Lendlease’s Barangaroo South precinct is officially complete, marking the culmination of a 15-year urban regeneration project that has revitalised Sydney’s harbourfront.&nbsp;

In 2009, the NSW Government’s Barangaroo Delivery Authority appointed <a href="https://www.apartments.com.au/developers/lendlease-development">Lendlease</a> as developer to transform what was once an inaccessible container port on the western edge &nbsp;of Sydney’s CBD into one of the city’s most thriving mixed-use destinations. Today, Barangaroo South is home to more than 1,800 residents, 23,000 workers, 95 retailers and welcomes 33,000 visitors each day. The precinct stands as an international benchmark for large-scale urban regeneration.&nbsp;

International Towers Sydney, the three flagship commercial buildings at the centre of &nbsp;Barangaroo South, together with engineered timber buildings Daramu House and &nbsp;International House, attracted major corporate tenants from the outset, including Westpac, &nbsp;PwC and KPMG, who are still there today. These workplaces remain some of the most &nbsp;sought after in Sydney’s CBD with over 95 per cent occupancy– a testament to the appeal of world-class, modern infrastructure alongside the precinct’s dining and entertainment that &nbsp;are a drawcard for businesses.&nbsp;

One Sydney Harbour, the three luxury residential towers designed by world-renowned architect Renzo Piano, has achieved more than $4 billion in sales since its launch in 2019, while setting new Australia property price records. This includes the three-level penthouse that crowns Residences One which sold for more than $141 million in 2019 – the most expensive individual residential property ever sold in Australia. &nbsp;

[smartcode_project:default project_id=139801 project_image_fid=349150]

Barangaroo South is also Australia’s first mixed-use carbon-neutral development, an accolade achieved through energy-efficient and innovative infrastructure, including a district cooling plant with a harbour water heat rejection system, a recycled water &nbsp;treatment plant, onsite solar and an embedded electricity network.

The precinct has maintained its Climate Active Carbon Neutral certification since 2019, affirming its &nbsp;reputation as the gold standard in large scale, sustainable urban renewal. Additionally, its &nbsp;world leadership status has been validated by the Green Building Council of Australia’s &nbsp;6 Star Green Star Communities recertification (Pilot v.2).

[smartcode_project:default project_id=139801 project_image_fid=349157]

First Nations cultural values were embedded throughout the planning and delivery of the project. The precinct honours Barangaroo, a prominent First Nations woman, through its &nbsp;name. Public art, street names, and design elements across the precinct reflect and &nbsp;celebrate First Nations cultures and connections to Country.&nbsp;

The project's completion positions Barangaroo South as a legacy urban transformation delivered through long-term partnerships and world-leading urban regeneration and placemaking capabilities. &nbsp;

[smartcode_project:default project_id=139801 project_image_fid=349154]

Tony Lombardo, Group CEO Lendlease, said&nbsp;Barangaroo South represents one of the most significant urban regeneration projects in Australia.

"[It] demonstrates what can be achieved through an ambitious vision, innovative placemaking, long-term commitment and strong partnerships. The precinct has changed the face of Sydney's waterfront, established new benchmarks &nbsp;for sustainable development, and provided a model for urban regeneration that continues &nbsp;to inform our approach to creating places that deliver long-lasting value.”&nbsp;

Tom Mackellar, CEO Development Lendlease, said&nbsp;Barangaroo South has reconnected the city to its harbour in a way that seemed unimaginable 15 years ago and turned it into a thriving precinct where people can live, work and gather on the harbour’s edge.&nbsp;

“This precinct is the result of countless contributions, led by the NSW Government who set the ambition, supported by investment partners who believed in Lendlease’s vision, imagined by architects and designers, shaped by consultants and artists, and brought to &nbsp;life by our dedicated construction teams. &nbsp;

“What we’ve created here is more than buildings – it’s the best of placemaking, sustainability, arts and culture and quality design. Barangaroo South has become an integral part of Sydney that will serve our city and economy for generations.”

Staff Writer

Barangaroo South’s 15-year transformation of  Sydney’s waterfront officially complete

CBE Asia Pacific has lodged plans for a prominent corner site in Fitzroy North, with a proposal that integrates state-significant affordable housing alongside heritage adaptation and new retail.

The application covers a consolidated 2,024 sqm parcel at 201–215 Queens Parade and 6–12 Dummett Crescent. The site includes the heritage-listed Former Clifton Motor Hill Garage, fronting Queens Parade, and vacant land to the rear abutting Dummett Crescent.

