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GUEST OBSERVER
The property market has finally received some clarity in relation to the Government’s plan to reduce depreciation deductions for residential properties. It’s good news too, if you ask me. 
On Friday 14th July, the Treasury Office released a <a href="https://treasury.gov.au/ConsultationsandReviews/Consultations/2017/Housing-Tax-Integrity" target="_blank">draft bill</a> regarding how depreciation deductions on second-hand property can be claimed moving forward. They also invited interested parties to make submissions.
It's complicated to say the least, so I’ve tried to simplify this Bill and the key points. Here are my 9 Key Takeaways from the draft Legislation;
1. If you acquire a second-hand residential property after May 10, 2017, which contains “previously used” depreciating assets, you will no longer be able to claim depreciation on those assets.
2. Acquirers of brand new property will carry on claiming depreciation exactly the way they have done so to date. This is great news for the property industry and the way it should be.
We suspected this would be the case and I believe the property industry can collectively breathe a sigh of relief. 
3. The proposed changes only relate to residential property. Commercial, industrial, retail and other non-residential properties are not affected in the slightest. 
4.  The building allowance or claims on the structure of the building has not changed at all. You will still need a Depreciation Schedule to calculate these deductions. This component typically represents approximately between 80 to 85 percent of the construction cost of a property.
5. The proposed changes do not apply if you buy the property in a corporate tax entity, super fund (note Self-Managed Super Funds do not apply here) or a large unit trust.
This is interesting and I suspect a lot more people will start buying properties in company tax structures.
6. If you engage a builder to build a house and it remains an investment property, you will still be able to claim depreciation on both the structure and the Plant and Equipment items. 
7. If you renovate a property that is being used as an investment, you will still be able to claim depreciation on it when you have finished the renovations.
8. If you renovate a house, whilst living it in, then sell the property to an investor, the asset will be deemed to have been previously used and the new owner cannot claim depreciation.
9. Perhaps the most interesting point: Whilst investors purchasing second-hand property can now no longer claim depreciation on the existing plant and equipment, they will have the benefit of paying less capital gains tax when they sell the property. 
How? Well, in summary, what you would’ve been able to claim in depreciation under the previous legislation, now simply gets taken off the sale price in the event you sell the property in the future.
Here is an example of how this will work: 
Peter buys a property in September 2017 for $600k, included within the property was $25k worth of previously used depreciating assets.
As they were previously used, Peter can’t claim depreciation on those items.
Peter sells the property in 2022 for $800k, which included $15k worth of those depreciation assets.
Peter can now claim a capital loss of $10k ($25k-$15k) for the portion that Peter has not claimed in depreciation.
SUMMARY OF THE PROPOSED CHANGES
In my view the Draft Bill could've been a lot worse for both the property industry and the Quantity Surveying professions.
It will certainly address the integrity measure concern of stopping “refreshed” valuations of plant and equipment by property investors.
It may, however, create a two-tier property market in relation to new and second hand property.
You can see the ads now “Buy Brand New - We’ve Got The Depreciation Allowances”. 
It will still be just as critical for all property investors to get a breakdown of the building allowance &amp; plant and equipment values so you can:
A. Claim the building allowance (where applicable) and
B. Reduce the CGT payable when selling the property by deducting the unclaimed Plant and Equipment allowances.
The Quantity Surveying industry, just like the property development industry just breathed a huge sigh of relief.
I believe this integrity measure could've been better addressed and will be making a submission accordingly. 
But it wasn’t a bad ‘first run’ by the Government!
Tyron Hyde is a director of Washington Brown and can be contacted <a href="https://www.washingtonbrown.com.au/staff/tyron-hyde/" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

What depreciation property investors can now claim: Nine key insights from the draft legislation: Tyron Hyde

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The NSW auction legislation says the auctioneer's decision is final.
But on the weekend it was seemingly not the case when an auctioneer got muddled on his reserve price at a 9.15am Redfern auction.
The legislation also says the highest bidder is the purchaser, <a href="https://www.fairtrading.nsw.gov.au/ftw/Property_agents_and_managers/Rules_of_conduct/Real_estate_agents/Auction_conditions.page" target="_blank">subject to any reserve price</a>. 
As the Sunday Telegraph's auction coverage noted, the builders Sean Piper and Martin Allen were overjoyed when they snapped up the dilapidated three-bed terrace with peeling paint, squeaky floorboards, mouldy walls and outdoor dunny at <a href="https://www.realestate.com.au/property-terrace-nsw-redfern-125768162" target="_blank">Boronia Street</a> for $1.36 million.
“The property passed in because it didn’t reach reserve,” Cheryle Lanthois, of Carrington Real Estate, advised quickly after.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/07/17/Redfer1.jpg" alt="">
Jake Moore, of Cooley Auctions, had seemingly indicated the ­reserve had been reached in the auction's final minutes.
The <a href="https://www.news.com.au/national/nsw-act/renovators-delight-sells-for-136m-at-auction-except-its-not-sold/news-story/7e18fd7d602240e5511da3118bb0c039" target="_blank">Sunday Telegraph reporter</a> was onsite watching as bidding between three parties hit $1.35 million, with Mr Piper in the lead.
The auctioneer told the crowd and parties involved: “I assume my instructions are the same, we’re selling today.”
But there was a misunderstanding. And its seems the listing agent was oblivious to the impending slip-up.
Mr Piper’s main opponent offered another $5000, taking the bidding to $1.355 million.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/07/17/Redfern2.jpg" alt="">
When Mr Piper and Mr Allen matched that with ­another $5000, Mr Moore slammed down the gavel in their favour. 
“Sold!” the auctioneer announced.
But then the perplexed listing agent intervened. The house apparently had not been “sold” at all.
“I’m sorry, I’ve made a mistake. The written reserve was $1.4 million — I had it as $1.3 million. Come inside and we’ll negotiate with the vendor,” Mr Moore told the top bidders.
“We’re not negotiating — that’s it,” Mr Piper reportedly said.
Mr Moore: “I sold it under the written reserve — it’s my fault. It’s not the owner’s fault, it’s not Cheryl’s fault, it’s my fault.”
Ms Lanthois confirmed that the vendor wasn’t selling at $1.36 million, but holding out for $1.4 million.
The would-be buyers are now discussing the matter with their lawyers. 
Post-auction Cooley Auctions principal Damien Cooley said "the highest bidder is the purchaser, subject to the reserve price."
"In this situation, the property has been knocked down at a figure below the ­reserve price — it is not sold,” he said.
Sydney property lawyer Neil Matthews of Matthews Solicitors said Mr Cooley’s assessment is probably correct, though the legislation is “far from clear”.
It is not yet apparent what legal consequences will flow.
But being Sydney there could be consequences - or damages - arise if a $1.4 million sale doesn't eventuate.
According to his LinkedIn, Mr Moore has been at Cooley Auctioneers for three months, with his website profile indicating he has been in the industry for over five years as a agent.
It was at Thirroul on the NSW South Coast.
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Does auctioneer slip-up invalidate the fall of the hammer? 

