Manufacturing expansion fastest since 1992

Australia’s manufacturing sector is growing at its fastest pace in almost 30 years, despite the headwinds from COVID-19 outbreaks and associated lockdowns.

The Australian Industry Group performance of manufacturing index rose a further 1.4 points in June to 63.2, the highest monthly result since the index commenced in 1992.

“The 2020/21 financial year closed on a high note for Australia’s manufacturing sector,” Ai Group chief executive Innes Willox said.

A record pace of expansion was evident across the food and beverages, machinery and equipment, building materials and chemicals sectors.

“Production, employment and sales exports were all higher than in May although the rate of acceleration generally eased,” Mr Willox said.

“Exports of manufactured goods surged in June and new orders were also higher, pointing to the likelihood of further expansion in the months ahead.”

Separate figures shows the housing market posted strong price gains over the 2020/21 financial year, although there are some early signs that momentum is easing, which may be of comfort to Australia’s financial regulators.

Residential property prices rose 13.5 per cent over the year, the highest annual growth rate since 2004 when the market was unwinding from the housing boom of the early 2000s.

The CoreLogic home value index rose 1.9 per cent in June, with prices rising in all capital cities.

But CoreLogic head of research Eliza Owen said softer growth rates are emerging at the high end of the market, as well as in Perth and Darwin.

“The rest of the market tends to follow movements at the high end, and this is the first time in nine months that the high-tier growth rate has not accelerated,” Ms Owen said.

Australia’s financial regulators have been monitoring developments in the housing market in recent months.

The Reserve Bank of Australia has consistently said it is not its role to target house prices, only to ensure lending standards do not deteriorate.

At a meeting of the Council of Financial Regulators last month, the central bank agreed overall lending standards in Australia remained sound.

The council is made up of the RBA, Treasury, the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission.

Figures released by the RBA on Wednesday showed housing credit grew by 0.6 per cent in May, the largest rise since June 2017.

However, the growth was largely made up by owner-occupier loans, rather than what are considered riskier investor home loans.

The Australian Bureau of Statistics is preparing to release the latest international trade and job vacancy figures.

Economists expect the trade balance for goods and services to balloon to a record $10.5 billion surplus in May, buoyed by commodity exports, particularly iron ore shipments to China.

The previous record surplus was $9.7 billion in March 2020.

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