Second quarter GDP shows pre-Delta economy in decent shape

The main focus this week was the June quarter GDP result. There had been some speculation that the data might deliver a surprise quarterly decline which – given that a Delta- and lockdown-driven contraction in the third quarter looks unavoidable – would have signalled the onset of two consecutive quarters of negative growth and a technical recession. 

In fact, GDP surprised on the upside with a 0.7 per cent quarterly increase, powered by a mix of household consumption, the still-booming housing market, and public sector spending on health and infrastructure.  Annual growth was an impressive 9.6 per cent, setting a new series record, although this particular result was driven by the severe downturn suffered in the corresponding quarter of last year.  All up, the GDP data depict an Australian economy that was in relatively decent shape before Delta hit. Unfortunately, however, that perspective on the economy is now of rapidly diminishing relevance.

Note that in a change to the format this week, we’ve included a link to a separate chart pack on the GDP numbers.  The idea is to avoid packing too many charts on the national accounts into the weekly note itself while still providing the option of a deeper dive into the numbers for interested readers.

Also, on the data front, this week provided a reminder of the ongoing transformation in Australia’s external position, with Q2:2021 setting new records for current account and trade surpluses.  Australia has now reported nine consecutive quarters of external surpluses – a striking turnround after having previously experienced current account deficits for 175 quarters in a row.  With another record monthly trade surplus in July this year, the run of surpluses look set to continue.  This week’s releases also brought a series of updates on the housing market, which continues to look robust in the face of Delta and state lockdowns: CoreLogic’s national home value index rose 1.5 per cent in August to be 18.4 per cent higher over the year, marking the strongest annual gain seen since 1989. Granted, the pace of monthly price increases has continued to ease relative to earlier this year, but here too growth remains comfortably above its historical average.  The number of new dwelling approvals did fall in July as past stimulus effects from the government’s HomeBuilder scheme continue to fade and new loan commitments stabilised over the same month.  Even so, both series remain elevated relative to pre-pandemic levels.

This week’s readings include the debate over the ACCC’s call for an overhaul of Australia’s merger laws, new RBA research on the relationship between wages and unemployment, vaccine thresholds and past mistakes, ABS data on business profits and government finances, a review of some of the papers discussed at last week’s Jackson Hole conference, the threat of stagflation and the prospects of a return to the world of the 1970s, rising food prices, the importance of the ‘bezzle’ for the macro economy, new data on global residential property prices, and a podcast on Australia’s vaccine rollout.

Finally, stay up to date on the economic front with our AICD Dismal Science podcast . Listen and subscribe: Apple Podcasts | Google Podcasts | Spotify

What I’ve been following in Australia . . .

Australia: Real GDP

What happened:

The ABS said that Australia’s real GDP rose 0.7 per cent over the quarter (seasonally adjusted) in the June quarter of this year to be 9.6 per cent higher than in the same quarter last year.  The Australian economy grew by 1.4 per cent over 2020-21 as a whole.

Taking into account Australia’s current meagre rate of population growth, real GDP per capita rose 0.4 per cent over the quarter and 9.4 per cent over the year.  Real net national disposable income per capita – which adjusts GDP for the impact of changes in the terms of trade, the real impact of income flows between Australia and the rest of the world, and the depreciation of machinery, buildings and other produced capital – jumped by a  much stronger 3.5 per cent over the quarter and soared by more than 17 per cent in annual terms.  That strong performance was propelled by high commodity prices that boosted the terms of trade by seven per cent over the quarter and 24.1 per cent over the year, leaving the ratio of export to import prices at the highest level in history.

Those high terms of trade also contributed to rapid nominal GDP growth in Q2, with the current price dollar value of GDP up 3.2 per cent over the quarter and 16.4 per cent over the year.

On an expenditure basis, that 0.7 per cent quarterly growth in real GDP in the June quarter was driven by domestic demand, which contributed 1.6 percentage points to overall growth.  By expenditure component, there were strong contributions from household consumption (0.6 percentage points), general government consumption (0.3 percentage points) and public investment (0.3 percentage points).  Dwelling investment and ownership transfer costs also made a positive contribution as the housing boom rolled on. Changes in inventories and net exports, however, were both headwinds.