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<img src="https://counter.theconversation.edu.au/content/77403/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Western Sydney is one of the fastest-growing regions in Australia. It’s also one of the most culturally and linguistically diverse, as a key arrival point for refugees and new migrants when they first settle in Australia.
Various public figures and media outlets have connected asylum-seeker intake and immigration to traffic congestion and queues at hospitals in Western Sydney. 
However, this kind of reaction can pin the blame for infrastructure and affordability problems on culturally diverse populations who may have already lived in Australia for many years, if not several generations.
<h2>Growth from international and domestic migration</h2>
Greater Western Sydney includes Blacktown, the Blue Mountains, Camden, Campbelltown, Canterbury-Bankstown, Cumberland, Fairfield Hawkesbury, Liverpool, Parramatta, Penrith, the Hills Shire and Wollondilly.
We examined census data compiled by WESTIR Ltd, a non-profit research organisation based in Western Sydney, partly funded by the NSW Department of Family and Community Services. These data showthat Greater Western Sydney’s population increased by 9.8% between 2011 and 2016. Over the decade from 2006 to 2016, it grew by 16%. 
About 55% of those living there were born in Australia, and about 39% where born elsewhere (the remainder did not state their place of birth). Most put English or Australian as their first response when asked about their ancestry.
<a href="https://www.propertyobserver.com.au/images/2017/07/17/Screen%20Shot%202017-07-17%20at%208.35.36%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/17/Screen%20Shot%202017-07-17%20at%208.35.36%20AM.png" alt=""> 
Source: <a class="source" href="https://www.westir.org.au/new/index.php/census-2016" target="_blank">WESTIR LTD analysis of Census 2016 data</a>
New births are slightly down in the region, meaning growth is coming from other sources. This includes new international migration arrivals, but also incoming residents from other parts of New South Wales and interstate.
Greater Western Sydney has long-established cultural and linguistic diversity. The percentage of residents born overseas has increased from 34.1% in 2006 to 38.7% in 2016. Overall, the west accounts for 50.2% of the overseas-born population for the whole of metropolitan Sydney.
Reasoned debates on sustainable migration intake levels are a crucial part of discussions of urban and regional growth. There are valid criticisms of “Big Australia” policies, based on resource and environmental sustainability. 
But while the number of new arrivals settling in Western Sydney has increased steadily since the second world war, with a significant jump over the last decade reflecting accelerated skilled migration policies to fill labour shortages, the majority of overseas-born living in the region are long-term settlers who have been in Australia for ten years or more. 
<a href="https://www.propertyobserver.com.au/images/2017/07/17/Screen%20Shot%202017-07-17%20at%208.37.27%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/17/Screen%20Shot%202017-07-17%20at%208.37.27%20AM.png" alt="">
Source: <a class="source" href="https://www.propertyobserver.com.au/https://www.abs.gov.au/websitedbs/censushome.nsf/home/2016" target="_blank">WESTIR analysis of Census 2016 data</a>
<h2>Increasing diversity does not always mean more new migrant settlers</h2>
The data show that 64% of Western Sydney residents have at least one parent born overseas. This is greater than the number of those born overseas. This correlates with national data indicating that Australian-born second-generation migrant residents outnumber those born outside of Australia. 
<a href="https://www.propertyobserver.com.au/images/2017/07/17/Screen%20Shot%202017-07-17%20at%208.38.46%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/17/Screen%20Shot%202017-07-17%20at%208.38.46%20AM.png" alt="">
Source: <a class="source" href="https://www.westir.org.au/new/index.php/census-2016" target="_blank">WESTIR analysis of Census 2016 data</a>
So while critics may look at non-white Western Sydney residents and assume they are recent migrants, what they’re often really seeing is multiple generations of multiculturalism. Most of these people are long-term local residents, not necessarily a sudden influx of new arrivals.
In addition, not all overseas-born residents are permanent settlers. Australia takes far larger numbers of temporary entrants than it has in the past. Most of these temporary visa holders, such as international students and temporary skilled workers, live in major metropolitan areas and their surrounds, like Western Sydney.
While some portion of these populations do stay on longer-term, they are not all permanent settlers who will add to long-term population growth. Net migration figures, which take into account people who depart Australia every year as well as arrive, and exclude short-term visitors, have generally been decreasing over the past six years. 
<h2>Who do we define as ‘migrants’?</h2>
New Zealand citizens moving under Trans-Tasman agreements and migrants from the United Kingdom are still among the largest migrant groups in Greater Western Sydney. 
<a href="https://www.propertyobserver.com.au/images/2017/07/17/Screen%20Shot%202017-07-17%20at%208.43.14%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/17/Screen%20Shot%202017-07-17%20at%208.43.14%20AM.png" alt="">
Source: <a class="source" href="https://www.westir.org.au/new/index.php/census-2016" target="_blank">WESTIR LTD, using Census 2016 data</a>
In many local government areas in Western Sydney – such as Wollondilly, the Hills Shire, Penrith, Hawkesbury and Campbelltown – England and/or New Zealand feature in the top five countries of birth of overseas-born residents. 
If anxieties about migration and population in Western Sydney are based on genuine sustainability concerns and not xenophobia, why target mostly refugees and non-white migrants? Why focus only on areas with large non-white and non-English-speaking background populations?
<h2>Migrants do use infrastructure, but also drive economic and jobs growth</h2>
It’s never as simple as one new arrival “using up” an allocation of limited resources, whether jobs, housing, or seats on trains. In fact, new arrivals fill the gaps of an ageing workforce, and current migration policies are targeted to favour younger migrants and specific skills shortages.
Western Sydney, like many regions in Australia, has an ageing population. Residents aged 65-74 years increased from 6.2% in 2011 to 7.2% in 2016. 
<a href="https://www.propertyobserver.com.au/images/2017/07/17/Screen%20Shot%202017-07-17%20at%208.44.20%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/17/Screen%20Shot%202017-07-17%20at%208.44.20%20AM.png" alt="">
Source: <a class="source" href="https://www.westir.org.au/new/index.php/census-2016" target="_blank">WESTIR Ltd Using Census 2016 data</a>
Large-scale infrastructure – whether the slated new airport or the Westmead hospital – requires young and often skilled workers.
Nationally, recently arrived overseas-born residents have a lower median age and a higher level of education than Australian-born residents.
Infrastructure problems are also problems of policy, planning and funding, rather than just population numbers. Problems in transport and health infrastructure in Western Sydney cannot be easily solved by reactive anti-immigration attitudes or policies. 
Cuts to programs like the humanitarian program or skilled temporary work visas, where the intake numbers remain relatively small as a proportion of the overall population, will not solve those infrastructure problems.
Western Sydney is growing, and with growth comes growing pains. But equating the region’s rich cultural diversity with a population crisis is the wrong message to send.
<a href="https://theconversation.com/profiles/shanthi-robertson-48422" target="_blank">Shanthi Robertson</a> is Senior Research Fellow, Institute for Culture and Society, Western Sydney University.
<a href="https://theconversation.com/profiles/kristine-aquino-376456" target="_blank">Kristine Aquino</a> is Lecturer in Global Studies, University of Technology Sydney.
Both are authors for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
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Blaming migrants won’t solve Western Sydney’s growing pains

