<html><body>
The main reason superannuation costs are too high in Australia is both simple and horrendously complex: it’s the only service we buy where we give the service provider our money to look after.
It’s true that we also give our money to banks, but mostly, especially when we’re young, the banks give us money as loans.
The fact that super funds, and the investment managers and wealth advisers who run them, hold our money for us allows them to simply take some of it every month as their fee.
Everyone else has to send us a bill.
This might sound too obvious to even bother mentioning, but that system has two very powerful hidden effects:
<ol>
<li>
The providers of investment services get to charge a percentage of the money, and almost nobody understands percentages and even fewer understand the power of compounding;
</li>
<li>
Since the fee is usually a fixed percentage of the client’s account balance, it increases at the same rate as the balance, which is in turn being fed by the sum of investment returns and all contributions – mandatory and voluntary.
</li>
</ol>
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/46256/width668/wbzddg8b-1397351382.jpg" alt="">
Compounding fees
As a result, super and investment fees compound at several times the rate of inflation but the customers barely see what’s happening, and those that do, don’t understand it.
Say you’re 25, earning $50,000 and you start with $1000 balance in super. And say the fee is 1% (actually by the time you add in advice and investment management it’s probably more like 2%, but let’s stick with 1% for simplicity).
That 1% produces a $10 fee. In the following 12 months you contribute 9% of your salary, or $375 per month. On top of that the fund manages a return of 10% on the average balance.
At the end of the year your balance will be $5950 – marvellous. New fee: $59.50 – a six-fold increase.
Next year you got a pay rise of 5%, which means your contributions increase to $393.75 per month, or $4725. Once again the fund earns you 10%, so at the end of the year your new balance is $11,506. New fee: $115.06 – nearly twice last year’s fee.
Obviously that escalation in fees is dramatic because the balance started from a low base. That means, by the way, that people with low balances who are just starting out are subsidised by those with more money in their accounts, and that’s the best thing about the percentage fee system.
So let’s look at the same metrics for someone more established in the workforce, with $100,000 in super and a salary of $100,000 a year.
First year fee is $1,000 (1% of $100,000). Next year, assuming 9% of salary in contributions and a 10% return on the average balance, the fee is $1,194.50 – an increase of 19.45%.
Next year’s fee, assuming a 5% salary increase and another 10% investment return, is $1336.25, 12% more than last year. And the year after you get a promotion! Salary goes to $120,000 and contributions to $10,800 for the year. Your new super balance is a very healthy $158,270. New fee: $1582.70 – an 18% increase over last year.
<h2>And yet we comply…</h2>
Do you ring and complain about being gouged? Well, no, because the fee is still 1% – it hasn’t changed. And you’re feeling good about the rising balance, so why complain? And anyway, you probably don’t even know. The fee statement is there somewhere, but you never pay much attention to it.
There are two things to think about here. First, your salary is increasing by 5% so it’s a fair bet that the super fund’s staff are also getting the same sort of pay rises, possibly less.
Yet the fees are increasing at 2-3 times that rate because the law requires us to contribute 9% of salary and because investment returns usually average about three times the inflation rate as well, simply as a result of the rising stockmarket (not the super fund’s brilliance). That’s the whole point of investing in shares – they return 2-3 times inflation over time.
Second, with $150,000 in super you’re probably paying 2% in management and adviser fees (not 1%), which is $3000 a year, or $250 a month. Some people have account balances of $500,000, especially when they retire, and pay fees of $10,000 a year, or $833 a month.
Think about how many services you pay $800 a month for, month after month, year after year, or even $250 a month for that matter.
<h2>What can be done?</h2>
Super funds hate this description, but superannuation is a utility, like gas, electricity or the phone; in fact it’s more so - a government-mandated utility.
What’s more you don’t get much for the money – basically super funds put the money into large companies and ride the market up and down. This year’s winner is next year’s loser, and vice versa, and there’s no way of telling the difference between them.
Yet not only is it almost certainly the most expensive service you buy, the cost of it compounds at several times the inflation rate every year and the providers don’t have to send you a bill like the other utilities – they just quietly take some of your money each month.
And remember that the prices charged by gas, electricity and communications companies are regulated by the ACCC, which actually determines what return on capital they’re allowed to make. Super fees are not regulated at all.
So to control the ballooning cost of super, three things should happen:
<ul>
<li>
super funds and their advisers must be told to stop skimming the accounts for their fees, and to send a bill instead that we have to actually pay
</li>
<li>
the costs of compliance and regulation need to be brought down, which the government is trying to do
</li>
<li>
the fees that super funds charge, and the profits they make, should be regulated, just as other utilities are regulated.
</li>
</ul>
On second thoughts, perhaps only the first of those would be needed.
If we started getting a bill for $500 a month from our super fund, the price would quickly come down because customers wouldn’t pay it … especially when the share market was falling and along with it all the account balances.
Yes, stop making the super funds disclose the fees they skim, make them send us a bill instead.
<img src="https://counter.theconversation.edu.au/content/25199/count.gif" alt="The Conversation" width="1" height="1">
Alan Kohler is the founder of the Eureka Report, a subscription-based newsletter that gives general advice related to superannuation.
This article was originally published on <a href="https://theconversation.com">The Conversation</a>. Read the <a href="https://theconversation.com/superannuation-is-too-costly-so-bill-me-25199">original article</a>.
</body></html>

