ANZ believes the Reserve Bank is in no rush to move again.

Following the release of the May Monetary Policy Board Minutes, ANZ has taken the view that the RBA is now firmly in a holding pattern, with the cumulative impact of previous rate hikes giving the Board scope to assess how the economy evolves from here.

That positioning, in ANZ’s view, makes a June rate hike unlikely.

The bank continues to expect the cash rate to remain unchanged at 4.35 per cent for an extended period, with the RBA adopting what is effectively a wait-and-see approach.

The Minutes point to a Board that sees financial conditions as already restrictive, but without a clear read on just how restrictive they are. That uncertainty has shifted the focus away from immediate policy action and toward monitoring both domestic conditions and global developments, particularly the conflict in the Middle East.

As ANZ interprets it, the Board is deliberately avoiding strong forward guidance.

Instead, it is allowing itself flexibility, acknowledging that monetary policy has limited ability to influence the near-term trajectory of inflation, while also recognising that economic growth is likely to remain below potential for some time.

Despite that pause in momentum, ANZ notes that the Board still carries a tightening bias.

The Minutes reveal that, in weighing up its decision, the Board seriously considered another 25 basis point increase. The key debate centred on the trade-off between inflation and activity, particularly in the context of global uncertainty.

Ultimately, most members leaned toward the inflation side of that equation.

Underlying inflation is still expected to remain above target for an extended period, regardless of how external risks evolve. That has led to a view within the Board that the risks to its inflation objective have increased, and that the current cash rate may not be sufficiently restrictive to fully contain those pressures.

That’s important.

While the decision, for now, is to hold, the underlying tone of the Minutes suggests the door to further tightening has not been closed.

ANZ also points to commentary from Assistant Governor (Economic) Sarah Hunter, who highlighted the risk that inflation could pass through the economy more quickly and broadly than in previous cycles. Both Hunter and a majority of the Board expressed concern that inflation expectations could become less anchored after such a prolonged period above target.

That combination, persistent inflation and the risk of expectations shifting, is what continues to underpin the RBA’s cautious stance.

However, where ANZ diverges from the RBA is on the outlook for activity.

The Board appears relatively comfortable with current spending patterns, effectively downplaying recent declines in business and consumer sentiment. It notes that sentiment has historically been only weakly correlated with actual spending, and that feedback from its liaison program has not yet pointed to a meaningful slowdown in consumption.

ANZ is less convinced.

The bank believes the link between household disposable income, sentiment and spending is more direct than the RBA is currently acknowledging. With inflation continuing to erode real incomes, ANZ expects household spending to soften more materially than the central bank is forecasting.

That divergence matters because it shifts the balance of risk.

If activity weakens more than expected, the trade-off between inflation and growth changes. In ANZ’s view, that would reduce the need for further tightening and reinforce the case for the RBA to remain on hold.

It also suggests that the current policy setting may already be doing more work than the Board fully appreciates.

The broader takeaway from ANZ’s interpretation is that the RBA is walking a narrow path.

On one side sits the risk of inflation remaining elevated for longer than expected. On the other is the growing pressure on households and the potential for a sharper slowdown in activity.

For now, the Board is choosing to wait.

But it is a pause that still carries an underlying tightening bias, rather than a clear pivot toward easing.

In practical terms, that leaves the cash rate anchored at 4.35 per cent for the foreseeable future, with the next move still uncertain.

For borrowers, it reinforces the reality that relief is not imminent.

And for the broader economy, it highlights the delicate balance the RBA is trying to strike, between bringing inflation back to target and avoiding an unnecessarily sharp slowdown in growth.

According to ANZ, it is a balance that is becoming increasingly difficult to maintain.

Joel Robinson

RBA to hold rates for "prolonged period" rather than hikes: ANZ

<a href="https://www.apartments.com.au/developers/venturecrowd-property-projects">VentureCrowd</a> is down to the final Canopy Villa release at Cumulus Grand Villas in Carrara, as construction continues on the 59-residence gated community positioned above 100 hectares of natural savanna on the Gold Coast.

The remaining Canopy Villa forms part of one of four collections within the <a href="https://www.apartments.com.au/architects/bda-architecture">BDA Architecture</a>-designed community and has attracted interest from buyers seeking larger-format homes that combine privacy, security and low-maintenance living. Positioned within a private cul-de-sac and facing a protected black she oak forest, the four-bedroom villa includes a large private outdoor area suited to pet owners and families wanting more flexible space.

<a href="https://www.apartments.com.au/new-townhouses/cumulus-grand-villas-carrara-17-baltimore-court-carrara-qld-4211">Cumulus Grand Villas</a>, located at 17 Baltimore Court, comprises a mix of three and four-bedroom villas across the Skyline, Canopy, Savanna and Broadview collections. Prices currently range from $1.455 million to $1.895 million, with the final Canopy Villa priced from $1.825 million.

[smartcode_project:default project_id=135663 project_image_fid=360477]

The Canopy Collection villas offer four bedrooms, 2.5 bathrooms and approximately 245 sqm of internal space, alongside double garages and landscaped private areas. Expansive glazing, open-plan living spaces and private balconies have been designed to maximise natural light and outlooks toward the surrounding savanna landscape.

Construction is now underway across the fully funded development, which VentureCrowd says has become an increasingly important consideration for buyers assessing off-the-plan opportunities on the Gold Coast. The project is being delivered by <a href="https://www.apartments.com.au/builders/devcon">Devcon Property Group</a>, which has operated in South East Queensland since 1993 and delivered more than 1,000 homes across the region.

VentureCrowd Director of Property David Whitting previously said the project responds to changing buyer priorities in the prestige Gold Coast market.

“Flexible floorplans have proven particularly relevant for purchasers aged between 40 and 65, including next home buyers, downsizers and investors,” Whitting said.

[smartcode_project:default project_id=135663 project_image_fid=360505]

The buyer profile at Cumulus has reflected that shift toward owner-occupier-driven demand. Stuart Towns and Tracey Loynes recently purchased a Canopy Villa, drawn to both the lifestyle offering and the flexibility the home provided for their next stage of living together.

The couple, who met three years ago, sold their Robina home earlier this year after identifying what they saw as strong long-term investment potential at Cumulus while remaining within the same Gold Coast market. The villa’s private backyard was a major drawcard for their dog Luna, while proximity to golf courses including Emerald Lakes also aligned with their lifestyle interests.

Beyond the residences themselves, the community has been planned around shared lifestyle and recreation amenities. The Infinity Terrace will include a 20-metre heated pool, barbecue facilities, alfresco dining spaces and elevated retreat areas overlooking the surrounding landscape. Walking trails, a private nature reserve, orchard and herb garden are also integrated into the masterplan.

[smartcode_project:default project_id=135663 project_image_fid=360473]

BDA Architecture Director Darren Greenaway said the design approach was heavily influenced by the site’s outlook and secluded setting.