Australia: Contribution to real GDP growth, Q1: 2020 to Q2: 2021

Household consumption rose 1.1 per cent over the quarter and 15.4 per cent over the year, although in level terms expenditure is still (just, 0.3 per cent) below pre-pandemic levels.  Quarterly private consumption spending was driven by an increase in spending on services (up 1.3 per cent) and a more modest increase in spending on goods (up 0.9 per cent).  This increase in household spending contributed to a further fall in the household saving ratio, which dropped from 11.6 per cent in the March quarter to 9.7 per cent in the June quarter as household gross disposable income also slipped by 0.3 per cent.

Public investment rose by a strong 7.4 per cent over the quarter and 14.2 per cent over the year, lifted by state and local government infrastructure projects.  Private investment rose by two per cent, reflecting increases in dwelling investment (up 1.7 per cent), ownership transfer costs (up 10 per cent) and business investment (up 0.8 per cent).

Exports of goods and services fell 3.2 per cent in volume terms over the quarter, subtracting 0.7 percentage points from overall GDP growth, while imports of goods and services were up 1.5 per cent, subtracting a further 0.3 percentage points.

On a production basis, gross value added (GVA) rose 0.9 per cent over the quarter with increases in 17 of 19 industries.  Quarterly growth in GVA was strongest in administrative and support services (up 6.2 per cent on the back of a strong rebound in demand for labour hire services), transport, postal and warehousing services (up 3.7 per cent), accommodation and food services (up 2.8 per cent) and in health care and social assistance services and other services (both up two per cent).  The two sectors that suffered a quarterly fall in GVA were mining (down 1.3 per cent) and professional, scientific and technical services (down 0.5 per cent).

On an income basis, compensation of employees rose 1.3 per cent over the quarter while gross operating surplus rose 4.1 per cent. Gross mixed income fell 0.7 per cent.  Taxes less subsidies on production and imports jumped 12.7 per cent quarter-on-quarter.

Finally, quarterly growth in state and territory final demand rose across all geographies.  Growth was strongest in the Northern Territory (up 5.3 per cent), New South Wales (up 2.2 per cent) and Queensland (up two per cent) and softest in the ACT (up 0.9 per cent) and Western Australia (up 1.2 per cent). 

Why it matters:

The June quarter national accounts provide a view of the pre-Delta Australian economy and as such have only limited implications for either the current quarter or for the economic outlook beyond that. There had been some speculation that the Q2 reading might see a small quarter-on-quarter fall.  If that had been the case, with Q3 widely expected to deliver a sizable quarterly decline due to lockdowns, then the headlines would have declared Australia to be in a technical recession.  In the event, however, this quarter’s outcome was stronger than the consensus forecast, which had expected a 0.4 per cent quarterly growth rate and a 9.1 per cent annual result.  As a result, instead of a story about a ‘double dip’ recession, the narrative is that the Australian economy was demonstrating reasonable (albeit slowing) momentum prior to the arrival of the Delta variant and the consequent economic disruption.

The Q2 results were also influenced – at least in terms of year-on-year comparisons – by the fact that the June quarter last year saw a dramatic slump in activity.  That big base effect provides some important context for the 9.6 per cent annual growth rate in the June quarter that is now the strongest in the history of the quarterly GDP series.  Note also that although real GDP at the end of the June quarter was about 1.6 per cent higher than its pre-pandemic level in the final quarter of 2019, output was still significantly below where it would have been in the absence of the COVID-19 recession of last year.

Australia: Real GDP

Another feature worth marking in the latest GDP numbers is the significant role played by public demand, which contributed 0.7 percentage points to overall quarterly growth.  That was a product of both government consumption and public investment.  Government consumption spending was boosted by health-related expenditure while the Bureau provides a deep dive into public investment, which in the June quarter rose to $29.2 billion, the highest level on record, and accounted for 5.8 per cent of GDP.  As noted above, the bulk of this reflected state and local government investment in new assets, particularly in hospital, school, road and rail projects.  Moreover, the ABS notes that there is still a significant amount of public investment work in the pipeline: looking back to Q1:2021, public sector engineering construction work yet to be done had risen to its highest ever level at $35 billion. Comparable June quarter data will be released toward the end of this month.

As noted above, the nominal economy continued to grow rapidly in the second quarter, with Australia’s terms of trade now at their highest level on record.  That was good news for the government’s tax take in Q2, which also hit a new record (see also this week’s readings, below).

Finally, a reminder that for those who would like a deeper dive into the GDP numbers you can take a look at our GDP chart pack here.

Australia: Current account balance

What happened:

Australia’s current account surplus rose $1.5 billion to $20.5 billion in the June quarter of this year, according to the ABS.

