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- 🏦 Australia's Unemployment Rate Rises Slightly to 4.2% in July 2023
🏦 Australia's Unemployment Rate Rises Slightly to 4.2% in July 2023
Miko Santos
August 15, 2024
Good Afternoon. Miko here! Welcome to the first edition of Bada Embankment. We're thrilled to bring you the top banking stories from Australasia and Southeast Asia.
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Today’s reading time is 6 minutes.
👇 Santos Unfiltered is a podcast that uses the best journalism to find the answers to the biggest questions.
Image : RBNZ
The economy slumps, inflation slows, and New Zealand's central bank cuts interest rates, causing a plunge in the local dollar. A reduction in the official cash rate was widely predicted by economists and executed the Monetary Policy Committee to 5.25 per cent.
The Details
New Zealand's annual consumer price inflation is returning to within the Monetary Policy Committee's 1 to 3 percent target band.
The trend for surveyed inflation expectations, firms' pricing behavior, headline inflation, and a range of measures of core inflation are all moving consistent with low and stable inflation.
At present, economic growth is running below trend, partly because consumer spending and investment have been weak, which contributed to falling inflation in advanced economies due to weaker demand and global economic uncertainty. Some central banks have started reducing the policy interest rates.
Imported inflation into New Zealand has fallen back to be more in line with pre–Covid levels. Domestic services inflation is still high, but it is also expected to continue falling, both here and abroad, in line with rising spare economic capacity.
Taking into account current economic indicators and market trends, consumer price inflation in New Zealand over the near term is expected to stay near the target midpoint. In an effort to boost economic activity, coupled with muted inflation pressures, the Committee agreed to reduce the monetary policy restraint presently embodied in the OCR by 25 basis points, to 5.25 percent.
Why it matters :
This decision is taken to underpin economic growth and to keep inflation within the target range. It would put more weight on stability and growth objectives. Lowering of the OCR will boost spending and investments in the economy, giving stimulus to the economic activity.
Bottom line:
This reduction of the OCR is hence quite a proactive measure from the Committee regarding economic conditions and supporting growth. It reflects a commitment to stability, and to support sustainable activity in New Zealand.
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Image : CBA newsroom
In the past twelve months, the Commonwealth Bank of Australia has jacked up the support for customers by underpinning the strength of its balance sheet with a range of customer assistance measures to help cope with cost-of-living pressures and protect from frauds and scams. CEO Matt Comyn acknowledges the pressures many Australians are facing and sets out steps to proactively support customers.
The Details :
Operating expenses of $12.2 billion, increased by 3 percent year-on-year due to higher inflation, impacting salary costs;
Investment spend of slightly over $2 billion, inclusive of technology improvements to improve customer service, enhance resilience and meet the growing regulatory requirements;
Net interest margins of 1.99 percent, down eight basis points on FY23 largely as a result of competition for loans and deposits.
Loan impairment expense of $802 million was down 28 percent from a year earlier and reflects the bank's strong volume growth and underwriting discipline, together with rising house prices and an improved outlook in consumer finance;
The group has extended for 12 months the period for completion of its $1 billion on-market share buyback announced last year.
The annual after-tax cash net profit for the bank in 2024 was at $9.8 billion, which was 2% lower than the previous year and 3% lower in the first half of FY24, while the statutory net cash profit came in at $9.48 billion—a 6% drop.
Curve: What's important
Against the background of a 2024 decline in the bank's statutory net cash profit and annual cash net profit after taxes, concerns related to the financial performance of the bank and its ability to deliver returns to shareholders could be raised. Moreover, the extension of the deadline for share buybacks may reflect that more time is needed to meet prepaid financial objectives or that the ongoing dictation of market conditions is forcing the decision-making process.
Bottom line :
On the other hand, towards determining the potential of the bank to accrue profits, the investors may have to be vigilant and take stock of the financial plans and the performances of the bank in the moving into the future. Moreover, why share buyback has had its deadline extended will give an insight into what is in store for the aspirations and challenges of the bank in the coming times.
🌏 SOUTHEAST ASIA
🇨🇳 China : Factory output in China rose 5.1% in July but eased from 5.3% in June, pointing to weak domestic demand that may need further policy support to boost the economy.
