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Monday 18

June, 2018 2:03 PM



Largest fall in weekly petrol prices in 8mths

Largest fall in weekly petrol prices in 8mths

According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 4.5 cents last week to 148.8 cents per litre ? the largest weekly fall in 8 months.

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12.06.2018 04:05 PM

Largest fall in weekly petrol prices in 8 months
Home loan size at record high

Business survey; Housing finance; Lending; Petrol prices; Credit & debit cards

Petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 4.5 cents last week to 148.8 cents per litre – the largest weekly fall in 8 months.

Business survey: The NAB business conditions index fell from an upwardly-revised record high of +21.2 points (previously +21.1 points) in April to +15.1 points in May. The business confidence index fell from an upwardly-revised +10.6 points (previously +10.1 points) in April to +6.2 points in May.

Number of home loans: The number of loans (commitments) by home owners (owner-occupiers) fell by 1.4 per cent in April – the fifth consecutive monthly decline. Loans are down by 2.9 per cent on the year.

Value of home loans: The value of new housing commitments (owner occupier and investment) fell by 0.2 per cent in April.

Record high home loan size: The average home loan across Australia stood at a record-high $398,500 in April, up by 7.2 per cent on the year.

Lending finance: Total new lending commitments (housing, personal, commercial and lease finance) rose by 0.9 per cent in April to $69.6 billion. Commitments are down by 0.8 per cent on the year.

Credit cards: The average credit card balance fell by $39.60 to $3,194.90 in April. In smoothed terms (12 month average) the average balance was up by 0.5 per cent. 

What does it all mean?

Good news for motorists. Crude oil prices are declining at last. Pump prices fell by the most in eight months last week. While retail prices still remain elevated across most of Australia, fuel prices are approaching the bottom of the current price discounting cycle in Sydney, Melbourne and Brisbane. It’s almost three weeks since their most recent peak.

The Aussie housing market continues to rebalance. Home prices are falling in Sydney and Melbourne. Lending standards are being tightened and home loan growth is easing. And perhaps with good reason. The average size of home loans across Australia is at a record-high near-$400,000. Elevated mortgage debt is a concern to the Reserve Bank. That said, credit card debt fell in April as

Aussies tightened their belts.

There is no need to fret about the easing in today’s NAB business survey. Last month conditions were at all-time record highs. It was only last week that Reserve Bank analysis showed that corporate borrowing is running close to record levels with more than $25 billion in bonds issued by companies last year. Clearly the non-mining corporates are doing the heavy lifting on the investment and jobs front presently.

What do the figures show?
National Australia Bank Business Survey

The NAB business conditions index fell from an upwardlyrevised record high of +21.2 points (previously +21.1 points) in April to +15.1 points in May. The long-term average is +5.6 points. 

The business confidence index fell from an upwardly-revised +10.6 points (previously +10.1 points) in April to +6.2 points in May. The long-term average is +6.0 points.

The survey was undertaken from May 23 to 30.

The rolling annual average business conditions index increased to a record-high +17.3 points in May, up from +17.1 points in April.

Components: the index of trading conditions fell from +28.1 points to +21.9 points; employment fell from +12.6 points to +8.4 points; profitability fell from +22.3 points to +12.7 points; forward orders fell from +4.5 points to +4.1 points.

Inflationary indicators: The monthly reading of labour costs rose at a 1.0 per cent quarterly rate in May after a 0.9 per cent rise in April. Purchase costs rose at a 0.9 per cent quarterly rate in May after a 0.5 per cent rise in April. Final product prices rose by 0.5 per cent in May after increasing by 0.4 per cent quarterly rate in April. Retail prices rose at a 0.2 per cent quarterly rate in May after a 0.2 per cent rise in April.

Capacity utilisation fell to 82.0 per cent in May from 82.4 per cent in April, above the long-term average of 81.1.

The proportion of firms reporting that they did not require credit fell to 50 per cent in May, down from 72 per cent in April.

Housing finance – number

The number of loans (commitments) by home owners (owner-occupiers) fell by 1.4 per cent in April – the fifth consecutive monthly decline. Loans are down by 2.9 per cent on the year.

Excluding refinancing of dwellings, the number of loans fell by 1.9 per cent.

Loans by owner-occupiers for the construction of homes decreased by 0.2 per cent – the third consecutive decline.

Loans to buy newly-erected dwellings fell by 3.7 per cent after falling by 1.9 per cent in March.

Loans for the purchase of established dwellings (excluding refinancing) fell by 2.0 per cent – the second fall in three months.

The number of refinancing transactions fell by 0.3 per cent – the third straight fall.

Changes in home loans across the country: NSW (down 0.8 per cent); Victoria (down 3.5 per cent); Queensland (down 1.5 per cent); South Australia (up 4.4 per cent); Western Australia (down 1.5 per cent); Tasmania (down 2.7 per cent); Northern Territory (up 6.7 per cent); ACT (down 1.2 per cent). 

Housing finance – value

The value of new housing commitments (owner occupier and investment) fell by 0.2 per cent in April.

Owner-occupier loans rose by 0.2 per cent and investment loans fell by 0.9 per cent.

The value of loans by owner-occupiers and investors to build new homes rose by 4.1 per cent in April to $2.95 billion.

Housing finance – other statistics

The value of cancelled loans totalled $1.1 billion in April, down from $1.2 billion a year earlier.

Commitments actually advanced (loans made) totalled $18.1 billion, up from $17.1 billion a year earlier.

The proportion of first-time buyers in the home loan market rose from 17.4 per cent to 17.6 per cent (decade-average 17.8 per cent).

The proportion of fixed rate loans fell from 14.2 per cent to a 17-month low of 13.2 per cent.

And the average home loan across Australia stood at a record-high $398,500, up by 7.2 per cent on the year.