The goods and services trade balance rose to $28.9 billion in the June quarter from $25.4 billion in the March quarter as exports of goods and services rose by $7 billion (six per cent) while imports increased by $3.5 billion (four per cent).  The net primary income deficit grew from $6.2 billion in Q1:2021 to $7.4 billion in Q2:2021.

The capital and financial account recorded a deficit of $24.5 billion in the June quarter of this year, reflecting a financial account deficit of $24.2 billion.  That in turn was the product of a net outflow of equity of $24.5 billion and a net inflow of debt of just $0.3 billion.

Australia’s net international investment position was a liability of $885.1 billion at 31 June 2021, down $29.8 billion on the position at 31 March this year.  The decline in net liabilities reflected an increase in Australia’s net foreign equity asset position. 

Why it matters:

Australia set a new current account surplus record in the June quarter, built on a record trade surplus that was itself powered by strong commodity prices and record export values for metal ores and minerals.  With a surplus of about 3.8 per cent of GDP, June’s result continues a transformation in Australia’s external accounts that has now delivered nine consecutive quarters of current account surpluses.  Prior to that, Australia had reported current account deficits for 175 quarters in a row, with the last time the current account was in surplus coming in the June quarter of 1975.

Australia: Current account balance since 1960

On the ‘balancing’ side of the balance of payments, the concomitant rise in the financial account deficit reflects the activity of Australian superannuation and investment funds that saw a sharp increase in the purchase of overseas equities.  Those flows, plus the impact of positive valuation effects, also boosted the value of Australia’s net international equity position, thereby leading to a decline in our net overseas liabilities overall.  As a share of GDP, Australia’s net international investment liability position is now at its second lowest since the 1990s (the net liability ratio was slightly lower in the March quarter of 2020, on the eve of the pandemic).

Australia: Trade balance

What happened:

The ABS said that Australia recorded a trade surplus of $12.1 billion in July (seasonally adjusted).  Exports of goods and services rose by five per cent over the month to about $45.9 billion while imports were up by three per cent over the month to $33.8 billion.

Why it matters:

July delivered another record trade surplus, comfortably above consensus expectations for a $10 billion print.  Strong commodity prices in particular continue to lift Australian export values: while total exports of goods and services were up about $2 billion over the month, exports of metal ores and minerals were up by almost $0.7 billion, exports of coal were up by more than $0.6 billion and exports of other mineral fuels rose by more than $0.9 billion. 

Australia: Corelogic Hedonic home value index, combined capitals

What happened:

CoreLogic said that its national home value index rose 1.5 per cent in August to be 18.4 per cent higher than in August 2020.  The combined capitals index rose 1.5 per cent over the month and 17.5 per cent over the year while the combined regional index was up 1.6 per cent in monthly terms and 21.6 per cent in annual terms.

Dwelling values fell 0.1 per cent in Darwin over the month but rose in every other capital city, including increases of two per cent or more in Brisbane, Canberra and Hobart (note that for technical reasons CoreLogic did not report results for Perth or regional WA this month).

Index results as at August 31, 2021

Capital city houses continue to see faster growth in values than capital city units, although the gap between the two is narrowing – from about 1.1 percentage points each month in the first quarter of this year to about 0.7 percentage points now.

The impact of lockdowns is visible in the volume of home sales, where the number of sales has fallen by 19 per cent in Sydney and 34 per cent in Melbourne when compared with the prior three-month period (CoreLogic notes that rules associated with physical property restrictions are stricter in Melbourne, consistent with the larger fall in sales activity in that city).   Inventory levels have also fallen sharply across cities where lockdowns are in place and there has been a slide in auction clearance rates, particularly in Melbourne where CoreLogic remarks that a large proportion of auctions have been withdrawn from the market.  The median number of days to sell a property has also increased.

CoreLogic also reported that the pace of rental growth has softened over recent months, although the trend in rising rents remains strong: nationwide, rents rose 8.2 per cent over the year to August, marking the largest rise in rents since 2008.  Growth in rents for houses (up 9.9 per cent) has been much stronger than for units (up four per cent) over this period, with the gap particularly pronounced in Sydney and Melbourne.  With national housing values up 18.4 per cent and rents up 8.2 per cent over the year, national gross rental yields have fallen to a record low of 3.3 per cent, with Sydney, Melbourne, Brisbane, Hobart and Canberra all at historic lows.

Why it matters:

The annual rate of increase in national home values in August was the fastest since the year ending July 1989 and was 3.6 times higher than the 30-year average rate of annual growth, indicating that Australia’s housing market continues to boom in the face of the pandemic and renewed lockdowns. 

