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Australia’s major retail outlets could once again bring forward their end-of-year sales in a bid to shift clearance stock and capitalise on the Christmas spending bonanza.
Both Myer and David Jones are considering moving forward their Boxing Day sales to combat weeks of patchy trading, <a href="https://www.afr.com/p/business/companies/david_jones_myer_concern_jump_gun_jCeIa2YDgJZLgamIHJvnqO" target="_blank">according to Fairfax</a>.
If the retail giants opt to bring forward their end-of-year sales it would not be the first time. Three years ago Myer brought forward its December sales by two days, informing loyalty card holders they could <a href="https://www.smartcompany.com.au/growth/economy/23692-20111223-the-boxing-day-sale-that-wasn-t-myer-brings-forward-big-discounts-to-christmas-eve" target="_blank">receive Boxing Day discounts on Christmas Eve</a> in the wake of tough trading conditions.
A spokesperson for Myer did not confirm whether the company would push forward its Boxing Day sales, but said the retailer regularly promotes discounts and the Christmas period is no different.
“We have promotional activity for our customers right throughout the year,” the spokesperson says.
“The lead up for Christmas is no different and this is what we have always done to support Christmas in our stores.”
The spokesperson says Myer is “currently very focused” on Christmas trade as an important time of year.
But Paul Greenberg, executive chairman of the National Online Retailers Association, said he thinks the time when Boxing Day sales meant people would trample over one another to get into a store is “well and truly over”.
“Days are gone where we’re going to sleep overnight at the front door of a retailer and fight it out,” Greenberg says.
“A focus not just on price but convenience and value has to be the new focus and that’s going to be good for everybody.”
Greenberg says there has been a “buzz” for quite a long time now that the level of discounting on Boxing Day itself is not as aggressive as it once was.
“Customers have access now to information and transparent pricing that I think makes it a different ball game,” he says.
“But it’s still very exciting. Promotional activity needs to be part of everyday retail.”
Last year retailers enjoyed strong Boxing Day sales trading. The Australian National Retailers Association estimated around $1.8 billion was spent on Boxing Day itself, with $5.7 billion spent in the first week of the end-of-year sales.
SmartCompany contacted David Jones for comment but did not receive a response prior to publication.
This article first appeared on <a href="https://www.smartcompany.com.au/" target="_blank">SmartCompany</a>.
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Are Boxing Day sales still relevant for retailers?

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GUEST OBSERVATION
Cringe-worthy, confusing and sometimes plain bizarre, real estate advertising can provide an endless source of entertainment. But why is so much real estate advertising amusingly awful?
It turns out there is a very simple explanation. Despite real estate agents proclaiming themselves as experts in property marketing, most have never actually been trained to write an ad. Much like skydiving, bus driving or navigating an oil tanker without any training, the results are predictably disastrous.  
Below are just a few snippets from recent real estate ads along with some very basic tips for those agents who wish to avoid sounding ridiculous.
<ul>
<li>Tip one: Put a little thought into your headline</li>
</ul>
IDEAL FOR A SMALL DOG!
A bad headline can really get things off to a shaky start. Having implied they are selling a tiny kennel, this agent is unlikely to lure a huge numbers of buyers.
<ul>
<li>Tip two: Before using a big word make sure you know what it means</li>
</ul>
Unequalled luxury and classic contemporary elegance personified.
It is possible this house morphs into a human being. It could be something like a Transformer which is part house and part George Clooney. It is far more likely however that the agent failed to consult a dictionary and find out what ‘personified’ actually means.
<ul>
<li>Tip three: Houses are generally incapable of emotion</li>
</ul>
This exceptional two storey residence enjoys one of Sydney's most coveted addresses.
What else does this house enjoy? Tim Tams, ice skating and romantic walks on the beach? Do other houses get sad when they are stuck on a main road in a dodgy suburb? While excitable agents are known to get carried away, they should always remember they are selling an inanimate object.
<ul>
<li>Tip four: A house is not a lifestyle</li>
</ul>
Here is an ideal lockup &amp; go lifestyle
‘Lifestyle’ is one of real estate’s most overused and misused buzzwords. When you buy a house your lifestyle may well be dominated by working 60 hours a week to pay for your mortgage, then going to Bunnings on the weekend for all those exciting DIY projects. It can only be assumed this agent is attempting to glamorise this lifestyle of constantly locking up and going to work or Bunnings.
<ul>
<li>Tip five: A sentence is not a stir fry</li>
</ul>
Relishing its impressive 151m2 of living space in a boutique setting, this freshly presented two-storey townhouse responds to its vibrant lifestyle location with a sanctuary-style ambience encompassing fuss-free interior finishes, an expansive wraparound courtyard with masses of potential and an idyllic leafy aspect.
Many agents create sentences the same way they create a stir fry. They throw completely everything in, jumble it all around and expect to turn out something amazing.  What they actually end up with is a confusing, off-putting mess. Most could markedly improve their ads simply by adding in a few more full stops.
<ul>
<li>Tip six: Show a little sensitivity</li>
</ul>
OWNER RELOCATED TO RETIREMENT VILLAGE!!
While securing a new listing may be extremely exciting, it may be perceived as poor form to publicly celebrate your vendor’s dementia, recent stroke or simple inability to keep climbing their home’s stairs. The capital letters and multiple exclamation marks used in this headline also create an annoying shouting effect, which makes this agent sound particularly callous.
<ul>
<li>Tip seven: Do not make your high school English teacher cry</li>
</ul>
You simply cant replace this. Its Impossible.
Sure, this agent may have ignored all those high school lessons on apostrophes, distracted by their raging hormones and their secret crush on the girl sitting in the second row. Why, however did they have to ignore all the squiggly lines which popped up on their computer’s grammar checker? There’s simply no need to make your old English teacher think their professional life was completely wasted.
While it is easy to laugh at bad real estate advertising, agents should be taking the task of writing ads far more seriously. Awful ads damage the reputation of the industry and do little to help clients who have forked out thousands for professional marketing. Basic training can help agents to avoid the common mistakes and create ads which get results rather than just giggles.
Jamie Watson is the developer of <a href="https://www.rets.com.au/shop/item/real-estate-writing-creating-a-great-ad">REwrite</a>, a new online CPD training program which helps agents to write better ads. 
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Ideal for a small dog! Seven tips to avoid real estate advertising disaster

