Hunter Insight Dashboard

Economic Update - February 2024

The University of Newcastle’s Institute for Regional Futures’ Insight Dashboard tracks socio-economic conditions in the Hunter. The dashboard is based on the Hunter Research Foundation Centre’s databank collected over 60 years, the most comprehensive collection for any region in Australia.

This dashboard of economic updates is designed to give decision-makers in government, industry and the community the latest data on the Hunter’s performance across key indicators. The dashboard draws upon national and regional data sources to deliver insights about the Hunter region. These updates will be provided throughout the year, in addition to the Hunter Insight Series. This release is the second in this format.

The dashboard is a snapshot of just some of the total data collected by the Institute for Regional Futures. For more information please contact irf@newcastle.edu.au.

National economy

Trends: The national economy has continued recent trends of levels of growth of circa 2% per annum, but a per capita decline of 0.5% per annum.

Latest: The latest data points show a 0.2% growth for the third quarter of 2023, down from a 0.4% growth for the second quarter of 2023.

At the national level, Australian Bureau of Statistics (ABS) data shows a quarterly rise in Gross Domestic Product (GDP) of 0.2% for the third quarter of 2023, continuing the previous quarter’s trend and giving a 12 month rise of 2.1% (chain volume measures). GDP per capita fell 0.5% due to the continued uptick in migration post-COVID. The ABS Australian National Accounts: National Income, Expenditure and Product, September release highlight the following points:

• Domestic demand has remained strong and been a primary upward driver of growth, providing a 0.5% increase in the quarter.
• Government expenditure and capital investment both contributed 0.2% points to GDP growth. Changes in inventories, principally mining inventories, contributed 0.4%.
• Net trade was the largest drag on GDP growth, detracting 0.6% from GDP. There was a 0.7% fall in exports, offsetting a 2.1% increase in imports.
• Household spending was flat in the third quarter in chain volume measures, capping a 0.4% increase for the whole year.
• Compensation of employees rose 2.6% due to tightness in the labour market and resultant wage growth.
• The household saving to income ratio has declined to 1.1%, the lowest level since December 2007.

Prices of key export commodities, combined with international inventories was mostly responsible for the decline in exports, whilst oil prices led to increases in import prices for the quarter. See ABS for more info.

Business performance

The NAB Group Economics update for December 2023 shows:

• Business conditions declined slightly at the end of 2023 both for NSW and Australia. While down from earlier peaks, the trend lines are still above long-term averages. Declines in conditions were led by manufacturing and construction and were a result of declines in trading conditions and employment indicators.
• Business confidence measures are more mixed. Both state and national levels saw a large dip in November followed by a recovery in December 2023 to end close to zero. The indicators both remain well below long-run averages.

Data source: NAB Group Economics

Household spending

The ABS Monthly Household Spending Indicator from November 2023 for New South Wales indicates:

• An increase in household spending of +2.2% compared to November 2022 in current prices.
• An increase in spending on services of +5.6% and a decrease on goods of -1.1% since November 2022, continuing previous trends.
• An increase in non-discretionary expenditure of 5.6% with a fall for discretionary expenditure of -1.1%, also continuing previous trends.

The consumer price index rose 4.3% in the 12 months to November 2023. This is down from a peak of over 8% in December 2022, but still well above long-term averages. Housing (+6.6%), food and non-alcoholic beverages (+4.6%), insurance and financial services (+8.8%) and alcohol and tobacco (+6.4%) have been the main drivers. The latest data for November 2023 shows a tapering in transport, recreation and food and non-alcoholic beverage prices. Price increases in services are starting to overtake the large price increases seen in goods in the post-COVID years. In terms of international trade, the prices of tradeable goods are now declining significantly faster than average.

Data source: ABS Monthly consumer price index indicator

The ABS also publishes specific price data on housing related expenses to give better insights (at the national level) about the price movements of purchases, rents and other expenses. Rents and natural gas have seen the largest price increases. Electricity costs have also increased circa 25% since the low points of 2021.

Data source: ABS Monthly consumer price index indicator

Rising costs of construction (for both private and public housing) has been of particular interest due to the elevated material costs since COVID and the rising labour costs now occurring. At the same time, there is significant interest in addressing the shortfall in affordable housing. The construction price index (data for Sydney) shows the rapid rise in costs since January 2021 have started to peak, with levels stabilising nearly 40 percentage points above pre-COVID levels.