The practice sought to create what Greenaway described as a “little piece of paradise,” drawing inspiration from the elevated views, surrounding greenery and quiet location.

<a href="https://www.apartments.com.au/developments/carrara-qld-4211">Carrara</a> continues to attract buyers seeking larger homes within proximity to the coast but without direct beachfront pricing. Cumulus sits within easy reach of Broadbeach, Pacific Fair, Robina Town Centre and the M1, providing connections north to Brisbane and south toward the Gold Coast Airport and northern New South Wales.

The first stage of Cumulus Grand Villas is targeting completion in 2026.

[smartcode_project_cta:default project_id=135663]

VentureCrowd nears sell-out of Canopy Collection at Cumulus Grand Villas in Carrara

Waverley Council has made a call that many councils have been reluctant to make publicly. Growth is coming, regardless of who controls it.

The release of the Bondi Junction Vision and Master Plan is less about whether the Eastern Suburbs’ primary centre will change, and more about how that change is shaped, funded, and ultimately experienced on the ground. Waverley Council has released a 100-page plan which is effectively the first comprehensive blueprint for Bondi Junction in over two decades, and in doing so, signals a clear shift in how councils are positioning themselves in the current planning environment.

For the past 18 months, the conversation across New South Wales has been dominated by the State Government’s Low and Mid-Rise Housing reforms and the emergence of the Housing Delivery Authority pathway. Both have created faster, more centralised avenues for development approvals, particularly in well-located, infrastructure-rich areas like Bondi Junction.

Waverley Council’s response has been to move early, and decisively.

Rather than react to individual proposals as they come through the HDA or broader State-led reforms, Council has sought to establish a clear, place-based framework that sets the terms for how Bondi Junction evolves. The underlying position is relatively straightforward: if densification is inevitable, it should be tied to infrastructure, public domain improvements, and a cohesive vision for the centre, not delivered piecemeal through ad hoc applications.

<img alt="bondi junction" data-entity-type="file" data-entity-uuid="7f1f729c-ed99-4c6c-bf87-ffbce6991941" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-19%20at%209.58.16%E2%80%AFAM.png?VersionId=ULX4OlXKjeJ5BvNCNGL86evgXCjCfMih" />

At its core, the document is attempting to reposition Bondi Junction from what it largely functions as today, a transport interchange anchored by a major retail centre, into something far more layered. The ambition is to transform it into what the plan describes as the “civic and cultural heart of Sydney’s East,” a place that is active beyond commuting hours and capable of supporting a broader mix of uses, experiences and communities.

That repositioning is built around four key ambitions.

The first is to create a true destination. Bondi Junction already attracts significant foot traffic, with more than 86,000 daily transport users and millions of annual retail visits, but much of that activity is transient. People pass through, rather than stay.

The Master Plan seeks to change that dynamic. It leans heavily into the idea of an “18-hour economy,” extending activity well beyond traditional retail hours through dining, cultural programming, events, and a more active night-time offering. This is not just about adding more hospitality venues, but about fundamentally shifting how the centre operates, from a daytime shopping destination to a place that functions across the full span of the day and into the evening.

Oxford Street Mall sits at the centre of that shift.

Long seen as underperforming relative to its potential, the Mall is identified as one of the key catalyst projects in the plan. It is to be reimagined as a day-to-night spine, combining retail, dining, wellness and cultural uses in a way that creates a continuous flow of activity. Outdoor dining, rooftop venues, laneway activation and a curated events program are all part of the strategy, alongside significant public domain upgrades that aim to improve comfort, safety and usability.

&nbsp;

The second ambition is to transform Bondi Junction into a world-class interchange.

Despite being one of the most heavily used transport nodes in Sydney, the current experience is fragmented. Connections between the station, Westfield, Oxford Street Mall and surrounding streets are often unclear, and major roads create physical barriers that disrupt pedestrian movement.

The Master Plan proposes a more seamless, people-focused network. That includes clearer pedestrian links, improved wayfinding, better integration between transport modes, and a rethinking of how arrival into the centre is experienced. The aim is to shift the perception of Bondi Junction from a place people move through, to a place they arrive in.

The third ambition focuses on greening and open space.

One of the more consistent pieces of community feedback throughout the Vision phase was the need for more greenery, better public spaces, and a more comfortable urban environment. Despite being surrounded by major parks, Bondi Junction itself has relatively limited accessible open space, with much of the public realm dominated by hard surfaces and traffic infrastructure.

The plan responds with a network of new and upgraded public spaces, increased tree canopy, and what it terms the “Parkline,” a green link connecting Waverley Park through to Centennial Park. This is not just about aesthetics. It is about addressing heat, improving liveability, and ensuring that increased density is matched by access to high-quality outdoor space.

The fourth ambition is perhaps the most important from a development perspective: growth that gives back.

Bondi Junction is already the primary location for new housing supply in the Waverley LGA, and that is expected to continue. The area carries a target of 2,400 new dwellings by 2029, with further growth projected beyond that as demand for well-located housing continues to rise. The Master Plan does not seek to limit that growth. Instead, it attempts to shape it.

New housing is to be concentrated around transport, with stepped building heights designed to protect the character of surrounding neighbourhoods. At the same time, the plan introduces a more explicit link between development uplift and public benefit. This is where value capture becomes central.

The document outlines a framework where increased development potential is tied to contributions that fund public domain improvements, community infrastructure, open space, and affordable housing. It is an approach that recognises that much of the transformation of Bondi Junction will be delivered by the private sector, but seeks to ensure that the benefits of that growth are shared more broadly. The Civic Precinct is a key part of that equation.

Leveraging Council-owned land, the plan proposes a consolidated civic and cultural hub centred around Ebley Street. This would include new community facilities, cultural spaces, and potentially a new Council Chambers, creating a focal point for civic life that currently does not exist in Bondi Junction at scale.

It is one of several catalyst projects identified in the Master Plan, alongside the Oxford Street Mall transformation. These projects are intended to anchor change, acting as early interventions that unlock broader investment across the precinct.

Importantly, the Master Plan is not just a design document. It includes a delivery framework that sets out how these ambitions are intended to be realised.

Council is explicit in acknowledging that it cannot deliver the transformation alone. Implementation will require coordination between State agencies, private developers, landowners and the community, with a mix of planning agreements, infrastructure contributions and direct delivery mechanisms used to fund and stage improvements over time.

The plan outlines a mix of short-term, medium-term and long-term actions, from immediate public domain upgrades and planning controls, through to larger-scale projects that will unfold over the next decade or more. In practical terms, the next 12 to 24 months will be the most important.

This is when the Master Plan will move through exhibition, refinement and eventual adoption. It is also the period in which Council will seek to embed the framework into its planning controls, giving it weight in the assessment of future development applications.