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GUEST OBSERVATION
"<a href="https://www.newcriterion.com/articles.cfm/Herb-Stein-s-law-7531" target="_blank">If something can’t go on for ever, it won’t.</a> – Herb Stein, chief economic adviser to former US president Richard Nixon.
China’s economic rise has been a good news story for Australia. According to most economic policymakers and commentators, the growing middle classes of China and the rest of Asia will ensure Australia continues to flourish over coming decades.
Treasurer Joe Hockey, for example, recently <a href="https://jbh.ministers.treasury.gov.au/speech/024-2014/" target="_blank">argued</a>: "China’s middle class of around 150 million people is expected to reach one billion in just 16 years … This rising middle class of Asia wants what comes from Australia’s farms and our gas fields. They want to come here as tourists, attend our universities and they need our financial sector to manage their wealth and plan their retirement."
Reserve Bank economist Alexandra Heath also <a href="https://www.rba.gov.au/speeches/2014/sp-so-211114" target="_blank">contends</a>: "Even if the sustainable growth trajectory for the Chinese economy gradually declines over the medium term, the economy is much larger than it was and is still growing. This implies there will continue to be a huge appetite for commodities of many kinds."
They could be right, and if you judged future opportunities based on past performance you’d be reasonably confident. But what if they’re wrong? Is Australia prepared if the optimistic scenario doesn’t eventuate? Do we need a plan B?
Australia is now the most China-dependent economy in the world. Australian exports to China have grown from <a href="https://www.treasury.gov.au/PublicationsAndMedia/Speeches/2014/CEDA-27112014" target="_blank">8.5% of the total in 2003-04</a> to <a href="https://dfat.gov.au/publications/tgs/index" target="_blank">32.5% in 2013-14</a> – and they continue to grow.
Australia’s dependence on its top three export destinations has also increased over the past ten years. The top three accounted for 33.7% (Japan 15.7%, US 9.5% and China 8.5%) in 2003-04, rising to 55.1% (China 32.5%, Japan 15.8% and South Korea 6.8%) by 2013-14. The top five now account for 63.7%, up from 47.7%.
More worryingly, not only is Australia more China-dependent, but so is most of the rest of Asia. This means that a China slowdown (or worse) will also hit Australia’s exports to Japan and South Korea – our second and third-largest export destinations.
Let us hope that the dreamers are right about China’s long-term progress and that the doomsayers are wrong. But remember also that all of this export growth to China occurred without the free trade agreement that Australia and China have <a href="https://www.pm.gov.au/media/2014-11-17/landmark-china-australia-free-trade-agreement" target="_blank">concluded negotiating</a>. It’s possible that the agreement will help to diversify Australia’s export mix to China – <a href="https://www.smh.com.au/business/the-economy/who-wins-in-australiachina-free-trade-agreement-20141117-11ojvd" target="_blank">more agriculture, more services</a> – but it might also just make us more vulnerable down the track as Australia becomes even more dependent on China for earning foreign exchange.
Current policy settings aim to reinforce Australia’s strengths. While this has worked well for us over recent years, Australia’s long-standing economic vulnerabilities remain. These include our vulnerability to falls in the demand for – and prices of – <a href="https://www.theaustralian.com.au/business/news/iron-ore-price-resumes-downwards-trend/story-e6frg906-1227142842905" target="_blank">resources</a>, and high levels of <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1415/Quick_Guides/AustForeignDebt" target="_blank">foreign</a> and <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2014-05-07/household-debt-the-big-threat-to-australian-economy/5435844" target="_blank">household</a> debt.
This leads us to the big question: does Australia need a Plan B? And what would that be? A Plan B would involve a realisation that while resources have helped to make Australia rich, they’re not enough to sustain our prosperity over time. Australia needs active policy efforts to diversify the economy away from a reliance on resources and on buying and selling houses.
Policymakers need to reconsider industry policies and think of ways to develop new industries rather than just support old ones in ad hoc ways. Efforts to extract greater rents from Australia’s <a href="https://www.miningaustralia.com.au/news/foreign-ownership-dominates-mining-industry-rba">80% foreign-owned</a> mining sector are also necessary – that is, through mining taxes. Encouraging the development of renewable technologies through a carbon price should also be a no-brainer for Australia.
In other words, the two policies that the Abbott government <a href="https://www.news.com.au/national/budget-what-did-the-abbott-government-achieve/story-fncynjr2-1227144981800">trumpets as successes</a> are anything but.
The continuing transformation of the Australian political economy is likely to cause ongoing political volatility as Australian governments deal with the electoral consequences of structural changes and economic vulnerabilities.
The best way to ease the pain and avoid resistance to necessary structural reforms is to ensure a fairer distribution of Australian prosperity and a fairer distribution of the pain when the current period of economic growth ends. There are no guarantees of political success, but a fairer political economy is likely to underpin support for economic openness and flexibility. Both are vital preconditions for a more productive economy.
Improvements in productivity – the efficiency of labour and capital – and an egalitarian distribution of the fruits of that productivity are what matters for long-term prosperity. Getting Australia’s policymakers and the wider population to realise that the two are not contradictory is the short-term challenge.
Both good and bad things can come from political processes but we cannot remove politics from the equation. It is worth remembering that Australia is a <a href="https://theconversation.com/income-and-wealth-inequality-how-is-australia-faring-23483">wealthy and relatively equal country</a> because of political interventions, not despite them. Australia needs to utilise its luck to lessen its vulnerabilities.
If policymakers simply believe that China will sustain Australia’s prosperity over the next 20 years, then many Australians will think there’s no reason to change tack – until it’s too late.
Tom Conley is senior lecturer, School of Government and International Relations at Griffith University.
This article was originally published on <a href="https://theconversation.com" target="_blank">The Conversation</a>.
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Australia’s China dependence: Do we need a Plan B?

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Guest observation
Working with the banks on a daily basis, its easy to understand why tech savvy entrepreneurs are competing for their market share.
Innovation, like <a href="https://http//www.afr.com/p/business/companies/paypal_targets_aussie_business_loans_RrvZdKX866PcZidAXElHcJ">PayPal's </a>venture into the small business loans sector, will force our banks to become more competitive and accommodating when dealing with small to medium enterprises (SMEs) who continue to be forced to meet ridiculous hurdles when trying to access capital.
Although our banks would argue otherwise, in my opinion, other than continuing to channel huge amounts of dollars into property, our banks have played a very small role in helping SME’s grow during the post GFC years and the economic recovery in general.
If you were to look deeper into lending in Australia, you will see that most of the lending that does occur to businesses is supported by the security of Real Property.
Banks have effectively homogenised lending to the lowest common denominator, with very little room for negotiation when it comes to products, pricing or terms. They also almost always rely on Real Property Security as a substitute to critical credit analysis, where a lender would set pricing according to risk.
This standardised form of lending has ensured that the banks can continue to operate with the lowest cost base generating the highest returns.
Of course, this has been great windfall for shareholders, but at what cost to the real economy? 
<a href="https://http//www.afr.com/f/free/blogs/christopher_joye/houses_overvalued_official_up_to_OaTjLJaWNe179RZAhcUzJI">Our property market is one of the most expensive in the world</a>, <a href="https://http//www.smh.com.au/business/the-economy/australians-living-the-high-cost-life-20140430-37h4b">we have one of the highest costs of living </a>and yet our economy lacks efficiency and <a href="https://http//theconversation.com/australias-productivity-problem-why-it-matters-8584">productivity has deteriorated dramatically during the past decade</a>.
These imbalances are very obvious and have all been compounded by the fact that capital in Australia is not channeled into the most productive areas where it will achieve the maximum return.
Banks play a critical role in our economy. We need them to be profitable and well capitalised, but while they continue to remain protected from competition, remain “<a href="https://http//www.afr.com/p/business/financial_services/major_banks_pay_the_price_for_being_fSEQAeD1pHK9L8Qm6hJFkP">to big to fail</a>” and continue to rely on government guarantees underwritten by our tax dollars, they should be forced to make a greater contribution to the growth and success of our economy.
Or, to put it another way, they should not be allowed to conduct their business in a way the that kills productivity and put into jeopardy the hopes and dreams of future generations.
Con Katsiouras is the Director of Folio Finance.
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Lending to housing is a productivity killer

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Guest observation
David Murray’s <a href="https://fsi.gov.au">Financial System Inquiry</a> may call for the removal of superannuation tax breaks but the government’s tax discussion paper, due to be released next week, is unlikely to advocate similar changes.
The FSI inquiry report recommends articulating the overarching purpose of the superannuation system so that future tax changes can be measured against the objective.
It says the purpose of superannuation is to “provide income in retirement to substitute or supplement the age pension”. This then prescribes, in theory at least, the tax breaks individuals can get from the system.
In this case, the maximum tax break an individual should get from superannuation would be roughly equal to the net present value of the age pension paid from age 65 to the median life expectancy.
The age pension is designed to keep people out of poverty after they leave the workforce. Yet how does the inquiry’s definition of superannuation fit with financial planning theory which says that people need to aim for <a href="https://www.oecd.org/daf/fin/44628862.pdf">70% of pre-retirement income</a> to maintain their lifestyle?
It makes redundant any discussion about whether the current compulsory contribution limit of 9.25% provides an adequate retirement income. It also implies that superannuation should attract few tax breaks.
The theory is don't use taxes to incentivise saving
However, this raises the question of whether the tax system should be used to encourage saving, either through superannuation or outside it. There are four reasons why the tax system should not be used for this purpose.
First, the tax revenue forgone through the concession is borne by all taxpayers, while only those using the concession benefit from it.
Second and third, tax benefits only go to the wealthy who have disposable income to save and who have access to information to maximise the benefits of saving, such as accountants and lawyers.
Finally, tax concessions don’t increase savings, they just move preferences to where people save.But the reality is that they are used.
The report observes that superannuation tax breaks <a href="https://www.smh.com.au/business/tax-breaks-on-housing-shares-and-super-distort-behaviour-benefit-the-rich-murray-20141207-121x1c">distort behaviour and favour the wealthy</a>. However, a number of its observations will be difficult for the government to implement.
The inquiry report endorses <a href="https://taxreview.treasury.gov.au/content/Content.aspx?doc=html/home.htm">Ken Henry’s tax review</a> recommendation to reduce the tax benefits of popular negative gearing investing as well as the over-taxation of income from deposits. It also advocates that income from large superannuation balances should attract more tax, however this has a whiff of retrospective tax about it.
Another suggestion that post-tax contributions should be further limited is also unlikely to be adopted by the government. Few people use these concessions and they benefit empty nesters who are selling down to enjoy a hipster inner city lifestyle rather than those trying to minimize their tax obligations.
The report says the system that taxes super earnings at 15% in the accumulation phase but not in the retirement phase, leads to asset allocation distortions, tax arbitrage and prevents funds offering “whole-of-life” financial products. However, it is doubtful whether any of these problems are tangible and important enough to warrant changing the system.
Finally, the report suggested removing the company share dividend imputation system and reviewing the capital gains tax discount. Interestingly, the report argues these incentives distort asset allocation yet both these measures were introduced with the intention of removing tax distortions.
Imputation credits were introduced to lower the cost of capital towards equity rather than debt funding. The capital gains tax discount was introduced to prevent the over-taxation that potentially arises from capital gains all being taxed in one year leading to higher marginal tax rates.
However, the report’s focus on changing interest withholding tax on foreign lending institutions should be addressed. This tax distorts the funding decisions of financial institutions and places Australia at an international competitive disadvantage. If it has to be paid then almost invariably it will be paid by the Australian borrower, not the foreign lender, so it just raises the cost of capital with little revenue to be gained.
Government unlikely to implement super tax changes
Should these tax observations be included in the tax issues paper? They seem to warrant considered discussion but with two overarching caveats.
First, superannuation is a very long-term savings vehicle and changes reduces confidence in the system.
Second, savings in the system are there based on the good faith continuance of existing tax laws. In the past 35 years there has been only <a href="https://www.aph.gov.au/binaries/library/pubs/bn/eco/chron_superannuation.pdf">minor changes </a>that adversely affected existing superannuation account balances.
However, the chances of the government implementing these tax changes is slight.
Though <a href="https://www.smh.com.au/business/treasurer-joe-hockey-urges-banks-to-cooperate-with-regulators-20141207-121vxt">Treasurer Joe Hockey backed</a> the report’s recommendations to lower fees for super funds, it is unlikely that many of the report’s observations in terms of tax will go ahead.
<a href="https://www.smh.com.au/business/the-economy/super-system-must-remain-strong-says-tony-abbott-20130926-2ufq0">Adverse changes to the superannuation system</a> are off the table for the first term of this government apparently. If superannuation tax breaks are measured against the age pension, a significant proportion of the population will be adversely affected.
Changes to capital gains tax is also unlikely to go ahead as most countries differentiate between regular income and capital gains. What remains is imputation credits for company dividends. Adverse changes here would be politically unwise as they are very popular among mum and dad investors and super funds.
Gordon Mackenzie is a Senior Lecturer at UNSW Australia Business School.
<img src="https://counter.theconversation.edu.au/content/35158/count.gif" alt="The Conversation" width="1" height="1">This article was originally published on <a href="https://theconversation.com">The Conversation</a>. Read the <a href="https://theconversation.com/murray-pushes-for-fewer-super-tax-breaks-but-change-is-unlikely-35158">original article</a>.
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Murray pushes for fewer super tax breaks but change is unlikely 

