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The Treasury announced its full acceptance of findings and recommendations in the latest release of the independent review of Inland Rail. This affirms our expectations that the Inland Rail projects total cost estimate has increased to over $19.0bn.

AEMO publishes this Draft 2023 Inputs, Assumptions and Scenarios Report (IASR) pursuant to National Electricity Rules (NER) 5.22.8. This report includes key information and context for the inputs and assumptions used in AEMO’s Forecasting and Planning publications for the National Electricity Market (NEM).

Black Friday sales are becoming a larger part of the retail landscape. In recent years, consumers are increasingly delaying purchases that would previously have been made in October and bringing forward December spending to capitalise on lower prices.

A couple more rate hikes from the RBA are anticipated early this year, lifting the cash rate target to a peak of 3.6%. The combination of higher borrowing costs, falling house prices, and the increased cost to build a new dwelling set a negative backdrop for new dwelling supply.

BIS Oxford Economics was commissioned by the Australian Railway Association to examine the outlook for Australia’s railway construction and maintenance work for the next 10 years and presents the key drivers of activity at a national and state level.

BIS Oxford Economics has been engaged by APRA AMCOS to assess how tax offsets levied at venues staging live music might support an economic rebound from the pandemic and foster a healthy live performance ecosystem over the long run.

Sydney Skyline

The city of Sydney commissioned BIS Oxford Economics to conduct its 2022 Business Needs Survey.

Growth in construction activity is expected to pick up in 2023, despite the spectre of recession in many advanced economies. In this context, we have identified 6 themes that we think will dominate the narrative of the construction sector over 2023.

Australia’s changing climate represents a significant challenge to households, communities, government and industry. We are already experiencing the adverse effects of climate change including average temperature increases, more frequent extreme weather events and rising sea levels. This is expected to continue unless we grasp the opportunity to make more sustainable choices and reduce future emissions.

In 2020 the Australian Constructors Association commissioned BIS Oxford Economics to report on the opportunity cost1 of the poor productivity performance of Australia’s construction industry since 1990.

After a surge in global merchandise trade in 2021, activity has slowed in 2022 due to several factors, including shifting consumption patterns, high commodity prices, rising interest rates and a slowdown in China. Merchandise trade in 2022 is still expected to be 9% higher than in 2019. However, a deteriorating outlook for world economic growth is expected to lead to an overall decline in merchandise trade over 2023.

TradePrism is the most comprehensive forecasting service for trade. Offering 1200 product-level forecasts of trade between 46 major economies, and high-level indicators for an additional 137 economies delivered through an interactive data visualisation platform allows organisations to understand the key trends across global trade.

BIS Oxford Economics was commissioned to measure the economic impact of BNPL in Australia. Our research found that BNPL contributed $14.3 billion in GDP to the Australian economy in FY 2021.

Adelaide street scape
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Research Briefing | Jul 8, 2022

Divergent consumption patterns persist despite recovery

consumption RB in iPad frame

Household consumption increased a robust 1.5% q/q in Q1. Spending exceeded our expectations, with the Omicron outbreak proving to be less of a headwind than was anticipated. Nevertheless, Omicron would have provided some drag on spending, and we expect the q/q pace of growth increased in the June quarter. Consumption has reached the level it would have been had the 2018-19 pace of growth been maintained from 2020 onwards (2018-19 was a particularly soft period; spending is still adrift of the 2010- 19 trend path). However, the headline consumption figure masks remarkable divergences across components.

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Research Briefing | Jul 8, 2022

Divergent consumption patterns persist despite recovery

consumption RB in iPad frame

Household consumption increased a robust 1.5% q/q in Q1. Spending exceeded our expectations, with the Omicron outbreak proving to be less of a headwind than was anticipated. Nevertheless, Omicron would have provided some drag on spending, and we expect the q/q pace of growth increased in the June quarter. Consumption has reached the level it would have been had the 2018-19 pace of growth been maintained from 2020 onwards (2018-19 was a particularly soft period; spending is still adrift of the 2010- 19 trend path). However, the headline consumption figure masks remarkable divergences across components.

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residential house planning
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Research Briefing | Jul 8, 2022

Further credit tightening weighs on residential outlook

credit tightening weighs on residential outlook

Powered by HomeBuilder and record low interest rates, total building activity rebounded 13% in FY2021 to $131.21 billion (constant FY2020 prices). With the winding back of stimulus and capacity constraints biting, a modest 2% fall is estimated for FY2022.