Council officers have indicated that once the Master Plan is in place, it could be used as a benchmark when assessing Housing Delivery Authority proposals, and potentially reduce the need for further HDA declarations within Bondi Junction. In effect, it is an attempt to bring planning control back to the local level, while still aligning with State housing targets.

That tension between State-led reform and local planning control is not unique to Waverley. It is playing out across Sydney.

&nbsp;

&nbsp;

&nbsp;

If delivered as intended, Bondi Junction will become denser, more active, and more complex. It will support more residents, more workers, and a wider range of uses, extending beyond its current retail core into a more layered urban environment.

“The civic and cultural heart of Sydney’s East”: Bondi Junction masterplan revealed

Toorak's dress circle St Georges Road, home to some of the city's priciest homes, is set for a rare new apartment development.

Blood Diamond Group, an entity tied to Tina Brandi, wife of David Brandi who has been a prolific bidder on The Block over the years, has filed plans for an ultra-exclusive development across an amalgamated 3,662 sqm site at <a href="https://www.apartments.com.au/new-apartments/104-106-st-georges-road-toorak-vic-3142">104 and 106 St Georges Road</a>.

The proposal would replace two existing homes on the riverfront site with a five-level apartment building cascading down the steeply sloping land toward the Yarra River. Designed by Charles Wright Architects, the development has been carefully shaped around the site’s topography and river environs, with the upper levels stepping back to reduce visual bulk from both St Georges Road and the Yarra corridor.

Planning documents describe the proposal as “a site layout and building typology that is consistent with the emerging character of the area and which provides exceptional amenity for future residents without compromising that of neighbouring properties.”&nbsp;

<img alt="First look: Blood Diamond Group unveils riverfront apartment plans for Toorak Pavilion" data-entity-type="file" data-entity-uuid="ea19a17e-7528-4fa8-b727-05f2f7c025e5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Toorak%20pavilion%20a_0.png?VersionId=rZ2IjdoUL_UrRl1sZ4wZHnQXbYUaEmUQ" />

The scheme comprises 12 apartments, including 10 three-bedroom residences, one one-bedroom apartment, and a substantial split-level five-bedroom penthouse. A 624 sqm communal rooftop terrace will crown the building, while three undercroft levels embedded into the hillside will accommodate apartments and basement parking.

The design leverages the site’s dramatic northern outlook across the Yarra River, with living areas and balconies oriented toward the water. A central atrium running the full height of the building is intended to draw natural light deep into the residences and improve internal amenity.

Landscape architecture by <a href="https://www.apartments.com.au/landscape-architect/jack-merlo">Jack Merlo Design &amp; Landscape</a> will play a major role in softening the built form, particularly along the river edge where significant setbacks have been introduced. The proposal includes a minimum 30-metre setback from the Yarra River boundary, preserving a substantial landscaped buffer between the development and the waterway.

While a mature English Oak near the front of the site is proposed for removal, the plans retain a large English Elm closer to the riverfront, alongside other established vegetation in the lower section of the property.

<img alt="First look: Blood Diamond Group unveils riverfront apartment plans for Toorak Pavilion" data-entity-type="file" data-entity-uuid="ed3bf19b-5bc7-482f-bde7-41f709a13c3a" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Toorak%20pavilion%20b.png?VersionId=SG_kBGu4rOaSPY8FtVcmPJfSCrstuOfg" />

Architecturally, the building adopts strong horizontal forms with expansive glazing and curved balcony edges facing the river. Planning documents note the upper levels “adopt a receding form” to ensure the building responds appropriately to the Yarra River environs overlay controls.&nbsp;

The surrounding streetscape is characterised by large contemporary homes embedded into the hillside, many presenting as modest one or two-storey forms to the street before expanding toward the river frontage below. The planning report notes this established pattern heavily influenced the massing strategy for Toorak Pavilion.&nbsp;

Until the recent sale of the landmark Clendon Road mansion Coonac for around $130 million, St Georges Road held the state's most expensive home, the $80,000,088 derelict "Ghost House" mansion that was bought by crypto king Ed Craven.&nbsp;

Blair House, also on St Georges Road, sold for $74.5 million in 2022.

First look: Toorak Pavilions slated for dress circle St Georges Road

Six months after a development site on Kangaroo Point’s Shafston Avenue sold for $6.55 million, plans have been lodged for a 23-storey apartment tower.

A company named JMT Mega Capital, understood to be interstate investors when the 1,222 sqm double block traded late last year through Patona Property, is proposing an 84-apartment development in place of the existing low-rise buildings.

The slender tower at <a href="https://www.apartments.com.au/new-apartments/212-220-shafston-avenue-east-brisbane-qld-4169">212–220 Shafston Avenue</a>, overlooking the Brisbane River, has been designed by <a href="https://www.apartments.com.au/architects/aplus-design-group">Aplus Design Group</a>. It will comprise a mix of one-, two- and three-bedroom apartments above six basement levels, topped by rooftop resident amenities.

<img alt="First look: 23-storey Kangaroo Point tower planned for Shafston Avenue riverfront precinct" data-entity-type="file" data-entity-uuid="7e17ba9e-553e-42ef-92b6-22081671521a" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/podium_3.png?VersionId=hlVUf99vrOjUs.vhQs0qV0DhOncUy9T8" />

The development has been designed as a vertically articulated tower with recessed balconies, curved façades and planted edges intended to soften its scale within the evolving Shafston Avenue skyline. In the submitted Urban Design Report, Aplus Design Group said the tower had been “shaped with a slender vertical expression, articulated façades, recessed balcony zones, integrated planting and a clearly defined podium relationship, helping to reduce perceived bulk and create a more elegant contribution to the Shafston Avenue streetscape and broader Kangaroo Point skyline.”

The scheme comprises 84 apartments, including 25 one-bedroom units, 34 two-bedroom apartments and 25 three-bedroom residences. A total of 104 car spaces are proposed across six basement levels, including resident, visitor and accessible parking.

Residents will have access to rooftop communal open space and shared amenities, while the development also incorporates deep planting zones and subtropical landscaping throughout the podium and tower levels. The project includes 35 per cent communal space coverage across the site and a 17.5 per cent deep soil zone allocation to support urban greening outcomes.

The application exceeds the mapped building height under the Kangaroo Point Peninsula Neighbourhood Plan and is being assessed under Brisbane City Council’s impact assessment pathway. The design team argues the additional height is supported by the site’s strategic inner-city location, existing high-density zoning, and proximity to transport and employment hubs.

“The design has been developed to make better use of a well-serviced urban site within an established high-density residential setting, while improving the street presentation and overall quality of the public realm interface,” the report states.

<img alt="First look: 23-storey Kangaroo Point tower planned for Shafston Avenue riverfront precinct" data-entity-type="file" data-entity-uuid="1ab44b1e-ff45-4bf3-8da8-8aa0cd79db33" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/site_10.png?VersionId=tSxeGekZOqj1e9g3PEn_yFoC3taKDp3U" />

The proposal adds to a growing pipeline of apartment developments reshaping Kangaroo Point ahead of the 2032 Brisbane Olympic Games, with demand continuing to strengthen for new housing supply in well-connected inner-city precincts.