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GUEST OBSERVATION
Pop quiz: in 2014 the quantity of Australian iron ore demanded by China has: a) fallen sharply, b) fallen modestly, c) remained the same, d) increased modestly, e) increased sharply?
The answer in just a moment.
Last week the Australian Bureau of Statistics (ABS) told us that the economy is suffering from an <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/ProductsbyReleaseDate/52AFA5FD696482CACA25768D0021E2C7?OpenDocument" target="_blank">income recession</a>. Our exports aren’t fetching the prices they used to – the terms of trade are down by around 9% for the year - and that means we can’t afford to buy as much from overseas as before.
Growth in China has also <a href="https://www.afr.com/p/world/china_growth_slows_from_rail_to_GPWU3X58iAOG5SvvMgNi9L" target="_blank">slowed</a> and the construction industry there is in the middle of a major funk. Moreover, China’s economy is rebalancing away from growth led by resources-hungry investment.
<a href="https://www.smh.com.au/world/chinas-slump-will-hurt-australian-incomes-and-the-pain-is-likely-to-linger-20141205-11zy1z" target="_blank">Joining the dots</a> is proving irresistible. But there’s a problem with this story, and it’s a big one.
The answer to the above question is unambiguously option e. In the September quarter – that’s the same quarter Australia shifted into an income recession - exports of iron ore to China were <a href="https://www.bree.gov.au/files/files//publications/crq/westpacbree-crq-201411.pdf" target="_blank">up 33% from a year earlier</a>, according to Westpac and the Bureau of Energy and Resources Economics (BREE). This followed a 32% jump the first quarter and a 36% leap in the second.
These are extraordinary numbers and we should not be at all surprised when they start to slow. But, for now, Chinese demand continues unabated.
In a sense this is not difficult to understand. The law of demand says that when the price falls, the quantity demanded will increase. The price of iron ore is down nearly 50% since the beginning of the year.
And while growth in China is now 7.3%, the slowest pace in five years, that’s coming off an ever-larger base. In terms of the number of dollars being added to the economy each year, 7.3% growth now is more than a match for 8% a couple years ago.
Watch the miners
If the price has fallen and the quantity traded has increased, there can be only one culprit – a dramatic increase in supply. And so there has been: BHP Billiton alone is in the midst of a 65 million tonne per annum <a href="https://www.bhpbilliton.com/home/investors/reports/Documents/2014/141006_IronOreBriefingandWesternAustraliaIronOreSiteTour.pdf" target="_blank">expansion</a> of its Western Australian iron ore operations.
Treasurer Joe Hockey may be worried about falling iron ore prices but BHP Billiton certainly isn’t. Even with iron ore prices sitting as they are between A$70 and $80 per tonne, the business remains hugely profitable. Its current cost of supply is around A$27 per tonne and the target is less than $20 in the medium term. Producers in other sectors of the economy would kill for those sorts of margins.
While it’s become popular to dismiss the projections for Chinese demand from the miners themselves as being overly optimistic – why exactly is not clear. Remember, it’s their billions of investment dollars on the line - and <a href="https://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2014/Long%20run%20forecasts%20of%20Australias%20terms%20of%20trade/Documents/PDF/long_run_tot.ashx" target="_blank">forecasts</a> offered by the Commonwealth Treasury in May based on an analysis of demand and supply fundamentals are proving remarkably accurate. In reference to iron ore they concluded that “… supply will increase at a much faster rate than demand…” and that “The shift of production to the flatter section of the supply curve is expected to cause a rapid fall in the real price…”
These dynamics will play out until 2017-2018. From then on, the price will stabilise at a touch above $70 per tonne. There’s little to worry about here.
The bottom line in all of this is that the impact of China on the Australian economy remains a tremendously good news story. According to the latest <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/ausstats/abs@.nsf/mf/5368.0">trade data</a> from the ABS, the value of our exports to China is more than double that to our second-largest customer, Japan. This ratio holds true across the board - agriculture, fuels and minerals, services and even manufactured goods.
None of this is expected to change any time soon. China is the world’s second-largest economy and the International Monetary Fund continues to <a href="https://www.imf.org/external/pubs/ft/weo/2014/02/">forecast</a> that it will grow by 7.4% this year and 7.1% next year. That growth in 2015 is more than double that predicted for the US and nearly nine times that for Japan. There’s always room to quibble about the exact numbers but few would disagree that China will continue to outperform other major economies.
For the Australian economy it doesn’t get much better than that.<img src="https://counter.theconversation.edu.au/content/35243/count.gif" alt="The Conversation" width="1" height="1" style="line-height: 1.3em;">
James Laurenceson is deputy director and professor, Australia-China Relations Institute (ACRI) at University of Technology, Sydney.
This article was originally published on <a href="https://theconversation.com">The Conversation</a>.
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China-Australia doomsayers overlook strong fundamentals