According to planning documents prepared by proUrban, the proposal seeks approval for a 12-storey residential building comprising 98 apartments, including a component of affordable housing, over a ground floor retail podium integrated within the heritage structure. Approximately 780 sqm of retail space will occupy the ground floor, while residents will have access to over 850 sqm of communal amenity.

The built form presents as two connected volumes: a 12-storey tower addressing Dummett Crescent and a five-storey volume fronting Queens Parade, the latter consistent with a separate Heritage Victoria permit granted in 2023. The tower reaches a maximum height of 38.26 metres, with upper-level setbacks of 14 metres from the western boundary to reduce visual bulk. A 1.5-metre footpath widening is proposed to Dummett Crescent Lane.

Parking is provided across four basement levels, accessed via Dummett Crescent, with a total of 142 car spaces and 143 bicycle spaces.

The architectural response by <a href="https://www.apartments.com.au/architects/cht-architects">CHT Architects</a> is framed by a need to reconcile new density with a sensitive heritage overlay. The Former Clifton Motor Hill Garage, identified as a place of State heritage significance, will retain its key façades, with demolition and reconstruction limited to approved elements.

As noted in the Heritage Impact Assessment, the proposal remains consistent with the Heritage Victoria permit, which allows "partial demolition, reconstruction and new works, involving the construction of a five-storey multi-use development and three basement levels".

Affordable housing has been embedded into the proposal under Clause 53.23, with specific apartment allocations aimed at enhancing housing diversity within the Queens Parade Activity Centre.

"The proposal is generally consistent with the relevant policy objectives and the intent of the Yarra Planning Scheme," proUrban states in its planning assessment, citing its alignment with strategic documents including Plan Melbourne and Victoria’s Housing Statement.

CHT Architects' plans emphasise a tiered design that acknowledges the site's varied interfaces—from the elevated Heidelberg Road ramp reserve to the recently built Clifton Views aged care facility to the north-east.

CBE Asia Pacific has not been previously active in this precinct, but the project joins a wave of higher-density residential proposals along the Queens Parade corridor, spurred by Melbourne’s broader push to increase affordable housing in well-connected inner-urban areas.

The site benefits from direct access to the Queens Parade tram corridor and proximity to Clifton Hill Station (approximately 200 metres), as well as green open spaces including Mayors Park and Raines Reserve. Clifton Hill Primary School and the Queens Parade retail village lie within walking distance.

First look: CBE Asia Pacific plans 100-apartment Jenkin House on Queens Parade, Fitzroy North

ALT Pasta, one of Melbourne’s most beloved inner-city pasta bars, has been confirmed as one of the first tenancies for the highly anticipated <a href="https://www.apartments.com.au/new-apartments/comme-prahran-182-194-commercial-road-prahran-vic-3181">Comme Prahran</a> development, marking an exciting next chapter for the cult favourite as it prepares to expand into the heart of <a href="https://www.apartments.com.au/developments/prahran-vic-3181">Prahran</a>.

Fresh off being named National Best Italian Restaurant at the 2025 Restaurant &amp; Catering Hostplus Awards for Excellence, ALT continues to solidify its reputation as a quietly confident leader in Melbourne’s dining scene. Lauded for its reinterpretation of Italian pasta through a Korean and Japanese lens, the restaurant has grown into a staple since opening three years ago, and its new Prahran outpost will only deepen its local impact.

“From the very beginning, ALT has been about respect - for tradition, for ingredients, and for the process,” shares Mino Han, ALT’s founder, a Korean-Australian chef whose vision is shaped by cultural duality and craftsmanship.&nbsp;

“We’re not trying to reinvent the wheel, just make something beautifully familiar, feel quietly special,” added Han.

[smartcode_project:default project_id=108413 project_image_fid=353585]

Positioned at the entrance to Comme Prahran and directly opposite the iconic Prahran Market, the new venue will celebrate the interplay between casual comfort and elevated detail. Designed in collaboration with Rooftop Architecture, the same team behind ALT’s flagship city location, the space will mirror the neighbourhood’s laid-back energy while staying true to the brand’s understated refinement.

Diners can expect a frequently changing menu that takes advantage of the market’s daily produce, along with set menu offerings exclusive to this location. A distinctive chef’s table and open kitchen format are also in the works, allowing guests to experience ALT’s signature intimacy and transparency in a new light.