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<img src="https://counter.theconversation.edu.au/content/80742/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Vacant housing rates are rising in our major cities. Across Australia on census night, 11.2 percent of housing was recorded as unoccupied – a total of 1,089,165 dwellings. With housing affordability stress also intensifying, the moment for a push on empty property taxes looks to have arrived. 
The 2016 Census showed empty property numbers up by 19% in Melbourne and 15 percent in Sydney over the past five years alone. Considering that thousands of people sleep rough – almost 7,000 on census night in 2011, more than 400 per night in Sydney in 2017 – and that hundreds of thousands face overcrowded homes or unaffordable rents, these seem like cruel and immoral revelations.
Public awareness of unused homes has been growing in Australia and globally. In London, Vancouver and elsewhere – just as in Sydney and Melbourne – the night-time spectacle of dark spaces in newly built “luxury towers” has triggered outrage.
This has struck a chord with the public not only because of its connotations of obscene wealth inequality and waste, but also because of the contended link to foreign ownership.
Early movers on vacancy tax
Against this backdrop, the Victorian state government has felt sufficiently emboldened to legislate an empty homes tax. Federally, the shadow treasurer, Chris Bowen, recently backed a standard vacant dwelling tax across all the nation’s major cities. 
Similar measures have come into force in Vancouver and Paris. And Ontario’s provincial government recently granted Toronto new powers to tax empty properties.
Emulating Vancouver, Victoria’s tax is a 1% capital value charge on homes vacant for at least six months in a year. Curiously, though, it applies only in Melbourne’s inner and middle suburbs. And there are exceptions – if the property is a grossly under-used second home you pay only if you’re a foreigner. 
Also, as in Vancouver, tax liability relies on self-reporting, which is seemingly a loophole. This might be less problematic if all owners were required to confirm their properties were occupied for at least six months of the past year. But that would be administratively cumbersome. 
This highlights a broader “practicability challenge” for empty property taxes. For example, how do you define acceptable reasons for a property being empty? 
In principle, such a tax should probably be limited to habitable dwellings. So, if you own a speculative vacancy, what do you do? Remove the kitchen sink to declare it unliveable?
How can we be sure a home is empty?
Lack of reliable data on empty homes is a major problem in Australia. Census figures are useful mainly because they indicate trends over time, but they substantially overstate the true number of long-term vacant habitable properties because they include temporarily empty dwellings (including second homes). 
Using Victorian water records, Prosper Australia estimates about half of Melbourne’s census-recorded vacant properties are long-term “speculative vacancies”. That’s 82,000 homes. 
Applying a similar “conversion factor” to Sydney’s census numbers would indicate around 68,000 speculative vacancies. Australia-wide, the Prosper Australia findings imply around 300,000 speculative vacancies – 3 percent of all housing. That’s equivalent to two years’ house building at current rates.
According to University of Queensland real estate economics expert Cameron Murray, a national tax that entirely eliminated this glut might moderate the price of housing by 1-2%. Therefore, although worthwhile, dealing with this element of our inefficient use of land and property would provide only a small easing of Australia’s broader affordability problem.
Making better use of a scarce resource
Taxing long-term empty properties is consistent with making more efficient use of our housing stock – a scarce resource. A big-picture implication is that tackling Australia’s housing stress shouldn’t be seen as purely about boosting new housing supply – as commonly portrayed by governments. 
It should also be about making more efficient and equitable use of existing housing and housing-designated land.
Penalising empty dwellings is fine if it can be practicably achieved. That’s especially if the revenue is used to enhance the trivial amount of public funding going into building affordable rental housing in most of our states and territories. 
But empty homes represent just a small element of our increasingly inefficient and wasteful use of housing and the increasingly unequal distribution of our national wealth.
One aspect of this is the under-utilisation of occupied housing. Australian Bureau of Statistics survey data show that, across Australia, more than a million homes (mainly owner-occupied) have three or more spare bedrooms. A comparison of the latest statistics (for 2013-14) with those for 2007-08 suggests this body of “grossly under-utilised” properties grew by more than 250,000 in the last six years.
Our tax system does nothing to discourage this increasingly wasteful use of housing. It’s arguably encouraged by the “tax on mobility” constituted by stamp duty and the exemption of the family home from the pension assets test. 
A parallel issue is the speculative land banks owned by developers. The volume of development approvals far exceeds the amount of actual building. In the past year in Sydney, for example, 56,000 development approvals were granted – but only 38,000 homes were built. 
In many cases, getting an approval is just part of land speculation. The owner then hoards the site until “market conditions are right” for on-selling as approved for development at a fat profit.
Properly addressing these issues calls for something much more ambitious than an empty property tax. The federal government should be encouraging all states and territories to follow the ACT’s lead by phasing in a broad-based land tax to replace stamp duty.
Such a tax will provide a stronger financial incentive to make effective use of land and property. The Grattan Institute estimates this switch would also “add up to A$9 billion annually to gross domestic product”. How much longer can we afford to ignore this obvious policy innovation?
 
Hal Pawson is Associate Director - City Futures - Urban Policy and Strategy, City Futures Research Centre, Housing Policy and Practice, UNSW and author for <a href="https://theconversation.com/profiles/hal-pawson-147969" target="_blank">The Conversation</a>.
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Taxing empty homes: a step towards affordable housing, but much more can be done