Mosaic has nearly sold out its under-construction <a href="https://www.apartments.com.au/new-apartments/the-bedford-by-mosaic-16-30-prospect-street-kangaroo-point-qld-4169">The Bedford by Mosaic</a>&nbsp;and <a href="https://www.apartments.com.au/new-apartments/the-carter-by-mosaic-77-linton-street-kangaroo-point-qld-4169">The Carter</a>,&nbsp;while Pikos recently completed <a href="https://www.apartments.com.au/buildings/skye-residences-by-pikos-kangaroo-point-8-river-terrace-kangaroo-point-qld-4169">Skye Residences</a> nearby. Pikos is also delivering <a href="https://www.apartments.com.au/new-apartments/gaia-kangaroo-point-108-lambert-street-kangaroo-point-qld-4169">Gaia</a>, over 230 three- and four-bedroom apartments on Lambert Street.

First look: 23-storey Kangaroo Point apartment tower planned for Shafston Avenue riverfront precinct

Prominent New Zealand apartment and hotel operator, <a href="/developers/safari-group">Safari Group</a>, is offering up a prime investment opportunity for Australians to purchase off the plan in one of the world’s most popular ski destinations.

They recently took to market Mountain Oak Queenstown Apartments, in the growing precinct of Remarkables Park in Frankton, near the airport and at the foot of The Remarkables - the mountain range the locals like to call “The Remarks”.&nbsp;

Sydney investors have shown interest in the one, two and three-bedroom apartments that secure high-season occupancy six months over the year, primarily over summer and winter months.

They average 90 per cent occupancy across their portfolio over January, February, March, August, November and December, while shoulder season months of April, July, September and October are still occupied 70 per cent of the time, with the growing appeal of Queenstown becoming not just a hotspot for the snow, but a lifestyle destination.

Even in the low seasons of May and June, occupancy levels reach around 40 per cent.

<img alt="Safari Group’s Mountain Oak Apartments brings new investment potential to Queenstown" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_auto/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Ext_Cam15_Sunny.jpg?VersionId=SJAROUM_1s.Tr5ciMk4EEj5oAt_Vewmv" />

Safari’s Safari Hotels arm can also manage the holiday letting for an investor, from the listing on holiday accommodation websites such as Airbnb and Booking.com to the cleaning and maintenance of the investment. They’ve been in the short stay management business for 15 years and offer 24/7 support for investors, an important convenience benefit for any overseas investor

Another major drawcard for Australians is that New Zealand doesn’t have a stamp duty policy - so the entry price of NZ$639,000 (AU$586,000), is all that is payable on completion.

<img alt="Safari Group’s Mountain Oak Apartments brings new investment potential to Queenstown" 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/313_Livingv2_WEB.jpg?VersionId=nV229fM0ZeYpoxOrX372HyGjfwY_LR8c" />

Safari is starting construction of the 141 apartments in Q2 this year, with a two-year build estimated to complete in mid-to-late 2027.<img alt="" data-entity-type="" data-entity-uuid="" height="15" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXczFpFAb7WuA6f4f9TtKWcqXyNwR8qqtakWv352ERkpqNlP3KwIo8YKxw67jZNHfpjEGIZGv5MQTbnvLZwNt8iu9IVdOrswOjCvBZ4zhSoOOLrpt6etVEZTN1gkBho0r_R72zdHNA?key=yq3daOanqHSb88QFd8jGYKdb" title="Click and drag to move" width="15" />​

The apartments will feature modern amenities and contemporary designs with expansive windows capturing sweeping views of The Remarkables mountain range.&nbsp;

Interiors are equipped with modern finishes, premium appliances, and secure electronic key-locked doors, ensuring a comfortable living experience for residents and guests alike.

With its strategic location near Coronet Peak and Cardrona Alpine Resort, as well as key retail and dining precincts such as Market Street, Five Mile Shopping Centre, and Remarkables Market, Mountain Oak offers a strong proposition for investors seeking high rental yields and capital appreciation in one of New Zealand’s most sought-after locations.&nbsp;

Queenstown’s sustained demand for visitor accommodation and rental properties is underpinned by a shortage of housing options, attracting both local and international buyers.

Safari Group offers low-touch investment proposition in Queenstown’s popular ski fields district

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The Australian Bureau of Statistics released construction work done data for the March 2016 quarter last week. 
The data set looks at the value of construction work completed over the quarter and is an input to the national accounts (GDP) data.
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Over the quarter, the value of construction work done was $47.928 billion which was down -5.5 percent over the quarter and -7.2 percent year-on-year.  In fact, the value of construction work done over the March 2016 quarter was the lowest since June 2011 and has been trending lower since the December 2012 quarter.
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The decline in the value of work done is largely being driven by engineering construction which was bolstered until recent by the mining investment boom.  Over the quarter there was $24.9 billion worth of building work completed and $23.0 billion in engineering construction completed. 
It shows that following a recent boost from infrastructure investment, building construction is now the key driver.  The value of engineering construction work done peaked at $34.7 billion in the September 2012 quarter and has since fallen by -33.6 percent while building activity peaked at $25.2 billion in the December 2015 quarter and has fallen by -1.0%.  With construction work in both the building and engineering sectors falling it is difficult to see how construction work done won’t continue to decline over the coming months.  Even the largest residential housing construction boom on record has not been enough to offset the previous largest engineering construction investment boom on record.
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The building segment of construction work done consists of residential and non-residential construction (offices, retail shops, industrial properties).  The previous data showed building work has started to fall with the fall being driven by non-residential construction.  In fact residential construction work done is continuing to climb and is now at a record high $16.6 billion while non-residential is down -18.6 percent from its June 2010 peak.  While the largest residential construction boom in history continues to drive activity in that sector higher, it isn’t enough to offset the decline in the non-residential (and engineering construction) sector which is well below peak levels of activity.
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The residential construction component is further broken down into three components: houses, other residential (units) and alterations and additions, including conversions. Unit construction work done reached a record high of $6.8 billion on the back of the biggest unit construction boom on record. 
While unit construction activity continues to rise, the $7.7 billion in work done for houses is down -7.1 percent from its recent peak in March 2015 at $8.3 billion.  The value of alterations and additions completed was recorded at $2.0 billion over the quarter down -6.9 percent from its $2.1 billion peak over the September 2011 quarter.  It is anticipated work done for houses will continue to trend lower while unit work should trend higher over the next few quarters before starting to fall. 
Meanwhile, the direction of alterations and additions is unclear but there could be some scope for an increase over the coming quarters and years given how much equity some home owners have and the costs associated with moving home.
Residential construction has been a large contributor to economic growth over recent years however, it looks as if it is likely to start detracting from growth as construction activity moves through a peak. 
Housing construction activity has already been fading for a year while unit activity continues to rise however, we anticipate that it too will turn within the next 12 months. With the resources boom and concurrent infrastructure investment boom so important to Australia’s prosperity coming out of the financial crisis as it faded, building activity became extremely important, particularly residential construction activity. 
With the residential construction boom starting to fade we need the next economic driver to rise in order to offset the slowing in building activity. An increase in infrastructure investment would seem to be a prime candidate however, Governments may not be willing to invest the money. The next boom will seemingly need to come from somewhere else; potentially from the education, health and tourism sectors as the lower Australian dollar makes these sectors more globally competitive as well as increased consumption if households start to ease their rate of saving.
 