That said, the monthly rate of increase did ease for a fourth consecutive month as August reported the lowest rise since January this year.  While some of this ongoing slowdown in price momentum could reflect the impact of lockdowns, CoreLogic reckons that tightening affordability constraints are likely to be the more important factor, with housing prices having risen almost 11 times faster than wages over the past year.  Rather than prices, lockdowns have tended to be felt in the form of lower numbers of listings and fewer home sales, with the consequent reduction in supply potentially adding to upward pressure on prices.  Meanwhile, the monthly rate of growth in values still sits well above its long-run average even after August’s moderation in pace.

Australia: Lending to household for dwellings (ex refinancing)

What happened:

The ABS said that the value of new loan commitments for housing in July 2021 rose 0.2 per cent over the month (seasonally adjusted) to be 68.2 per cent higher over the year.  Lending to owner occupiers fell 0.4 per cent month-on-month but was still up more than 58 per cent year-on-year.  Lending to investors rose 1.8 per cent over the month and soared by 98.7 per cent in annual terms.

Why it matters:

July’s result shows new lending commitments for housing levelling off, with the ABS pointing to an ongoing unwinding in owner-occupier construction lending following the ending of the HomeBuilder grant, noting that since hitting a peak in February 2021, the value of these commitments has fallen from $4.2 billion to $2.5 billion (a 42 per cent drop). At the same time, the number of new loan commitments to owner-occupier first home buyers has now fallen 20 per cent since January 2021, although it remains 20 per cent higher compared to a year ago.

As with prices (see previous story) and approvals (see below), the overall trend here is of a relative loss of momentum but one that is taking place at elevated levels and that follows a sizeable run-up. 

It’s also worth noting that the fall in lending to owner occupiers over the month was offset by a rise in lending to investors.  The latter has been rising since October last year and is now close to 2015’s high, a development that regulators will be monitoring closely. 

Finally, the Bureau reported that borrower refinancing reached a series high of $17.2 billion in July, 60 per cent higher than in the same month last year, as borrowers have hunted for lower interest rates and/or cashback deals.

Australia: Housing credit

What happened:

Data on July’s financial aggregates from the RBA showed that private sector credit grew 0.7 per cent over the month (seasonally adjusted) to be up four per cent over the year.  Housing credit rose 0.6 per cent month-on-month and 5.8 per cent year-on-year. 

Personal credit fell one per over the month and was down 5.9 per cent in annual terms while business credit rose 1.1 per cent in monthly terms and 2.4 per cent from July last year.

Why it matters:

At 0.7 per cent over the month, private sector credit growth came in a bit above the median forecast for 0.5 per cent growth, driven by an uptick in business credit growth (likely reflecting businesses drawing down on credit lines to ensure cashflow during lockdowns).  Housing credit growth also remains robust, with growth in credit to owner-occupiers (up 0.9 per cent over the month) continuing to outpace growth to investors (up 0.3 per cent).

Australia: Building approvals (dwellings)

What happened:

According to the ABS, the number of total dwellings approved fell 8.6 per cent over the month in July 2021.  In annual terms, however, dwellings were up 21.5 per cent relative to July 2020.  Approvals for private sector houses  fell 5.8 per cent  month on month but rose 28 per cent over the year while approvals for private sector dwellings excluding houses fell 12.3 per cent over the month and rose 12.4 per cent over the year.

The value of new residential building approved fell 7.6 per cent over the month while the value of alterations and additions to residential building edged up 0.1 per cent.  The value of non-residential building approved dropped 30.5 per cent over the month.

Why it matters:

July marked a fourth consecutive monthly decline in the number of dwellings approved, which is now almost 25 per cent down from the peak hit in March this year.  The Bureau points to the unwinding of government stimulus measures such as HomeBuilder and the introduction of lockdowns in New South Wales and Victoria as driving the decline in approvals.  Even so, they remain well up on their levels in 2020 and in (pre-pandemic) 2019.

Australia: ANZ-Roy Morgan Weekly Consumer Confidence

What happened:

The ANZ-Roy Morgan Index of Consumer Confidence was little changed over the week to 29 August, with the index edging up higher by just 0.2 per cent.

Confidence rose in Sydney (up 0.9 per cent) but fell in Brisbane (down 1.6 per cent), Melbourne (down 1.9 per cent), Adelaide (down 8.6 per cent) and Perth (down 0.8 per cent).