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GUEST OBSERVER
There has been a marked improvement in the Australian labour market with a lift to total employment, of which the largest share has been full-time, and a drop in the unemployment rate.
Despite a clear tightening in labour market conditions we are yet to see a lift in wage inflation.
Firms do not appear to be under pressure to lift wages to attract staff while rising underemployment and relatively high unemployment expectations suggest household are not confident enough to bargain for stronger wage rises.
Since 2015 wages have underperformed the historical relationship but this underperformance is less clear in Victoria. The relationship is still broadly holding in SA.
<a href="https://www.propertyobserver.com.au/images/2017/07/14/Screen%20Shot%202017-07-14%20at%208.34.44%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/14/Screen%20Shot%202017-07-14%20at%208.34.44%20AM.png" alt="">
It is not yet clear if we have seen a shift in the curve or a breakdown in relationship. Regardless, we expect any lift in wage inflation to be modest and gradual. 
A meaningful improvement in the labour market conditions.
The Australian labour market went through a soft patch from August to November in 2016 when the average gain in employment was a paltry 2.2k per month. So far in 2017 there has been a distinct uplift in employment. In the three months to May, total employment gained 141.1k, or an average of 47k per month, lifting the annual pace from 0.9%yr to 2.0%yr. Employment growth is now more in line with our preferred leading indicators, the various business survey’s and household demand.
Taking the Labour Force data at face value, you could argue there has been a material tightening in labour market conditions. The quarterly unemployment rate peaked at 6.2% in 2015 Q3 then fell steadily to average 5.7% for the three months to May 2017, pointing to a material tightening. And it is not just unemployment that is pointing to an improvement.
<a href="https://www.propertyobserver.com.au/images/2017/07/14/Screen%20Shot%202017-07-14%20at%208.35.53%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/14/Screen%20Shot%202017-07-14%20at%208.35.53%20AM.png" alt="">
We have also seen a recovery in full-time employment. Through 2016, full-time employment fell 35k as part-time employment rose 127k. In 2016, all of the growth in total employment came from the significant lift in part-time employment. In the year to May 2017, full-time employment rose 148k for a 1.8%yr pace, so full-time employment growth is now exceeding growth in the working age population, the first time it has done so since February 2016.
And yet wages continue to languish at record lows.
Normally when you observe a tightening in the labour market, you would expect to see an increase in wage inflation. But we have not seen this with wage inflation, as measured by the Wage Price Index (WPI), holding at a historical low of 1.9%yr. One measure of tightness is to compare the unemployment rate to the rate unemployment would be if the economy was at full employment.
The RBA estimates a NAIRU, or Non-Accelerating Inflation Rate of Unemployment, to be currently around 5.0%. So while there is still a gap, the unemployment rate has moved closer to the NAIRU representing a tightening of the labour market.
<a href="https://www.propertyobserver.com.au/images/2017/07/14/Screen%20Shot%202017-07-14%20at%208.37.22%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/14/Screen%20Shot%202017-07-14%20at%208.37.22%20AM.png" alt="">
Westpac uses a labour gap which is the difference between unemployment and trend unemployment. Historically the labour gap had a two quarter lead to wage inflation. In the year to the June quarter, the labour gap averaged +3ppts; the last time it was this positive was back in September 2012 when wage inflation (as measured by the Wage Price Index) was running at a 33⁄4%yr pace. Wage inflation printed 1.9%yr in the March quarter of 2017.
Employers do not feel under pressure to bid up wages.
Another measure of slack is the “is labour easy or hard to find” question from the Westpac/Australian Chamber business survey. However, whereas from early 2016 the labour gap was pointing to a tighter labour market conditions, this index suggested labour was still relatively easy to find. While it may have become bit harder since, it is still consistent with a neutral response (neither easy nor hard to find) and as such it does not appear that employers are under any pressure to bid up wages.
Underemployment has lifted as job insecurity holds a relatively high level.
Could employees’ employment insecurity have a role to play? Since late 2014, unemployment expectations from the Consumer Sentiment survey has been relatively weaker than its historical relationship with unemployment so maybe workers aren’t confident enough to bid up wages.
There does appear to be some basis for this relatively high level of job insecurity. The ABS has an alternative labour market measure known as underemployment, which is the share of labour that while employed are willing and able to work more hours. From 2015 H2, while the underemployment rate fell from a peak of 6.1% to 5.5%, the underemployment rate rose from 8.3% to 8.8%, with an 8.9% peak in early 2017.
The RBA noted in the February Statement on Monetary Policy that since the 1980’s, the upward drift in underemployment can be explained by the rising share of part-time employment. It also noted that “underemployment rates are higher among groups that have a higher share of part-time employment, such as females, younger workers and older workers”, so as their share of employment rises so too does underemployment.
We would, however, counter with two observations.
Firstly, in the year to May, full-time employment growth accelerated while part-time employment eased, yet underemployment lifted from 8.4% to 8.8% suggesting a genuine broadening in underemployment rather than a compositional shift.
Secondly, combining unemployment and underemployment generates underutilisation, the broadest measure of labour market slack. We have found that this measure has a better relationship with wage inflation than either unemployment or underemployment by themselves. But this still leaves the observation that, since 2015 there has been an underperformance of wage outcomes to underutilisation.
State data reveals some interesting divergences from the national average.
How long can we divert from this historical relationship? To answer we turn to the state labour markets. In NSW the unemployment rate in May was just 4.8%, well below the national average and below the RBA’s estimate of the NAIRU. From the end of 2015, NSW’s unemployment fell from 5.3% to 5.1% (March quarter average) and yet underemployment lifted from 7.5% to 8.0% boosting underutilisation from 12.8% to 13.1%. However, even this softening in underutilisation does not explain the on-going weakness in private sector wage inflation, which printed just 2.0%yr in the March quarter. If wage inflation held the historical relationship with underutilisation, it would just under 3.0%yr.
We should also note that NSW also has the lowest participation and employment to population ratio for any mainland state outside of SA. These factors put into perspective the fact that NSW low unemployment is not a strong indicator of the overall tightness of a labour market.
Compare this with Victoria, where wages have kept something of a tighter relationship with underutilisation. At 15%, underutilisation suggests wage inflation should be running at just under 21⁄2%yr. The state’s WPI printed 1.9% in March which is a smaller wedge to underutilisation than in NSW. Victoria also has a higher rate of unemployment than NSW (6.1% vs. 4.7%) and underemployment (8.6% vs. 8.0%) but that does not necessarily mean Victoria has a weaker labour market.
Total employment has grown just under 4%yr pace in Victoria while in NSW it has grown less than 1%yr. The higher rate of underemployment and unemployment in Victoria reflects that states faster rate of population growth combined with a higher rate of participation (for both males and females). Victoria is also the only state where you can observe a trend rise in male participation since 2014. Other states may show something of a levelling out, or a recovery, since late 2016 but all declining male participation preceding. It has also recently seen the largest jump in female participation for any state.
In Qld, wages are below the curve with an underutilisation rate around 14% pointing to wages growth of at least 3.0%yr. Wages in that state are currently growing at 1.8%yr, a significant wedge to historical outcomes. Male participation has started to lift again in Qld so even if we do see the underutilisation/wage relationship return to the curve, will it be driven by rising wages or rising underutilisation due to rising participation?
<a href="https://www.propertyobserver.com.au/images/2017/07/14/Screen%20Shot%202017-07-14%20at%208.38.30%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/14/Screen%20Shot%202017-07-14%20at%208.38.30%20AM.png" alt="">
WA is interesting in that while wage outcomes since 2015 are clearly below the longer run relationship with underutilisation, the shape of the relationship still holds - that is it appears that the curve has shifted downwards since 2015. This suggests that while the historical underutilisation/wage relationship would put wages growth around 2%yr (for a 15% underutilisation rate) actual wages growth of just under 1% appears to be holding a shorter term relationship since 2015.
Of all the states SA is holding the tightest long-term relationship for underutilisation/wages. An underutilisation rate of around 17% would normally see wages grow at 21⁄2%yr; the WPI rose 2.0% in the year to the March quarter. We have been watching the relative out performance of wages in SA despite the relatively high rates of unemployment (and underemployment) and wonder if this reflects the relatively more significant contribution manufacturing makes to that state's economic activity compared to the other states.
It is not clear if curve is shifting or breaking down.
The significant underperformance of NSW wage inflation does raise questions not just on the specification of a NAIRU but whether the NAIRU is still a useful concept. It is possible that the breakdown in the NAIRU is due, at least in part, to the Australian economy’s shift away from goods production to services provision, which is more dominate in NSW than it is in Vic and SA, and as such the breakdown may be temporary.
The downward shift in the WA curve suggests this may be the case as that state has seen it economy experience a rapid and significant shift away from the resources sector. But the significantly different participation rates between the states may also point to something more structural. As such, to assume that a falling unemployment rate will drive an uptick in wages may lead to an overstatement of the outlook for wages, household income growth and thus inflation and consumption. Currently Westpac is taking a cautious view that while wage inflation may have found a base, any uptick will be modest and gradual. 
Justin Smirk is ‎senior economist, Westpac Group and can be contacted <a href="https://www.westpac.com.au/about-westpac/westpac-group/">here</a>.
 
 
 
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Australian wages underperforming current labour market conditions: Justin Smirk