akohler-TyLfJGrMb8

Superannuation is too costly, so bill me

<html><body>
The Reserve Bank has no choice but to join the currency debasement contest that’s now going on around the world, and to cut rates by another 1 percentage point in the coming 12 months – including 0.5 percentage points by the end of the year.
The Australian dollar is in a 'no lose' situation: when Western central banks launch asset buying programs, as the central banks of the US, Europe, UK and Japan have all done lately, the 'risk on' environment sees the Aussie rise as a result of fund buying; but Australia’s AAA status and relatively high yield makes it a preferred safe haven as well, especially for other central banks.
Last week the RBA published a list of 16 global central banks that have been buying Australian dollars as part of their diversification strategy, including Russia, Brazil, Korea and Switzerland. On Thursday the Philippines was added to the list.
The result is that as the Chinese economy slows, commodity prices fall and with them Australia’s terms of trade, while the exchange rate has remained stubbornly above 104 US cents.
In other words, the dollar’s unique status as risk asset for hedge funds and safe haven for central banks means that it is no longer doing its usual job of buffering the Australian economy from an Asian or global downturn, as it did in 2001 and 2008.
This morning it is trading at 104.5 US cents, having slipped from its post-third-quarter high of 106.26.
What to do? Well, in March, when the dollar touched 108, the RBA started to sell more dollars than usual and talked the currency down.
Then on May 1, with the dollar still above 104, it shocked the market with a bigger than expected cut of 50 basis points and followed up with another 25 points in June. The dollar instantly fell to 103.3 on May 1 and then kept falling, bottoming at just below 97 US cents a month later before climbing to 106 in August on the back of speculation about European and US quantitative easing programs.
Since then the risk-on trade, the interest differential and central bank diversification has kept it above 104.
 
<hr class="system-pagebreak">
 
The RBA must cut again in October, and possibly by another 50 basis points to shock the markets once more. It also needs to do a bit more Australian dollar selling than usual, although not enough to trigger suggestions that it’s 'intervening' in the currency (can’t have that!).
Certainly the cash rate needs to be significantly lower than it is now by this time next year.
In essence it seems that the world’s central banks are working hard to debase their currencies as an alternative to a trade war. That may not be the primary intention of their quantitative easing and zero interest rate strategies, but it’s definitely an intended consequence.
The US, Europe, UK and Japan are all desperately keen to prop up, and if possible grow, net exports because of weak domestic employment. Some central banks are intervening directly in their currencies, others are settling for printing money to reduce its value.
For years now, the RBA has been talking about the inevitable “painful structural adjustment” as a result of the high terms of trade and currency.
But what if the terms of trade go back down and the currency doesn’t?
The fact that hedge funds and other central banks like the Aussie anyway should not be allowed to continue the painful structural adjustment for Australia’s export industries even as their export prices and volumes fall as well.
The result would not be structural adjustment, but disaster.
This article originally appeared on <a href="https://www.businessspectator.com.au/" target="_blank">Business Spectator.</a>
</body></html>

The RBA must cut the cash rate by 100 basis points by next year

<html><body>
Today's Business Spectator CEO Pulse survey puts the matter beyond doubt: Australia's chief executives do not like the Fair Work Act one bit.
They think it's bad for their businesses, they think it's bad for their industries and they especially think it's bad for the country. What's more, two-thirds of them think Fair Work Australia is doing a worse job than its predecessor, the Fair Pay Commission, because it's bureaucratic, inefficient and, worst of all, biased.
Do the nation's business leaders think the Rudd/Gillard system of workplace relations has anything going for it at all? Well, er, 3% of them think it has made things better.
The latest quarterly survey of Australian CEOs carried out by GA Research*, contains a devastating critique of the Fair Work Act and a rebuttal of the government's argument that the legislation improves productivity and is supported by business. It doesn't, and it's not.
The main problem, nominated by 54% of respondents, is that the Act sets up tension between wages and productivity. Other issues that need to be resolved are provisions around industrial action, collective bargaining and unfair dismissal – basically all the important things.
A lot of CEOs said that the new regime sets up an adversarial relationship between the unions and business, and is based around conflict. Some said that costs had increased and that they were dealing with more disputes and others said that the losses to productivity were hampering their ability to compete internationally.
To be fair, there were some positive comments. One CEO told our surveyors that there was "greater clarity and simplification via modern awards", while another praised Fair Work Australia: "Overall, Fair Work has presided over a necessarily complex area competently."
But Australia's CEOs have given the system a resounding thumbs down, with 82% saying it's bad for Australia, 60% concluding it's bad for their industry, and 51% that it's bad for their own company.
The interesting difference between those three figures lies in varying numbers of CEOs who think it has no impact at all: from 45% for the individual businesses to 9% for the nation. There was no change in the percentage that thought it was good, which was 3% for all categories.
Unsurprisingly, perhaps, the CEO collective now gives the Labor government 2.8 out of 10 for managing the economy. When we started these surveys in February 2010 the score was 5.4 out of 10, almost double today's score.
The decline in the government's standing has been remarkably steady, apart from a few months after Julia Gillard took over as prime minister and again just after the Future Jobs Forum was held late last year, accompanied as it was by a brief flurry of optimism that there would some action to help businesses lift employment.
Another interesting trend in the survey is around what's keeping them awake at night: achieving top line growth has now clearly replaced "sourcing and retaining skilled staff" as the key issue for CEOs. Even though unemployment is still low, CEOs are now much more worried about growing sales than finding staff.
Broadly, optimism about both the economy as a whole and individual businesses has fallen a long way versus this time last year: from 72% feeling somewhat or strongly optimistic about their own business to 56% now.
As for optimism about the Australian economy as a whole, that's down from 51% a year ago to 28% now, and no one is "strongly optimistic" at all – the whole 28% is now just "somewhat optimistic".
This is not good. CEOs are, by their nature, optimistic creatures because they spend their lives selling hope to their staff and their customers. That nearly a half of them are pessimistic about the nation's prospects, and a fifth of them are gloomy about their own companies is kind of shocking.
* Research design and analysis for the CEO Pulse was conducted by GA Research and fieldwork by AFS. The sample comprised n=96 CEOs of organisations with an Australian turnover of $100 million or more who opted to participate in a five minute survey conducted over the phone or online between July 17 and July 29, 2012.
This article first appeared on <a href="https://www.businessspectator.com.au/" rel="nofollow">Business Spectator</a>.
</body></html>