Given a significant backlog of residential work to get through and a sizeable major project pipeline on the non-residential building front, total building starts are expected to rise 3% to $133.31 billion in FY2023. With the sharp profile of recent cash rate target rises, the trajectory of credit availability has worsened. Construction input shortages remain acute, with trade labour and material costs continuing to firm. Both factors will contribute to a higher rate of demand destruction in the near term.

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Research Briefing | Jul 8, 2022

Further credit tightening weighs on residential outlook

credit tightening weighs on residential outlook

Powered by HomeBuilder and record low interest rates, total building activity rebounded 13% in FY2021 to $131.21 billion (constant FY2020 prices). With the winding back of stimulus and capacity constraints biting, a modest 2% fall is estimated for FY2022.

Given a significant backlog of residential work to get through and a sizeable major project pipeline on the non-residential building front, total building starts are expected to rise 3% to $133.31 billion in FY2023. With the sharp profile of recent cash rate target rises, the trajectory of credit availability has worsened. Construction input shortages remain acute, with trade labour and material costs continuing to firm. Both factors will contribute to a higher rate of demand destruction in the near term.

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row of houses in London
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Research Briefing | Jul 7, 2022

Recession would severely impact near-term property returns

Recession property impacts

The global economic outlook has shifted drastically in the three months since our last global real estate scenario research briefing. The war in Ukraine introduced a significant amount of uncertainty into geopolitics and the outlook for the global economy, with downside risks accumulating since then. Over the past few months, we’ve gradually downgraded our global economic growth forecast, while upward revisions to the global inflation forecasts have seemingly been unremittent. Our most recent June flash Global Risk Survey suggests a shift in business perceptions about the key risks to the global economic outlook. While still pervasive, the war in Ukraine is no longer the prime concern of the Oxford Economics’ clients canvassed. Instead, it’s been supplanted in the latest survey by the risk of an advanced economy recession, on the back of quickening central bank tightening (Chart 2).

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Research Briefing | Jul 7, 2022

Recession would severely impact near-term property returns

Recession property impacts

The global economic outlook has shifted drastically in the three months since our last global real estate scenario research briefing. The war in Ukraine introduced a significant amount of uncertainty into geopolitics and the outlook for the global economy, with downside risks accumulating since then. Over the past few months, we’ve gradually downgraded our global economic growth forecast, while upward revisions to the global inflation forecasts have seemingly been unremittent. Our most recent June flash Global Risk Survey suggests a shift in business perceptions about the key risks to the global economic outlook. While still pervasive, the war in Ukraine is no longer the prime concern of the Oxford Economics’ clients canvassed. Instead, it’s been supplanted in the latest survey by the risk of an advanced economy recession, on the back of quickening central bank tightening (Chart 2).

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construction scaffolds
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Research Briefing | Jun 29, 2022

Global construction costs to remain high in 2023

Research paper in iPad frame

The global rebound in construction activity is set to continue over the coming years, supported by a wave of publicly funded infrastructure projects. This investment is coming at a time when global supply chain disruptions are hampering the delivery of construction materials, and tight labour markets are limiting the supply of labour. The resulting supply-demand mismatch has driven up construction costs, increasing the risks of cost-blowouts as well as project delays and cancellations.

Lockdowns in China and the Russia-Ukraine conflict have intensified global supply chain disruptions which means that input costs are likely to remain elevated for some time. While we write about national averages in our various construction service, there are sub-national and sub-sector variations. Please contact us if you would like more granular information.

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Research Briefing | Jun 29, 2022

Global construction costs to remain high in 2023

Research paper in iPad frame

The global rebound in construction activity is set to continue over the coming years, supported by a wave of publicly funded infrastructure projects. This investment is coming at a time when global supply chain disruptions are hampering the delivery of construction materials, and tight labour markets are limiting the supply of labour. The resulting supply-demand mismatch has driven up construction costs, increasing the risks of cost-blowouts as well as project delays and cancellations.

Lockdowns in China and the Russia-Ukraine conflict have intensified global supply chain disruptions which means that input costs are likely to remain elevated for some time. While we write about national averages in our various construction service, there are sub-national and sub-sector variations. Please contact us if you would like more granular information.