Lending Finance

Total new lending commitments (housing, personal, commercial and lease finance) rose by 0.9 per cent in April to $69.6 billion. Commitments are down by 0.8 per cent on the year.

In trend terms, lending fell for the fourth straight month, down by 0.7 per cent in March.

All housing finance rose by 0.1 per cent in April with construction and purchases up by 0.2 per cent. Alterations and additions fell by 2.9 per cent – the seventh consecutive decline – and were down by 19.0 per cent over the year – the weakest annual growth rate in 7½-years. All housing finance is up 3.7 per cent over the year.

Personal finance commitments rose by 2.0 in April after falling by 2.5 per cent in March. Fixed lending fell by 1.6 per cent. But revolving credit was up by 7.6 per cent following a 9.6 per cent surge in January – the best monthly outcome in 14 months. Personal loans are up by 6.5 per cent on a year ago – the best annual growth rate in 16 months.

Commercial finance rose by 1.1 per cent in April after declining by 1.9 per cent in March. Within commercial commitments, fixed lending rose by 3.2 per cent while revolving credit fell by 6.0 per cent. Commercial loans are down by 3.8 per cent on a year ago.

Lease finance rose by 2.1 per cent in April after declining by 1.3 per cent in March to stand 10.6 per cent lower over the year.

Credit & debit card lending:

The average credit card balance fell by $39.60 to $3,194.90 in April. In smoothed terms (12 month average) the average balance was up by 0.5 per cent.

Of credit cards attracting interest charges, the average outstanding balance rose by $36.90 in April to 2-year highs of $1,995.70. The average balance accruing interest was up by 3.8 per cent on a year ago – the strongest annual growth rate in over 7 years. In smoothed terms (12 month average) the average balance was down by 0.9 per cent on a year ago.

The average credit card limit rose by $19.10 to $9,466.00 in April to be up 2.9 per cent over the year.

Usage of credit card limits stood at 33.8 per cent in April.

The number of credit card accounts stood at 16.253 million in April, down by 3.0 per cent over the year.

The number of debit card accounts stood at 46.905 million in April; up by 3.4 per cent over the year.

The number of ATM transactions in February were down 4.5 per cent over the year. Transactions have been consistently falling in annual terms for over five years.

The number of debit card purchases in April were 19.5 per cent higher than a year ago with the value up 12.7 per cent.

In April 14.5 transactions per account were made on credit cards (on average) with 11.0 transactions per account made on debit cards.

Petrol prices

According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 4.5 cents to 148.8 cents a litre in the past week – the largest weekly fall in 8 months.

The metropolitan petrol price fell by 6.4 cents to 146.8 cents per litre and the regional price fell by 0.9 cents to 152.8 cents per litre. The gross retail margin fell from 12.66 cents to 12.38 cents.

Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 8.3 cents to 143.4 c/l), Melbourne (down by 6.3 cents to 146.5 c/l), Brisbane (down by 5.8 cents to 150.0 c/l), Adelaide (down by 16.1 cents to 140.5 c/l), Perth (down by 0.4 cents to 150.1 c/l), Darwin (up by 1.8 cents to 155.1 c/l), Canberra (up by 2.7 cents at 155.0c/l) and Hobart (up by 1.3 cents to 157.8c/l).

Today, the national average wholesale (terminal gate) unleaded petrol price stands at a 136.2 cents a litre, down by 2.8 cents over the week. The terminal gate diesel price stands at 138.5 cents a litre, down by 2.1 cents over the past week.

Last week the key Singapore gasoline price fell by US$2.60 or 3.0 per cent to US$85.20 a barrel. In Australian dollar terms the Singapore gasoline price fell by $4.46 or 3.8 per cent to $111.97 a barrel or 70.42 cents a litre.

MotorMouth records the following average retail prices for capital cities today: Sydney 138.7c; Melbourne 142.9c; Brisbane 146.5c; Adelaide 131.8c; Perth 157.5c; Canberra 155.1c; Darwin 155.2c; Hobart 157.9c.

What is the importance of the economic data?

The monthly National Australia Bank business survey is valuable in providing a timely reading about the health of Corporate Australia. Key indicators of business conditions such as orders, employment, profitability and capacity use are covered together with a gauge on confidence levels.

Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.

Lending Finance is released monthly by the Bureau of Statistics and contains figures on new housing, personal, commercial and lease finance commitments. The importance of the data lies in what it reveals about the appropriateness of interest rate settings, confidence and spending levels in the economy.

Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory's metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.

The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.

What are the implications for interest rates and investors?

Higher oil and petrol prices have contributed to rising inflationary expectations globally. Petrol and gasoline prices have been near 4-year highs. Political pressure to ease the burden on cash-strapped households is building – the driving season has begun in the US and President Trump isn’t happy. 

Saudi Arabia has already increased output in advance of this month’s much-anticipated OPEC gathering in Vienna. Perhaps this will be a source of conversation when Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman attend the FIFA World Cup together later this week? Russia plays Saudi.

There is no need for alarm following today’s business survey release. A statistical “give back” was expected after conditions reached nose-bleed levels last month. Australia’s businesses are largely in good health and the drag from the end of the mining construction boom is receding. Jobs are being created, but employers need to lift staff wages to push consumer prices higher.

Developments in the housing market will continue to be closely watched by policy makers. Credit growth is slowing and bank lending standards are tightening amid a focus on regulation. The potential for out-of-cycle mortgage rate increases and the spill-over into household consumption are concerns.

Credit card debt fell in April. The number of debit card purchases are building. The trend away from credit cards continues. Aussie companies such as Afterpay Touch continue to drive retail and payments innovation.

CommSec expects official interest rates to be stable until early 2019.

Published by Ryan Felsman, Senior Economist, CommSec
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