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Hunter

Employment

The Hunter region (see below and footnotes for region definitions) experienced a significant increase in job opportunities between 2022 and early 2023, but the trend has since reversed. The region reached its peak employment of 262,800 jobs in September 2023. Since September, over 11,000 jobs have been shed, 7,300 of which were shed in December alone. In contrast, employment for the whole of NSW saw a small dip from July to October reverse in November and December. In terms of year-on-year growth, the Hunter saw a 0.5% growth in employment in the last 12 months, compared to a 4.4% growth in the 12 months prior. Part-time employment has declined faster than full-time employment with a 6.3% decline in 2023. Note that for the Hunter, employment statistics are collected at the Statistical Area Level 4 (SA4), including the SA4s of ‘Hunter Valley excluding Newcastle’, and ‘Newcastle and Lake Macquarie’, but excluding the Mid-Coast LGA which is classified in the Mid North Coast SA4 region. Hence data for the Hunter Region in this section excludes the Mid-Coast LGA.

Data source: ABS Labour Force, Australia, Detailed

Unemployment

Data source: ABS Labour Force, Australia, Detailed.

Interestingly, whilst the number of jobs has decreased in recent months in the Hunter region, this is not reflected by an increase in unemployment. The latest data for end of 2023 shows a lower rate of unemployment than September 2023, with the Hunter recording an unemployment rate of 2.8% in December 2023, Newcastle and Lake Macquarie a rate of 2.5%, the rest of the Hunter a rate of 3.1% and NSW a rate of 3.3%. These rates compare to a notional figure of circa 4.5% for the ‘non-accelerating inflation rate of unemployment’ or NAIRU. Unemployment rates far away from the NAIRU are expected to help fuel wages growth and inflation. Note that the values expressed here are with a 3-month moving average.

Data source: ABS Labour Force, Australia, Detailed.

Employment - by industry

The last half of 2023 saw further declines in employment in some of the traditional industries, with agriculture, forestry and fishing reducing 800 full time equivalent employees (FTEs), manufacturing down 1600 FTEs and utilities down 1000 FTEs. In contrast, mining saw an increase of 2300 FTEs, and construction an increase of 600 FTEs. In the increasingly important service sector for the region, large swings were evident, with hospitality, retail and wholesale trade putting on a combined 6100 FTEs, likely recovering from lay-offs post COVID. The professional services sector saw declines in many industries, whilst public services (including education and health) saw large increases. Interestingly, a lot of these changes are consistent with what we saw in the early part of 2023.

Data source: ABS Labour Force, Australia, Detailed.

House prices

Data source: NSW Govt Rent and Sales Report.

The latest data shows the median price of housing in the Hunter starting to increase again, with a 1% increase from March to June 2023 in the Greater Newcastle Area (for the Cessnock, Lake Macquarie, Maitland, Newcastle and Port Stephens, based on the aggregate available in the NSW Govt Rent and Sales Report see regional explanations in the footnotes). All LGAs have maintained significantly higher median prices than pre-COVID, but are still below NSW averages on a value basis. Price increases in the 6 months to June 2023 are evident in Singleton, Maitland, Dungog, Cessnock, Port Stephens, Lake Macquarie and Newcastle. Upper Hunter Shire, Muswellbrook and Mid-Coast saw declines.

Data source: NSW Govt Rent and Sales Report.

Rental prices

For renters, there was hope that a peak in rental prices in mid-2023 may be followed by a stabilisation or decline in prices. However, for most LGAs in the Hunter, there is still a strong upward trend in prices. The data below is for the median weekly rent for 3-bedroom stand-alone houses. It is possible to see the median value by LGA, or the median values by LGA indexed to September 2010 (i.e. showing relative price increases for each LGA before and after September 2010). The latest data from the NSW Govt Rent and Sales Report extends to the third quarter of 2023.

Data source: NSW Govt Rent and Sales Report. Data indexed to start 2009.

