Ryan Felsman, Senior Economist Twitter: @CommSec IMPORTANT INFORMATION AND DISCLAIMER FOR RETAIL CLIENTS The Economic Insights Series provides general market-related commentary on Australian macroeconomic themes that have been selected for coverage by the Commonwealth Securities Limited (CommSec) Chief Economist. Economic Insights are not intended to be investment research reports. This report has been prepared without taking into account your objectives, financial situation or needs. It is not to be construed as a solicitation or an offer to buy or sell any securities or financial instruments, or as a recommendation and/or investment advice. Before acting on the information in this report, you should consider the appropriateness and suitability of the information, having regard to your own objectives, financial situation and needs and, if necessary, seek appropriate professional of financial advice. CommSec believes that the information in this report is correct and any opinions, conclusions or recommendations are reasonably held or made based on information available at the time of its compilation, but no representation or warranty is made as to the accuracy, reliability or completeness of any statements made in this report. Any opinions, conclusions or recommendations set forth in this report are subject to change without notice and may differ or be contrary to the opinions, conclusions or recommendations expressed by any other member of the Commonwealth Bank of Australia group of companies. CommSec is under no obligation to, and does not, update or keep current the information contained in this report. Neither Commonwealth Bank of Australia nor any of its affiliates or subsidiaries accepts liability for loss or damage arising out of the use of all or any part of this report. All material presented in this report, unless specifically indicated otherwise, is under copyright of CommSec. This report is approved and distributed in Australia by Commonwealth Securities Limited ABN 60 067 254 399, a wholly owned but not guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. This report is not directed to, nor intended for distribution to or use by, any person or entity who is a citizen or resident of, or located in, any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or that would subject any entity within the Commonwealth Bank group of companies to any registration or licensing requirement within such jurisdiction.

Economics | September 7, 2020

Petrol prices hit 6-month high; Job ads lift ATM withdrawals hit 20-year lows Weekly Petrol Prices; Job advertisements; Credit/debit cards; Services activity Fuel prices: According to the Australian Institute of Petroleum, the national average price of unleaded

petrol rose by 7.2 cents last week – the most in 12 weeks – to 6-month highs of 129.7 cents a litre.

East Coast petrol prices: Average daily unleaded retail petrol prices are averaging between $1.29 and $1.38 a litre today across our biggest cities – Sydney, Melbourne and Brisbane – according to real-time fuel app MotorMouth. Prices have declined by up to 9 cents a litre since hitting highs of between $1.37 and $1.45 a litre in late August/early September.

Job advertisements: ANZ job advertisements rose by 1.6 per cent in August to 109,103 available positions. But ads are still down by 30 per cent from a year ago. Ads rose by 19.1 per cent in July after a record 41 per cent gain in June and 0.6 per cent lift in May. But ads fell by a record 53.1 per cent in April.

Card purchases: The value of credit & debit card purchases fell by 0.2 per cent in July. Card purchases were up 2 cent on the year. Smoothed annual growth (12-month average) eased from 2.9 per cent to 2.6 per cent. The annual average of ATM withdrawals hit 20-year lows in July at 38.25 million.

Services gauge: The AiGroup Performance of Services index fell by 1.5 points to 42.5 in August – the 9th successive monthly contraction in activity (reading below 50).

Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. The job advertisements data is a leading indicator of the job market and therefore important for consumer-focussed stocks and companies such as SEEK. The credit & debit card spending data provides guidance for consumer-focussed businesses. The services purchasing managers index provides guidance on conditions in retailing, financial services and the services sector more broadly.

What does it all mean? Average Aussie unleaded petrol prices rose the most in 12 weeks last week – hitting 6-month highs of 129.7

cents a litre – as East Coast pump prices reached the most expensive point of the retail cycle. But prices have begun easing from their peaks, averaging between $1.29 and $1.38 a litre today across our biggest cities – Sydney, Melbourne and Brisbane – according to real-time fuel app MotorMouth. In fact, bowser prices have declined by up to 9 cents a litre since hitting highs of between $1.37 and $1.45 a litre in late August.

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Economic Insights. Petrol prices hit 6-month high; Job ads lift

Motorists should top up rather than fill up their cars this week with prices expected to remain elevated before gradually falling over the next couple of weeks with the discounting price cycle underway.

The number of Aussie job advertisements lifted for a fourth successive month in August. That said, the 1.6 per cent gain was modest when compared to the record gains of 41 per cent and 19.1 per cent in June and July, respectively.