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Cameron Kusher is research analyst for CoreLogic RP Data. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>. </div>
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The value of construction work done for houses is falling with units likely to follow shortly: Cameron Kusher

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The preliminary auction clearance rate nudged higher over the first week of winter, however the number of auctions dipped compared with the previous week. 
There were 1,953 auctions held over the week, down from 2,480 last week, however higher than one year ago when 1,201 auctions were held and auction volumes were low due to the Queen’s birthday public holiday in all cities with the exclusion of Perth.
Preliminary results show that 70.4 percent of capital city auctions held this week were successful, rising from a final result of 67.7 percent last week. One year ago, across the lower number of auctions, 78.5 percent sold. Melbourne and Sydney, the two largest auction markets have maintained strength this week, while across the remaining, significantly smaller auction markets, results have been more varied.
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<img src="/images/2016/06/06/20160606-Capital-city.png" alt="">
This week, 959 residential properties were taken to auction in Melbourne with 71.4 percent clearing, based on preliminary results. In comparison, over the previous week 1,170 auctions were held with a 71.5 percent clearance rate, while one year ago, given the following Monday was a public holiday, just 315 homes went to auction, with a strong clearance rate of 80.3 percent. While Melbourne as a whole had a clearance rate of 71.4 percent this week, across the individual sub-regions clearance rates ranged from as high as 79.2 percent across the Inner South region and as low as 60.6 percent across the South East region. The busiest sub-region for auctions was the Inner region with 180 auctions.
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<img src="/images/2016/06/06/20160606-Melbourne.png" alt="">
Sydney’s clearance rate rose over the week from 73.2 percent last week to 76.7 percent. The number of auctions held across the city this week was lower than last week, at 654, compared to 811. One year ago 603 Sydney auctions were held with 88.7 percent clearing. So far this year, Sydney’s clearance rate has remained relatively robust, after dipping to as low as 52.9 percent at the end of last year. However, results across the city are substantially lower than they were at the same time last year, and the volume of auctions held over the year to date is around 20 percent lower. This week, the City and Inner South region had the strongest preliminary clearance result across the city (85.7 percent), followed by Ryde at 85 percent and Eastern Suburbs at 84.9 percent.
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<img src="/images/2016/06/06/20160606-Sydney.png" alt="">
This week auction activity across Brisbane fell, from 192 auctions last week to 129 this week. Last week Brisbane’s clearance rate was 41.7 percent, however preliminary results show a weekly rise to 55.4 percent this week. One year ago, 130 Brisbane auctions were held with a clearance rate of 48.5 percent. Across the Gold Coast, the preliminary clearance rate this week is 35.3 percent, compared to 40.7 percent last week. There were 46 auctions held across the region, down from 84 last week.
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<img src="/images/2016/06/06/20160606-Brisbane.png" alt="">
The preliminary auction clearance rate for Adelaide was 67.2 percent this week, up from 52.6 percent last week, which was the second lowest clearance rate result seen across the city so far this year. 98 homes were taken to auction this week, compared to 125 last week. Over the corresponding week last year, 62 Adelaide auctions were held with 71.2 percent clearing.
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<img src="/images/2016/06/06/20160606-Adelaide.png" alt="">
Perth’s preliminary results show that 30 per cent of the 10 reported auctions were successful this week. Perth’s clearance rate tends to move around a lot, however this week’s result is only slightly lower than last week (30.6 percent) and down compared to last year (45.9 percent).
For the first time in five weeks, Canberra’s clearance rate edged over the 70 percent mark last week, recorded at 70.5 percent. This week, however, the clearance rate for the city fell to 46.8 percent across 77 auctions. One year ago, Canberra’s final auction clearance rate for the week was 61.3 percent across 38 auctions.
8 auctions were held across Tasmania this week, with 4 reported so far and 3 sold.
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Auction clearance rate maintains strength over first week of winter: CoreLogic's Shana Miller 

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Bill Shorten and Labor are promising to perform a mathematical miracle in the real estate industry: they have a policy under which prices will keep rising but affordability will improve.
Labor justified its real estate taxation policy with the claimed desire to improve housing affordability. Shorten in his policy announcement essentially blamed all price rises over the past 30 years on negatively-geared investors and inferred that nobbling them would revolutionise affordability.
This has scared the living daylights out Australians who live in the 70 percent of households which own their homes. Labor was promising to reduce the value of their major asset.
Since Labor realised the fundamental flaw in its policy pitch, it has been at pains to claim that property values won’t fall under its changes. The ALP-aligned think tank, The McKell Institute, is now saying that house prices will keep rising under the Labor policy.
So Labor proposes to perform a statistical miracle. Prices will keep rising but affordability will improve. One wonders about the means they will use to achieve this. Other than lower prices, the only mechanisms for improving affordability are a big cut in interest rates (already at record lows and not controlled by the politicians) and/or a big rise in incomes (not part of the plan, as far as I know).
This confirms – yet again – that politicians collectively lack even a primary school understanding of how property markets work and how their blinkered policies impact on real estate consumers. They seem unable to think policies through to logical conclusions. They keep introducing laws which they claim will improve affordability but which make it worse – every time.
This is playing out at a state level, with the Governments in charge of the two biggest states slugging foreign investors with new taxes. They maintain that this will somehow make housing cheaper but sadly - yet again - it will have the opposite impact.
There are widely diverging views on affordability – how serious it is, what causes the problem, who’s to blame for prices rising and how to fix things. But one area where most parties tend to agree is that increasing the supply of dwellings would have a beneficial impact.
In fact, the best chance of bringing down prices at a local level is creation of an oversupply. As we have seen in selected locations around Australia in recent years, it’s the one major element that causes prices to drop.
Specific markets, notably inner-city apartment markets in some capital cities, are poised for a hefty rise in supply which is linked directly to foreign investment. If planned projects proceed, price decline is almost inevitable.
But state government moves in Victoria and New South Wales to lift sharply increase taxes on foreign buyers of Australia real estate are likely to prevent or limit that increase in supply.
Coupled with moves by the banks to curtail lending to foreign buyers and ATO measures affecting sales above $2 million, Australia has quickly cobbled together a series of major disincentives to foreign investment. There are reports of Asian investors switching their focus away from Australia to other, more welcoming nations.
If foreign investors stop buying (they won’t all be turned away, but many will, I suspect) many of the proposed apartment projects simply will not be built. 
The big increase in new dwelling supply will be lost, as will many construction jobs. 
In reality, I suspect the state measures have little to do with a desire to improve affordability. It’s essentially a cash grab, disguised as a measure to help young Australians achieve home ownership.
Like everything else coming out of the befuddled brains of politicians, the moves will make the problems in real estate worse.
Terry Ryder is the founder of <a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a>. You can <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email him</a> or follow him on <a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a>
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Cash grab or about affordability? Terry Ryder