ALT Prahran won’t replace the original venue; rather, it complements it.

“Our city site is like our heritage bottle; it’ll age gracefully. Prahran is where we’ll play, explore new ingredients, and bring something special to the community,” Mino notes.

[smartcode_project:default project_id=108413 project_image_fid=353584]

For Comme Prahran, a boutique development by Leeka that blends heritage with multi-dimensional wellness, ALT Pasta’s arrival signals a meaningful addition to its vision of cultural connection, food-first living, and local engagement.

“Being part of Comme is more than just opening a second venue. It’s about contributing to a neighbourhood with character, history, and a strong sense of community. That’s something we deeply relate to,” says Mino.

Sustainability and cultural identity are deeply embedded in the ethos of ALT. From ingredient sourcing to interior design, the new location will reflect both environmental mindfulness and a spirit of inclusion, embodying the values of Melbourne’s diverse, forward-thinking culinary scene.

Comme Prahran is scheduled for completion in late 2027, with ALT Pasta expected to be among the first tenancies to open its doors shortly after.

[smartcode_project_cta:default project_id=108413]

National best Italian restaurant ALT Pasta to open at Comme Prahran, bringing refined familiarity to Melbourne’s culinary heart

National BEST Italian restaurant ALT Pasta to open at Comme Prahran

&nbsp;Boutique development and construction firm Ryser has filed plans for its debut apartment building.

Ryser, founded by Jonthan Ryan and Wil Prosser, has sought to develop <a href="https://www.apartments.com.au/new-apartments/sorelle-4a-fern-place-woollahra-nsw-2025">Sorelle</a>, 28 new apartments at 4a Fern Place, Woollahra.

The&nbsp;750 sqm site on the edge of Bondi Junction falls within the Grafton Precinct Heritage Conservation Area, though it is currently vacant and not identified as a contributory item.&nbsp;

<a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a> has been commissioned to design Sorelle, creating an eight and a nine-storey building with six apartments dedicated to affordable housing to support essential workers&nbsp;under the NSW Government’s low and mid-rise housing policy.

The dwelling mix includes 12 one-bedroom units, six one-bedroom affordable units, six two-bedroom units, and four three-bedroom residences.<img alt="4A Fern Place, Woollahra." data-entity-type="file" data-entity-uuid="86626941-772d-49c5-8d31-a8e42f44cdcc" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Fern%20bldg%20st.png?VersionId=tWIzXYX9gD60nP1L3..Z0BFbY5mafb36" />

According to the planning documents submitted to the Woollahra Council, the development responds to the complex interface of heritage fabric and urban infrastructure with two mid-rise residential buildings oriented to the north and designed to capitalise on sweeping views over Sydney Harbour and Bellevue Hill.&nbsp;

“The proposal aims to hero some of the brick detailing of Woollahra, celebrating the existing datums of Fern Place, whilst embracing the strong verticals of the Holy Cross Church and Bondi Junction with a nod to the historic iron works and iron rich soils of the area,” Woods Bagot noted in their Design Report.

&nbsp;

Only three car parking spaces are proposed, alongside 33 bicycle bays, in a move that leverages the site's proximity to Bondi Junction train station, just 400 metres away.

Architecturally, the material palette incorporates Corten steel and face brickwork to reference the site’s industrial past and local geological character. Landscaping features include a communal garden bridging the two buildings at ground level, landscaped setbacks to protect visual privacy, and a small corner park intended to soften the public interface.

<img alt="4A Fern Place, Woollahra." data-entity-type="file" data-entity-uuid="f71766d6-aa14-44df-9bc5-42f91890fd4a" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Fern%20bldg%20rear.png?VersionId=uh7u1rJ6NJF5OqyRs9iNJcy6R9ssgaXU" />

Ryser said Sorelle "brings together the best of both worlds, the intimacy of village life with the amenity and luxury of modern design."

The developer said the project marks the first of three developments they will be announcing shortly, a key step in their&nbsp;evolution as a builder-developer delivering meaningful, high quality urban outcomes across Sydney.