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GUEST OBSERVER
When you think of Antarctica, you probably picture vast, continuous ice sheets and glaciers, with maybe a penguin or two thrown in.
Yet most Antarctic plants and animals live in the permanently ice-free areas that cover about 1 percent of the continent. Our new research predicts that these areas could grow by a quarter during this century, with mixed prospects for the species that currently live there. 
Besides everyone’s favourite Emperor and Adélie penguins, terrestrial Antarctic species also include beautiful mosses, lichens, two types of flowering plants, and a suite of hardy invertebrates such as nematodes, springtails, rotifers and tardigrades, many of which are found nowhere else on Earth. Tardigrades – tiny creatures sometimes nicknamed “waterbears” – are so tough they can survive in space.
Antarctica’s ice-free areas are currently limited to a scattering of rocky outcrops along the coastline, or cliff faces, or the tops of mountain ranges. They form small patches of suitable habitat in a huge sea of ice, much like islands. 
As a result, the plants and animals that live there are often isolated from each other. But as Antarctica’s climate warms, we expect ice-free areas to get bigger and eventually start joining up. This would create more habitat for native species, but also new opportunities for non-native species to spread. 
Our study, published today in Nature, forecasts that climate change will expand Antarctica’s ice-free areas over the course of this century. Under the most severe scenario that we modelled (which is also the one on which the globe is currently tracking), more than 17,000 square km of new ice-free area could emerge across the continent by 2100. 
This would increase the current total ice-free area by nearly a quarter. The majority of this new ice-free land will be on the Antarctic Peninsula, which could have three times as much ice-free area as it does today.  
Brave new world
As the ice-free areas expand, the distances between them will decrease, giving plants and animals more opportunity to spread through the landscape. On the Antarctic Peninsula, which has already warmed more than anywhere else in Antarctica, many of the ice-free patches will expand so much that they will start joining together.
Will this increase in habitat availability benefit the plants and animals that live there? It will definitely provide new opportunities for some native plants and animals to expand their range and colonise new areas. The warming climate may also give a boost to species that are currently hampered by the lack of warmth, nutrients and water. Some Antarctic mosses, for example, are expected to grow faster as temperatures rise, and Antarctica’s two flowering plant species are already expanding southward.
However, the potential benefits seem likely to be outweighed by the negatives. The joining-up of habitat patches could allow species that have been isolated for much of their evolutionary past to meet suddenly. If the newcomers to a particular area outcompete the native species, then it may lead to localised extinctions. Over the coming centuries this could lead to the loss of many plants and animals, and the homogenisation of Antarctica’s ecosystems.
Antarctic aliens
An even bigger concern is that Antarctica’s great thaw could provide new opportunities for species to invade. Antarctica’s best bulwark against non-native species is its harsh climate and extreme weather, to which native Antarctic species have spent many thousands of years adapting. 
We already know that many plants and invertebrates are reaching Antarctica, most often in food or cargo shipments. As the climate warms, some of these non-native species may be able to establish themselves on the Antarctic Peninsula, and the increasing connectivity will allow them to easily move through the landscape. Many of these animals and plants may become invasive, competing with the native species for space and resources. 
We don’t know how Antarctica’s species will cope with the increasing competition. But if the sub-Antarctic islands provide any indication, the outlook is depressing. Australia’s World Heritage-listed Macquarie Island, for example, was severely impacted by invasive cats, rats, rabbits and mice (although it has since been declared free of these pests after an intensive eradication effort).
Several non-native species have already come to Antarctica, including the invasive annual meadowgrass Poa annua (a common weed around the world), which has colonised newly ice-free areas left behind by retreating glaciers. It is thought to outcompete Antarctica’s native plants, although we don’t yet know what the impact will be on animals. 
Humans – both scientists and tourists – are key transporters of non-native species to the continent, and tourist numbers continue to grow (almost 37,000 visited in the 2016-17 summer). 
Biosecurity is paramount for the ongoing protection of Antarctica. If bags, shoes, clothes and field equipment are not properly cleaned and inspected before arriving on the continent, then non-native seeds, microbes and insects could be transported to Antarctica and begin to spread. 
We call for protection of ice-free areas that will remain intact in a changing climate, and for the Antarctic scientific and tourism communities to pinpoint key areas where greater biosecurity and monitoring for invasive species may be needed.
<a href="https://theconversation.com/profiles/jasmine-lee-171931" target="_blank">Jasmine Lee</a> is PhD candidate, biodiversity conservation and climate change, The University of Queensland.
<a href="https://theconversation.com/profiles/justine-shaw-299755" target="_blank">Justine Shaw</a> is Conservation Biologist, The University of Queensland.
<a href="https://theconversation.com/profiles/richard-fuller-169469" target="_blank">Richard Fuller</a> is Associate Professor in Biodiversity and Conservation, The University of Queensland.
All are authors for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
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The winners and losers of Antarctica’s great thaw

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GUEST OBSERVER
A recent episode of ABC TV’s Ask the Doctor pointed to poor urban planning as a major culprit in worsening obesity rates and associated lifestyle diseases such as diabetes. The show highlighted suburbs without footpaths, fresh-food outlets or exercise opportunities.
Built environments are important contributors to our health and wealth. Urban planners strive to create the best environments, but many describe the results as “obesogenic” – that is, places where fast-food outlets abound and there are few opportunities to be sufficiently physically active.
Increasing access to health data, along with the powerful analytical tools needed to interpret these data, provides an opportunity to develop a real fix for this worsening situation.
How far planners have come
Urban planners have come a long way in supporting healthy and active living. Internationally, this goes back to the late 1940s, when the World Health Organisation (WHO) defined health as much more than the absence of disease.
The subsequent and ongoing development of the WHO Healthy Cities movement, the declaration of the Ottawa Charter, and the publication of the social determinants of health and the related settlement map, further reinforced the importance of urban planning and design in creating places that support health and wellbeing.
Recently, the UN Sustainable Development Goals cemented this focus on healthy built environments.
In Australia, this global recognition has brought built environment and health professionals into a closer working relationship. For example:
The Victorian government requires local councils to prepare municipal health plans.
The New South Wales government policy acknowledges the built environment as a key determinant of health.
In Western Australia, the longitudinal RESIDE project traces the health impacts on residents of the Liveable Neighbourhoods Community Design Guidelines.
In Queensland, a Healthy Futures Commission has been legislated to tackle chronic disease by adopting healthy lifestyles.
The National Heart Foundation has made an impressive set of contributions to healthy built environments.
The Planning Institute of Australia has spearheaded interdisciplinary collaborations. Most recently, it issued a statement supporting healthy built environments.
How health data can help
Despite this progress, some health indicators continue to deteriorate. The numbers of children either overweight or obese is a global public heath epidemic. In Australia, around 25% of children are overweight or obese.
This trend is worrying, as obesity in childhood and adulthood is strongly linked.
Being overweight or obese is a significant risk factor for developing type 2 diabetes. Globally, more than 420 million people have type 2 diabetes, and these numbers have quadrupled since 1980. In Western Sydney alone, 60% of adults are overweight or obese.
But increasing access to health data and more readily available analytical tools offer new opportunities to tackle ever-growing rates of obesity.
The Heart Foundation has published comprehensive design guidelines and a website linking research evidence to good practice.
In NSW, the Healthy Urban Development Checklist assists health professionals to comment on the extent to which urban planning proposals will support health. In Victoria, Community Indicators link practitioners with communities to create healthy places.
Other tools include Healthy Built Environment Indicators and the NSW Integrated Planning and Reporting Framework to get physical activity and healthy eating into local council community strategic plans.
Beyond these approaches, geographical information systems (GIS) and other analytical tools can help tackle obesity. South Australia’s Department for Health and Ageing used GIS to plot gaps in built environment facilities and resources that impact childhood obesity. One study established a link between obesity and access to fast-food outlets.
Another initiative provided insights into the spatial patterning of health issues by developing a diabetes map.
Using these tools is a step in the right direction. But challenges remain, particularly in terms of access to health data. The release of datasets such as the National Health Services Directory and the National Deaths and Mortality database is encouraging.
Greater ease of use improves implementation
Increasing user-friendliness of analytical tools, such as GIS and online portals like the AURIN workbench, and walkability planning support systems offer more powerful means of understanding the relationship between health and the built environment.
However, to seize these opportunities, we need enhanced data analysis, interpretation and presentation skills for planners and policymakers.
It takes skill to communicate the stories in the data and clearly identify the implications and required policy responses. Practical and policy-relevant research is critical.
Enshrining the need for planning healthy built environments in legislation will help planners in their fundamental role of promoting healthy lifestyles. Planners can be taught the theory. But putting it into practice requires a strong policy framework to support principles, maintain standards and withstand cost-cutting pressures.
With the increasing democratisation of health data and better access to analytical tools such as Australian National Data Services, AURIN and others, spatial thinking, data-driven approaches and collaborative action can fast-track plans for new and renewed environments that enable healthy living.
<a href="https://theconversation.com/profiles/alison-taylor-388947" target="_blank">Alison Taylor</a> is lecturer, Faculty of Built Environment, UNSW.
<a href="https://theconversation.com/profiles/christopher-pettit-388997" target="_blank">Christopher Pettit</a> is professor of Urban Science, UNSW.
<a href="https://theconversation.com/profiles/ori-gudes-114294" target="_blank">Ori Gudes</a> is research fellow, Cities Futures Research Centre, UNSW.
<a href="https://theconversation.com/profiles/susan-thompson-116543" target="_blank">Susan Thompson</a> is professor of Planning and Head, City Wellbeing Program, City Futures Research Centre, UNSW.
All are authors for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
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With better data access, urban planners could help ease our weight problems