Of course, Victoria’s level four virus restrictions are weighing on national hiring intentions with the state representing about a fifth of total Aussie jobs ads. SEEK recently highlighting that, “Since the re-introduction of restrictions in metropolitan Melbourne, we have seen a decline in job ads, but this has not been as severe as what we saw in March and April. The number of job ads were 45 per cent of pre-COVID levels [in the fortnight to August 23], but 59 per cent higher than the low point in April.”

Spending on ‘stay-at-home’ related household and electrical goods continues to be robust with Aussies – armed with stimulus payments and super withdrawals – confined to their home offices and lounge rooms. But in-line with an easing in Commonwealth Bank (CBA) credit and debit card spending, the Reserve Bank’s latest card lending data re-affirms the still-cautious attitude of consumers towards their ‘plastic fantastic’! Rising job market, economic and virus insecurities likely contributed to average credit/charge card balances hitting 14-years lows of $2,768.13 in July.

With concerns around the health and hygiene of banknotes, Aussies continue to prefer contactless payments rather than cash in the pandemic. And many retailers are only accepting cards as a means of payment. In this environment, bank ATMs (Automatic Teller Machines) are being used less and less with withdrawals from machines at 20-year lows in July. Cash is only sought as a store of wealth – especially $50 and $100 notes.

What do the reports and figures show? Petrol prices

According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 7.2 cents last week – the most in 12 weeks – to 6-month highs of 129.7 cents a litre. The metropolitan price rose by 9.4 cents to 134.4 cents a litre and the regional price was up by 2.8 cents to 120.3 cents a litre.

Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 3.6 cents to 134.0 c/l), Melbourne (up by 13.2 cents to 141.4 c/l), Brisbane (up by 15.4 cents to 140.6 c/l), Adelaide (up by 19.1 cents to 130.2 c/l), Perth (down by 0.1 cent to 117.9 c/l), Darwin (down by 0.1 cent to 117.7 c/l), Canberra (up by 0.2 cents to 122.3 c/l) and Hobart (unchanged at 124.2 c/l).

The smoothed gross retail margin (2-month rolling average) for unleaded petrol rose from 17.68 cents to a 15-week high of 18.89 cents (24-month average: 14.6 cents a litre).

The national average diesel petrol price was steady at 120.0 cents a litre over the past week. The metropolitan price fell by 0.1 cent to 118.4 cents a litre and the regional price was also down 0.1 cent to 121.2 cents a litre.

Last week, the national average unleaded Terminal Gate Price (TGP) was steady at 104.8 cents a litre. The terminal gate diesel price stood at 104.4 cents a litre, down by 0.3 cents over the week.

Today, the average unleaded TGP stands at 103.8 cents a litre, down 1.5 cents over the week. The terminal gate diesel price stands at 103.3 cents a litre, also down 1.5 cents a litre over the week.

MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 129.5c; Melbourne 137.6c; Brisbane 135.4c; Adelaide 113.4c; Perth 106.6c; Canberra 122.3c; Darwin 117.7c; Hobart 124.2c.

Last week the key Singapore gasoline price rose by just US5 cents a barrel or 0.1 per cent to US$47.80 a barrel. In Australian dollar terms, the Singapore gasoline price gained 33 cents or 0.5 per cent to $65.75 a barrel or 41.35 cents a litre.

Job advertisements – August

ANZ job advertisements rose by 1.6 per cent in August – a 4th successive monthly gain – to 109,103 available positions. But ads are still down by 30 per cent from a year ago. Ads rose by 19.1 per cent in July after a record 41 per cent gain in June and 0.6 per cent lift in May. But ads fell by a record 53.1 per cent in April.

ANZ said, “With Victoria accounting for more than 26 per cent

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Economic Insights. Petrol prices hit 6-month high; Job ads lift

of the nation’s pre-pandemic employment, the Stage 4 restrictions in Melbourne and Stage 3 in regional Victoria have undoubtedly put the brakes on. Predictably, new SEEK job ads in Victoria have fallen; but SEEK also notes that the improvement in New South Wales ads has been sluggish compared with other parts of the country. This is consistent with weekly payroll data, which show Victorian jobs falling and New South Wales jobs coming to a standstill.”

Credit and debit card lending - July

The average credit/charge card balance fell by 4.2 per cent to 14-years lows of $2,768.13 in July. The average limit was just below record highs (highest in 26 years) at $9,900.18. A series break in September prevents getting accurate growth estimates. But the average credit balance has been falling for some time.