Why it matters:

Despite Sydney’s daily case count rising above 1,000 for the first time last week, the weekly reading on consumer confidence was largely unchanged.  ANZ speculated that this could reflect rising vaccination rates and the hope that the prospect of hitting vaccination targets in coming months might lead to a future easing of restrictions.

Australia: Retail trade (nominal)

What happened:

Last Friday, the ABS reported that retail trade in July 2021 fell 2.7 per cent month-on-month (seasonally adjusted) and dropped 3.1 per cent over the year.

By industry, the largest falls in turnover were in cafes, restaurants and takeaway services (down 12.3 per cent over the month), clothing, footwear and personal accessory retailing (down 15.4 per cent) and department stores (down 11.4 per cent).  In contrast, food retailing was up 2.3 per cent.

By state, retail turnover slumped by almost nine per cent over the month in New South Wales.  There were also falls in South Australia (down 3.3 per cent) and Queensland (down 0.9 per cent).  Turnover rose elsewhere, with the largest increase in Tasmania (up 2.7 per cent). 

Why it matters:

The monthly drop of 2.7 per cent in turnover was only a little larger than the median expectation of a 2.5 per cent decline, with forecasters anticipating that lockdowns and stay-at-home orders would provide a significant headwind over the month.  That was particularly the case in New South Wales, where turnover fell sharply in the first full month of lockdown.  Likewise, the distribution of declines in retail trade by industry is also consistent with industries that were hit by store closures and other restrictions.

What I’ve been reading . . .