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GUEST OBSERVER
A new report from Infrastructure Australia, Improving Public Transport: Customer Focused Franchising, and its associated technical report from Pricewaterhouse Coopers (PwC), will have state and federal treasurers salivating. The accompanying press release is clearly intended to set their fiscal juices flowing. It suggests that:
"… subjecting the operation of Australia’s government-operated bus and rail services to competitive tender processes could save Australian taxpayers up to $15.5 billion by 2040…"
This A$15.5 billion is the estimated high operational cost savings scenario, in present value terms (2016 prices; 7% real discount rate). Infrastructure Australia/PwC’s conservative savings estimate is still a very substantial A$11.6 billion.
The magic pudding is competitive tendering of a range of government-operated rail and bus public transport services, as well as Melbourne’s privately run bus services, which are not currently awarded by competitive tendering.
Just how realistic are these savings?
Rail services
Ownership and contracting of public transport services has been a major transport policy focus for 30 years. This issue has had its own two-yearly conference, the Thredbo International Conference Series, for most of that time.
The Thredbo series (named after the location of the first conference) provides a vast array of international material that sheds light on ways to improve the efficiency and effectiveness of public transport under different operating regimes. Australian federal and state government officials rarely attend.
The PwC report presents Australian and international examples of competitive tendering of rail and bus services. It concludes that first-round rail tenders will deliver operational cost savings of 15-20 percent (conservative and high estimates respectively) by the end of the first tender and 25-32 percent by the end of the second. For bus services, the report estimates savings of 15-20 percent from the first tender and 30-35 percent by the end of the third round.
International experience on rail privatisation is sparse, with the sources that PwC cites among the more well known. We are concerned, however, that contrary evidence is given no attention. This raises questions about the objectivity of the analysis.
Andrew Smith and colleagues, in a paper to the Thredbo 6 Conference, reviewed the UK rail experience. They found costs rose after privatisation.
Total passenger train operating costs (excluding infrastructure) per train-kilometre were 14 percent higher in 2006 than at privatisation ten years earlier. Between privatisation and 2008-09, real average salary costs rose much faster than in the economy as a whole.
Pedro Cantos and colleagues reviewed the European experience across 16 countries. Their study concluded that tendering regional passenger services did not have a significant effect on efficiency and productivity.
Melbourne’s early rail franchising experience also left a lot to be desired. One operator handed back its contracts – train, tram and bus – before completion.
As Public Transport Users Association president Tony Morton wrote in May 2017 to The Age:
"Victoria’s train/tram privatisation hasn’t saved taxpayers one cent. A former minister, the late Lynne Kosky, admitted as much ten years ago. We do save money relative to Sydney by not having train guards, a decision that predates privatisation."
Those labour savings were part of large reductions in Melbourne rail staff, from 18,000 to 8,400, during the 1990s. This was done in a corporatisation process that preceded privatisation.
Taking account of the sources cited above and Melbourne’s experience, as well as the sources PwC cites, an assumption that rail privatisation will deliver cost savings of 25-32% by the end of Term 2 tenders is, to say the least, heroic.
We would see even the “conservative” figure of 25% as a high estimate. Melbourne’s experience suggests many of the mooted savings might also be achievable by a thorough corporatisation process. Infrastructure Australia, by simply taking the competitive tendering pathway, does not do justice to the choices available.
Bus services
In a 2007 review of bus privatisation, one of us reported cost reductions from the first round of tenders as follows:
Great Britain 50-55%
Scandinavia most in the range 20-30% but with a range of 5-34%
USA 30-46%
Australia: Perth 22%; Adelaide 38%
New Zealand: 40% ex-public operators; about 5% private operators
Norway 10%. 
The savings for Norway are lower than elsewhere because the local bus industry had been improving its efficiency over some time, mirroring NZ experience. The Norwegian study suggested the threat of competitive tendering was important in driving savings.
One of us recently analysed the tendering of private bus services in Sydney, where private operators run some existing services. The analysis found savings of under 4% on a like-for-like basis.
These various bus findings suggest the cost savings range of 30-35% selected by PwC and reported by Infrastructure Australia might be possible, if an efficient private operator replaces an inefficient public operator. We make no comment on the efficiency of the public bus operators reviewed by PwC.
But such savings will not be achievable in Melbourne, where private operators already provide service. Cost savings of less than 5% are more realistic there.
As we argue below, achieving the latter savings does not rely on competitive tendering. Importantly, all such savings, in rail and bus, are a one-off windfall gain. Our research commonly shows evidence of significant real cost increases after the initial tender round.
What about the alternatives?
Wallis, Bray and Webster, pioneers of the Adelaide privatisation experience, recognised the tendency for costs to increase in subsequent tendering rounds. They proposed that performance-based contracts negotiated with incumbent operators should replace the city’s fourth round of bus tenders.
It is surprising that neither the Infrastructure Australia report nor PwC technical paper mention such contracts as an alternative to competitive tendering.
Our research suggests that negotiated performance-based contracts with efficient operators deliver cost outcomes in line with competitive tendering. And this approach provides two other benefits. Transaction costs are lower and it provides opportunities for closer partnering between purchaser and provider on service planning.
Importantly, given competition law in Australia, if it can be shown that the benefits of a particular contracting regime, such as competitive tendering or negotiated performance-based contracts, outweigh the costs, then the compliance case is strong.
It is surprising that Infrastructure Australia is either not aware of, or more likely has chosen for some reason to ignore, the opportunities afforded by negotiated performance-based contracts, particularly for bus services. This narrowing of the policy options put forward for public consideration risks loss of benefits from important transport reforms.
In short, we believe that Infrastructure Australia, and its advisers PwC, have overestimated the achievable cost savings from competitive tendering of publicly provided rail services. They have also ignored the potential for savings within existing publicly provided public transport services. Competitive tendering of such services will deliver cost savings, but it would be surprising if they were as big as suggested.
For Melbourne bus services, any operating cost savings from competitive tendering are likely to be much less than forecast, most likely under 5%. Such savings will be equally achievable under negotiated performance-based contracts.
Although we recognise that the first round of any competitive tendering will produce a windfall gain, this will be partly at the risk of service quality. Once we consider this, the one-off financial benefits are diluted.
<a href="https://theconversation.com/profiles/john-stanley-115" target="_blank"></a>
<a href="https://theconversation.com/profiles/john-stanley-115" target="_blank">John Stanley </a>is Adjunct Professor, Institute of Transport and Logistics Studies, The Business School, University of Sydney.
<a href="https://theconversation.com/profiles/john-stanley-115" target="_blank"></a>
<a href="https://theconversation.com/profiles/david-hensher-11295" target="_blank">David Hensher </a>is Director, Institute of Transport and Logistics Studies, University of Sydney.
<a href="https://theconversation.com/profiles/john-stanley-115" target="_blank"></a>
Both are authors for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
<a href="https://theconversation.com/profiles/john-stanley-115" target="_blank"> </a>
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Why touted public transport savings from competitive tendering are too high