The number of credit and charge card purchases rose by 1.6 per cent in July after rising 7.7 per cent in June.

The value of purchases made with credit and charge cards fell by 1 per cent in July to be down 14.3 per cent on a year ago.

The number of overseas purchases fell by 2 per cent in July to be down 52.7 per cent on the year.

The value of overseas purchases was also down by 2 per cent in July to be 67.6 per cent lower on the year.

The number of debit card purchases fell by 0.4 per cent in July, but were still up 11.1 per cent on the year. The value of debit card purchases rose by 0.4 per cent in July to be up 17.9 per cent over the year.

By value, the sum of credit & debit card purchases eased by 0.2 per cent in July. Card purchases were up 2 cent on the year. Smoothed annual growth (12-month average) eased from 2.9 per cent to 2.6 per cent.

The number of credit and charge card accounts stood at a near 12-year low in July at 13.96 million, down from 14.09 million in June.

The number of debit card accounts rose 0.4 per cent to 40.2 million in July. Accounts are up 3.6 per cent on the year.

The number of ATM transactions continues to fall. The annual average of ATM withdrawals hit 20-year lows in July at 38.25 million.

AiGroup Performance of Services index – August

The AiGroup Performance of Services index fell by 1.5 points to 42.5 in August – the 9th successive monthly contraction in activity (reading below 50).

By sub-index, employment (-7.9 points to 39.4), new orders (-1.7 points to 45.2), supplier deliveries (+7.4 points to 44.7), capacity utilisation fell by 0.6 percentage points to 74.3 per cent, sales fell 0.1 point to 43.3 and finished stocks fell 1.6 points to 38.4. And average wages fell by 2.4 points to 43.4, selling prices rose 5.1 points to 45.4 and input prices rose 3 points to 55.5.

According to the AiGroup, “Government financial stimulus including construction sector incentives were nominated by respondents as having a positive impact on activity. Easing activity restriction across some states led to an improvement in customer demand. Some business-oriented respondents reported ongoing steady demand particularly for technology and communication services. There was an increase in sales through online channels reported as well as an increase in orders from locations other than Victoria.”

And, “Ongoing lower demand due to the COVID-19 global pandemic and the introduction of stage 4 restrictions in greater Melbourne were the the most frequently reported factors affecting services businesses in August. Customers were wary of the potential for increased activity restrictions in areas other than Victoria, and a lack of certainty generally continued to delay orders and investment decisions. Some respondents noted that there are ongoing limitations accessing customer sites reducing their ability to undertake servicing jobs and delaying maintenance projects.”

What is the importance of the economic data? Weekly petrol prices data 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 metropolitan and non-metropolitan retail petrol prices, with the weights based

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Economic Insights. Petrol prices hit 6-month high; Job ads lift

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 monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.

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.

The Australian Industry Group compile the Performance of Manufacturing Index, the Performance of Services index and the Performance of Construction index each month (the latter with the Housing Industry of Australia). The Commonwealth Bank and Markit also compile purchasing manager surveys for manufacturing and services sectors. The surveys are amongst the timeliest economic indicators released in Australia. The surveys are useful not just in showing how key sectors are performing but also in providing some sense about where they are headed. The key ‘forward looking’ components are orders and employment.

What are the implications for investors? Good news for motorists. Global crude oil prices – the biggest influence over Aussie petrol prices – are

weakening. The US Nymex price fell by 7.5 per cent last week to US$39.77 a barrel - the biggest weekly fall since June. And the Brent crude price lost 5.3 per cent to US$42.66 a barrel. Concerns over global oil demand have resurfaced with key OPEC+ alliance member Russia suggesting that demand may not get back to pre-pandemic levels for another 2-3 years.

And crude oil has extended its decline in early trading today with US Nymex crude oil price futures down as much as 2 per cent after producer Saudi Arabia cut pricing for oil sales in October, highlighting that the global crude oil demand recovery is struggling due to increasing virus cases in parts of Europe and India.

Along with today’s ANZ job ads release, tomorrow’s weekly payrolls jobs and wages data from the Bureau of Statistics will be key in providing some timely guidance on the impact of the Victorian lockdown on the jobs market in August. While job ads in the relatively ‘virus-free’ states of Western Australia and South Australia are within touching distance of pre-COVID-19 levels (according to SEEK), the extension of Melbourne’s lockdown and slowdown in NSW vacancies threaten to stall the national jobs recovery.

Ryan Felsman, Senior Economist, CommSec Twitter: @CommSec