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GUEST OBSERVATION
A key component of the <a href="https://fsi.gov.au/publications/final-report/">Financial System Inquiry</a> handed to Treasurer Joe Hockey this week was that “the financial system should be subject and responsive to market forces, including competition”. But on both market forces and competition, inquiry chair David Murray and his team squibbed it.
Much of the discussion of the Murray report in the financial press has been on the push back by the major banks against the inquiry’s insistence they hold more capital and properly account for the risks in mortgage lending. But the issue of the optimal structure of the Australian financial system, as opposed to its internal workings, was completely ignored.
Despite talk in Australia of coming “structural reforms”, Murray has set his face in stone against such reforms in the banking sector. And he’s not alone - the report points out that neither APRA nor the RBA nor the banking industry saw a strong case for such reforms.
“The Inquiry does not recommend pursuing industry-wide structural reforms such as ring-fencing. These measures can have high costs, and require changes for all institutions regardless of the institution-specific risks."
The inquiry did not consider the considerable risk-reduction benefits of reforms such as ring fencing as against the putative costs. Murray points out that although Australia did dodge the global financial crisis, it is not immune to “financial shock” and as a result the banking system must be made more resilient, hence the call for more capital. These were precisely the same arguments made for major structural reforms, such as <a href="https://faculty.london.edu/fmalherbe/overview.pdf">ring fencing</a> in the UK, and the “Volker rule” in the USA, but such arguments were dismissed in the Australian context.
Ring fencing, <a href="https://hmt-sanctions.s3.amazonaws.com/ICB%20final%20report/ICB%2520Final%2520Report%5B1%5D.pdf">recommended</a> by the UK Independent Commission on Banking in 2011, is often portrayed as cutting loose the investment banking cowboys but, in fact, it is a very sensible crisis management tool for bankers and regulators. As outlined by the Commission, and in the process of being <a href="https://www.gov.uk/government/policies/creating-stronger-and-safer-banks">implemented</a> by the UK government, certain banking functions, such as payments and deposit taking, would be designated as being “permitted” inside the ring fence, and everything else would be outside. It is like having a “safe” bank within a bank.
Four pillars distortions
The elephant in the room in Australian banking is the “four pillars” policy, which is the unwritten rule that the pillars (originally six but now the four major banks) cannot acquire one another. The policy is not without its critics. In response to the Wallis Inquiry, which recommended scrapping the policy for competition reasons, Peter Costello maintained the prohibition on local takeovers, but left the door open (very slightly) to international acquisitions.
The four pillars responded to this near-death experience by increasing their importance and, in the almost 15 years since Wallis, have acquired smaller banks, such as Westpac’s take-over of St. George. They also branched out to acquire retail super funds. In 2013, the superannuation subsidiaries acquired by the four pillars, such as BT and First State, were four of the top five retail funds by assets (one of the original pillars, AMP was first). But getting bigger does not mean getting better, as evidenced by the financial planning scandals facing some of the major banks.
The Murray inquiry took a diametrically opposed position to Wallis on the four pillars, with a somewhat bizarre argument for a free-market advocate: “To prevent further concentration, the longstanding ‘Four Pillars’ policy, which precludes mergers between the four major banks, should be preserved as outlined in the Interim Report.”
While the four pillars policy has been credited with helping Australia survive the global financial crisis, its impact is somewhat overrated as it relies on the argument that four CEOs cannot be as stupid as one or two - a fact that has been proven wrong elsewhere.
There are a number of questions that the FSI team failed to ask - “Why four pillars, why not two, three or six?” and “Why not international banks as part of the four/three or two?”
Too many branches
Australia is chronically over-banked. The latest <a href="https://www.apra.gov.au/adi/Publications/Documents/2014_PoP_PDF.pdf?WT.mc_id=1408POP-PDF">APRA statistics</a> show there are 69 firms with licenses as Authorised Deposit-taking Institutions (ADIs) with full service branches or other “face to face” customer contact operations. Between them, these ADIs operate 6,332 branches, which means there is a full service branch for every 3,650 people in Australia. It’s one service outlet for every 1,918 individuals if you count Australia Post (Bank@Post) stores. And there is one ATM for every 1,500 people, one Eftpos terminal for every 30 people.
With such overbanking and associated costs, how do Australian banks make such super profits? It can hardly be lack of competition as Murray believes, as there is competition a plenty. Fees of course are one answer, such as the <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2014-03-18/credit-card-surcharges-top-800-million/5327092">credit card surcharges</a> that have recently come under scrutiny, not least by the Murray report which recommends banning unnecessary surcharges.
But bank bashing is national sport and it is much harder to answer the question: “What should a modern banking system look like in Australia?” First of all – it should be modern!
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What a modern banking system looks like
The Murray inquiry makes great play of financial innovation, introducing concepts such as “crowdfunding” and “peer-to-peer lending”. These fashionable but largely irrelevant notions are little more than DIY advertising for someone to lend you money, a sort of banking dating site.
Surprisingly, the Murray report does not address one of the major disruptors in the Australian financial system – internet/mobile banking.
With 72% of online Australians and 35% of mobile phone customers using online/mobile banking, why are so many physical branches and banks needed - surely they will go the way of the corner shop? In future the competitors to the banks for payments, credit cards and insurance will not be other banks, but instead companies such as <a href="https://www.woolworthsmoney.com.au/wowm/wps/wcm/connect/WowMoney/WowMoney/Credit+Cards/">Woolworths</a> and <a href="https://www.abc.net.au/7.30/content/2014/s4062642.htm">Coles</a>.
In the US, JPMorgan Chase, one of the world’s largest banks, operates around 5,700 branches for some 70 million customer accounts. So technically, only one bank is needed to handle banking for Australia’s population of 23.1 million. Australian banks bring little innovation to banking, as they source the bulk of their technology from foreign suppliers and proven technology from one major bank could reduce costs considerably across the system.
The question of ownership and control is of course important. Having one bank, albeit as illustrious as JPMorgan, could be dangerous. But maybe two would be sufficient? One local to provide backup in the case that the other international bank failed?
What are the arguments for four pillars? None, other than status-quo.
The issue is not ownership nor the number of banks, it is regulation. If one of the banks was undoubtedly stronger than local banks could be, it would actually diversify the sector, which should reduce its riskiness overall.
But the Murray Inquiry did not consider how technology will radically change ordinary banking in the next decade, wasting the chance of making the structural reforms needed to adapt to such changes.
Pat McConnell is honorary fellow, Macquarie University Applied Finance Centre at Macquarie University.
<img src="https://counter.theconversation.edu.au/content/35244/count.gif" alt="The Conversation" width="1" height="1">This article was originally published on <a href="https://theconversation.com" target="_blank" style="line-height: 1.3em;">The Conversation</a>.
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Murray inquiry not made for a future with fewer banks

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GUEST OBSERVATION
Having enjoyed continuously increasing prosperity since the Second World War, Australians have come to expect that each generation will live a better life than the last.
But this steady progress may be at risk. As shown in Grattan Institute’s latest report <a href="https://grattan.edu.au/">The wealth of generations</a>, today’s young Australians may end up with lower living standards than their parents at the same age.
Young Australians will bear the costs of fiscal decisions made by past and present governments. The cost of rising government spending on older households and repaying government debt will fall most heavily on today’s young.
Younger Australians have always been net contributors to the budget. Under the generational bargain, people of working age pay more in taxes than they receive in government benefits and services. They then become net takers from the budget in retirement. Strong income growth allowed each generation to take out more from the budget that they put in. But the generational bargain is now at risk.
Many expect incomes will rise more slowly in coming decades, making transfers to older households less affordable. Affordability concerns are compounded by the growing size of net benefits received by older Australians. In 2010, governments spent A$9400 more per household headed by someone above 65 than they did in 2004.
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/66722/width668/image-20141209-32162-12u017d.jpg" alt="">
This increase in net benefits for older households was a result of increased spending on health, higher Age Pension payments and lower income taxes.
Spending on pensions increased most with the Howard government’s changes to the pension asset test and the Rudd government’s 10% increase in the base pension rate. On the tax side, concessional superannuation tax arrangements now allow individuals above 60 to materially reduce their income tax liability, by up to $5000 a year. The <a href="https://www.ato.gov.au/Calculators-and-tools/Senior-Australians---pensioner-tax-offset/">seniors and pensioners tax offset</a> can also reduce tax payable by up to $1600.
Spending on health has risen particularly fast. Health spending per person has increased for all age groups but it increased most in dollar terms for those above 60. Increased use of services, rather than population ageing has been the main driver. For example, technological improvements allow more medical procedures to be performed safely and successfully on those who are older.
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/66723/width668/image-20141209-32146-vmgi8e.jpg" alt="">
Population ageing will magnify the cost of growing transfers to older households. As the baby boomer generation reaches the “draw down” phase of the generational bargain, Age Pension and government health spending will substantially increase. For example, the Productivity Commission estimates that state and Commonwealth government health spending will increase from 6.5% of GDP in 2011-12 to almost 11% in 2059-60.
Over the last six years, the increased spending on older households was funded through deficits. The cost of the increase in payments to households above 65 was about $22 billion a year. This was a substantial contribution to Commonwealth budget deficits which have exceeded $40 billion per year for four of the last five years.
The cost of these deficits will be worn by younger generations. To repay the accumulated debt, they will pay higher taxes or receive fewer government services. An annual deficit of $40 billion a year implies an additional future tax burden of around $10,000 for each younger household.
<h3>Prevention is better than cure</h3>
Government policy choices have contributed to the size of the future burden on young Australians. Other policy choices would reduce the risk of the next generation being worse off.
Targeting the Age Pension, reducing superannuation tax concessions and increasing asset taxes (such as taxes on land) could reduce the transfers between today’s younger taxpayers and older retirees. These reforms would fall most on those who have benefited from government largesse and paying lower taxes while deficits accumulated.
These reforms would also significantly contribute to solving government budget problems. Even if all the Commonwealth government’s stalled budget reforms were passed, they will be nothing like enough to bridge the budget gap. Larger scale tax and spending reforms are needed.
If government expenditures on health, pensions and superannuation concessions are cut because budgets cannot sustain them, this will also disadvantage younger Australians. Younger generations, on the wrong side of the drawbridge after the policies change, will have paid for benefits they will never get to enjoy. This strengthens the case for reforming these policies sooner rather than later, and limiting the scope of “grandfathering” provisions.
The generational bargain has served Australia well. Yet it will be undermined if some generations are asked to do more than their fair share. Reforms to pensions, superannuation tax concessions and asset taxation are needed to ensure the sustainability and fairness of the tax and transfer system. Without them, there is a real risk that our children and grandchildren will not enjoy the fruits of Australia’s prosperity as much as their parents.
John Daley is chief executive officer at Grattan Institute.
Danielle Wood is fellow, Australian Perspectives at Grattan Institute.
<img src="https://counter.theconversation.edu.au/content/35250/count.gif" alt="The Conversation" width="1" height="1">This article was originally published on <a href="https://theconversation.com" style="line-height: 1.3em;">The Conversation</a>.
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Young Australians set to pay for government policy mistakes