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The Redcliffe Tavern, prominently positioned in the commercial heart of the Redcliffe peninsular, north of Brisbane, has been sold for $15 million.
The off-market sale, on behalf of the private investor from Melbourne, was negotiated by Jon Tyson and Peter Tyson of Savills Retail Sales.
The property, comprising a modern freestanding tavern and First Choice Liquor Superstore, was acquired by a private investor on a yield of approximately 6%.
Peter Tyson said the property is leased to Liquorland (Qld) Pty Ltd, the major liquor division of Coles Group Ltd, on a 20-year lease to 2029 with two further 10-year options,” he said. 
The Redcliffe Tavernwas developed in circa 2009 on a 2,498sq m site at 32 Anzac Avenue, Redcliffe, approximately 28km north of the Brisbane CBD. 
It was bought in 2014 for $11.5 million on a yield of 7.27 per cent.
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The Redcliffe Tavern north of Brisbane has been sold for $15 million

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The Australian Prudential Regulation Authority (APRA) has released its quarterly Authorised Deposit-taking Institution (ADI) property exposures data for the March 2016 quarter. 
This data is really valuable as it provides additional insight into the mortgage market, including data which is not available from the monthly housing finance statistics.
<a href="/images/2016/06/01/Chart-1-4-580x207.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/06/01/Chart-1-4-580x207.jpg" alt="">
The data initially focuses on outstanding total values and shows that at the end of the March 2016 quarter there was $906.7 billion outstanding to owner occupiers and $501.3 billion to investors.  While total lending continued to rise, up 8.7% year-on-year, it is interesting to see how the tilt away from investment lending has progressed.
Over the past 12 months, total investor lending has increased by just 0.1% with the total value of investor mortgage lending outstanding down -3.2% from its June 2015 quarter peak.  The data also indicates that investor credit growth now sits significantly below the APRA imposed 10% pa speed limit.  This could lead to a rebound in lending to investors over the coming quarters.  Total lending to owner occupiers has continued to increase and is up 14.0% year-on-year.  In terms of the total value of outstanding mortgages, owner occupiers account for 64.4% compared to 35.6% to investors.  The proportion of outstanding mortgages to investors has fallen sharply from its recent peak of 39.0% in June 2015.
<a href="/images/2016/06/01/Chart-2-3-580x211.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/06/01/Chart-2-3-580x211.jpg" alt="">
Although the total value of outstanding mortgages is rising you can see that growth is generally slowing.  Mortgages with offset facilities account for a record-high 43.0% of all outstanding mortgages and the value of these mortgages has increased 20.4% year-on-year.  Interest-only mortgages account for 39.3% of total outstanding mortgages, with the value having increased by 9.6% year-on-year.  Reverse mortgages account for just 0.5% of all outstanding mortgages with the value of outstanding mortgages up 1.4% year-on-year.  Only 2.4% of the value of outstanding mortgages are for low-documentation loans and 0.1% are other non-standard loans.  Year-on-year the value of outstanding low-documentation mortgages is -16.5% lower and other non-standard mortgages are -4.0% lower.  In fact the total value of outstanding low-documentation and other non-standard mortgages is at a record low.
<a href="/images/2016/06/01/Chart-3-3-580x208.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/06/01/Chart-3-3-580x208.jpg" alt="">
The average outstanding mortgage balance was recorded at $251,900 in March 2016, having increased by 4.8% year-on-year.  At the end of March 2016, the average outstanding balances across loan types were: $307,200 for loans with an offset, $334,400 for interest-only, $96,500 for reverse mortgages, $192,200 for low-documentation and $193,400 for other non-standard loans.  All loan types except for low-documentation (-1.1%) and other non-standard (-7.0%) have seen the average balance increase over the past year: offset (6.3%), interest-only (5.0%), reverse mortgages (2.4%).
To date, all data analysed has focused on total balances outstanding, the following data will focus specifically on quarterly new lending.
<a href="/images/2016/06/01/Chart-4-2-580x208.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/06/01/Chart-4-2-580x208.jpg" alt="">
Over the March 2016 quarter there was $81.7 billion in new mortgage lending, which was the lowest quarterly value of new lending since the March 2014 quarter.  This figure comprises of $56.0 billion in lending to owner occupiers and $25.7 billion in lending to investors.  The value of new lending to owner occupiers has increased by 16.1% year-on-year while the value of investor lending is -25.5% lower year-on-year.  The value of new lending to investors is the lowest since the March 2013 quarter and is -37.7% lower from its peak over the June 2015 quarter.  The data indicates that there has been a significant pull-back in new lending to investors over recent quarters.
<a href="/images/2016/06/01/Chart-5-1-580x207.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/06/01/Chart-5-1-580x207.jpg" alt="">
With the value of new mortgage lending falling, the value of most loan types is now also falling.  Over the March 2016 quarter, 0.3% of new lending was for low documentation loans, 34.9% was for interest-only, 0.1% was for other non-standard loans, 46.5% was originated through third part channels and 3.8% of loans were approved outside of serviceability.  The value of new lending for low documentation mortgages was at a record low.  The value of new interest-only lending was the lowest since the March 2013 quarter.  The value of other non-standard lending was the lowest since the same quarter last year as was loans approved outside of serviceability.  The value of new mortgage lending by third parties was the lowest since the September 2014 quarter.
Higher loan to value ratio (LVR) lending is reducing meaning that borrowers are typically using larger deposits.  In fact, the value of new lending for LVRS above 90% in the March 2016 was the lowest since the March 2011 quarter and has fallen by -22.8% over the past year.  Lending for LVRs between 80% and 90% has increased by 2.7% year-on-year however, it has fallen over each of the past four quarters.  In fact, lending for LVRs above 80% represented 22.4% of all new lending in March 2016 which was its lowest proportion on record and well down from the peak in March 2009 where it accounted for 37.6% of all new lending.
The value of lending to investors is falling sharply as assessment criteria is tightened and investors are typically now charged a higher interest rate than owner occupiers.  Interest-only lending which APRA and the Reserve bank have previously sounded warnings about is also starting to fall and is now at its lowest level since March 2013.  Higher LVR lending which is associated with smaller deposits are also trending lower which indicates less risky lending.  The added benefit surrounding lower LVRs is that if a borrower has a deposit of more than 20% of the value of the property they can typically avoid lenders mortgage insurance (LMI).  New lending to loans outside of serviceability, low documentation loans and other non-standard loans has also been falling over recent quarters which is reflective of less risky lending practices being undertaken.  These emerging trends can only be positives for the stability and security of the Australian mortgage lending market.
Based on the data presented, it is apparent that tighter lending policies by lenders is having a noticeable impact on the mortgage market.
Cameron Kusher is research analyst for CoreLogic RP Data. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>.
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Tighter lending policies see a reduction in investor and riskier lending types: Cameron Kusher