The expectation is the Woollahra LGA will become popular for developers with the signal from the NSW Government they will deliver&nbsp;<a href="https://www.apartments.com.au/developments/sydney-nsw" target="">Sydney</a>’s first new heavy rail station in more than a decade – enabling up to 10,000 new homes by rezoning land around&nbsp;<a href="https://www.apartments.com.au/developments/woollahra-nsw-2025" target="">Woollahra</a>&nbsp;and&nbsp;<a href="https://www.apartments.com.au/developments/edgecliff-nsw-2027" target="">Edgecliff</a>&nbsp;stations.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/next-stop-woollahra-train-station-delivering-up-to-10-000-new-homes-in-the-heart-of-sydney">Next stop Woollahra train station - delivering up to 10,000 new homes in the heart of Sydney&nbsp;</a>

Joel Robinson

First look: Ryser plans two apartment buildings on Woollahra, Bondi Junction border

ASX-listed developer <a href="https://www.apartments.com.au/developers/cedar-woods" target="">Cedar Woods</a> didn’t miss a beat when the opportunity arose to acquire a prime residential development site in one of Perth’s most popular suburbs. In 2019, the developer secured the former Wembley TAFE site, a 1.4-hectare parcel perfectly positioned on the western edge of <a href="https://www.apartments.com.au/developments/subiaco-wa-6008" target="">Subiaco</a>’s vibrant centre.

The first stage, <a href="https://www.apartments.com.au/new-apartments/incontro-subiaco-133-salvado-road-subiaco-wa-6008">Incontro Townhomes</a>, delivered 41 contemporary homes that embrace the suburb’s unique blend of nature and urban energy. Now, Incontro Apartments continues that story, offering a collection of new residences in a market limited with new residential stock. The rarity of a development in such a prime pocket hasn't been lost on buyers, with more than 60 per cent already sold in the early stages of construction.

[smartcode_project:default project_id=108869 project_image_fid=317909]

Set on the tree-lined Bishop Street, in a quiet pocket within Western Subiaco, Incontro Apartments offers convenient access to several lush parks and recreation spots.&nbsp;

Within the estate is Incontro’s Little Green, a linear park that connects the Incontro townhome precinct with the future apartment building. This peaceful stretch of landscaped parkland features shaded seating and communal spaces for residents to relax and interact close to home.&nbsp;

Less than 400 metres away is find Henderson Park, a perfect spot for morning walks, weekend picnics or casual exercise. Neighbouring Henderson Park is Mabel Talbot Park, home to Jolimont Lake and a playground, while just a little further lies Pat Goodridge Park, offering a large sports field and another playground.&nbsp;

[smartcode_project:default project_id=108869 project_image_fid=325604]

For something closer to home, Subiaco Common provides a peaceful green retreat right on your doorstep - ideal for reading under the trees, walking the dog or relaxing with friends.

Beyond the parks and open spaces, Incontro residents are just moments from everything that makes Subiaco such an enviable place to live.&nbsp;

Down the road is Bishop Street Café, a local favourite for a morning caffeine fix. Subiaco’s Rokeby Road and Hay Street are lined with retailers, cafés, vibrant bars and some of Perth’s most loved dining spots, from long lunches at Refuge Small Bar or Juanita’s, to weekend brunch at Community Coffee Co. or Boucla Café. Add to that a strong sense of local community, regular markets, and the energy of Subiaco Square, and it’s easy to see why Subiaco continues to be one of Perth’s most liveable and in-demand suburbs.

[smartcode_project:default project_id=108869 project_image_fid=325605]

Construction of Incontro Apartments is now underway by <a href="https://www.apartments.com.au/builders/emco-building">EMCO Building</a>. With completion expected in mid-2027, buyers have the chance to join a thriving Subiaco community in the not-too-distant future. &nbsp;

One-bedroom apartments are now sold out, with only a selection of two-bedroom apartments and just three three-bedroom residences remaining. Each features generous layouts, stylish finishes and private balconies to enjoy the leafy outlook that makes this Subiaco address so special. Prices start from $925,000*.