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Guest observation
The federal government has missed an opportunity to give serious thought to housing affordability in Australia. The <a href="https://www.aph.gov.au/~/media/02%20Parliamentary%20Business/24%20Committees/243%20Reps%20Committees/Economics/44p/Real%20Estate/Report/Report%20Final.pdf">House Standing Committee on Economics</a> recently released its report on individual foreign investment in residential real estate. The report received <a href="/expert-insights/investing/mixed-reactions-to-federal-foreign-buyer-inquiry-recommendations">mixed reactions</a>.
Media debate about Chinese property investment and housing affordability in major Australian cities almost certainly informed the rationale for the inquiry. So it was surprising the inquiry’s terms of reference provided little scope for investigating the relationship between foreign investment, house prices and affordable housing solutions.
As the report heads to the government archives, it is worth pausing to reflect on the history of Asian real estate investment in Australia. Over the last three decades, media coverage of the Asian property invasion narrative and the federal government’s geopolitical positioning have developed an interesting circularity. This history tells us much about the lost opportunity.
The Asian property invasion narrative
Individual foreign investment in residential real estate in the United States, United Kingdom, Canada and Australia is a longstanding political issue. Over the last five years the changing nationalities of foreign investors in these countries has garnered considerable political and media attention.
Not since the 1980s has media attention been as focused on the foreign investment practices of Asian investors. In 1983 The Sydney Morning Herald reported “Our Asianisation is gaining pace”. By 1987 The Bulletin reported on “The new Asian invasion: how Australian property is being sold off”.
<a href="https://dro.deakin.edu.au/view/DU:30000419">Joseph Hajdu’s</a> analysis of media in the 1980s shows “people believed that the flow of Japanese money was a prime cause of … property inflation” and resulted in “increasing financial difficulties being faced by first home buyers”.
Recently, an audience member of ABC television program <a href="https://www.abc.net.au/tv/qanda/txt/s3946770.htm">Q&amp;A</a> asked: “Why are the Chinese allowed to buy up Australian property? This is inflating the price and sentencing a whole generation to renting.”
The recent inquiry offered hope for a more balanced appraisal. Yet, similar to the 1980s-90s, broader geopolitical forces were at play.
The geopolitics of Australia in the Asian Century
Joseph Hajdu argues that the “rise in anti-Asian sentiment was the last thing” the federal government wanted in the late 1980s when it was “trying to persuade the public that Australia’s future lay with Asia”.
There are surprising parallels between Australia’s focus on Asia in the 1980-90s and the position of more recent federal governments. The Hawke government’s pro-Asia geopolitical discourse of the 1980s was revived in the Gillard government’s 2012 <a href="https://www.murdoch.edu.au/ALTC-Fellowship/_document/Resources/australia-in-the-asian-century-white-paper.pdf">Australia in the Asian Century</a> white paper.
During both periods, government discourse has been filled with pro-Asian political sentiments and regional commitments.
In the mid-1980s the federal government argued Australia was a part of Asia. In cooperation with Japan, the government established the first <a href="https://www.apec.org/About-Us/About-APEC/History.aspx">Asia Pacific Economic Cooperation (APEC)</a> meeting in Canberra. Now the Abbott government is moving forward with a <a href="https://dfat.gov.au/fta/chafta/">China-Australia free trade agreement</a>.
The Abbott government, like the Gillard and Hawke governments, seeks to attract Asian capital. It is no surprise, therefore, that Asian real estate investment has recently shown a corresponding rise.
This geopolitical landscape leaves little scope for removing foreign investment in Australian property. <a href="https://www.smh.com.au/federal-politics/political-news/tony-abbott-says-australia-benefited-from-foreign-investment-because-it-was-unsettled-before-the-british-20140703-zsvby">Prime Minister Tony Abbott</a> has been quoted as saying:
<blockquote>
“As a general principle we support foreign investment. Always have and always will.”
</blockquote>
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The limitations of the inquiry
The terms of reference for the inquiry were driven and limited by these political concerns.
Abbott’s comments implied that recommendations advocating reduced foreign investment were off the inquiry agenda. At the same time international real estate companies within Australia have risen in recent prominence. At the Brisbane Global Café, a precursor event to the G20, one of the speakers was the <a href="https://list.juwai.com/news/2014/10/andrew-taylor-of-juwai-com-to-speak-at-g20-curtain-raiser">Australian chief of Juwai</a>, one of the largest Chinese-speaking online real estate firms.
Meanwhile, the inquiry failed to consider in any detail how foreign investor taxes or developer contributions could be used to provide affordable housing solutions. It could only focus on general supply and demand issues.
A lost affordable housing opportunity
The inquiry had the chance to turn the initially parochial, <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2014-02-25/rogers-chinese-investors-myth-vs-reality/5281538">perhaps even racist</a>, response to Chinese investment into a productive discussion. It missed that opportunity.
The inquiry <a href="/news/no-surprises-in-kelly-odwyers-12-firb-report-recommendations">concluded</a> by recommending foreign investment rules for residential real estate should be retained. It indirectly blamed real estate agents, financial advisers and legal professionals for assisting foreign investors to break the rules.
Foreign nationals invest in Australia because our political, financial and housing systems facilitate their capital. Given that foreign investment is here to stay, governments need to consider how foreign capital should be used to achieve better social outcomes.
It is unclear if foreign <a href="https://www.firb.gov.au/content/Publications/AnnualReports/2012-2013/_downloads/FIRB-Annual-Report-2012-13.pdf">investor capital</a> will continue to grow. If it does, there are innovative ways to use this capital to increase affordable housing supply. This may include channelling these funds into areas where housing is needed most and for the benefit of those low-income families most disadvantaged by increasing property prices.
The inquiry found foreign investors might not be part of Australia’s housing affordability problem. However, it failed to investigate if foreign capital, taxation settings and equitable housing policies could be brought together to achieve a better outcome for those who are being closed out of an increasingly expensive property market.
<img src="https://counter.theconversation.edu.au/content/34960/count.gif" alt="The Conversation" width="1" height="1">Dallas Rogers is a research fellow at the Urban Research Centre at <a href="https://theconversation.com/institutions/university-of-western-sydney">University of Western Sydney.</a>
This article was originally published on <a href="https://theconversation.com">The Conversation</a>. Read the <a href="https://theconversation.com/foreign-investment-in-real-estate-inquiry-a-lost-opportunity-34960">original article</a>.
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Foreign investment in real estate inquiry: a lost opportunity