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A large Williamstown industrial site has sold under the hammer for $2.9 million.
The 7,081 sqm site at <a href="https://www.realcommercial.com.au/property-industrial+warehouse-vic-williamstown-501937546">64 Tennyson Street</a> was sold to a developer.
It has a combined 241 sqm frontage to Fink Street, Chelmsford Street and Tennyson Street.
Fitzroys agents Chris Kombi and James Gregson handled the auction campaign, in conjunction with Grita Angelucci and Sam Nadde of Property Au.
The site was offered with opportunities for investors, owner occupiers and developers, according to Chris Kombi.
It receveieced more than 60 enquiries throughout the campaign.
Gregson said the property is located in an established and highly sought after industrial precinct in Melbourne’s inner west, with the owner planning to divide the site into around 30 office/warehouse buildings. 
 
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Williamstown industrial site sold for $2.9 million

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Colliers International are auctioning a portfolio of four G8 childcare centres and seven neighbourhood retail shops across Queensland and South Australia on Wednesday 15 June at 10.30am.
The Ormeau Kids and Ormeau Shopping Centre at 1 Arthur Way in Ormeau, Queensland can be purchased separately or together. The childcare centre has a 10 year lease with options through to 2041. The shopping centre is 100 percent leased with 7 retail tenancies including Pizza Capers, Liquor Legends, Friendly Grocer, Thai Restaurant, Café, Chemist and Hairdresser.
Coomera Kids at 1/1 Brygon Creek Drive Upper Coomera, Queensland has 224 places over 3,743 sqm and a fully leased net income of $523,185.
Upper Coomera Kids at 35 Nicola Way, Upper Coomera, Queensland has 138 places over 2993 sqm and a fully leased net income of $322,319
<div id="x_prop3iconoption3_START">Morphett Vale Early Learning Centre at 105-107 Flaxmill road Morpheme Vale, South Australia has 85 places and a fully leased net income $187,487. It is on a land area of 1,902 sqm.</div>
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Portfolio of four G8 childcare centres going to auction

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Melbourne based specialist wine storage and distribution firm, Quality Wine Logistics, has agreed terms on a new office/warehouse lease at Dandenong South in Melbourne’s south-east.
The deal brokered by Savills Australia for the 197-203 Ordish Road property comprises 3818 square metres of quality office and warehouse space, including a 468 square metre, two-level office component and 3350 square metres of high clearance warehousing.
The property is located within the heart of Dandenong's industrial precinct enabling immediate access to all main arterial road networks including EastLink, Greens Road, the M1 Freeway, Dandenong Bypass and Frankston-Dandenong Road.
According to Savills’ Senior Executive Paul Jones, who negotiated the deal, the tenant agreed to a five year lease at a rental of $270,000 per annum net for the lessor, a private Melbourne investor.
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Savills secures Dandenong industrial lease deal for wine distributors

