The Reserve Bank’s chart packs show that Australia approached peak household debt around 2007.
No longer could dwelling prices in regional Australia be driven by rising debt levels to the extent that they had been in the past.
The latest Detailed Labour Force data to February 2015 showed how the two most populous capital cities have created many more jobs since 2007 than their regional counterparts.
Since 2007, cumulative total employment growth in Sydney (+310,000) and Melbourne (+351,000) has been solid enough, though the labour market could clearly be doing better than it is.
Meanwhile through the heady fervour of the mining boom employment growth in regional New South Wales (+95,000) and Victoria (+63,000) had actually been fairly solid until around 2010, but now it is lagging.
The real driver of migration and dwelling prices, however, is full-time employment, and here the gap in cumulative jobs growth is becoming a gulf.
Sydney (+183,000) and Melbourne (+163,000) have created healthy-ish net growth in their respective full-time positions over the 8 years from February 2007 to February 2015.
On the other hand, regional New South Wales (+20,000) and regional Victoria (+13,000) have not.
Mining regions to suffer
Moreover with the mining investment and construction boom having definitively now passed its peak over the past year, the challenges for many regional areas are set to heighten.
It was less than 3 years ago that cashflow investors and analysts were raving about Port Hedland, South Hedland, Roxby Downs, Moranbah, Karratha, Emerald, Gladstone, Blackwater, Zeehan, Chinchilla, promising “at least a decade of growth”.
If something sounds too good to be true, it likely is.
We have seen an unprecedented boom in mining construction and therefore related resources sector employment over the past dozen years or so – but now we should get set for a corresponding resources investment and employment bust, on a scale not previously seen in Australia.
Regional unemployment rising
This is already beginning to show itself in the unemployment data, with the latest figures showing regional New South Wales unemployment rates rising to above 8 per cent, which is gradually set to be reflected in my rolling 12 monthly unemployment rate chart below.
Dwelling prices in Sydney are obviously booming, and the ripple effect has benefited many regional cities and centres since 2009, albeit to a lesser degree.
However, rising regional unemployment is now adding significant headwinds to future growth.