• ACCC Chair Rod Sims on protecting and promoting competition in Australia.  In his speech to the Law Council of Australia’s Competition and Consumer Workshop, Sims argued that ‘Australia’s current merger laws are failing to adequately protect competition…and so need to be changed,’ and said that the ACCC had ‘serious concerns about the level of competition in our economy and our ability under the current law to prevent further consolidation via anti-competitive acquisitions.’ 
• In the AFR, Graeme Samuel, a former chair of the ACCC, is sceptical of the call to change Australia’s merger laws.  Also from the AFR, a roundup of the debate on merger law. (See also the WSJ piece linked below on the shift to a neo-Brandeisian approach to antitrust in the United States).
• Richard Holden on vaccine thresholds and the dangers of repeating past mistakes (see also the podcast link at the end of this roundup for more from Holden and fellow economist Steven Hamilton).
• A new RBA discussion paper looks at the Phillips Curve (the relationship between unemployment rates and wage growth which implies that higher unemployment rates are associated with lower rates of wage growth, and vice versa) using local labour market data.  It estimates that the Phillips Curve is steeper when the unemployment rate is very low and flatter when there is more spare capacity.  More specifically, it estimates that when the unemployment rate exceeds 7.5 per cent, the Phillips Curve is flat and wage growth is not responsive to changes in unemployment.  But wages then become increasingly sensitive to changes in joblessness as the unemployment rate declines, particularly at rates below four per cent.  The paper’s baseline estimate is that if the unemployment rate is below four per cent, a one percentage point reduction will lead to an increase in wage growth that is about three times larger than if the starting unemployment rate as above 5.5 per cent (that is, the curve is about three times steeper at sub-four per cent rates of unemployment).
• Also from the RBA, its Corporate Plan 2021/22. 
• Helen Bird reckons that Canberra has backed down on key recommendations of the banking royal commission, arguing that of Hayne’s recommendations ‘more than half have been abandoned or watered down significantly, or are yet to be fully implemented.’
• David Uren asks, is China putting the squeeze on Australia by curbing steel supplies? Unlikely, he thinks.
• Greg Earl’s latest economic diplomacy column for the Lowy Interpreter looks at the cost of Australia’s role in Afghanistan, trade relations with India and an infrastructure push in the Pacific.
• The ABS published business indicator data for the June 2021 quarter.  Mining profits jumped 18.4 per cent over the quarter, boosted by high commodity prices, while non-mining profits fell by a bit more than one per cent.
• The ABS also released Government Finance Statistics for the second quarter of this year, which showed the general government operating balance  (that is, the balance for all levels of government) moving from a $20.8 billion deficit in the March quarter to a surplus of $2.6 billion in the June quarter. The deficit had peaked at $93.3 billion in the September quarter of last year.  Total taxation revenue reached record levels in the June 2021 quarter. 
• The agenda for last week’s Jackson Hole meeting includes links to papers and presentations.  As well as Fed Chair Jerome Powell’s speech on monetary policy in the time of COVID, the discussion covered topics including how monetary policy should respond to sectoral reallocation shocks (does easy monetary policy slow reallocation by prolonging the presence of ultimately non-viable businesses and jobs, or does it facilitate the adjustment of relative wages needed to encourage more mobility between sectors?), fiscal policy in the age of  COVID (including empirical findings based on 50 sectors across 27 economies that suggests that government support ‘saved’ many SMEs, reduced the share of ‘demand-constrained’ sectors and thereby supported employment, but was poorly targeted with a large share of disbursed funds going to firms that did not need support),  the participation cycle (that is, the forces that shape labour force participation), and the relative importance of income inequality vs demographic changes in explaining the downward trend in the (US) natural rate of interest (with the paper arguing that the former is more important, with a large rise in savings by high income earners since the 1980s).
• While the Fed’s view continues to be that current US inflationary pressures are mostly ‘transitory’ in nature, Nouriel Roubini thinks the threat of stagflation is real, arguing that negative supply shocks (deglobalisation and protectionism, tighter immigration restrictions, the start of a Sino-American Cold War, climate change disruptions to agriculture, persistent global pandemics leading to more pressure for national self-reliance, cyber warfare, and the political backlash against income and wealth inequality) will persist into the medium term, capping potential growth even as loose monetary and fiscal policies support demand and risk a de-anchoring of inflation expectations.
• Related, Ken Rogoff wonders whether we are headed back to the 1970s.
• Global weather disruptions and the implications for food prices.
• An update from the IMF on its pandemic proposal (pdf). The original proposal included targets to vaccinate at least 40 per cent of the population in all countries by end-2021 and at least 60 per cent by H1:2022 while also scaling up testing and maintaining an adequate supply of therapeutics and PPE in places where vaccine coverage is low.  The update argues that the serious downside risk associated with the Delta variant suggests raising the H1:2022 vaccine target to 70 per cent, reports that vaccine procurement has now reached over 60 per cent in most countries, and warns that large funding needs for diagnostics, therapeutics and PPE remain unmet.
• The WSJ Saturday Essay focused on the return of the trustbusters, looking at how the rise of Big tech has animated a New Brandeis movement (referring to Progressive Era Supreme Court Justice Louis Brandeis) that focuses on power and the problems of ‘bigness’.  Critics worry that – if the neo-Brandeisians prove successful – there could be a cost in terms of lower growth and smaller benefits to consumers.
• Also from the WSJ, a look at the natural experiment provided by different US states’ approach to unemployment benefits.  The data suggests that those US states that ended enhanced federal unemployment benefits early have (so far) seen similar job growth to states that continued to offer the higher payments.
• Matthew Klein explains that, contrary to the assertions of some de-growthers, being pro-growth isn’t anti-environment.
• The Economist magazine has a Special Report on the Arab World.
• Michael Pettis on why the bezzle matters for the economy.  The ‘bezzle’ is ‘the temporary gap between the perceived value of a portfolio of assets and its long-term economic value’ – something that, for example, could be a product of outright fraud (embezzlement) but that we might also expect to see during periods of ‘irrational exuberance’ and asset bubbles.  Pettis’ focus is on how the bezzle can translate into a temporary rise in reported GDP (e.g. via increased operating earnings, increased asset-based borrowing, and/or artificially lowering the cost of capital) and he argues that all these forces will later swing into reverse.
• New BIS data on residential property prices from the first quarter of this year: worldwide real property prices (that is, nominal property prices deflated by the consumer price index) rose 4.6 per cent over the year, recording their fastest growth since the global financial crisis.  Prices were up 7.3 per cent in advanced economies with rapid growth in the United States (up 10 per cent), Netherlands (up nine per cent), Germany and the UK (both up eight per cent), Canada (up seven per cent) and Australia (up six per cent.  New Zealand (up 19 per cent) and Denmark (up 14 per cent) recorded particularly large increases.  The BIS also notes that regional data shows that since the outbreak of the pandemic, housing inflation overall has tended to be less strong in capital/biggest cities vs. other parts of the country, although there is cross-country variation here.
• The FT on how Singapore is adapting to climate change.
• How the pandemic has affected national statistical offices across the developing world.
• Via Marginal Revolution, how US attempts to suppress opium production in Afghanistan ‘squandered billions of dollars, strengthened the Taliban, and destabilized the democratic government in Kabul.’
• William Dalrymple: Afghanistan always defeats the West.
• The Jolly Swagman podcast talks with economists Richard Holden and Steven Hamilton about Australia’s vaccine rollout and about our pandemic policies more generally.