Fair Work anger at the heart of CEO pessimism: Kohler

<html><body>
The next wave of online retailing, far more dangerous for traditional store retailers than the first wave, is now upon us. It has been happening in the US and Europe for more than a year, but has now arrived in Australia.
It is – wait for it – full-price, non-discount retailing. That’s right – they don’t compete on price. The first wave of online retailers was, and still is, the discounters, but why are full-price online stores more of a wealth hazard for traditional bricks and mortar retailers? Because the margin is applied to service, specifically better delivery, instead of discounting.
The first of these is an online clothing and footwear store called The Iconic, which started up six months ago. It was created in just six months of business planning by five former management consultants, four from Boston Consulting and one from McKinsey and Co, copying similar operations in Europe.
The Iconic’s point of difference is that it offers free overnight delivery, guaranteed, within Australia, and three-hour delivery in Sydney for $4.95. Returns within 100 days have free delivery as well.
The business’s principals are two Australians, Adam Jacobs and Cameron Votan, two Germans, Finn Henzel and Andreas Otto and an American, Ryan Tuohy. They were all working in Sydney with BCG and McKinsey and decided a year ago that there was a gap in this country for a full-priced, free delivery retailer, copying ones in the US and Europe that had already taken off.
They got start-up funding from Rocket Internet, one of the world’s biggest incubator funds, as well as a private Swedish fund called Kinnevik.
Almost all innovation involves taking something that’s already being done and doing it better, and the key to making this one work was developing a partnership with Australia Post. Under Ahmed Fahour’s management Australia Post is trying to transform itself into a parcel delivery service for products bought online, to counter the collapse of ordinary mail.
The five partners persuaded Fahour and his team to initiate a sorting shift between 2am and 4am that didn't cost The Iconic or its customers any more. It means that products bought in the evening in front of the TV are ready to be dispatched by 6am the next morning and delivered free at 9am (according to Adam Jacobs).
The three-hour delivery within Sydney is done by a courier company and an automatic dispatch system; any longer and the fee is refunded.
This is an astonishing level of service, and takes online retailing to the next level.
The five partners won’t reveal any of their numbers except website traffic, which is public anyway. The Iconic is averaging 150,000 unique visitors a day, which is about three times the traffic that most of the traditional retailers are getting to their online stores.
Henzel told me they are “considerably” ahead of business plan at this stage and growing rapidly, mainly supported by performance marketing online, but also some TV, radio and print marketing.
In my view this sort of operation is a dire threat to existing store retailers, especially the big cumbersome ones.
At this stage it sells about 500 fashion brands – mostly Australian, but they are steadily signing up international brands as well. The reason it’s taking longer for the overseas brands is that they have to deal with local distributors, who have close existing relationships with stores like David Jones and Myer and are reluctant to deal with a challenger.
But it’s more of a threat to the property owners. Myer, David Jones and the other fashion chains all now have online stores and although they have been slow to move, they can catch up if they’re good enough.
But the landlords have no hope. Like print media, they are in a business with a limited future – the only question is how long they’ve got.
This article originally appeared on <a href="https://www.businessspectator.com.au/" target="_blank">Business Spectator.</a>
</body></html>

New wave of online retailers pose more of a threat to Aussie bricks and mortar stores: Kohler

<html><body>
And everyone thought this was going to be a tough budget. It was a piece of cake, really – Wayne Swan hardly had to employ any smoke and mirrors at all. Just do a bit of pea-and-thimble shuffling of spending out of 2012-13, and revenue in, both forwards and backwards, forecast a bumper 11% increase in tax revenue, and – hey presto! – watch me pull a surplus out of my hat.
That’s right, tax receipts are going to grow by 11% in 2012-13, according to this budget, including company tax up 9% and personal tax up by 8%. On top of that, there’s an extra $5.6 billion from resource rent taxes and $4 billion from the carbon tax. 
This is, at its core, a big-taxing, big-spending budget, including a big increase in welfare. It is the budget of an unpopular government approaching an election, not one that’s tightening the belt.
According to Budget Paper No.2 – Budget Measures, “expense measures” in this budget actually increasespending by $201.2 million.
There are a total of 284 separate increases in spending in the budget, ranging in size from $100,000 (a new Remote Jobs and Communities Programme) to $911 million (continuing “Operation Slipper” in Afghanistan).
On top of that, about $1.6 billion in spending was pulled forward from 2012-13 into 2011-12: $1.1 billion has been thrown at local councils this year in grants that were due to be paid in 2012-13, and another $500 million has been pulled forward by replacing the Education Tax Refund with a “Schoolkids bonus”.
In total, welfare payments, including the school kids bonus and the extra family welfare, go up by $4.8 billion.
Meanwhile the revenue measures in this budget add up to $1.7 billion in extra revenue, but they’re mostly just deferrals of tax cuts and special dividends.
The higher cap for super contributions has been deferred ($580 million more money in 2012-13), the company tax cut has been scrapped ($302 million), another $121 million will be pulled out of super by implementing the so-called “SuperStream” reforms, and $200 million will be yanked out of the Export Finance and Insurance Corporation as a special dividend and a $100 million one-off dividend from the Australian Reinsurance Pool Corporation. Oh, and there’s $127 million from cigarettes and tobacco excise.
Tax receipts usually grow by about 8% a year, thanks to fiscal drag (taxpayers moving into higher marginal brackets), but this year’s increase is a blockbuster 11%. Yes, it’s about $6 billion less than forecast six months ago but that was just a silly forecast.
Is the new one silly as well? Probably, but we won’t really know for 18 months.
Iron ore and coal companies aren’t expecting to pay any MRRT, so the $3.5 billion budgeted from that in 2012-13 looks dodgy, and the rest of the increase depends on economic growth of 3.25% and on the companies that are due to pay the carbon tax continuing to spew out greenhouse gases at the same rate, rather than doing something about it to avoid tax.
The important thing is that, thanks to the budgeted $33.4 billion increase in tax revenue, the government doesn’t have to cut spending and can actually increase it. I know they will tell you that spending is, indeed, being cut, but don’t believe it.
One of the curious things in this budget is that it assumes a cut in staff numbers for the Commonwealth public service of 3,073 to 258,563, or 1.2% – not much, but better than the big increases of previous years. A third of the cut is in the Australian Taxation Office, which is supposed to be losing 1,039 staff, and half the rest is just casual census collectors moving off the books.
Yet the budget also says $378 million is going to be provided to the ATO over four years so it can increase its collection of tax debts, increase its GST collections, and fight tax evasion.
That investment is budgeted to provide a return of $2.4 billion over the forward estimates – six times the investment – but you would think it won’t result in a staff cut of more than 1,000 people in the ATO, if they are supposed to run down that much more tax.
This article originally appeared on <a target="_blank" href="https://www.businessspectator.com.au/">Business Spectator.</a>
</body></html>