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GUEST OBSERVER
Our cities have now been named as the saving places of a planet in crisis. And yet we cannot decide on the principles that make for a good city. Everybody has a view, but some views are more sustainable than others.
What we desperately need is a big and general public dialogue about the principles that make for a good city. This is the basis of our project, Principles for Better Cities, led by the City of Berlin. It provides a platform for the Ecocity World Summit in Melbourne this week.
<h2>Broader vision is needed</h2>
We need to get beyond the current tendency to become fixated on spruiking different high-level concepts. For example, IBM, Microsoft and Big Tech have put their money – or actually other people’s money – on the smart city.
But the concept of the smart city is too often reduced to narrow technological monitoring and big data collection. McKinsey says that a good city will achieve “smart growth”. But tell that to Brussels, Chicago, Montreal, Toronto and Vienna, global cities that are declining in size.
The Mercer group and The Economist tell us liveability is the key. However, they narrowly developed their indices for corporations seeking to decide on how much they will pay their executives for moving to less liveable cities. This raises a further question: “Liveable for whom?”
The Rockefeller Foundation is backing the resilient city. This too is an important concept. But much of its appeal to governments is in saving resources as they seek to defer increasing climate risks through pushing responsibility back to resilient communities to self-manage their recoveries.
<h2>A common problem of definition</h2>
What actually is a good city then? 
Depending on who you ask, they are sustainable cities, liveable cities and resilient cities, but they are also adapting cities and carbon-neutral cities. Or they are caring cities, inclusive cities, just cities, peaceful cities, information cities and networked cities. To confuse things further, they are also prosperous cities, learning cities and innovative cities.
Just by listing these urban forms, the problem starts to become clearer. These are just concepts with shifting or weak definitions. They mean anything “good” and apply variously to anybody’s projections.
The second problem comes with deciding what is actually good about these different emphases.
As part of this difficulty, assigning different indicators to each of these urban forms is extraordinarily difficult. Is a city more liveable because it has a Mediterranean climate? That is what the current liveability indices would suggest. 
Is a city more resilient because its “man-made assets” are more robust? (Excuse the gender-specific language here.) That is what the core resilience literature tells us.
<h2>Who decides?</h2>
The third problem centres on the question: “Who decides what is good?”
The principles and indicators tend to be decided by elite researchers working at a distance from the field, or by teams using sets of secondary data that may or may not be appropriate. 
Elite teams develop black-box indicator sets (such as liveability indexes) that remain commercial-in-confidence. The data drive the index construction without consideration of the meaning of that data. For example, one index ranking better cities in the greater Sydney region is driven by an indicator that suggests a key consideration is being closer to the beach or mountains.
The fourth problem becomes how do we order and prioritise the many claims about what is good. There are so many considerations that the number of potential principles becomes overwhelming. 
This happened to the New Urban Agenda, developed by the United Nations over the last two years. It has hundreds of principles, all thrown together in an incomprehensible list. Cities are understandably confused.
<h2>Towards an inclusive, holistic approach</h2>
Our Principles for Better Cities attempt to respond to all these problems. Complementary to the New Urban Agenda, Principles for Better Cities is an initiative of the World Association of Major Metropolises, which has been working with cities on a set of basic principles to guide good urban development.
This set is based on the proposition that, rather than just adding together a list of proposals from different current or immediate concerns, the principles should begin from a general framework that concerns the human condition.
We start with the idea that there should be basic principles that relate to the following basic domains of social life:
<ul>
<li>
Ecology – cities should have a deep and integrated relationship with nature.
</li>
<li>
Economics – cities should be based on an economy organised around the social needs of all citizens.
</li>
<li>
Politics – cities should have an enhanced emphasis on engaged and negotiated civic involvement.
</li>
<li>
Culture – cities should actively develop ongoing processes for dealing with the uncomfortable intersections of identity and difference.
</li>
</ul>
These have become the top-level principles for going deeper and deeper, elaborated across more and more specific subdomains of practice. 
And here is the completely novel dimension. These principles have been and will be debated by people. None of these principles are fixed, hidden, confusing, or commercial-in-confidence. They are the outcome of open dialogue.
<a href="https://theconversation.com/profiles/paul-james-95757" target="_blank">Paul James</a> is Professor of Globalization and Cultural Diversity, Western Sydney University.
<a href="https://theconversation.com/profiles/belinda-young-388954" target="_blank">Belinda Young</a> is Project Officer – Ecocity, Melbourne Sustainable Society Institute, University of Melbourne.
<a href="https://theconversation.com/profiles/brendan-gleeson-9823" target="_blank">Brendan Gleeson</a> is Director, Melbourne Sustainable Society Institute, University of Melbourne.
<a href="https://theconversation.com/profiles/john-wiseman-252" target="_blank">John Wiseman</a> is Professorial Fellow, University of Melbourne.
All are authors for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
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What actually is a good city?

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GUEST OBSERVER
In the recent case of Harold R Finger &amp; Co Pty Ltd v Karellas Investments Pty Ltd [2016] NSWCA 123, the NSW Court of Appeal agreed with the orders of the Primary Judge, but for significantly different reasons. The Court found that the letter alleging to be a Lease agreement was not a binding contractual lease document. Following this, it held that the Karellas Investments (Lessee) had not repudiated the contract and that Harold R Finger &amp; Co Pty Ltd (Landlord) had no right of termination.
Fact Summary
This case related to the leasing of a supermarket premises in Newtown. In December 2009, the Lessee sent a letter to the Landlord for a “binding offer to enter into an Agreement for Lease”. The Landlord accepted the letter of offer in January 2010. Some of the provisions of the letter contained clauses which subjected the agreement to the provision of further formal documentation and terms to be added which had not yet been agreed on.
Following a low turnover forecast, the Lessee’s solicitors wrote to the Landlord on June 9 2010 seeking to adjust the lease terms “to see if the proposed lease terms could accommodate” the Lessee’s concerns.
After a series of letters, the Landlord alleged that the Lessee had repudiated the contract and accepted this repudiation. The Landlord then sought to terminate the contract for repudiation.
Was the Letter a valid Agreement for Lease? The Landlord argued that the letter’s statement that it was a “binding offer to enter into an Agreement for Lease” was that both parties were bound to the lease. The Lessee denied that the letter of offer constituted a binding agreement but was simply an agreement to negotiate.
The Court found that the letter established an agreement, but questioned its actual effect. The Primary Judge held that there was an enforceable contract under which both parties agreed to be bound by rent and other terms. Though Ward JA on appeal found there was an agreement, this agreement did not bring into existence an enforceable contractual lease.
The letter clearly stipulated that the agreement would be subject to further documentation and negotiation of important terms not yet included in the letter. These clauses were construed by the Court to indicate that the agreement would not be complete without such additional terms. The letter also provided the Lessee with a right to withdraw from the agreement if the formal documents required were not executed in 12 months. The Court highlighted that the existence of such a withdrawal provision further indicated that a final agreement may not actually be reached within 12 months. Therefore, the letter could not be reasonably constructed as a final and enforceable lease document. It was an agreement to negotiate in good faith.
Could Terms in the Letter be Re-Negotiated?
As there was no provision which stated that the terms in the letter were set-in-stone, they were open to re-negotiation. The only terms the Landlord could rely on were that the Lessee would negotiate in good faith during the 12 month negotiation period. The Landlord could not rely on any terms that were being negotiated with the Lessee until such terms had been finalised.
Did the Lessee Repudiate the Agreement? The Lessee contended that the June 9 letter did not constitute a repudiation of the agreement. The Primary Judge held that the June 9 letter was an indication of the Lessee’s willingness to negotiate only in circumstances where their demands would be met.
On appeal, the Court held that the Primary Judge’s interpretation of the June 9 letter was incorrect. Ward JA noted that the June 9 letter was in fact an invitation to negotiate. Whilst the letter may have indicated the Lessee’s potential refusal of terms presently negotiated, it was not an ultimatum. Therefore there was no repudiation. As a consequence, the Landlord did not have a valid right to terminate the contract.
Was the Termination Valid?
Whilst no right of termination arose, the Court still considered whether the contract was validly terminated by the Landlord. In a letter on June 11 2010, the Landlord’s solicitors wrote to the Lessee:
Your client’s withdrawal from the lease will result in our client incurring substantial losses. Our client will endeavour to mitigate those losses. However, we are instructed to put your client on notice that our client will hold it liable for all losses incurred by our client as a result of your client's actions. The Landlord alleged that this letter constituted a termination of the agreement. The Court held that the letter did not reasonably make clear that the agreement was at an end and hence the agreement was not validly terminated.
Inconsistency of Clauses
Whilst the inconsistency of clauses within the letter of offer was not a vital issue in this case, it is worth noting. The letter of offer gave the Lessee the right to amend their offer. However, in a separate clause, it stipulated that the signing of the agreement would create binding heads of agreement. Due to this inconsistency the right to amend the letter of offer was only extended up to the point the letter was signed by the Landlord.
Lessons
This case holds four key take-away messages:
Firstly, if a document purports to be an agreement to lease but relies on subsequent negotiations and/or documentation, it may not constitute a valid Lease Agreement.
Secondly, parties to an agreement should be very cautious in assuming a right to terminate a contract. The consequences of wrongful termination may amount to a repudiation and make the alleging party liable to damages.
Thirdly, if a party is intending to exercise a right to terminate, it should use clear language and should not proceed on an assumption. Failing to do so may constitute serving an invalid termination.
Finally, parties should be cautious when drafting terms and ensure clauses are not inconsistent with one another.
Gary Newton is partner, Tress Cox Lawyers and can be contacted <a href="https://www.tresscox.com.au/" target="_blank">here</a>.
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A Lease Agreement may not be binding