🇲🇾 Malaysia : Head of UOB's group personal financial services, Jacquelyn Tan, targets to derive half of its income from other South-East Asian markets by 2026, bringing down Singapore's contribution.
🇻🇳 Vietnam : The Việt Nam Bank for Social Policies increased the lending rate for buying and repairing social housing from 4.8 percent to 6.6 percent per year; this will be applied to all forms of loans, old or new.
🇵🇭 Philippines : On Thursday, the Bangko Sentral ng Pilipinas cut its policy rate by 25 bps and entered an easing cycle amid lowered inflation expectations.
🈺 BUSINESS
Merger of Experian and illion: What It Means for Credit Reporting
The ACCC will not oppose the merger between Credit Data Solutions Pty Ltd (illion) and Experian Australia Credit Services Pty Ltd (Experian).
The Details :
Experian and illion supply consumer credit reports, credit decision software, marketing services, and solutions for categorization and verification of identity.
According to ACCC Commissioner Liza Carver, the merger proposal between Experian, illion, and Equifax may reduce competition. This may be because of a mix of the factors outlined above, both in terms of the nature of consumer credit reporting and Equifax's market position.
It was reported that most credit providers, especially those with a stated preference for Equifax, indicated high dependence on one bureau. Further, if they were depending on multiple bureaus, it would mostly be Experian or illion as the additional data source.
The review of the ACCC has returned that Experian and illion have less detailed data compared to Equifax, which in itself hampers competitiveness due to a narrower range of information.
This merger could finally make Experian-illion more competitive by enhancing their credit data with a more comprehensive dataset and, in turn, likely providing better services and solutions for both consumers and businesses.
Why it matters
The ACCC's decision to allow Experian and illion to acquire identity verification services could be rather huge in terms of potential implications for competition within the industry; it would change the whole nature and competitive dynamics among key players in the sector.
It remains important for business people and consumers to be informed about the developments so as to understand possible future implications and adapt appropriately.
Bottom Line :
The decision of the ACCC most directly affects industry competition and may have further implications for consumers and businesses. It is, therefore, very important to understand this outcome for all parties concerned in order to move forward. Knowing about these developments can help people in making decisions or adapting to changes.
🈺 EMPLOYMENT
Australia's Unemployment Rate Rises Slightly to 4.2% in July 2023
The Australian Bureau of Statistics may deter the Reserve Bank from cutting its key interest rate in the near future with its report that the unemployment rate edged up by 0.1 percentage points to 4.2% in July.
The details :
The unemployment rate added 24,000 people, while the employed rose by around 58,000. It lifted participation into a record high of 67.1 percent. The employment-to-population ratio went up 0.1 percentage points to 64.3 percent, which meant a greater proportion of the population was working, a little lower than the peak recorded in November 2023.
Despite the slight increase in unemployment, many people are working today and actively searching for employment. The total number of unemployed climbed to 637,000 in July, the highest since November 2021 but down about 70,000 compared with the level prior to the pandemic.
The employment-to-population ratio increased 0.1 percentage point to 64.3 percent, indicating that employment growth was stronger than population growth and was just shy of matching the all-time high of 64.4 percent in November 2023.
The percentage of people in employment who worked reduced hours because of illness was unchanged on 4.2% in July, the same rate as May and June. This remains higher than the 5-year pre-pandemic July average of 3.6%. This is somewhat offset by slightly lower-than-normal reporting of other reasons for reduced hours such as people taking annual leave.
Why it matter
In July, Australia's unemployment rate picked up a shade to 4.2%, indicating some moderation in the aggressive job market. This can feed into the monetary policy decisions at the Reserve Bank of Australia. While more Australians are now in employment than ever before, with the broader picture of employment remaining bright, this may yet dissuade the RBA from interest rate cuts anytime soon. This could have implications for wage growth, consumer confidence, and wider economic activity, so it is a development that needs to be kept under close scrutiny.
Bottom Line :
The slight rise in the unemployment rate may have broader implications for Australia's economy, particularly with respect to interest rates and monetary policy.
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