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GUEST OBSERVATION
During Queensland’s preparations for Severe Tropical Cyclone Ita earlier this year, <a href="https://www.abc.net.au/7.30/content/2014/s3983077.htm">Queensland Premier Campbell Newman</a> advised residents who lived in older houses (those built before 1985) to evacuate their homes as they were not likely to stand up to the storm’s destructive winds.
In the event, the damage was <a href="https://www.brisbanetimes.com.au/queensland/cyclone-ita-worsthit-areas-could-go-weeks-without-power-20140414-36m7d" target="_blank">largely to the electricity network</a>, while Cooktown, very close to the path of the storm, <a href="https://www.smh.com.au/environment/weather/cooktown-cleans-up-after-cyclone-ita-20140412-36jzz" target="_blank">suffered less destruction than had been feared</a>.
But the episode still begs the question: what was so special about 1985?
That was the year that building regulations changed to require new houses in cyclone-prone areas to be able to withstand higher winds. But how were these regulations determined, what do they mean for modern homes, and why do regulators always seem to wait until after a severe storm before updating the codes?
Updating the regulations
Building codes are drawn up by the <a href="https://www.abcb.gov.au/" target="_blank">Australian Building Codes Board (ABCB)</a>, which cites its mission as addressing “issues of safety and health, amenity and sustainability”.
Its job is to set minimum standards for the design, construction and performance of buildings to “withstand extreme climate related natural hazard events”. It is then up to each state and territory to adopt the recommended standards.
After natural disasters, the ABCB examines the nature of building damage to decide whether the regulations provide enough protection. During <a href="https://www.bom.gov.au/cyclone/history/tracy.shtml" target="_blank">Cyclone Tracy</a> in 1974, 70% of Darwin’s houses suffered severe damage (90% in some areas), causing 65 deaths and damage worth hundreds of millions of dollars. It was obvious that existing building standards were not protecting the community.
As a result, the regulations were changed in the 1980s to improve the construction processes that attach the roof to the rest of the house, making homes more resistant to severe wind damage.
Analysis after cyclones <a href="https://www.bom.gov.au/cyclone/history/vance.shtml" target="_blank">Vance</a> (1999), <a href="https://www.bom.gov.au/cyclone/history/larry.shtml" target="_blank">Larry</a> (2006) and <a href="https://www.bom.gov.au/cyclone/history/yasi.shtml" target="_blank">Yasi</a> (2011) showed that the updated regulations have resulted in <a href="https://www.abcb.gov.au/en/education-events-resources/national-conference/~/media/Files/Download%20Documents/Marketing%20Docs/BAF/4%20David%20Henderson%20FINAL.ashx" target="_blank">much less building damage and consequent loss of life</a>. During Cyclone Yasi, for example, 12% of older homes suffered severe roof damage, but only 3% of newer homes.
Of course, this does not mean that newer homes are completely impregnable. <a href="https://www.jcu.edu.au/cts/publications/content/technical-reports/jcu-078421.pdf/view" target="_blank">Analysis of damage from Cyclone Yasi</a> showed some remaining “weak points”: tiled roofs, sheds, garage doors, and doors/windows. It was found that more attention needs to be paid to the design, testing, installation, use and maintenance of products, components and fixings. Revised standards have since been developed for roof tiles, garage doors and shed design.
The right way to think about risk
Campbell Newman’s comment about older houses was partially correct – houses built to older standards were indeed more likely to suffer damage. But his statement is perhaps also misleading. Current building standards for Far North Queensland are designed to protect structural integrity in winds up to a Category 4 cyclone. If Ita had crossed the coast and maintained its Category 5 intensity, it is possible that all of Cooktown’s houses – old and new – would have been subject to severe damage.
It is crucial that the community understands what hazards and risks are being addressed by building regulations, and which ones are not.
For example, current regulations address wind loading associated with cyclones, but take no consideration of wind-driven rain (a major cause of water damage). There are also three specific hazards that are not addressed: hail, storm surges and heatwaves. The first two present risks to property; the third contributes to heat stress, which is in turn linked to health problems and deaths.
When deciding whether and how to update the regulations, the ABCB considers both costs and benefits. Regulations will only change if the ABCB and its stakeholders determine that the cost of the changes (such as higher building costs) are less than the benefits (the expected savings in reduced damage).
As a result, the regulations establish minimum standards, not best practice standards.
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The community’s role
Home owners and residents therefore need to be aware of these limitations in the building regulations, and be much more proactive in determining what level of risk is appropriate to their circumstances. A simple risk assessment identifies three things:
<ol>
<li>
What hazards and risks might your house/unit/building be exposed to?
</li>
<li>
What is the likelihood and frequency of those hazards?
</li>
<li>
What are the consequences if the event happens?
</li>
</ol>
Property damage is perhaps the first risk that people consider, particularly in relation to natural hazards such as cyclones, floods and bushfires. But buildings and their contents can also be damaged by heavy rain, hail, tidal surges, ground movement, and other phenomena.
There are also financial risks associated with not taking action, such as increased power prices and insurance premiums. These financial risks affect everyone in the community.
Meanwhile, people who are directly affected by property loss can also suffer resettlement costs and loss of income.
What should you do?
Listening to the authorities is important, but you should take responsibility for your own household risks too. One way to do it is to take out <a href="https://understandinsurance.com.au/" target="_blank">home insurance</a>, but you need to be aware of what risks your insurance does and does not cover, and what are your responsibilities.
Another way to manage your risk is to take these things into consideration when you are building, buying or renting a property. Find out how a building has been designed and constructed to manage these risks. Ask the architect, designer, builder, estate agent, landlord, body corporate or local council for documentary evidence.
The insurance sector could also play a more proactive role in promoting better building design, perhaps by offering lower premiums for buildings with stronger construction.
Consideration also needs to be given to changing the way damaged buildings are evaluated and repaired after a disaster. New Zealand has acknowledged that the <a href="https://cera.govt.nz/sites/cera.govt.nz/files/common/recovery-strategy-for-greater-christchurch.pdf" target="_blank">earthquake recovery process</a> provides an opportunity for creating a more resilient city, not just restoring what was lost.
What is needed is a more collaborative approach to withstanding risks to our buildings, our property, and even our health. The ABCB seems to be <a href="https://www.abcb.gov.au/~/media/Files/Download%20Documents/Major%20Initiatives/Draft%20ABCB%20Discussion%20Paper%20on%20Resilience%20to%20Extreme%20Weather%20Events.pdf" target="_blank">moving in this direction</a>, and it should not be expected to go it alone.
We all have a role to play in creating robust and resilient neighbourhoods that stand up to natural hazards.
Wendy Miller is senior research fellow at Queensland University of Technology.
Wendy Miller receives / has received funding from the Australian Research Council and the National Climate Change Adaptation Fund. She is being sponsored by ICPS Australia to present her research findings at the Australian and New Zealand Disaster and Emergency Management Conference on the Gold Coast in May.
This article was originally published on <a href="https://theconversation.com" target="_blank">The Conversation</a>.
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How building codes save homes from cyclones, and how they don’t

National Australia Bank (NAB) will fund <a href="https://www.apartments.com.au/new-apartments/palmera-residences-gold-coast-18-garfield-terrace-surfers-paradise-qld-4217">Palmera</a>, a $1 billion, 52-level luxury residential tower being developed by Central Equity in one of the Gold Coast’s most tightly held coastal locations at Northcliffe.

The project, launched recently by <a href="https://www.apartments.com.au/developers/central-equity">Central Equity</a>, one of Victoria’s largest private residential developers, comes at a time when construction funding for large residential developments has become increasingly competitive as lenders tighten exposure to the sector.

Multiplex has been appointed the builder, and construction is now underway.

[smartcode_project:default project_id=108274 project_image_fid=365784]

Since its first project, Central Equity has delivered more than 85 residential developments with a combined end value exceeding $8 billion.

Palmera reflects Central Equity’s growing focus on the Gold Coast luxury apartment market and continues a relationship between Central Equity and NAB that dates back to the late 1980s, when the bank funded one of Melbourne’s earliest inner-city residential towers at a time when high-rise apartment living in the CBD was largely unproven.

“NAB’s funding of Central Equity’s $36 million CBD development in the late 1980’s to the financing of the billion-dollar tower today highlights the long-term relationship between the two organisations in delivering major residential projects” said Central Equity Founder and Chairman Eddie Kutner.

He said NAB’s early support was instrumental in helping establish the company’s development model.

“When we commenced our first residential tower in the late 1980s the concept of funding off-the-plan apartments was still largely untested in Australia,” Kutner said.

“NAB recognised the opportunity early and supported the project when others were uncertain. That relationship has now continued for more than 37 years across many developments.”

[smartcode_project:default project_id=108274 project_image_fid=365771]

Central Equity was established in 1987 when Melbourne’s CBD and Southbank precinct were still dominated by warehouses and commercial buildings. Fewer than 100 residents lived in Southbank at the time, and large-scale residential development in the inner city was not widely considered.

Recognising changing demographics and lifestyle preferences, the company began developing high-rise residential projects designed to bring permanent residents into the city centre.

Central Equity has provided accommodation for approximately 40,000 residents across Melbourne’s CBD and Southbank, while also incorporating supporting infrastructure including essential lifestyle facilities like retail spaces, childcare facilities and neighbourhood activity centres.

Central Equity has spent many years assembling the Palmera development site on the corner of Garfield Terrace and Frederick Street in Northcliffe, creating a supersite of around 3,300 sqm.

The developer said the Palmera apartment tower reflects its long-term view of the Gold Coast as a growing and increasingly diversified economy.

[smartcode_project:default project_id=108274 project_image_fid=365768]

Supported by infrastructure including the light rail network, major road upgrades expanded education, hospital and medical facilities and continued expansion at the Gold Coast Airport with more internation and domestic flights.

Positioned in the tightly held Northcliffe precinct, the 52-level tower will deliver 347 apartments, targeting buyers seeking a high-end coastal lifestyle, from downsizers to interstate investors.

Designed by Marchese Partners with interiors by DBI, Palmera has been conceived as a next-generation residential offering, featuring a collection of oversized apartments, with premium three-bedroom residences offering sweeping northern views stretching from Surfers Paradise through to Burleigh Heads.

[smartcode_project_cta:default project_id=108274]

Joel Robinson

NAB funds $1 billion Surfers Paradise apartment development, Palmera

Two years after completing one of the newest developments in North Sydney, developer <a href="https://www.apartments.com.au/developers/aqualand-australia">Aqualand</a> is turning its attention to the rapidly evolving St Leonards apartment market.

The developer, which completed AURA by Aqualand on North Sydney's Walker Street, has lodged plans for a 5,918 sqm site at <a href="https://www.apartments.com.au/new-apartments/33-37-herbert-street-st-leonards-nsw-2065">33-37 Herbert Street, St Leonards,</a> seeking approval for a pair of residential towers rising above a shared podium opposite Royal North Shore Hospital.

The proposal forms part of the broader transformation underway across the St Leonards-Crows Nest precinct, where former industrial and commercial sites are increasingly being redeveloped into high-density mixed-use projects tied to major transport infrastructure.