Read more

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Research Briefing | Jun 14, 2022

Trading Today: Markets in a sell everything mood

Treasury yields rocketed higher and the curve flattened sharply last week as rate hike expectations jumped. The 2-year yield jumped more than 40bp, leading the bear flattening selloff, which was the largest weekly rise for the 2-year since July 2008. The nearly 40bp rise in the 3-year yield was the largest since June 2009. The two-week rise in  2- and 3-year yields was the largest since April 2008. The 2-year/10-year spread narrowed 18bp. The rising inflation and economic growth concerns also pushed the S&P 500 Index 5.1% lower, and the Nasdaq 5.6% lower, but pushed the dollar index back above 104 as the euro fell back to test 105 ahead of the 103.5 mid-May low.

Markets are melting down to begin the week. Treasury yields are soaring, equity markets are crumbling, and commodity prices are tumbling. The dollar has been the main beneficiary, benefiting from the extreme flight to safety. Trading activity has been extremely heavy. Treasury futures flows have been around 270% of the twenty-day average, with activity in 2-year, 3-year, and 5-year futures more than triple the average. That included extremely heavy block trading activity in 2-year, 5-year, and 10-year futures, along with very heavy block trading activity in SOFR futures and options. 

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Research Briefing | Jun 14, 2022

Trading Today: Markets in a sell everything mood

Treasury yields rocketed higher and the curve flattened sharply last week as rate hike expectations jumped. The 2-year yield jumped more than 40bp, leading the bear flattening selloff, which was the largest weekly rise for the 2-year since July 2008. The nearly 40bp rise in the 3-year yield was the largest since June 2009. The two-week rise in  2- and 3-year yields was the largest since April 2008. The 2-year/10-year spread narrowed 18bp. The rising inflation and economic growth concerns also pushed the S&P 500 Index 5.1% lower, and the Nasdaq 5.6% lower, but pushed the dollar index back above 104 as the euro fell back to test 105 ahead of the 103.5 mid-May low.

Markets are melting down to begin the week. Treasury yields are soaring, equity markets are crumbling, and commodity prices are tumbling. The dollar has been the main beneficiary, benefiting from the extreme flight to safety. Trading activity has been extremely heavy. Treasury futures flows have been around 270% of the twenty-day average, with activity in 2-year, 3-year, and 5-year futures more than triple the average. That included extremely heavy block trading activity in 2-year, 5-year, and 10-year futures, along with very heavy block trading activity in SOFR futures and options. 

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Raging bull
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Research Briefing | Jun 6, 2022

Beware of quantitative tightening, a little goes a long way in global stock markets

iPad Frame Research ReportThe quantitative easing (QE) programmes undertaken by the leading global central banks since the global financial crisis (GFC) have changed the relationship between money and stock prices profoundly. Money now matters more. And while stock markets have priced in quantitative tightening (QT) well before its launch, plenty of holdings remain on central bank balance sheets.

QE programmes have pushed excess liquidity to new heights. Through buying government (and corporate) securities outright, central banks have created a huge monetary base, increasing the big five balance sheets by US$12 trillion since the pandemic. Banking systems have then created more money stocks by credit creation, adding about US$23 trillion to the largest 10 economies.

Both the monetary base and credit impulse have since turned the corner, but plenty is still in the system. True, vast monetary base creation produces less and less effect in terms of total liquidity as credit demand is finite, but global liquidity is still excessive as seen in record-high voluntary bank reserves and reversed repo operations.

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Research Briefing | Jun 6, 2022

Beware of quantitative tightening, a little goes a long way in global stock markets

iPad Frame Research ReportThe quantitative easing (QE) programmes undertaken by the leading global central banks since the global financial crisis (GFC) have changed the relationship between money and stock prices profoundly. Money now matters more. And while stock markets have priced in quantitative tightening (QT) well before its launch, plenty of holdings remain on central bank balance sheets.

QE programmes have pushed excess liquidity to new heights. Through buying government (and corporate) securities outright, central banks have created a huge monetary base, increasing the big five balance sheets by US$12 trillion since the pandemic. Banking systems have then created more money stocks by credit creation, adding about US$23 trillion to the largest 10 economies.

Both the monetary base and credit impulse have since turned the corner, but plenty is still in the system. True, vast monetary base creation produces less and less effect in terms of total liquidity as credit demand is finite, but global liquidity is still excessive as seen in record-high voluntary bank reserves and reversed repo operations.

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George street, Sydney

Private new capital expenditure fell 0.3% q/q in Q1 2022, led lower by a fall in buildings and structures investment. The weak result is in part due to the impact of Omicron on labour availability, and the postponement of construction activity in flood affected areas. Machinery & equipment volumes rose in the quarter.

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