[smartcode_project_cta:default project_id=108869]

Over 60 per cent sold as Incontro Apartments captures Subiaco’s leafy appeal

Commodity Prices

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EXPERT OBSERVER
The Australian dollar has held within a narrow range of USD0.704 to USD0.716 over the month.
Key commodity prices, particularly iron ore, have been stable over the month with spot at around US$90/t. General expectations have been for this price to adjust downwards. For example the government’s forecast for the iron ore price (fob) by March 2020 is US$55/t (Westpac expects US$74/t spot).
Supporting the iron ore price has been ongoing reports from Vale of likely decommissioning of supply following the collapse of the tailings dam in Brumadinho – general expectation is that Vale will decommission around 40t of production lowering overall annual production from 400Mt to 360Mt.
However markets are expecting even larger production cuts to eventuate. Another major producer, Rio Tinto, has also recently been impacted by a supply shock.
On the demand side, confidence is rising in response to China’s commitment to stabilising growth through lifting credit; easing restrictions on the shadow banking sector; supporting bond issues by local governments to finance new infrastructure investment; tax cuts; and some support to housing in selective regions.
This stability at high levels for key commodity prices is providing solid support to the Australian dollar – indeed the fair value of the AUD as measured by commodity prices, is currently holding well in excess of current spot.
On the other hand, interest rate differentials continue to weigh on the AUD. When on February 21, Westpac moved to forecast the RBA would cut the cash rate by 25bps in August and November this year, markets were not anticipating a cut until April next year.
That pricing has now moved forward to August/September with 75% of a second cut priced by mid next year. (pricing COB Wednesday).
However in a Q&amp;A follow-up to a speech on Wednesday to the American Chamber of Commerce in Australia, Deputy Governor Debelle is reported to have noted “Our expectation is that we will see decent growth in the economy…so we won’t have to get to that point [of cutting rates]”.
A test of that assertion will be when the RBA releases its revised growth; inflation and employment forecasts in the May Statement on Monetary Policy on 10 May. Currently, the RBA is forecasting GDP growth of 3% in 2019 and 2.75% in 2020. The lower growth rate in 2020 is largely explained by a reduced contribution from resource exports – particularly LNG.
Those forecasts were released for the February Statement on Monetary Policy when the RBA was forecasting growth of 2.75% for 2018. Subsequently, growth printed at 2.3% for 2018.
BILL EVANS is the Chief Economist at Westpac
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Australian dollar holds as commodities remain stable: Bill Evans

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Conditions have generally improved over the past six months for businesses in the resource-related sector, according to RBA’s Financial Stability Review 2017.
The rise in commodity prices since the beginning of 2016, particularly for iron ore, and the ongoing efforts of these businesses to cut costs and reduce debt, have led to a substantial increase in the aggregate earnings of listed resource-related corporations (Graph 2.12).
<a href="https://www.propertyobserver.com.au/images/2017/04/19/Graph%202.12.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/19/Graph%202.12.jpg" alt="">
Many listed resource-related corporations have used some of their increased profits to pay down debts, resulting in a decline in the sector’s gearing and debt servicing ratios.
In line with these positive developments, resource-related corporations’ distance-to-default measures have increased over the past year (Graph 2.13).
<a href="https://www.propertyobserver.com.au/images/2017/04/19/Graph%202.13.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/19/Graph%202.13.jpg" alt="">
Nevertheless, earnings have continued to weaken for mining services corporations as resource producers have focused on cost reduction.
As noted in previous Reviews, banks’ direct exposures to the mining sector have declined in recent years and now constitute only a little over 1 per cent of their total lending, though this figure excludes banks’ exposures to non-resource-related businesses operating in mining regions (Graph 2.14).
<a href="https://www.propertyobserver.com.au/images/2017/04/19/Graph%202.14.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/19/Graph%202.14.jpg" alt="">
Conditions remain challenging for these businesses, given mining firms’ continued focus on cost containment, and some indicators of financial distress have picked up.
For instance, unincorporated business failure rates are elevated in Queensland and Western Australia (Graph 2.15).
<a href="https://www.propertyobserver.com.au/images/2017/04/19/Graph%202.15.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/19/Graph%202.15.jpg" alt="">
If higher commodity prices were to fall or not translate into improved economic conditions in mining-exposed regions, business failure rates may pick up further.
Outside the mining-exposed states, businesses’ finances generally appear sound and indicators of stress are low.
Survey measures of business conditions are well above their historical averages; listed corporations’ distance-to- default measures have continued their trend improvement and earnings have been in line with previous years; failure rates are low; gearing remains around its historical average; and many businesses continue to benefit from the depreciation of the Australian dollar since 2013 (Graph 2.16).
<a href="https://www.propertyobserver.com.au/images/2017/04/19/Graph%202.16.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/19/Graph%202.16.jpg" alt="">
The low interest rate environment has also made it easier for companies to meet their debt obligations by reducing debt-servicing costs (Graph 2.17).
<a href="https://www.propertyobserver.com.au/images/2017/04/19/Graph%202.17.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/19/Graph%202.17.jpg" alt="">
Find the RBA's latest Financial Stability Review 2017 <a href="https://www.rba.gov.au" target="_blank">here</a>.
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j.ballantyne1990-6AQqhLzZaK