Federal budget 2012: A big taxing, big spending budget: Alan Kohler

<html><body>
The Reserve Bank's economics department had a bad year in 2011, and as a result the board is now high and dry with an official cash rate that is obviously wrong. It needs to come down by 0.5%, to 3.75%. 
In its February 2011 Statement on Monetary Policy, the RBA had a GDP growth forecast for the year ended December 2011 of 4.25% and for June 2012 of 3.75%. CPI inflation for June 2012 was forecast at 2.75%, the same as underlying inflation.
But then in May the bank's economists came over all bullish and upped their GDP forecast for June 2012 to 4.25%, while leaving the December forecast at 4.25%. CPI inflation for June was cut to 2.5%. In August the GDP forecast was up again to 4.5% and while the CPI forecast was left at 2.5%, the underlying inflation forecast was jacked up to 3%.
In November wobbles started to appear and the GDP forecast was cut to 4% and underlying inflation back to 2.5%. In February this year the GDP forecast for June 2012 was back to 3.5% but underlying inflation was actually raised to 2.75%.
So the RBA's economists have made two big mistakes: they got 2011 GDP growth horribly wrong and raised their inflation forecast in February for this financial year even as GDP was falling short.
It's hard to know what came over them on GDP in May last year, but the statement was especially bullish about commodity prices and resource and farm exports. Maybe they were influenced by Treasury, which had a GDP forecast for 2011-12 of 4% in the May budget last year, which has also turned out to be wildly wrong, leading to a bigger than expected deficit (by almost $10 billion).
But why the RBA felt the need to be more bullish about economic growth than Treasury in the middle of last year will probably have to remain a mystery, but that rush of blood to the head in May is still dogging the Reserve bank governor, Glenn Stevens and his board.
With GDP growth of 3.5% and underlying inflation of 2.75% in their February SMP forecasts for 2012, the board could hardly cut rates then, no matter how hard the business people on the board were arguing for it.
The minutes for the April meeting drily say: "Members noted that the national accounts for the December quarter had shown an increase in real GDP of 0.4% in the quarter and 2.3% over the year, which were both lower than expected."
Well, yes, that's an understatement – as recently as November the economists were forecasting 2.75% growth for 2011; just six months earlier they'd been forecasting 4.25%! That's almost twice reality.
One can imagine a fierce debate in the April meeting between the business people and the economists, with the latter clinging to the last shreds of their dignity. In the event they persuaded the board to wait for the March quarter inflation figure before cutting rates and hanging them out to dry.
Kerplunk! March quarter CPI inflation was 1.6%, against last November's forecast for the year to June of 3.25% (there wasn't a forecast for the March quarter). By February that had been slashed to 1.75%, but even that now looks too high.
Next Tuesday it will be, or should be at least, a bedraggled, hangdog group of economists who shuffle into the RBA board meeting for their presentation. And many of the board members may well be checking their emails while it's going on, having already made up their minds to cut rates by 50 basis points.
Which is what they should do.
This article originally appeared on <a href="https://www.businessspectator.com.au/" target="_blank">Business Spectator.</a>
 
 
</body></html>

The RBA has egg on its face and needs to cut rates by 50 basis points: Alan Kohler

<html><body>
There’s an air of growing panic among Australia’s business people. Company directors are calling for a budget deficit, retailers feel like they are peering over a cliff and everybody’s worried sick about the carbon tax and the high currency.
Metcash’s Andrew Reitzer reported yesterday that he is seeing “unprecedented and prolonged challenging operating conditions”. The IGA supermarkets are battling deflation of 0.9%, with specials making up more than half of all shopping baskets and as a result Metcash is laying off 478 people.
Meanwhile the Reserve Bank and Treasury are insouciant. RBA Governor Glenn Stevens merely said yesterday that “considerable structural change is occurring”, while putting off a rate cut. Treasury is working with the government to produce one of the toughest budgets in the nation’s history.
I can’t remember a time when the policymakers and the real world diverged as much as they do now.
It’s entirely possible that business people are in a funk unnecessarily and that the bureaucrats in Canberra and Martin Place have a better idea of what’s going on, but I doubt it. The truth is that both the RBA and Treasury have been getting it wrong, and both are being forced to adjust their economic forecasts downwards.
At yesterday’s RBA meeting, according to Governor Glenn Stevens: “the board judged the pace of output growth to be somewhat lower than earlier estimated”, but they stubbornly put off a rate cut anyway.
Last year’s federal budget forecast real GDP growth this financial year of 4%, which now looks absurdly optimistic. For calendar 2011, growth was half that figure and there is no reason to think it will be much different for the financial year – perhaps a little more than 2%.
So why do the government economists have their heads in the clouds, apart from the fact that it’s normal?
It’s partly because one person’s 'structural change' is another’s nightmare, and partly because it suits them: Treasury needs to produce a $40 billion fiscal turnaround to assist the treasurer’s political agenda and the RBA is still focused on inflation.
Business people, meanwhile, are seeing weak domestic demand because of consumer deleveraging, weak export demand because of the currency appreciation, and rising costs because of the labour laws and higher energy prices, both present and future.
To a large extent, the yawning gap between the economists and business people reflects the difference between 'gross' and 'marginal' – that is, the RBA is watching aggregate national inflation numbers while business people are watching their margins get hammered, and Treasury is watching national output, including the mining investment boom, while on the east coast, businesses are watching their all-important marginal sales collapse.
Business is a marginal game, while economics is gross.
This article originally appeared on <a href="https://www.businessspectator.com.au/" target="_blank">Business Spectator</a>
 
