Economic update November 2019

3 min read

The Australian economy delivers a back-to-back current account surplus of $7.9bn for Q3.

US and China trade talks continue, with a ‘phase one deal’ potentially sliding into 2020. Despite a turbulent month for markets, Information Technology and Healthcare lead strong domestic performance. 


The Reserve Bank left the cash rate unchanged in November, sitting at its record low of 0.75%. RBA Governor Phillip Lowe has reiterated that for Australia to reach full employment and achieve an inflation target of 2-3% an extended period of low interest rates will be required in Australia. In November, Lowe delivered a speech on unconventional monetary policies suggesting that the RBA will cut official interest rates and, although lukewarm to the suggestion, will consider quantitative easing next year if necessary. Despite concern in the market, Lowe has made it clear that negative interest rates are “extraordinarily unlikely”.

In more positive news, the economy delivered a back-to-back current account surplus of $7.9bn (1.6% of GDP) for the September quarter – the first consecutive surplus in 46 years - an improvement on the $4.7bn surplus for June. Key drivers being higher levels of export earnings centred on rising commodity prices. 

Retail sales picked up in nominal terms in September, as did household consumption – growing 0.1% for Q3. However, retail volumes were -0.1% for the quarter and -0.2% for the year, the weakest result since the 1990 recession. 

The labour market showed signs of slowing, shedding 19,000 jobs in October, reducing the annual growth in employment to 1.9%. The unemployment rate edged up to 5.3%, while underemployment increased to 8.5%.

Australian house prices rose at their fastest pace in 16 years as boom-time conditions returned to the nation’s largest cities. CoreLogic’s November data indicated that the national housing market is back in optimistic annual growth territory for the first time since April 2018. Dwelling prices in Sydney jumped 2.7%, Melbourne was up 2.2% and Perth was up 0.4%; the first month-on-month rise since the downturn. Units increased 1.8% and houses rose by 3.1%. There is a shorter supply of houses compared to units, with buyers racing to make purchases while prices are at current levels. National monthly turnover, however, was reported at 45.4% – now below its 20 year median.

The Westpac-Melbourne Institute Consumer Confidence Index rose 4.5% to 97 points for November, following a sharp 5.5% reduction in October. This is the first growth for the index since August, though still well below the long-term average of 101.4 points despite the RBA’s multiple rate cuts. The Institute’s Unemployment Expectations Index rose 3.6% to 136.5, up 13.4% compared to November 2018. Westpac’s Chief economist Bill Evans warned that these readings are consistent with a slowdown in job growth and steady increases in unemployment and under-employment rates over the year ahead. 

United States

US consumer confidence dropped to 125.5 in November, amid worries of current business conditions and employment prospects. Despite this four-month decline, it remains at levels sufficient to support a steady pace of consumer spending. Amid a global slowdown in business sentiment, continued concerns regarding the Trump administration's 16-month trade war add to American households’ reservations in spending. Business confidence has been declining for several quarters and is now at its lowest level since the GFC.  

The China-US technology and trade disputes continue to affect international trade flows and investments as businesses scale back spending plans because of the uncertainty. 

President Trump has promised that a preliminary trade deal with China is close, but there is still no agreement, with the December 15 deadline closing in. Completion of a ‘phase one deal’ could potentially slide into 2020, with China asking for more extensive tariff rollbacks and the US countering with increased demands of its own. To date the US has already set tariffs on more than $500bn Chinese goods, while China has retaliated with tariffs on more than $110bn of US products.

US economic growth continues to slow. Last quarter GDP expanded at an annualised pace of 1.9%, as opposed to 3.1% at the start of 2019. ISM data reported a fourth consecutive monthly contraction in the US manufacturing sector from its 50-neutral level. PMI fell slightly to 48.1%, a 0.2% drop from October.  US factory activity contracted as the New Orders Index, a measure of demand, read 47.2%. Construction spending unpredictably fell by 0.8%, offering cautionary notes on an economy that had shown signs of growth. 

US Federal Reserve Chair Jerome Powell reiterated that interest rates are on hold for now, indicating that ensuring the right policies in place will be a priority for building on the economic gains achieved so far. Slowing global growth and trade developments pose “ongoing risks”.  

The Commerce Department reported that new home sales dropped 0.7%. The housing market has perked up in recent months, catching up to the Fed’s soft monetary policy stance. 


Japanese exports fell 9.2% in October from a year earlier, with sharp declines in all of Asia. Imports fell by 14.8% in the year. Weakening global demands and trade tensions were to blame. Japan is facing more heaviness from a sales tax hike as of last month with the economy lacking in key growth drivers. However, consumer confidence rose from 38.7 in November to 36.2 in October. Japan’s Jibun Bank PMIs depicted weakness in the service sector with a 40 month manufacturing low and signalling the first decline in private sector output in over three years.

Chinese central banks cut short-term lending rates for the first time in four years, from 2.55% to 2.5%, signalling that policymakers have moved into a new easing cycle. Despite uncertainty, China’s manufacturing sector returned to expansion-level PMI readings in November, driven by increases in domestic manufacturing demand and enterprise expansion. Caixin PMI rose to 51.8 in November from 51.7 in October, the first expansion in seven months, providing a boost to investors looking for signs of optimism.

Chinese exports fell 1.1% from 2018 levels, demonstrating the continued effect of the US-China trade war, with shipments to the US slowing, sharply down -23.0%. Meanwhile, Chinese imports increased 0.3%, the first year-on-year growth since April. The Chinese Ministry of Commerce has reiterated that the removal of all tariffs on Chinese products is essential to the resolution of the US-China trade war. 

Adding to the tension between the two powers, President Trump signed a bill expressing support for human rights in Hong Kong as well as prohibiting the sale of US-made munitions to the city’s authorities.

A more detailed summary can be found here.

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Information current as at 30 November 2019. 

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