<a href="https://www.apartments.com.au/developers/consolidated-properties">Consolidated Properties Group</a> (CPG) is approaching the launch of its latest Brisbane riverfront development, Castile, on the dress circle Skyring Terrace in Newstead.

VIP buyers are now being engaged, with a full public sales launch coming later this year.

Positioned as the final opportunity to secure a new absolute riverfront residence on the East bank of Newstead, Teneriffe or New Farm, Castile at 47 Skyring Terrace has been designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a> as a timeless addition to the Brisbane skyline.&nbsp;

[smartcode_project:default project_id=150489 project_image_fid=371113]

The name Castile draws on themes of permanence, sophistication and legacy, reflecting a broader vision centred on enduring architecture and timelessness in the rarest of riverfront positions.&nbsp;

CPG Chairman and CEO Don O’Rorke said the project had been envisioned as a future Brisbane icon.&nbsp;

“With 47 metres of direct river frontage and never to be built out views, 47 Skyring Terrace is the definitive address on the Brisbane River,” O’Rorke said.&nbsp;

[smartcode_project:default project_id=150489 project_image_fid=371114]

“Rather than following trend-based apartment design, Castile draws inspiration from Brisbane’s great heritage buildings, reinterpreting classical architecture into a contemporary riverfront landmark designed to stand proudly for the next 100 years,” he said.&nbsp;

The approved development will comprise 227 apartments across a 25-storey tower alongside a boutique six-storey riverfront building of just 12 residences.&nbsp;

Construction is scheduled to commence in September 2026.

[smartcode_project_cta:default project_id=150489]

Joel Robinson

CPG unveils Castile Newstead ahead of upcoming sales launch

Australia’s online shopping habits have shifted dramatically over the last decade. As eCommerce volumes surged, so too did the frustrations that came with traditional parcel delivery: missed deliveries, long Post Office queues, parcel theft and the challenge of being home during business hours.

Australia Post’s Parcel Lockers emerged as one of the more practical responses to that changing consumer behaviour.

What started as a relatively niche delivery option has evolved into a nationwide network of more than 1,400 self-service Parcel Lockers positioned at train stations, shopping centres, supermarkets and Post Offices across the country. The system allows Australians to send, collect and return parcels 24 hours a day, fundamentally changing how many people interact with deliveries.

The appeal is relatively straightforward: flexibility.

Instead of waiting at home for a delivery driver or rushing to a Post Office before closing time, users can direct eligible parcels to a Parcel Locker location of their choice. Once the parcel arrives, Australia Post sends a notification with a collection code or QR access through the AusPost app, allowing customers to retrieve their package at any time within the collection window.

For apartment residents in particular, the system has become increasingly valuable.

Higher-density living has created logistical challenges around deliveries, especially in buildings without concierge services or secure parcel rooms. Missed deliveries are common, while parcel theft has become an increasing concern as online shopping volumes continue to rise.

Australia Post itself has repeatedly highlighted the growing issue of “porch pirates” during peak shopping periods, encouraging customers to use Parcel Lockers as a safer alternative to unattended home deliveries.

That security aspect is one of the key reasons the Australia Post Parcel Locker network has grown so rapidly.

Parcel Lockers are positioned as secure, monitored collection points that reduce the risk of theft while also improving delivery efficiency for Australia Post. Instead of multiple redelivery attempts, parcels can be consolidated into a single secure destination.

The Parcel Lockers themselves are free to use through a MyPost account and support a range of parcel sizes up to 16 kilograms and dimensions of approximately 35 x 44 x 61 centimetres.

Beyond receiving parcels, the system has increasingly become integrated into the broader eCommerce ecosystem.

Customers can now use Parcel Lockers to return online purchases, while retailers have embraced the model as a way to improve delivery success rates and reduce friction in the shopping process. Australia Post has actively expanded partnerships with major retailers and promoted Parcel Lockers as part of a broader out-of-home strategy.

The timing of that expansion aligns with broader changes in Australian shopping behaviour.

The acceleration of online retail during and after the pandemic placed enormous pressure on delivery infrastructure. Parcel volumes reached record highs, particularly during Black Friday and Christmas periods, with Australia Post delivering more than 100 million parcels during peak festive seasons.

That growth forced logistics providers to rethink the “last mile” of delivery, widely regarded as the most expensive and operationally difficult stage of the process.

Parcel Locker systems have increasingly been viewed as part of the long-term solution.

The concept itself is not unique to Australia. Parcel Locker networks have become common globally, particularly across Europe and Asia, where dense urban environments and apartment living create similar logistical challenges. But Australia’s geography and suburban sprawl made adoption slower initially.

Now, however, the convenience factor is driving mainstream usage.

For commuters, Parcel Lockers near train stations allow parcels to be collected on the way home from work. For apartment dwellers, they remove the uncertainty around access and missed deliveries.

The rise of the AusPost app has also streamlined the experience, centralising notifications, tracking and Parcel Locker access into a single platform. Australia Post has increasingly pushed customers toward app-based delivery management, partly as a way to combat phishing scams and fake delivery notifications, which have become more sophisticated in recent years.

The Parcel Locker model is also beginning to influence property development itself.

Parcel management has become a growing consideration in apartment building design, particularly as online shopping becomes embedded in everyday life. Many new residential developments are now incorporating dedicated parcel rooms or Parcel Locker systems into foyers and communal spaces.

For developers, parcel management is increasingly viewed as part of the broader resident amenity offering, alongside gyms, wellness spaces and communal work areas.

That reflects a wider evolution in how residential buildings are designed.

Apartment buyers are placing greater emphasis on convenience, security and operational functionality, particularly in higher-density urban environments. Parcel delivery, once considered a minor operational detail, has become an increasingly important part of that equation.

Australia Post’s Parcel Locker network sits at the centre of that behavioural shift.

What began as a simple alternative delivery option has evolved into a key piece of infrastructure supporting Australia’s growing eCommerce economy and changing urban lifestyles.

And as online shopping continues to expand, the role of Parcel Lockers is likely to become even more embedded in how Australians live, shop and receive goods.

How Australia Post Parcel Lockers changed parcel delivery convenience in Australia

Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Jonathan Chancellor

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