Rockdale has long been characterized as a suburb on the cusp. Well-located, well-connected, but historically underserved by modern apartment offerings.

It has everything going for it: outstanding connectivity to the Sydney CBD, just four train stops to Central Station, strong local amenity anchored by Roc​kdale Plaza and a growing main-street dining scene, and enviable proximity to Brighton-Le-Sands. The six-kilometre beachfront is lined with bayside restaurants, cafés, and walking paths, giving residents a lifestyle typically associated with much more expensive coastal suburbs.

What Rock​dale has lacked is high-quality contemporary apartments. Most existing developments date back several decades, with floorplans that no longer support modern living needs, and buildings constructed long before today’s standards in engineering, efficiency, and sustainability.

Lender, fund manager and apartment developer Princeton identified the gap early. Seeing all the right ingredients in Rockd​ale, transport, lifestyle, retail, and affordability, they set out to deliver what the suburb was missing. Their answer is <a href="https://www.apartments.com.au/new-apartments/marque-rockdale-602-608-princes-highway-rockdale-nsw-2216">Marque Rockdale</a>, a collection of 58 one-, two-, and three-bedroom apartments now nearing completion just a short walk from Ro​ckdale Plaza, home to over 50 specialist retailers and anchored by&nbsp;Woolworths, Big W and Aldi.

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Understanding they would be resetting the benchmark for the area, Princeton focused on ensuring buyers received best-in-class quality, longevity, and protection.

A major step was securing the sought-after Latent Defects Insurance policy from Resilience Insurance. This policy protects apartment buyers from structural or waterproofing defects for the first 10 years of the building’s lifecycle. Crucially, it is first-response insurance, meaning that if an issue arises, the insurer pays immediately for remediation—rather than waiting for lengthy investigations to determine fault before work can begin. For purchasers, it offers an unprecedented layer of security rarely seen in Sydney apartment projects.

During construction, independent building inspection firm SDSS has been providing Technical Inspection Services, bringing highly specialised construction experts on-site at key stages to ensure workmanship meets the highest standards. The project is being built by Coplex, an iCIRT-rated construction company, and throughout the build SDSS has frequently referred to <a href="https://www.apartments.com.au/new-apartments/marque-rockdale-602-608-princes-highway-rockdale-nsw-2216">Marque Rockdale</a> as one of the best projects currently on their books.

Princeton also doubled down on comfort, acoustics, and livability.&nbsp;As well as being the only building along Princes Highway with a landscaped buffer between the building and the road, Princeton has purposefully included double-glazed windows in all apartments to reduce noise.

Apartments feature double-glazed, noise-reducing windows and ducted air conditioning in every residence.&nbsp;In addition to the project’s transport convenience, Princeton has partnered with GoGet Car Share to provide a dedicated GoGet vehicle housed permanently within the building. Residents will receive a free annual GoGet membership, paying only usage fees, offering a flexible alternative to owning a second car and enhancing the project’s sustainability credentials.

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Residents will enjoy an exclusive rooftop oasis, purpose-designed as an extension of their living space. The communal rooftop includes BBQ facilities and outdoor entertaining areas, a&nbsp;pergola-shaded dining zone, a dedicated children’s play space, and a landscaped herb garden.

Princeton and Coplex is approaching completion of <a href="https://www.apartments.com.au/new-apartments/marque-rockdale-602-608-princes-highway-rockdale-nsw-2216">Marque Rockdale</a>, and are expecting residents to move in early in the new year. The mix of apartment configurations and price points have been a hit with young professionals, those who need to commute to the CBD, and families who appreciate doorstep amenity.

“Marque is a place where residents will be proud to call it home," Princeton Head of Development George Young says.

"We’ve worked really hard with Coplex and our design team to deliver an incredible building for the future home owners to make their own. The homes are all designed to allow the residents to make it their own, a place to belong and live a stylish urban life."

[smartcode_project_cta:default project_id=136442]

Joel Robinson

Marque Rockdale sets a new standard of apartment living in Sydney's south

Plans to revitalize the&nbsp;long-established Benowa Gardens Shopping Centre into a mixed-use community combining living, shopping, dining, health and wellbeing facilities, have been proposed to the Gold Coast City Council.

