Booming houses, dwindling jobs: Australia’s economic paradox

By Maria Irene

Australia’s housing market continues to show signs of robust growth, but online job advertisements indicate that unemployment is ticking up. This complex dynamic, influenced both by domestic monetary policy decisions and global factors such as China’s economic performance, raises important questions about Australia’s economic trajectory.

Job advertisements in Australia dropped by 2% in September 2023, equating to 5,558 fewer positions. The total now stands at 272,937, marking a 4.1% decrease or 11,797 fewer roles compared to the year ending in September. On the flip side, Stephen Koukoulas, an advisor to the Prime Minister and a prominent treasury figure, countered market pessimism about the Australian real estate sector. According to him, critics who once predicted a 25% decline in house prices due to interest rate hikes are now advocating for another intervention by the Reserve Bank of Australia (RBA) to curb soaring property valuations.

The housing market, particularly in Melbourne and Sydney, continues to defy economic gravity to some extent. Auction clearance rates in Sydney showed an uptick last week, while Melbourne experienced a dip. Specifically, in Sydney, 72.3% of the 718 homes auctioned yielded successful results, marking a 2.6-percentage-point increase from the previous week. The RBA has already intimated that rising house prices are positively contributing to household wealth, albeit with a lagging effect on overall spending.

So, what role does China play in this economic balancing act? Shane Oliver, Chief Economist at AMP, highlighted that most of China’s economic indicators have exceeded expectations, including a GDP slowdown to 4.9% year-on-year. Although property risks remain elevated in China, policy measures appear to be taking root, which bodes well for Australia’s closely tied economy. This optimism is further bolstered by modest gains in the Australian Dollar against the US Dollar after China’s GDP figures outperformed forecasts.

However, it’s not all rosy. The auction scene in Australia has begun to show signs of fatigue. Activity slowed by 6.5% last week, with a total of 2,286 homes taken to auction across Australia’s capital cities. This marked the lowest preliminary clearance rate in nearly six months at 69.9%. Even Melbourne, which hosted its busiest auction week since before Easter the previous week, saw its activity ease by 12.2%.

Australia’s labour and property markets are navigating a complex landscape influenced by a mix of domestic and international factors, including China’s economic performance. Given these intricate dynamics, it’s no surprise that forecasts are continually evolving. As we keep an eye on these interconnected developments, one thing remains clear: uncertainty prevails, and only time will clarify Australia’s economic path forward.

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