Conditions have improved mining businesses: RBA

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GUEST OBSERVER
The tailwind is here. Higher commodity prices are boosting national incomes and the numbers are large.
Export values rose by a strong 32% year-on-year in December which drove the largest trade surplus on record. This is driving a strong rise in mining profits and tax revenues. The debate is about whether the lift in mining profits and taxes will boost wages growth, household spending and domestic inflation, as it has done in the past.
Will households feel the tailwind too? Some observers argue that without another mining investment boom or the government delivering personal tax cuts, both of which, we agree, seem unlikely, a rise in domestic wages and inflation will not happen. In our view, scale is important here. Although we agree that the income effect on households is likely to be less potent than in the past, some of the effect should still get through. Plus, this boost is in addition to the services sector growth story which is still humming along. We think this will keep the RBA from cutting further and expect that these same forces could mean rate hikes in 2018.
As we have been pointing out for some time now, we see the recent lift in commodity prices as having changed the economic story for Australia. For the past five years, Australia has sought to pull off a 'great rebalancing act' and this year with think that the rebalancing act is almost done. This is largely because the significant headwind that Australia has faced over the past five years, as a result of falling commodity prices and mining investment, is now becoming a noticeable tailwind. The resources sector is set to become a contributor, rather than a drag, on growth.
The past couple of weeks have revealed more evidence that the boost to incomes from higher commodity prices has already arrived. Export values rose by a strong 32% year-on-year in December, supported by a 127% rise in the value of coal exports. This drove a significant swing in the trade balance, from a deficit in October to the largest trade surplus in the history of the available numbers (since 1971) in December. Although we do not yet have the Q4 GDP figures, as chart 1 below shows, there is a strong positive correlation between commodity prices and Australia's nominal GDP growth. As a result, the RBA has been confident enough to recently state that higher commodity prices 'are providing a boost to Australia's national income'.
<img src="https://www.urban.com.au/images/2017/02/09/blo%20one.gif" alt="">
As the income has already arrived, the question is not whether there will be a pick-up in incomes, but whether it will flow through to the household sector, to wages and domestic inflation, as it has done in the past? On this, some observers argue that without another mining investment boom or boost to household incomes from personal tax cuts, both of which seem unlikely, a rise in domestic wages and inflation is unlikely.
We agree with some of these arguments, but think it is mostly a question of scale.
First, we agree that the pick-up in commodity prices is unlikely to stoke a substantial upswing in mining investment anytime soon. But we are not as convinced that this means you will not see any flow through to households. Keep in mind that mining investment is already set to stop falling from around mid-2017, as the resources sector shifts from new construction to maintenance and repair, which is now a larger spend than it has been in the past. Mining employment has also already started to stabilise and the timely mining sector job vacancy indicators are lifting. Spending on mineral exploration has also levelled out recently, after years of decline. Given the considerable recent boost to mining profits it seems unlikely, in our view, that mining sector wages growth will continue to fall as much it has in recent years.
Second, we agree that the federal government is unlikely to deliver income tax cuts, as it did between 2003 and 2007 when the commodity price super-cycle was first in its upswing. However, the corporate tax take will be boosted, which should take some pressure off the Federal budget. Some of this is likely to show up in the public sector wage bill. State royalties will also be boosted in Western Australia and Queensland and we expect some of this to trickle into state spending and public sector wages.
<img src="https://www.urban.com.au/images/2017/02/09/blo%20two.gif" alt="">
Overall, our strongest argument is that the significant scale of the ramp up in commodity prices, exports and nominal incomes means that at least some of the pick-up is likely to get through to the household sector, wages growth and domestic inflation. Just a levelling out of mining sector activity and incomes, after five years of decline should be expected to help see wages and domestic inflation stabilise. What we have seen is much more than this, with national income significantly boosted (again, see chart 1). Add to this that the non-mining economy has already been growing solidly, supported by low interest rates, the lower AUD and rising demand for services from Asia's growing middle classes.
Finally, it is worth keeping in mind that recent history supports the view that a lift in commodity prices should drive a pick-up in wages growth and inflation. As chart 2 shows, there is strong positive historical correlation between the terms of trade (think commodity prices) and unit labour costs (think wages). Given the scale of the ramp up in the terms of trade it would be surprising if unit labour costs did not lift at all. In turn, rising unit labour costs should be enough to support a modest lift in domestic inflation. In our view, the RBA only needs to be convinced that underlying inflation is past its trough to keep them from cutting. With this, we expect the RBA to be on hold through 2017 and to lift its cash rate in 2018.
Paul Bloxham is chief economist, Australia, New Zealand of HSBC.
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jonathanchancellor-7SQnKwU6yx