The Benowa Gardens Urban Village proposal by Benowa Gardens Holdings seeks to transform the 17,660 sqm site at <a href="https://www.apartments.com.au/new-apartments/203-ashmore-road-benowa-qld-4217">203 Ashmore Road</a> into a contemporary, sustainable destination that reflects global trends in modern community design while retaining the familiar local character residents value.

The site is bordered by Ashmore and Benowa Roads and Carrara, with ready access to Pindara private hospital, four schools, TAFE, sports fields and the nearby Botanic Gardens.

Benowa Gardens Holdings is seeking a preliminary Council approval only for its proposed masterplan and variations to the site’s Neighbourhood Centre zoning.&nbsp; 
Formal Public Exhibition commenced Friday and also marks the start of comprehensive community consultation with surroundings residents, schools, P&amp;Cs, existing retailers, nearby sporting clubs, arts groups and Botanic Gardens volunteers.

Designed by Neylan Architecture, the masterplan envisions around 413 new apartments, complemented by upgraded retail, dining, and wellness amenities as part of 10,000 sqm of retail, and 9,630 sqm of office space/medical suites.

The development will feature green open spaces, shaded promenades, landscaped terraces, pedestrian walkways, and expanded healthcare and lifestyle services in synergy with the neighbouring Pindara Private Hospital and local schools.

<img alt="Benowa" data-entity-type="file" data-entity-uuid="244f4d54-2e67-4141-92b8-78d5735f47c2" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-11-26%20at%2012.47.34%E2%80%AFPM.png?VersionId=FmF5lzhpwVZc7POsdB770TJ_Bf2c0od8" />

“This concept embraces the way people increasingly want to live - safely, conveniently, and within strong local communities,” said Patrick Lu, Director of Benowa Gardens Holding.

“Benowa Gardens will set a new benchmark for integrated living on the Gold Coast. It’s a thoughtful, community-minded evolution that brings global best practice in urban design to one of the city’s most established areas.”

Lu said this isn’t just a redevelopment, it’s a renewal with purpose.

“Benowa Gardens has served the community for decades. Our goal is to ensure it continues to do so for generations to come, as a lively, connected Urban Village where people can truly live, work and thrive. We’re already talking to school leaders and the community to seek their feedback on our proposal, and have taken on board their ideas to improve student safety with additional “traffic calming” measures on Carrara Street. We’re conducting meaningful and sincere consultations and want to play our role in preserving and enhancing the local community."

The proposed redevelopment aims to deliver tangible benefits across the Benowa and wider Gold Coast community, including:

<ul>
	<li>Improvement of retail amenity, to capture the under-served local market demand and keep the local business at their local shopping centre.</li>
	<li>Housing diversity; offering a range of apartment types for key workers, downsizers, and local families who wish to remain in the area.</li>
	<li>Enhanced shopping and dining; revitalised retail spaces designed to support local businesses and attract more visitors.</li>
	<li>Health and wellbeing access; additional medical and wellness amenities to complement existing local facilities.</li>
	<li>Improved traffic flow and access; two new access points, upgraded intersections, upgrade pedestrian pathway’s signal and proposed upgrade of pedestrian and cycle connections/space to improve safety and convenience, especially for school children.</li>
	<li>Environmental sustainability; energy-efficient design, green rooftops, and water-sensitive landscaping to reduce emissions and enhance comfort.</li>
	<li>Local jobs and investment; supporting hundreds of construction and long-term roles while stimulating local economic growth.</li>
</ul>

The group behind the project boasts extensive experience in the property development industry, both in Australia and international markets. Over the past 23 years, the group has been involved in the development and management of a diverse portfolio of assets including residential dwellings, shopping centres, bulky-goods stores, community and medical facilities, childcare centres, offices, hotels, and taverns, across Brisbane, Ipswich, and the Gold Coast.