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<h1> </h1>
GUEST OBSERVER
Deflation refers to persistent and generalised price falls.
It occurred in the 1800s, 1930s and the last 20 years in Japan. Most people would see falling prices as good because they can buy more with their income. However, deflation can be good or bad depending on the circumstances.
In the period 1870-1895 in the US, deflation occurred against a background of strong economic growth, reflecting rapid productivity growth and technological innovation. This can be called “good deflation”. However, falling prices are not good if they are associated with falling wages, rising unemployment, falling asset prices and rising real debt burdens. For example, in the 1930s and more recently in Japan. This is “bad deflation”.
In the current environment of high debt levels, sustained deflation could cause big problems. Falling wages and prices would make it harder to service debts. Lower nominal growth will mean less growth in tax revenues making high public debt levels harder to pay off. And when prices fall people put off decisions to spend and invest, which could threaten economic growth. This could risk a debt deflation spiral of falling asset prices and falling incomes leading to rising debt burdens, increasing defaults, spurring more falls in asset prices, etc. There are good reasons why central banks want to avoid that.
As can be seen in the next chart, there are still more countries experiencing deflation than hyperinflation.
<h1><a href="/images/2016/05/31/chart-2.png" target="_blank">Click to enlarge</a></h1>
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<img src="/images/2016/05/31/chart-2.png" alt=""> Source: Thomson Reuters, AMP Capital
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The RBA eased this month because actual inflation has fallen below target and is likely to stay there for a while.
Cutting inflation targets would be foolish and make it harder to get inflation back up to target.
Low rates are helping the Australian economy and zero rates and quantitative easing have helped the US. Central banks are not out of ammo.
For investors, it’s likely to remain a low interest rate environment for some time to come.
This year has seen a growing concern that central banks are out of ammo when it comes to reinvigorating global growth and preventing deflation. And the Reserve Bank of Australia’s latest rate cut has some fearing that it’s going down the same “failed path” as other major central banks. But is it really that bad? Have central banks really failed? Are they really out of ammo?
Why did the RBA ease again?
The latest RBA rate cut, which took the official cash rate to a record low of 1.75% percent, surprised many because recent economic data in Australia has been OK. But the reason for the cut is simple. Inflation has fallen well below the RBA’s 2-3 percent target, the weakness in prices was broad based and inflation is expected by the RBA to remain below target or at the low end of the target for some time.
<a href="/images/2016/05/31/chart-1.png" target="_blank">Click to enlarge</a>
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<img src="/images/2016/05/31/chart-1.png" alt=""> <div class="article-body">
Source: ABS, RBA, AMP Capital
Naturally, the RBA worried that if it didn’t provide more stimulus to the economy low inflation could become entrenched and could give way to deflation. With the $A pushing up towards $US0.80 prior to the cut and the Fed continuing to delay rate hikes, the RBA was no doubt also concerned that if it didn’t ease the $A would push even higher, putting more downwards pressure on inflation.
<h2>Why not just lower the inflation target?</h2>
Since the last RBA cut, some have said that the RBA should just lower its inflation target because it cannot fight falling global commodity prices and what’s wrong with very low inflation anyway. This reminds me of a similar argument back in 2007-08, when inflation had pushed above 4%, that the RBA should not worry but just raise its inflation target as it cannot fight rising global commodity prices. Such arguments are nonsense.
First, the whole point of having an inflation target is to anchor inflation expectations. If the target is just raised or lowered each time it looks like being seriously breached then those expectations - which workers use to form wage demands and companies use in setting wages and prices - will simply move up or down depending on which way the target is changed. And so inflationary or deflationary shocks from things like commodity prices will turn into permanent shifts up or down in inflation. Second, there are problems with allowing too-low inflation. Most central bank inflation targets are set at 2% or so because statistical measures of inflation tend to overstate actual inflation by 1-2% because statisticians have trouble actually adjusting for quality improvements and so some measured price rises really reflect quality improvements. In other words, 1.5% inflation could mean we are actually in deflation. And there are problems with deflation – see below.
<h2>How far will the RBA cut rates?</h2>
To the extent that the minutes from the RBA’s May meeting indicate the RBA had considered “waiting for more information”, it may choose to sit tight at its June meeting. However, given the downside risks to inflation, particularly with wages growth falling to a record low 2.1%, constrained growth and the still high $A more rate cuts are likely. We are allowing for two more rate cuts this year, taking the cash rate to 1.25% by year end.
<h2> </h2>
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<h2>What has been driving deflation?</h2>
Several factors have driven the plunge in global inflation and some countries dipping into deflation: commodity prices have been in a downtrend since 2011 as their supply surged; and the sub-par global recovery since 2009 means the world has plenty of spare capacity. Global economic activity is around 2.5% below potential. Excess capacity means companies lack pricing power and workers lack bargaining power.
<h2>But are rate cuts actually working?</h2>
Some worry that rate cuts have just made things worse by cutting into the spending power of retirees and forcing those nearing retirement to save more. However, there are several points to note in relation to this. First, the level of household deposits in banks in Australia at around $0.9 trillion is swamped by the level of household debt at $2.2 trillion. So the household sector is a huge net beneficiary of lower interest rates. Second, the responsiveness to changes in spending power for a family with a mortgage is far greater than for retirees. Third, the proof is in the pudding. The fall in interest rates has helped the economy rebalance as mining investment has collapsed: first via a pick-up in housing construction and more recently via growth in consumer spending of close to 3% per annum (pa). While those close to retirement may be saving more because of lower investment returns, the household saving rate overall has drifted down from 11% to around 8% since the first RBA rate cut in late 2011. And of course RBA rate cuts have helped push the $A lower. So overall, rate cuts do work.
<h2>Have non-traditional monetary policies failed?</h2>
This is a relevant question with many saying that zero interest rates and quantitative easing in developed countries have not worked. But actually in the US they have as growth there has been averaging around potential at 2% pa, unemployment has fallen from 10% to below 6%, wages look to be picking up and underlying inflation is close to the Fed’s 2% inflation target. Sure, the Eurozone and particularly Japan are less clear but this may be because they waited too long before acting by which time low inflation or deflation had become entrenched. The lesson from this is that central banks need to act quickly and not that non-traditional monetary policy doesn’t work.
<h2>Are central banks out of ammo?</h2>
This is a common concern. However, central banks are a long way from being unable to do anything: the Fed can reverse last year’s interest rate hike and launch another round of quantitative easing if needed; and both the ECB and Bank of Japan could expand their quantitative easing programs further both in terms of size and the type of assets. More negative interest rates are an option but central banks are wary of this after the adverse impact of Japan’s experience regarding negative rates.
The ultimate option is for central banks to provide direct financing of government spending or tax cuts using printed money. This is often referred to as “helicopter money”. Unlike quantitative easing, which requires banks to lend their newfound cash to borrowers who want to borrow, it would yield an almost guaranteed response as the recipients of government spending/tax cuts will spend at least some of it. It won’t add to government debt either. As the examples of Zimbabwe and the Weimar Republic demonstrate, such an approach would make no sense if supply is constrained relative to demand and inflation is already high and rising. But that is not the case now and deflation remains the main threat, not inflation.
Of course none of these are an issue for the RBA as it still has plenty of scope to cut interest rates if needed.
Ideally, central banks should be getting more help from governments in terms of fiscal stimulus and supply side reforms but there are all sorts of constraints around this.
<h2>Implications for investors?</h2>
There are a number of implications for investors. First, while the worst may be over in terms of commodity price falls so the threat from deflation may be receding globally, the risk remains thanks to spare capacity and low wages growth, so low interest rates will remain in place for some time. While the Fed may continue down its path of gradual rate hikes, elsewhere rates are likely to stay low and, in Australia, fall further. Australian term deposit rates at around 2% are at their lowest since the early 1950s. So don’t expect great returns from them.
Second, given the absence of significant monetary tightening, a 1994-style bond crash remains as distant as ever. The most likely outcome is just low returns from government bonds.
Third, the low interest rate environment means the chase for yield is likely to continue supporting commercial property, infrastructure and shares offering sustainable high dividends.
Finally, as can be seen in the next chart, low inflation is generally good for shares as it allows shares to trade on higher price to earnings multiples. But it would be preferable not to see low inflation slip into deflation as this could be bad for shares given it tends to go with poor growth and profits and as a result shares trade on lower PEs. The same would apply to assets like commercial property and infrastructure.
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<img src="/images/2016/05/31/chart-3.png" alt=""> Source: Global Financial Data, Bloomberg, AMP Capital
So, combined with the social damage that a bout of debt deflation could cause, I would much prefer to see central banks continue to do all they can to avoid deflation.
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
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RBA rate cuts, inflation targets, deflation and are central banks out of ammo? AMP Capital's Shane Oliver

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A private Australian syndicate is poised to resurrect the Hinchinbrook Harbour over the next decade.
The revival is expected to cost around $450 million but economic modelling forecasts more than $1 billion will be pumped into the Cassowary Coast region with its reignited tourism.
The Passage Holdings are the syndicate behind the development which includes a restoration of the Cyclone Yasi-ravaged marina, 600 additional residences, hotel, family resort, water theme park, international fishing village, 300-site motorhome park, campgrounds and backpacker accomodation.
MacroPlan Dimasi undertook an economic benefit analysis which showed the project's 10 year construction phase would generate $400 million in direct economic activity and a further $654 million indirectly.
The assessment suggests that the additional accommodation capacity, enhanced entertainment, recreation and general tourism amenity and infrastructure established throughout the development, will support and contribute to ongoing growth in visitation for the region.
Hinchinbrook Harbour will deliver around 90 full-time jobs onsite and 180 jobs indirectly each year during construction.
On completion, the community will support a 430 strong permanent workforce comprising retail, hospitality and office positions.
The completed Harbour would generate 420,000 visitor nights each year for the local industry.
Hinchinbrook Harbour sales and marketing agent Bruce Goddard, of Place Projects, said there had been a significant decline in visitor nights in the region, in part because of the effects of Cyclone Yasi and a post-GFC downturn in tourism.
“This redevelopment is a catalyst for wider economic stimulation and will see the region return to its pre-Yasi halcyon days,” he said.
“Hinchinbrook Harbour will deliver the tourism amenity and capacity required to enhance the overall regional offer.”
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