Will households feel the tailwind of rising commodity prices?: Paul Bloxham

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GUEST OBSERVER
Growth was considerably weaker in the third quarter of 2016 than was expected, with real GDP falling on the quarter for the first time since Q1 2011. 
However, the fall appears to reflect the coincidence of a number of one-off factors, including a temporary disruption to coal exports and inclement weather affecting construction activity, rather than the beginning of a more significant downturn. Recent numbers for retail sales, business conditions and international trade already suggest a solid pick-up in GDP growth is likely in Q4 2016. 
In addition, there has been a substantial pick-up in coal and iron ore prices recently. Although this rise did not arrive in time to support the Q3 2016 GDP numbers, it should flow through to a significant boost in income growth in Q4 2016 and beyond. Australia’s commodity price index has risen by 20% in AUD terms since Q3 2016. Our estimates suggest that the pick-up in commodity prices should add around 2.0pp to nominal GDP over the coming year.
<a href="https://www.propertyobserver.com.au/images/2017/01/09/Screen%20Shot%202017-01-09%20at%2012.39.47%20PM.png" target="_blank">Click to enlarge</a>
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Overall, the strong rise in commodity prices and end of the mining investment decline are changing the local growth story. For the past five years, the Australian economic story has been about rebalancing growth away from being driven by mining investment at the end of the commodity prices ‘super-cycle’. Lower interest rates and the fall in the AUD over recent years have supported a housing boom and rising services exports, which have rebalanced growth. The mining sector is now stabilising and is no longer set to drag on growth and incomes. 
Given the recent downside surprise to GDP growth, we now expect growth of 2.4 percent in 2016 (previously 2.9 percent), rising to 2.8 percent in 2017 (previously 2.9 percent) and 3.2 percent in 2018 (unchanged). 
Although local inflation is currently below the RBA’s 2-3 percent target and wages growth is sluggish, we expect both to rise gradually through 2017. Supporting this, we see the rise in commodity prices as likely to lift national incomes, tax revenues, corporate profits and wages growth. Non-mining business investment is also already showing signs of rising modestly and, although the labour market has spare capacity, it is worth keeping in mind that job creation tends to lag the cycle, rather than lead it. We retain our view that the RBA is likely to keep its cash rate on hold at 1.50 percent through 2017 and have recently shifted our call for 2018, with 50bp of RBA hikes now pencilled in. 
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The Australian government has passed legislation to re-instate the Australian Building and Construction Commission, which is an indication that there has been some progress on labour market reform. This legislation was difficult to pass and was the trigger for the July 2016 ‘double dissolution’ Federal election. 
The government has also passed a number of fiscal reform measures, including the ‘backpacker tax’, with the measures set to save the government AUD21bn over the next four years. Tax revenues are also expected to get a boost from rising commodity prices. Offsetting these measures, slower-than-expected wages growth has weighed on the personal income tax take. The government’s focus on fiscal reform has become more pressing since one of the major rating agencies, Standard &amp; Poor’s, put the Australian government on ‘negative outlook’ for its triple-A sovereign rating in July 2016. 
Financial stability concerns remain an ongoing issue for the central bank, given a further recent pick-up in housing prices and a modest revival in investment activity in Australia’s housing market. The pick-up in housing market activity has occurred despite local prudential settings having been tightened over the past two years. The pick-up in investor credit growth adds to the case for the RBA to keep its cash rate unchanged over the next few quarters. 
Risks 
We view the risks to growth as evenly balanced. On the upside, the lift in commodity prices and boost to incomes could provide more support for growth than we currently expect. On the downside, slower-than-expected growth in China could weaken demand for Australian commodities or services exports. The risks to our inflation outlook are tilted to the downside. Changing patterns of employment could put more persistent downside pressure on wage growth, and thus local underlying inflation, than we have currently factored into our central case. 
<a href="https://www.propertyobserver.com.au/images/2017/01/09/Screen%20Shot%202017-01-09%20at%2012.41.15%20PM.png" target="_blank">Click to enlarge</a>
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 <a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">PAUL BLOXHAM</a> IS CHIEF ECONOMIST (AUSTRALIA AND NEW ZEALAND) FOR HSBC. 
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Commodity price rise to boost incomes: HSBC'S Paul Bloxham