 
</body></html>

Business is marginal, government economists have their heads in the clouds: Alan Kohler

<html><body>
Keynesian purists are all clutching their foreheads, but actually it's pretty fabulous that Australia's politicians are competing with each other to promise budget surpluses: it's so much better than the appalling tax cut and spending competition of last decade led by JW Howard. 
Politicians can really only be trusted with emergency fiscal policy, such as when they flooded the world, and Australia, with blind government spending in late 2008. Otherwise borrow only in recession please, and at other times make outgoings less than incomings.
Central banks are running the global economy now, not finance ministers and bureaucrats. Elected governments are either tapped out or, in the case of Australia, splendidly sidelined by the potent political symbolism of surplus budgeting.
The European Central Bank and the US Federal Reserve are both using the rather novel strategy of printing money for financial speculators to play with to try and avoid another collapse and recession. Quantitative easing in the US and the ECB's LTRO strategy involve flooding the system with cheap money knowing that it won't be lent but gambled on carry trades and asset punts.
The result, as we begin 2012, is rising asset markets. In the US it's shares and property, in Europe all-important sovereign bonds, specifically in Italy and Spain. This morning's contraction in German industrial production, however, as well as the continuing weakness in US employment (highlighted by Fed chairman <a href="https://www.bloomberg.com/news/2012-02-07/bernanke-says-8-3-unemployment-understates-weakness-in-u-s-labor-market" target="_blank">Ben Bernanke this morning</a>) suggests that the transmission of this plan to the real economy is muffled.
The problem for the Australian central bank is that the speculators thus financed are keen on Australian assets, and why not? It's a AAA country paying 4% on 10-year bonds and a dividend yield of 8% on Telstra shares that is underpinned by government cash.
Australia is a carry trade paradise and to prove it the dollar is at, or close to, $US1.08, moving higher.
So does the RBA cut rates to bring down the currency, as some suggest? No, that won't work. The capital inflow is not investing in cash.
Far better, according to the RBA, to just watch the inflation rate, watch unemployment, try to ignore warnings about hardship and layoffs in the real world, and read up with what's happening in Europe.
On that basis there was a solid case for leaving rates on hold yesterday because, in theory and looking only at the stats, the economy is in equilibrium (moderate inflation, moderate to low unemployment) and Europe is looking a bit better thanks to the ECB's employment of the "good bacteria" of carry trade speculators keep the sovereign bond market afloat.
But as we have suggested previously in these columns, unemployment on the Australian east coast, and perhaps in the national statistics, is heading higher because retailers, manufacturers and banks are all cutting costs, because penalty rates are capping employment in hospitality and the currency is cutting tourism and exports.
In addition there seems a fair chance the banks will break cover and raise mortgage rates over the next month, starting with ANZ on Friday, which won't be great for the property market.
But at least Australia's RBA still has "sea-room", to quote Wayne Swan, to use normal monetary policy to impose a pay cut on the nation's bank depositors, thus lowering at least some of the banks' funding costs.
Other central banks can't do that since rates are at or close to zero. All they can do is print money for speculators to play with and hope that one day actual businesses will want to start borrowing to invest.
This article originally appeared on<a href="https://www.businessspectator.com.au/" target="_blank"> Business Spectator</a>.
 
</body></html>

There's a fair chance the banks will raise mortgage rates, starting with ANZ on Friday: Kohler

<html><body>
It’s hard to avoid concluding that both employment and commercial property returns in Australia are going to come under a lot of pressure this year and beyond. The banks are clearly preparing for some big redundancy rounds because of slower lending growth and higher funding costs, and retailers have been closing down and reducing staff for a while already and are going to keep doing it. Meanwhile, the manufacturing industry is hanging on by its fingernails, through government funding of the car industry. These industries are Australia’s three biggest employers, and each is now in a downturn for both the same and different reasons. They are going to need fewer workers and less real estate – offices, shops and factories. This week a big report on the banks by Jonathan Mott of UBS got a lot of attention when he predicted that 7,000 jobs would go in the banking industry. He said the banks’ staff numbers have increased from 141,000 to 179,000 over the past 10 years, and would be cut to 172,000 over two years. And the rest. As Stephen Bartholomeusz pointed out in Business Spectator yesterday (<a target="_blank" href="https://www.businessspectator.com.au/bs.nsf/Article/ANZ-McFarlane-job-cuts-banks-CBA-NAB-WBC-pd20120117-QL3MP?OpenDocument&amp;src=sph">Brace for a bank jobs blitz</a>, January 17), banks will have to reshape their business models, if not reinvent them, because credit growth has fallen permanently, the cost of funds has increased and online banking is now fully established. As with retailing and manufacturing – all businesses in fact – the first of those is the most important. Banks have already disconnected themselves from the Reserve Bank’s interest rate moves and will be cutting their mortgage rates by less than official cash rates this year. In fact, they might even increase rates while the RBA cuts. Cost increases can generally be passed on to customers, but if demand for your product is down there is nothing you can do but reduce costs, and for banks, retailers and manufacturers, that means staff. Jonathan Mott says the banks have been “lax” on costs, increasing staff by 7% a year for a decade, compared with 2.7% a year the previous decade. They were “investing for growth”. That growth – 14% to 16% compound annual growth in lending – has now evaporated and the banks have entered a new era of low volume growth as their customers retrench debt. The only sector that is investing and borrowing large sums in Australia is mining and energy, and the local banks haven’t got much of a foothold there – the big projects are funded globally. And mortgage rate cuts only tend to accelerate the reduction in lending growth because 80 per cent of mortgagees don’t reduce their repayments: they just increase their principal repayments and keep the monthly mortgage payments the same. That offsets any growth in new lending, which is pretty weak these days anyway. And the fact is that almost everybody is using ATMs and internet banking these days. Branches and face-to-face contact with customers are still important for sales and client relationships – especially big clients – but nobody’s going into branches to get cash, transfer money or pay bills any more. A revolution has happened in banking that is not yet reflected in the way they operate. I suspect the reduction in banking employment will be a lot more than 7,000 over the next few years. Likewise retailing. I drove down the clothing precinct of Bridge Road, Richmond yesterday and in a few hundred metres counted six closing down sales and three empty stores. While the big malls are still reporting near-100 per cent occupancy, most strip shopping centres are being hollowed out by online shopping combined with weak consumer spending. The retail revolution has only just begun but it’s happening with a rush now, helped by the strong Australian dollar. With customers doing a big part of their shopping online, a lot less shop staff will be needed to help them decide what to buy. As for manufacturing, the Australian dollar is not coming down in a hurry so exporting and competing with imports will remain difficult, if not impossible. The car industry patient is being kept alive by government life support, but at some point, you’d think, the respirator will have to be turned off, or at least down. Even with the subsidies, parts of the industry will die. Empty offices, empty shops, empty factories… who’d want to own commercial property these days?
This article originally appeared on <a href="https://www.businessspectator.com.au/" target="_blank">Business Spectator</a>.  
 
