicated, is, house approvals grew to 13-month highs, up 4%.

Credit and debit card purchases were up 16.3% on the year to 706 million purchases (just exceeding December 2016 Christmas sale figures). The purchases were up 11% over the year to almost $51 billion.

Retail sales were at 3.8% over the year after a 0.3% increase in June. Non-food retail sales have grown the past three months by 2.4%, and are up 3.8% on a year ago.

New motor vehicle purchasers grew 1.6% on a year ago to 92,754; a record for the July month. This sector of retail has been performing well (on and off) for the last few years.

The biggest trade surplus in five years has been recorded, growing from $8.9 billion to $12.7 billion. This shows the export sector is contributing to economic growth, although the high Australian dollar is causing some problems.

Record highs were recorded in the export prices for meat and meat products; rising by 7.2% in the quarter.

Over the year to May, air travel along the Sydney to Melbourne route hit a record high of 83.8% with 8.94 million passengers.

For the June quarter, the Chinese economy grew at 6.9% the annual pace, well above forecasts.

Tourists from Greater China to Australia were up 11.3% over the past year, with a total of 1,519,100 visitors. In the same period, tourists from the United States of America were up by 15.7% to 750,200 visitors.

In June, the NAB business conditions indexrose from +10.9 points to a 9½-year high of +15.1 points. The business confidence index grew from +7.5 points to +9.3 points (the long term average for this figure is +5.8).

The current negatives for the economy is the slow growth in wage rises and the increasing Australian dollar. If the US economy continues to produce good numbers in employment and jobs growth, the US dollar will strengthen and the Australian dollar will consequently fall. 

The Real Estate Institute of Queensland (REIQ) has released their quarterly rental vacancy data and its great news for Brisbane.

The June quarter data indicated a recovery is forthcoming with a tightening in Inner Brisbane, as well as much of regional Queensland.

Brisbane Local Government Area (LGA) moved from the ‘weak’ to ‘healthy’ range with a vacancy rate that fell from 3.7 per cent to 3.3 per cent.

Inner Brisbane, which is dominated by apartments, saw a significant drop from its all time high of 4.4 per cent in the March quarter, down to 3.5 per cent in this latest review.

REIQ CEO Antonia Mercorella said these figures are a good indicator of the health of the inner city market, with Brisbane moving into the ‘healthy’ range where “both tenants and landlords have reasonable expectations of their needs being met.”

Mrs Mercorella continued on to comment that the market “has an unswerving ability to self-correct” with 2300 new apartments coming onto the market in the first quarter on 2015, and in that same period in 2017, 260 apartments were released to the market.

The 5-10km ‘middle ring’ around Brisbane continues to impress, maintaining a 3.1 per cent vacancy rate from the previous March quarter. This region has seen a tightening over the past six to nine months. 

South-East Queensland is set for a flurry of tourism activity in coming years, with year on year airport figures showing good growth. Passenger movements though Brisbane Airport in 2016-2017 increased by half-a-million more passengers than the previous financial year, with the international terminal seeing the majority of the growth, reports smh.com.au.

The Brisbane Airport logged 22.87 million passenger movements (up 1.8 per cent from 2016/2016), with 5.63 million being international, and 22.87 million domestic. The addition of the new runway in 2020 will be well needed, with 48.7 million passenger movements predicted for 2033-34.

Queensland Tourism Industry Council chief executive Daniel Gschwind says the figures are encouraging with the rise of international tourism adding millions to the state’s economy. He added that Brisbane Airport is the major gateway to the state, and if it is doing well, this has a flow-on effect for the state.

The Gold Coast Airport is too expected to boom, with an increase of near 160 per cent in passenger activities predicted over the next 20 years. By 2037, the Gold Coast Airport will service about three quarters of that of Brisbane Airport’s turnover, with 16.6 million passengers per year.

These figures are set to soar in the coming years with major tourism drivers including Commonwealth Games in 2018 and the completion of the Queens Wharf development in 2022, to name just a few. 

Westpac’s Chief Economist Bill Evans has recently discussed interest rates in the July edition of Westpac’s ‘Business Focus.’ After 11 consecutive months of the Reserve Bank leaving the cash rate on hold, predictions are this may continue well into 2018, with market speculation that a 25 base points hike will come in August next year.

Interestingly, Mr Evans himself has indicated if interest rates were to move next year, he feels it would be down, not up.

In the 2015/2016 period, the banks raised rates by an average of 27 base points, comparatively, this rates cycle is sitting at an average of 28 base points so far. With regards to owner-occupier principal and interest loans, there has been no increase since 2015, steady at 17 base points.

From an interest rate perspective, the property market is an idyllic investment space in the current climate, especially in Brisbane with lower median house prices (in comparison to say Sydney or Melbourne), but the banks are tightening their policies around lending, especially interest-only loans targeted to the investor. These loans make up approximately 40 per cent of the banks’ mortgage portfolios. In recent months, investor interest-only loans have increased by 76 base points.

Mr Evans says Westpac Bank is taking a more reserved outlook for GDP growth for Australia in 2018, predicting 2.5% growth, where the Reserve Bank is forecasting 3.25%; which is in-line with their anticipated interest rate hike in 2018 as mentioned above. 

On the jobs front, the state is heading towards lower than expected unemployment rates, and possibly improved wages in the next year, reports the Courier Mail.

Nationally, ABS data shows job vacancies are up 11 per cent on a year ago and have reached a six year high. These statistics are even better in Queensland alone, where they are 17.8 per cent greater on average than in May 2016; evidence of a labour market that is improving.

In another win for the state, unemployment could potentially be lower than expected, with economist Gene Tunny predicted it could be below the 6 per cent that is forecast.

Further to the positive economy signals of the labour market, theurbandeveloper.com reports a new development application has been submitted by Walker Corporation for a large commercial tower at 801 Ann Street, Fortitude Valley. The concept includes a 22-storey office tower, plant level and three-storey podium. It is anticipated that the development would house approximately 5,000 workers.

In addition to this encouraging application, the latest Crushman & Wakefield quarterly report indicates the Brisbane CBD office market is well on the road to recovery. Average prime gross rents have increased by 1.9% since the previous year to $446 per square metre. It is anticipated that modest growth in rental prices will continue. Although tenants seem to maintain the advantage in lease negotiations, they are becoming more proactive in the sourcing of space and initiating options well prior to the lease expiry. Rental incentives and attractive rents are still top-of-mind for relocation strategies.

The state labour market and Brisbane CBD office market are just two indicators of a positive and growing economy, plus, with the addition of substantial development and investment commenced or in the pipeline, the future is looking bright and sunny in Brisbane.