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="2cc428cf-fe70-4cac-9cd5-264ad53af62c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.56%E2%80%AFAM.png?VersionId=otKSnHtbjAvAddOnovyXQMgcAwE6DMe1" />

According to the planning documents, the site sits “within the St Leonards–Crows Nest Strategic Centre, identified by the NSW Government as a key area for accommodating future jobs and housing across Sydney.”

The proposal has been designed by fjcstudio, formerly FJMT Studio, and is being progressed through the State Significant Development pathway due to its scale and affordable housing provision.

The scheme would comprise 413 apartments, including 46 affordable housing units, alongside retail and commercial uses fronting Herbert Street. The project would also include communal open space, landscaping, a swimming pool, gymnasium, children’s play areas and podium-level resident amenities.

Planning documents show the development would consist of a part-13, part-39 storey tower form positioned above a four-storey podium.

“The development comprises a unified podium that activates the street interface, and two setback towers to accommodate new housing supply while maintaining an appropriate human scale at ground level,” fjcstudio noted in its Design Report.

The northern and southern towers have been shaped to respond to the surrounding skyline while also limiting overshadowing impacts to nearby public open space, particularly Talus Reserve.

The design report said the differing tower heights were intended to “contribute to a varied skyline while responding to the surrounding built form context and solar access considerations.”

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="36da62dc-ff9e-41f2-a7e3-7be38373751c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.45%E2%80%AFAM_0.png?VersionId=Mo6Rp2r.XRLTzIfg_PEEpw8NepDH8UBs" />

The site sits directly opposite Royal North Shore Hospital and within walking distance of both St Leonards Station and the new Crows Nest Metro station.

While the site itself sits just outside the formal Crows Nest Transport Oriented Development boundary, the planning documents repeatedly reference its alignment with the broader TOD objectives reshaping the Lower North Shore.

“The site is located adjacent to St Leonards Station and in close proximity to Crows Nest Metro which is within the Crows Nest Transit Orientated Development Accelerated Precinct which has been identified by the NSW Government to support housing delivery,” the Design Verification Statement noted.

According to fjcstudio, the project has been designed to respond to the broader transition occurring across St Leonards, where increasing residential density is being concentrated around transport infrastructure and employment hubs.

“The broader precinct is undergoing significant change, with a mix of existing mid-rise buildings and newer high-density developments,” the report stated.

“Recent and approved projects indicate a consistent shift toward taller built form, typically organised as tower-and-podium typologies with more active ground levels.”

The proposal includes close to 6,000 sqm of retail and commercial space across the ground floor and podium levels, designed to create a more activated street edge along Herbert Street.

Aqualand’s plans would also introduce a landscaped podium shared between the two towers, with communal open space in the form of a podium rooftop designed to support resident interaction and improve urban greening outcomes. The scheme would also introduce pocket parks at the northern and southern ends of the site, including a landscaped area at the corner of Herbert and Ella streets designed to improve pedestrian amenity and soften the streetscape.

&nbsp;

The proposal is being progressed through the NSW Government’s Housing Delivery Authority pathway, which was introduced to accelerate housing supply across the state. The application was declared State Significant Development in April 2025 following an expression of interest process.

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="faf6d97d-2671-454f-b85a-fe1c6a7be608" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.49%E2%80%AFAM.png?VersionId=diVd28OBVr5.YV.7prrOz.uAanwwwm7a" />

St Leonards has been particularly active with new developments in recent weeks. Developer SP Setia’s <a href="https://www.apartments.com.au/news/nsw/first-look-sp-setia-targets-st-leonards-skyline-with-40-storey-tod-tower">plans for a new 42-storey tower</a> recently went on exhibition through the same pathway, while <a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">Stockland’s 52-storey tower proposal</a> was also recently unveiled.

Aside from the St Leonards project, which is expected to take around nine months to move through the approvals process ahead of a potential 2027 launch, Aqualand is also preparing to launch Boronia, a new apartment project in Roseville comprising around 111 apartments on Larkin Street.

The developer also has approvals in place for the next stage of the Barangaroo precinct, which will feature new residential, retail, hospitality and community uses, alongside a new metro entry across the five-hectare site.

More than 50 new retail destinations are planned for Central Barangaroo, alongside a 270-metre-long boulevard connecting Hickson Park to Nawi Cove. Together with Harbour Park, more than 50 per cent of the precinct will comprise public open space and parkland.

First look: Aqualand joins St Leonards apartment party

<section data-scroll-anchor="false" data-testid="conversation-turn-5" data-turn="user" data-turn-id="e65dbe94-e3b6-47f7-b62a-9cbb30c9bf79" data-turn-id-container="e65dbe94-e3b6-47f7-b62a-9cbb30c9bf79" dir="auto">Time &amp; Place’s plans to transform the former David Jones factory building in Surry Hills into a mixed-use residential precinct have gone on exhibition through the NSW Government’s In-fill Affordable Housing pathway.</section>

<section data-scroll-anchor="false" data-testid="conversation-turn-6" data-turn="assistant" data-turn-id="request-WEB:f4d533b7-64a5-413d-86fd-5c99649c2b73-2" data-turn-id-container="request-WEB:f4d533b7-64a5-413d-86fd-5c99649c2b73-2" dir="auto">
The Marlborough House proposal, lodged for the <a href="https://www.apartments.com.au/new-apartments/marlborough-house-47-97-marlborough-street-surry-hills-nsw-2010">47-97 Marlborough Street</a> site, would see the adaptive reuse of the heritage-listed warehouse building alongside the construction of new residential additions and a separate apartment building on the northern portion of the site.

The proposal seeks approval for 172 apartments across three buildings, including 15 per cent affordable housing managed by a community housing provider for at least 15 years from occupation.

<img alt="Marlborough" data-entity-type="file" data-entity-uuid="5d1d3c2a-bf13-47d6-a335-7c01102cdee1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.36%E2%80%AFAM.png?VersionId=cjMYrbR.BLUlWH4dar0RVDDo0bG.u2YT" />

Interior view from the Northern Building Penthouse overlooking the park

&nbsp;

The redevelopment is planned for the prominent 3,413 sqm site bounded by Marlborough Street, Goodlet Street and Lansdowne Street, directly opposite Eddie Ward Park and around 200 metres from the Surry Hills light rail stop.

Time &amp; Place acquired the former David Jones building in 2024, marking the first time the property had changed hands in around 50 years.

Designed by Wardle, the proposal centres around the adaptive reuse of the former David Jones factory, originally constructed between 1913 and 1935 in the Inter-War Chicagoesque architectural style.

Wardle noted in its Architectural Design Report that the building “occupies a significant place in the industrial and cultural history of Surry Hills” and at its peak was “the largest department store manufacturing facility in Australia, employing over 800 people and fuelling the growth of Sydney’s fashion and retail industries.”

The practice said the project positions itself “not as an isolated intervention, but as a contributor to the civic, social, and architectural grain of the precinct.”

The proposal would deliver 75 apartments within the retained southern heritage building, 59 apartments within the central addition, and a further 38 apartments within the new northern building fronting Lansdowne Street.

Planning documents show the scheme would comprise a mix of heritage apartments, new-build apartments, townhouses and penthouses.

<img alt="Marlborough" data-entity-type="file" data-entity-uuid="57758518-40a3-4b83-958c-d06e96a2cffa" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.42%E2%80%AFAM.png?VersionId=VerlX9ST5xgBi8.1_YRsqdWTJeT6ygjs" />Interior View of the Heritage Building Apartment

The development would also include a ground-floor retail tenancy on the corner of Marlborough and Lansdowne streets, rooftop communal open space, a landscaped pedestrian link along the western edge of the site, and basement parking accessed from Lansdowne Street via a car stacker system.

&nbsp;

The scheme emerged from a competitive design process run by Urbis, with Wardle ultimately selected as the winning architect ahead of FJC Studio, TZG, Architectus and Wilkinson Eyre.

The Design Integrity Panel later described several aspects of the Wardle scheme as fundamental to the project, including “the stepped character of the new addition to the north of the site”, the landscaped western pedestrian link, and the “garden arrival” experience separating the original Marlborough House from the heritage addition.

Wardle’s design heavily references the site’s industrial and heritage history, while also responding to the surrounding Surry Hills streetscape.

The Architectural Design Report describes Surry Hills as “a finely grained neighbourhood with beautiful and expressive brickworks throughout the suburb,” with the proposal introducing a material palette intended to sit comfortably alongside the existing warehouse fabric and neighbouring terraces.

The report also outlines the project’s relationship with Eddie Ward Park and the broader landscape context of the area.

“Marlborough House occupies a site of deep cultural memory and the neighbouring Eddie Ward Park is of local ecological significance, where natural systems, topography, and stories have long shaped human experience,” Wardle noted in the report.

The architects said the proposal sought to “rebind built form to Country” through landscape, materiality and the adaptive reuse of the heritage structure.