 
 
</body></html>

Commercial property under pressure due to job cut trend: Alan Kohler

Buyers considering a residence at boutique Gordon townhouse development <a href="https://www.apartments.com.au/new-townhouses/lume-gordon-43-47-dumaresq-street-gordon-nsw-2072">Lume</a>&nbsp;now have another reason to bring forward their decision.

For a limited time, purchasers of a residence at Lume will receive a BMW iX3 50 electric SUV, valued at more than $120,000, as part of their purchase. The offer is designed to add value for buyers while complementing the lifestyle envisioned for the architecturally designed Upper North Shore development.

Scott Timmins, Development Manager at <a href="https://www.apartments.com.au/developers/winim">WINIM</a>, said the partnership was created to provide buyers with a compelling reason to act.

"In today's market, buyers need a compelling reason to act now, and the BMW partnership was designed to create that catalyst. We wanted to add genuine value for our future purchasers. Choosing the all-electric BMW iX3 50 also reflects the values behind LUME, forward-thinking design, innovation and a more sustainable way of living. It's a premium incentive that complements the lifestyle our buyers aspire to and rewards those who commit early."

[smartcode_project:default project_id=7354 project_image_fid=374893]

Delivered by WINIM in partnership with Burtonwood Investment Partners, Lume comprises 14 architecturally designed two, three and four-bedroom townhomes created for families seeking the space of a freestanding house with the ease of modern, low-maintenance living.

The three-storey residences, designed by award-winning architecture practice <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a>, have been tailored for families and multi-generational living, featuring private internal lifts, flexible lower-level spaces, generous open-plan living and entertaining areas, media rooms, and landscaped outdoor spaces with custom outdoor kitchens.&nbsp;

Inside, engineered oak flooring, bespoke dining joinery with integrated wine fridges and backlit bars, sculptural porcelain bathrooms, Parisi freestanding baths and Astra Walker tapware create interiors that balance functionality with refined finishes.

Each townhome has been designed to combine generous internal spaces with sustainability initiatives such as EV charging infrastructure, while <a href="https://www.apartments.com.au/landscape-architect/arcadia-landscape-architecture">Arcadia</a>'s landscaped communal areas, centred around a restored creek line and native planting, encourage residents to connect with nature and spend more time outdoors.

[smartcode_project:default project_id=7354 project_image_fid=269527]

Rothelowman's Gary Tsui said the architecture was conceived to respond carefully to its Upper North Shore setting.

"Our vision was to create elegant, uplifting homes that draw on and positively contribute to the local character through meticulously considered design and an interaction with the surroundings."

The communal landscape has been designed as more than an open space between homes. Arcadia's Ben Newell and Kate Phillips said the adjoining reserve provided an opportunity to create a distinctive natural retreat for residents.

"Just as waterways carve their way through Ku-ring-gai's landscape, a raised boardwalk weaves through the reserve, connecting the homes to this tranquil oasis."

[smartcode_project:default project_id=7354 project_image_fid=374892]

Located just 300 metres from <a href="https://www.apartments.com.au/developments/gordon-nsw-2072">Gordon</a> Village and Gordon railway station, Lume offers convenient access to Sydney's CBD while placing residents close to some of the North Shore's leading schools, including Ravenswood, Pymble Ladies' College and Knox Grammar. Lane Cove National Park, Gordon Golf Club and a range of cafés and restaurants further reinforce the family-focused lifestyle on offer, with the BMW iX3 50 complementing everything from local trips around Gordon to weekend drives and city commutes.

Construction is underway with completion expected in mid-2027.

[smartcode_project_cta:default project_id=7354]

Joel Robinson

Boutique Gordon townhomes now come with a BMW iX3 50

Two apartments have sold for more than $10 million at EADE Byron Bay, setting some of the highest apartment prices ever achieved in the coastal town and underlining the growing appetite for luxury beachfront apartments in Australia's most popular coastal locations.

The $210 million project by Vitale Property Group has now secured more than $70 million in sales, led by residences that changed hands for $12.75 million and $11.75 million.

The record-breaking transactions reinforce the shift occurring in Byron Bay's premium property market, where affluent downsizers and lifestyle buyers are increasingly opting for high-end apartments over large beachfront homes.

<a href="https://www.apartments.com.au/new-apartments/eade-byron-bay-29-shirley-street-byron-bay-nsw-2481">EADE Byron Bay</a> occupies a rare 6,000 sqm absolute beachfront site on the corner of Shirley and Milton Streets overlooking Main Beach and The Wreck surf break, just 350 metres from Byron Bay's town centre.