In the 3 months to September 2023, at the LGA level, there were mixed signals. Newcastle, Lake Macquarie, Cessnock and Muswellbrook all recorded further increases in rents. Dungog has a very small rental market (not enough data was available to interpret trends in the second quarter of 2023) and saw a large decline. Smaller declines were evident in Maitland and Singleton. Upper-Hunter, Mid-Coast and Port Stephens all saw no change in median rents. Taking a volume weighted average of all new rents, the Greater Newcastle region (see comments about regional definitions above and in footnotes) saw an increase of 1.3% in the last quarter. Greater Sydney had an increase of around 5% in the September quarter.

Data source: NSW Govt Rent and Sales Report.

House prices to annual rent ratio

The ratio of house prices to annual rent is an indicator of affordability of rental prices in comparison to house purchase prices. The ratio is also used by investors to determine likely returns on investments The figure below shows the ratio of house price for a median 3 bedroom house to the rental price. Internationally, a value of 20 is a common baseline, and Australia tracks well above this number (reflecting the relatively high price of housing purchases). The ratio for NSW is in the range of 30-36 (i.e. the cost of purchase is 30-36 times the annual rent for a similar house). In the Hunter, most LGAs have ratios closer to 25. The peak in house prices seen above in 2022 is also evident in the peak in the price to rent ratio (implying that the rents did not peak in the same way as house prices). The decline in the ratio since 2022 implies that rental prices have been increasing faster than house prices during this period. This result appears to be common for all LGAs, although some (such as Lake Macquarie) are experiencing faster declines in the ratio than others (such as Singleton).

Building approvals

The number of building approvals by type since 2016 for the whole of the Hunter is shown below. This data is available by Statistical Local Area 2 (SA2) level, and thus the data presented here includes SA2 areas in the Mid-Coast LGA (see comment in footnotes). For the region as a whole, the predominant development is still housing, although number of approvals have been declining from a peak of 4000 in 2021 to just over 2025 in 2023. For more dense development, there are mixed signals, with a rise in apartment approvals (but still lower numbers than in the late 2010’s) offset by declines in the number of semi-detached, row or terraces houses since a peak in 2021.

A visualisation of the geographic spread of these approvals is provided below. The figure shows the number of building approvals by type since 2016 for the whole of the Hunter on a cumulative basis. For housing, the dominance of approvals in the outer-middle regions of the Hunter is evident, with housing approvals concentrated in the Branxton, Thornton and Morriset areas. The urban areas in Newcastle and Lake Maquarie see the concentration of apartment approvals, with few new housing approvals. The mid-density housing (semi-detached, row and terrace houses) are spread over a combination of urban areas and the outer SA2s.

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The Institute for Regional Futures delved into the issues surrounding housing in the region in its last Insight Series event for 2023 Hunter Insight Series: Building a Healthy Housing Market.

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For more detail on the Hunter Insight Dashboard, please contact Institute for Regional Futures.

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* The data presented here for the Hunter region includes the local government areas (LGAs) of Cessnock, Dungog, Lake Macquarie, Maitland, Mid-Coast, Muswellbrook, Newcastle, Port Stephens, Singleton and Upper Hunter. However, the ABS collects and reports data by Statistical Area which does not fully align with this definition. The Statistical Area Level 4 (SA4) classification, commonly used for reporting economic statistics includes the above LGAs in two SA4 areas comprising the Hunter Valley region, but classifies the Mid-Coast LGA in the Mid North Coast SA4. At the Statistical Area Level 2 (SA2), the SA2 areas that are part of the Mid-Coast LGA (including Taree, Gloucester, Old Bar, Buladelah, Forster, Tuncurry) are included in the data presented for the Hunter. The building approval data is available at SA2 level. For housing rental and sales data, the NSW Govt Rent and Sales Report provides aggregate median values only for the Greater Newcastle area based on old statistical subdivisions, but which corresponds to the LGAs of Cessnock, Lake Macquarie, Maitland, Newcastle and Port Stephens.

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Suggested citation: Institute for Regional Futures. “Hunter Insight Dashboard, Economic Update – February 2024.” University of Newcastle. February 2024. https://www.newcastle.edu.au/research/centre/regional-futures/hunter-insight-dashboard.

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Disclaimer: The information contained herein is believed to be reliable and accurate. However, no guarantee is given as to its accuracy or reliability, and no responsibility or liability for any information, opinions, or commentary contained herein, or for any consequences of its use, will be accepted by the University, or by any person involved in the preparation of this report.