<img alt="Marlborough House" data-entity-type="file" data-entity-uuid="9ae3f2f9-c85f-477a-a6f8-b43f6cb97c41" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.53%E2%80%AFAM.png?VersionId=B.qUCLqRvJOR.n9CvYcTpaknIX9LuqKZ" />

The project is also being progressed under the NSW Government’s in-fill affordable housing provisions, allowing developments that include affordable housing to access additional height and floor space incentives.

Under the plans, 2,593 sqm of the project’s floor space would be dedicated to affordable housing, slightly exceeding the required 15 per cent threshold.

In its Design Excellence Strategy, Urbis said the project aimed to “sensitively adapt and enhance the heritage-listed building on site through alterations and additions that preserve its historical significance” while delivering “high-quality market and infill affordable housing development in Surry Hills.”

Time &amp; Place has been one of the most active developers nationally in the last 12 to 24 months. Late last year they completed&nbsp;The Queensbridge in&nbsp;<a href="https://www.apartments.com.au/developments/southbank-vic-3006">Southbank</a>, a mixed-use tower with 353 apartments and a hotel. They are currently selling Park Modern, 246 apartments near the famous Botanic Gardens in&nbsp;<a href="https://www.apartments.com.au/developments/south-melbourne-vic-3205">South Melbourne</a>, and have future projects, <a href="https://www.apartments.com.au/new-apartments/the-wilmot-173-burke-road-28-hope-street-glen-iris-vic-3146">The Wilmot</a>&nbsp;in&nbsp;<a href="https://www.apartments.com.au/new-apartments/glen-iris-vic-3146">Glen Iris</a>, the redevelopment of the Northcote Plaza, and another tower in South Melbourne.

The developer broke into Sydney just a few years ago with Two Tides in Manly. They have another project nearby, which is at the ultra-luxury end of the market on&nbsp;<a href="https://www.apartments.com.au/buildings/shoreline-manly-beach-89-90-north-steyne-manly">North Steyne</a>, fronting the beach.

It is also continuing to work through the <a href="https://www.apartments.com.au/news/nsw/first-look-time-place-settles-on-design-for-the-chimes-potts-point-redevelopment">redevelopment of The Chimes building</a> on Macleay Street in&nbsp;<a href="https://www.apartments.com.au/developments/potts-point-nsw-2011">Potts Point</a>, as well as a project on <a href="https://www.apartments.com.au/news/nsw/time-place-to-take-on-mosman-apartment-market">Mosman's Redan Street</a>.
</section>

First look: Time & Place unveils Marlborough House redevelopment designs for former David Jones warehouse in Surry Hills

The residential transformation of St Kilda Road is set to continue into with more new apartment plans for the sought-after boulevard.

Wing Tai Asia has lodged plans for a major residential tower at 464-466 St Kilda Road, replacing the former VACC House with an 18-storey mixed-use development designed around a retained heritage podium and a sculpted contemporary tower.

The proposal, prepared under Victoria’s Significant Residential Development with Affordable Housing pathway, would deliver 325 apartments and ground-floor retail across the prominent 4,653 sqm boulevard site in Melbourne’s St Kilda Road North Precinct.

The project centres on the adaptive reuse of the site’s heritage-listed VACC Building, an eight-storey office designed by Bernard Evans that has occupied the address for decades. Planning documents state the development would involve “carefully dismantling and conserving off-site the original metal fabric of the podium visible from St Kilda Road,” before reinstating it as the defining frontage of the new scheme.

Above the restored podium, Wing Tai is proposing a curvilinear residential tower. The scheme includes 172 one-bedroom apartments, 63 two-bedroom apartments, 66 three-bedroom apartments, and 24 four-bedroom apartments, alongside two ground-floor food and beverage tenancies fronting St Kilda Road.

The tower has been designed with substantial articulation and variable setbacks to minimise perceived bulk and maintain view corridors along the boulevard. Urbis, which prepared the planning report, said the design “has been significantly articulated through a curvilinear design” with “an interplay with materials, façade expression and depth” to create visual separation and visual interest.

The proposal also includes 254 basement car spaces, landscaped pedestrian links connecting St Kilda Road and Queens Lane, and a biophilic landscape strategy featuring canopy trees, raised planters, cascading greenery and a glass oculus pool overlooking the eastern frontage.

Planning documents confirm the $270.1 million development will contribute 3 per cent of project costs to the Social Housing Growth Fund as part of the application process.

Wing Tai acquired the St Kilda Road property in 2018 alongside Abacus Property Group for $95.38 million, before later consolidating ownership of the site. The property previously served as the Victorian Automobile Chamber of Commerce headquarters for around 60 years.

The transformation of the St Kilda Rd boulevard is already beginning to materialise, with a number of high-profile projects recently completed, launched, or approaching launch as developers continue to back the long-term appeal of the precinct.

Among the most notable recent completions is Louise by Samuel Property Group, just off the strip on Queens Lane, the same pocket Hirsch &amp; Faigen recently launched The Queensbury. Mirvac is too on the same street with The Albertine, which is approaching completion.

Dexus recently secured approval for its slice of St Kilda Road, while Gurner also has approved plans for the precinct.

Wing Tai unveils 325-apartment St Kilda Road tower on former VACC House site

Malaysian developer <a href="https://www.apartments.com.au/developers/s-p-setia">SP Setia</a> is the latest to jump into St Leonards booming Transport Oriented Development precinct.

The developer, which has previously delivered Sapphire by the Gardens apartment development in Melbourne, identified the Atchison Street site in 2023. It filed a Scoping Report around 12 months ago, and now has revealed the designs for the new&nbsp;40-storey mixed-use tower.

The State Significant Development Application covers <a href="https://next-portal.urban.com.au/projects/14650/summary">20-22 Atchison Street</a>, a 1,374 sqm site positioned between St Leonards Station and the new Crows Nest Metro station.

Designed by <a href="https://www.apartments.com.au/architects/cox-architecture">COX Architecture</a>, the project would deliver 181 apartments, above a four-storey commercial podium, five basement levels, and new public domain works along Mitchell Street. The apartment mix comprises 35 one-bedroom apartments, 39 one-bedroom-plus-study apartments, 85 two-bedroom apartments, and 22 three-bedroom residences.

The proposal has been lodged as a shop-top housing development under the NSW Government’s TOD planning pathway, which allows increased density around key transport infrastructure. The site sits within the recently rezoned Crows Nest Accelerated TOD Precinct.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b799673d-48e2-46b0-801a-0e33a9330100" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20site.png?VersionId=dPh0UfwfaHpbFL1R7H1cbZNbIW0CHbCC" />

SP Setia acquired the Atchison Street site as part of its continued expansion into the Australian apartment market. In comments made to City &amp; Country (The Edge Malaysia) in 2023, SP Setia President and CEO Datuk Choong Kai Wai described the acquisition as “a strategic move” aligned with the group’s post-pandemic market recovery strategy.

“Our target for this exceptional development is local and overseas buyers, including first-home buyers, downsizers and investors,” Choong said.

The tower has been designed as a slender vertical form rising from a mixed-use podium, with COX Architecture positioning the development as a response to the evolving St Leonards and Crows Nest skyline.

“The purpose of the project is to facilitate the delivery of high-quality housing at a strategically located site and deliver a built tower outcome that is consistent with the desired future character of St Leonards and aligns with the TOD controls,” the design report stated.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b1a85eee-76f7-436c-a6da-73ba827b9b13" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20entry.png?VersionId=dA9jHGPMcm.dDbwk4QfxqWiY5bfh3UVt" />

The podium would incorporate retail uses fronting Atchison Street, commercial tenancies, landscaped communal areas, and pedestrian improvements along Mitchell Street. Vehicle access and loading would be consolidated via Atchison Lane.

Residents would have access to more than 665 sqm of communal indoor and outdoor spaces, while the development proposes 96 parking spaces across five basement levels.

The proposal also includes a commitment for 10 per cent of residential floor space to be allocated toward affordable housing through a monetary contribution.

COX said the tower form responds directly to the emerging high-density character of the precinct while seeking to maximise solar access, cross ventilation, and outlook from apartments.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="2163f85c-f63b-4be3-aafa-f8763976cec5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Article%20Feature%20Image%20%28Grid%29_5.png?VersionId=WiAmtIKJ6.ZQ41EtYEQ1fol7AeorKBlL" />

“The building is orientated towards north,” the Apartment Design Guide compliance report noted, adding that the tower’s slim form was driven by the constrained inner-urban site dimensions.

The design also incorporates landscaped setbacks and communal open space at podium level, intended to soften the interface with surrounding streets and improve pedestrian amenity.

The project adds to a growing wave of redevelopment proposals reshaping St Leonards and Crows Nest following the opening of the Sydney Metro City line and the NSW Government’s push for higher-density housing around major transport nodes.

Last week Stockland filed plans just down the road. They want to build a <a href="https://www.apartments.com.au/new-apartments/601-pacific-highway-st-leonards-nsw-2065">52-storey tower on Pacific Highway</a>.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">First look: Stockland plans 52-storey, 538-apartment St Leonards tower&nbsp;</a>

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