The 25-residence development is the first beachfront apartment project approved in Byron Bay in more than a decade and is currently under construction, with completion expected in May 2027.

[smartcode_project:default project_id=145590 project_image_fid=359521]

The project has attracted a mix of local Byron Shire residents downsizing from larger homes, alongside interstate buyers from Sydney, Melbourne and Brisbane seeking a permanent coastal lifestyle without compromising on space.

Designed by <a href="https://www.apartments.com.au/architects/hayball">Hayball</a> and with interiors by <a href="https://www.apartments.com.au/interior-designers/alexander-co">Alexander &amp; Co</a>, EADE comprises&nbsp;10 garden apartments ranging from 284 sqm to 622 sqm, nine with private pools, five full-floor apartments and 10 rooftop residences with private plunge pools, expansive outdoor entertaining areas and uninterrupted ocean views.

[smartcode_project:default project_id=145590 project_image_fid=359527]

<a href="https://www.apartments.com.au/developers/vitale-property-group">Vitale Property Group</a> Managing Partner Chris Vitale said the project's combination of scale, location and limited future supply was driving buyer demand.

"There isn't another beachfront holding in Byron Bay of this size and position that could be developed again," Vitale said.

"Buyers are responding to the scarcity and the irreplaceability of a site of this calibre and to floorplans they can't find elsewhere in the market.

"We are seeing buyers place significant value on quality, space, design, resort-style amenities and the rarity of the location. The sales achieved to date demonstrate that discerning purchasers recognise the long-term significance of what is being created at EADE Byron Bay.

"Many are coming from larger homes in the Byron region, or from Sydney, Melbourne and Brisbane, and are after the space, security and convenience, without the upkeep of a house."

&nbsp;

[smartcode_project:default project_id=145590 project_image_fid=359523]

The Byron Bay project follows Vitale Property Group's delivery of the Mondrian Hotel and Private Residences at Burleigh Heads, with EADE continuing the developer's focus on luxury coastal developments.

Residents will have access to a resort-style swimming pool, gymnasium, sauna, cold plunge pool, concierge services and dedicated workspaces, while the project is targeting an 8-Star Green Star rating.

EADE Byron Bay is being exclusively marketed by Projx Australia in conjunction with WHITEFOX Projects.

WHITEFOX National Projects Director Phillip Rand said demand had been driven predominantly by owner-occupiers.

"We are seeing buyers at EADE place significant value on quality, space, design, resort-style amenities and the rarity of this location," Rand says.

"The sales achieved to date demonstrate that purchasers at this level recognise the long-term significance of what is being created at EADE Byron Bay."

Residences at EADE Byron Bay are currently priced between $4.75 million and $15.95 million.

&nbsp;

&nbsp;

&nbsp;

&nbsp;

&nbsp;

[smartcode_project_cta:default project_id=145590]

Vitale breaks Byron Bay records with EADE sales flurry 

When buying an apartment, most people compare the big-ticket items first. Floorplans. Kitchens. Balcony size. Natural light. The view.

But there's one everyday consideration that often doesn't come up until after moving in: how parcels are delivered.

As online shopping has become part of everyday life, parcel deliveries have shifted from an occasional event to a regular occurrence. Australians spent a record $82.6 billion shopping online in 2025, with almost one in every four retail dollars now spent digitally.

For apartment residents, that can present a challenge.

If nobody is home to accept a delivery, parcels may be redirected to a nearby Post Office, left in a building lobby or common area, or require building management to step in. In higher-density buildings, where dozens or even hundreds of residents may receive deliveries each day, parcel management has become an increasingly important part of everyday living.

That can create a range of frustrations. A missed delivery often means making time to collect a parcel elsewhere, while packages left unattended in foyers or mail areas can create clutter and increase the risk of theft. What seems like a minor inconvenience can quickly become a recurring issue for residents who shop online regularly.

It's one of those details that rarely features in a display suite but can have a noticeable impact once residents move in.

As a result, buyers are beginning to look beyond traditional apartment features and consider how a building supports day-to-day convenience, including whether there are secure options for receiving deliveries.

Australia Post's Parcel Lockers provide one solution.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/CkF2oKmlACg?si=C50sDaoUUn2nuLmq" title="YouTube video player" width="560"></iframe>

Rather than having a parcel delivered directly to an apartment, eligible deliveries can be sent to a nominated Parcel Locker. Once the parcel arrives, residents receive a notification through the AusPost app or SMS and can collect it using a QR code or one-time PIN at a time that suits them.

The Parcel Locker network now includes more than 1,500 locations nationwide, with installations at Post Offices, shopping centres, transport hubs and an increasing number of residential developments. By providing a secure collection point, Parcel Lockers help reduce missed deliveries and avoid parcels being left unattended in common areas.

For developers, parcel infrastructure is becoming another way to improve the resident experience. Rather than relying on concierge staff or leaving parcels in communal spaces, secure collection points help streamline deliveries while preserving the presentation and functionality of shared areas.

For buyers, it's a reminder that the best apartment features aren't always the most obvious.

A generous floorplan or quality finishes might help narrow the shortlist, but the conveniences that simplify everyday life, whether that's EV charging, secure bike storage or reliable parcel delivery, often become the features residents appreciate most once they're living there.

The apartment feature many buyers don't think about, until their first missed delivery

<a href="https://www.apartments.com.au/developers/hg-developments">HG Developments</a> is doubling down on Maud Street in Newstead, filing plans for a new apartment tower just a few doors down from its under-construction Aire Newstead development.

Recently submitted to Brisbane City Council, the proposal is for an 18-storey building designed by bureau^proberts, which has drawn heavily on Brisbane's subtropical design principles while referencing the suburb's industrial heritage.

A total of 64 apartments are planned for the amalgamated 1,518 sqm site at <a href="https://www.apartments.com.au/new-apartments/17-21-maud-street-newstead-qld-4006">17–21 Maud Street</a>, a short walk from the Brisbane River and Newstead Riverwalk.