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<img src="https://counter.theconversation.edu.au/content/64542/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Some well known resource stocks in Australia have reported major losses, including US$6.38 billion for BHP Billiton over the past year and US$1.1 billion for Santos over the past six months.
These losses have largely been driven by lower commodity prices, which in turn is the result of a slowing Chinese economy and weak global growth rates. But the bigger question is whether this most recent downturn is heralding a long term decline in mining activities.
Commentators throughout history have predicted that minerals and energy production would eventually decline because of resource depletion and rising costs. One of the most well-known theories is Peak Oil, originally developed by King Hubbert in the 1950s. This theory explained how many oil fields have a bell-shaped production function from discovery through to exhaustion.
This was used to predict the year and level of when the industry would hit maximum supply. Since then this same concept of an inevitable ‘peak’ has been widely applied to other commodities, to describe when global production might reach maximum levels.
However these predictions of maximum production outputs continue to be surpassed. Hubbert’s original projections were that global oil production would peak in 1995 when actual annual production has continued to grow steadily since then to be about 55% higher. In fact the slump in oil prices since 2014 have largely been caused by excess supply (together with the effects of lower growth in China and other economies).
<div id="responsive-iframe-0">Understanding why resource production continues to grow even when depletion must be occurring, provides some hints as to the future of commodities. The first is that mineral commodities tend to be driven by long term cyclical forces, particularly on the supply side.</div>
Higher resource prices, as seen in the 2003-2012 resources boom, drove huge investments into new production, both in Australia and overseas. That growth in supply is now maturing because of the long lead time to get new projects developed, with virtually no new projects approved since 2012.
Oversupply causes lower prices and shuts off new projects; there is often a long hiatus until the next boom because of an expanding supply base and the buffering effects of inventories.
The second pointer is that there are a variety of structural factors that shift both supply and demand. The key factors on the supply side are new discoveries and better technologies; these increase potential supply over time.
On the demand side, increased development of renewables and more efficient energy systems can systematically lower fossil fuel demand, while countries typically have lower metals requirements once industrialisation has been achieved. It was the combination of cyclical forces, such as lower economic growth, and structural changes in both supply and demand factors that led to the post-2012 slowdown in commodity prices.
Some analysts have focused on the structural changes, arguing for example that greater generation of renewable energy and improved productivity will lower fossil fuel demands permanently. However it is unlikely that structural changes have been enough to date to outweigh increases in demand when the economic cycle moves more strongly into a growth phase.
For example the International Energy Agency in 2015 predicted that world energy demand would grow by nearly one-third between 2013 and 2040, and even though renewables will be the fastest growing sector there is still likely to be some growth in coal and oil consumption to meet the balance of needs.
The third pointer is that the major slump in commodity prices over the past three years has focused the minerals sector on cost-cutting and efficiency. This has been more intense than in previous downturns, but the end result is that production costs are much lower than in 2012.
As a result, any rebound in resource prices, as has occurred across some commodities this year, will not have to be as large for operations to be profitable. In essence the cyclical downturn has forced a structural reduction in operating expenses that will make the industry more resilient to future commodity cycles.
This broad summary papers over a number of factors that influence individual commodities; these include government regulation, exploration policies, controls on supply, market access, taxation and support policies, infrastructure access and charges, labour markets and technology drivers. While those factors help to explain movements between sectors, it is the cyclical forces of global demand and global supply that drive prices and returns for Australian companies.
Analysts should also keep in mind that the company accounting systems do not fully reflect all environmental costs; for example responsibilities for mine rehabilitation tends to be underestimated and there is no current system to internalise the spillover costs of greenhouse emissions. Regulatory and accounting systems need to be improved so that all environmental impacts and liabilities are fully recorded, particularly if a cyclical upturn in the future stimulates growth again in the sector.
John Rolfe is professor of Regional Economic Development, School of Business and Law, CQUniversity Australia and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/john-rolfe-1894" target="_blank">here</a>.
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