<img alt="First look: HG Developments plans 18-storey subtropical apartment tower for Newstead" data-entity-type="file" data-entity-uuid="a400c7fd-bd15-48f8-a63b-10ede92efe00" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Maud%20st%20bldg.png?VersionId=.0vPmjpbC7CNP7kqGWa6L7rGIwsNExaw" />

"The building is defined by a series of vaulted motifs that reinterpret the arches, colonnades and layered facades evident throughout Newstead's historic built fabric," the Urban Design Report states.

"Combined with recessed glazing and generous balconies, these elements create a layered building envelope that provides shade, weather protection and opportunities for natural ventilation whilst establishing a distinctive architectural identity."

The proposal comprises 64 two, three and four-bedroom apartments across 18 residential levels, positioning it alongside a growing number of taller residential projects transforming Newstead's northern precinct. The tower incorporates extensive subtropical landscaping, with cascading planter boxes, deep planting at street level and a landscaped rooftop recreation area.

<img alt="First look: HG Developments plans 18-storey subtropical apartment tower for Newstead" data-entity-type="file" data-entity-uuid="1d8140f4-8b98-45cd-b1b8-1efe8c8e266b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Maud%20st%20podium.png?VersionId=VAZtbCoD44YCJ57N99fQCAKeSJx7ldZs" />

Bureau Proberts has prioritised passive environmental design throughout the project, with generous balconies, recessed glazing and operable façades helping reduce solar heat gain while maximising natural ventilation. River views become available from the upper levels, while the building has been orientated to capture prevailing breezes from both the Brisbane River and the west.

The architects say landscape is intended to be integral to the building rather than an applied element.

"Vertical greenery, cascading planter boxes and elevated gardens are woven throughout the architecture, softening the built form and strengthening the connection between residents and the subtropical environment."

"Through the integration of landscape, high-quality materials and passive design principles, the development delivers a refined residential address that celebrates Newstead's heritage character while contributing positively to Brisbane's evolving subtropical identity."

Newstead has remained one of Brisbane's most active apartment markets in recent years, with a number of developers continuing to back the inner-city suburb.

HG Developments is currently delivering the 40-apartment Aire Newstead at 25 Maud Street. Fortis recently launched the 65-apartment <a href="https://www.apartments.com.au/new-apartments/crest-walker-newstead-12-kyabra-street-newstead-qld-4006">Crest &amp; Walker</a> on Kyabra Street, while builder-developer BPG and Don O'Rorke's Consolidated Properties are both expected to launch their respective Newstead projects before the end of the year.

HG Developments doubles down in Newstead with second Maud Street apartment development

Walk past a new apartment development promoting its sustainability credentials and it's easy to picture rooftop gardens, mature trees, landscaped courtyards and residents surrounded by nature.

But in many cases, that's not actually what those sustainability ratings guarantee.

Australia's leading environmental rating tools have played a significant role in improving the energy efficiency and environmental performance of buildings. Yet despite their focus on reducing emissions, many don't require developers to include trees, biodiversity or meaningful green space.

In other words, a building can achieve one of the country's highest sustainability ratings while containing little more than concrete, glass and hard landscaping.

That disconnect has led to the emergence of a new movement across Australia's property industry: nature-based cities.

The concept goes beyond designing buildings that consume less energy. Instead, it encourages developers to treat nature as essential infrastructure, integrating biodiversity, tree canopy, living landscapes and green spaces into projects from the earliest stages of planning.

Research has consistently linked access to nature with better physical and mental health, cooler neighbourhoods, improved biodiversity, stronger climate resilience and more connected communities. As Australia's cities continue to become denser, advocates say those outcomes should be considered just as important as energy efficiency.

Nature Based Cities (NBC) was established in 2022 to help accelerate that shift.

Founded by Hamton Executive Chairman Paul Hameister OAM, the not-for-profit was created after research highlighted a significant gap in Australia's sustainability framework. While existing environmental rating tools rewarded energy performance and emissions reductions, they placed little emphasis on the inclusion of living landscapes.

"We've always wanted to do more, and we know other developers who want to do more, but the ESD rating tools just aren't there," Hameister says.

"In Australia, you can have a five-green-star rated building that's concrete and glass with not a blade of grass.

"The focus is on reducing emissions, which is laudable, but there hasn't been enough attention paid to protecting and re-establishing nature. We need both for the health of the environment and for communities."

Since its launch, NBC has developed independent design guidelines and accreditation frameworks that encourage developers to prioritise ecology, biodiversity, tree canopy, walkability and living landscapes alongside traditional sustainability measures. The organisation first focused on medium and high-density residential developments before recently expanding into precinct-scale communities and masterplanned neighbourhoods.

Jan Talacko, founder of sustainability consultancy Ark Resources and a member of the Nature Based Cities Advisory Council, says the initiative addresses an area that has largely been overlooked by the property industry.

"Throughout my 25 years of working collaboratively with all stakeholders in the property sector, I've always favoured a pragmatic approach to sustainable design which encourages initiatives that not only meet environmental expectations but also improve amenity," Talacko says.

"Whilst we are making steady progress in relation to energy and carbon emissions from buildings, there has been much less emphasis on encouraging biodiversity and tackling the urban heat island effect.

"The Nature Based Cities initiative responds to a gap in the suite of tools currently used by the property development sector, which don't provide sufficient incentive, or recognition, for the integration of landscaping and greenery."

For apartment buyers, the shift is also changing the questions worth asking.

Rather than assuming a sustainable building will naturally include abundant green space, buyers are increasingly being encouraged to look beyond environmental ratings and ask what nature is actually being delivered. How much tree canopy will the development create? Has biodiversity been considered? Are landscaped spaces designed for people as well as appearance?

As Australia's cities continue to grow upwards and outwards, the next generation of sustainability may not simply be measured by lower emissions, but by how successfully developments bring nature back into everyday urban life.

Alan Kohler

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News