Benowa Gardens to become new mixed-use urban village

Demand for townhouses in Melbourne’s inner west has surged as buyers seek the elusive combination of space, affordability, and location.&nbsp;

With family-first apartments increasingly rare and standalone homes often out of reach, townhouses have emerged as the new sweet spot, delivering generous living areas with lower maintenance needs within close proximity to the Melbourne CBD.&nbsp;

<a href="https://www.apartments.com.au/new-townhouses/kings-lane-south-kingsville-50-58-new-street-south-kingsville-vic-3015">Kings Lane</a>, the new under-construction townhouse development by the family-owned developer&nbsp;<a href="https://www.apartments.com.au/developers/blue-run">Blue Run</a>&nbsp;in South Kingsville, responds directly to this trend. Comprising just 25 residences designed by <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a>, the project offers a compelling alternative to both apartment downsizers and family upsizers. With three-bedroom homes priced under $1 million, it presents one of the area’s rare attainable pathways to townhouse living less than eight kilometres from the CBD.

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<a href="https://www.apartments.com.au/developments/south-kingsville-vic-3015">South Kingsville</a> itself is quietly becoming one of Melbourne’s most dynamic pockets of urban renewal. Flanked by the established appeal of Yarraville, Newport and Williamstown, the suburb balances quiet, village-like streetscapes with major infrastructure upgrades and a growing slate of retail, dining and lifestyle amenity.&nbsp;

Kings Lane occupies a well-connected site at 50–58 New Street, just off Blackshaws Road and within walking distance of the emerging Union Quarter precinct, a major retail destination anchored by Woolworths, specialty food outlets and wellness services.

A 400-metre stroll brings residents to the Vernon Street shops, a local favourite known for its mix of independent grocers, cafes and family-run eateries. For broader shopping options, Altona Gate Shopping Centre and Yarraville Square are both within a short drive. Spotswood IGA and the Williamstown retail strip further broaden the convenience of daily essentials.

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Dining options in the area lean toward eclectic and community-driven, with standouts like Rocco’s Deli, Dad and Dave’s, and Pizza d’ASPORTO offering a range of casual and elevated menus. Cafés such as Hudson Road Wine &amp; Beer and Blacksheep Coffee add to the lively yet local feel of the neighbourhood.

Green space is another hallmark of life at Kings Lane. Edwards Reserve is close enough for morning walks or casual sport, while larger parks like Newport Lakes, Yarraville Gardens, and Cruickshank Park are all a few minutes’ drive away. More than half of the nine-hectares of new green space or parkland being created as part of the West Gate tunnel works is located just at the end of New Street, the same street as Kings Lane.

&nbsp;

For those with school-age children, South Kingsville is home to a range of quality childcare centres and schools, including Kingsville Primary, Spotswood Primary, and Williamstown North Primary. Community Children’s childcare and South Kingsville Preschool are nearby, making the suburb particularly attractive to young families.

Transport links continue to improve, with Spotswood Station and the West Gate Freeway both within a five-minute radius. Future upgrades, including the proposed sky rail for Newport and Spotswood, and the delivery of the West Gate Tunnel project, promise even better access to the CBD and Melbourne Airport in the years to come.

Kings Lane's 25 all-electric townhouses are currently under construction, and will complete in late 2026.

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Staff Writer

Kings Lane townhouses offers rare value in Melbourne's thriving inner west

Developer-builder <a href="https://www.apartments.com.au/developers/billbergia">Billbergia</a> has set a new apartment price record for <a href="https://www.apartments.com.au/developments/rhodes-nsw-2138">Rhodes</a>, a suburb the company has been instrumental in transforming over the past two decades.

The milestone follows the delivery of thousands of apartments across the harbourside peninsula, culminating in the $4.5 million sale of a 220 sqm penthouse in the <a href="https://www.apartments.com.au/buildings/rhodes-central-oasis-39-marquet-street-rhodes-nsw-2138">Rhodes Central Oasis</a> building, which Billbergia completed earlier this year. It is the first apartment in Rhodes to surpass not only the $4 million mark for settled sales, but also the $3 million mark, eclipsing the previous $2.75 million record set in 2021.

The purchaser had originally secured several apartments in the 40-storey tower off the plan as investments. During settlement, she spent more time in the Rhodes area and was so impressed with the building that she decided to downsize from her Northbridge home into the four-bedroom plus MPR penthouse.

The sale underscores the long-term work Billbergia has undertaken in Rhodes since the early 2000s. The company, rated 4.5 Gold Stars under the NSW iCIRT system, identifying it as one of the state’s most trustworthy and financially secure developers, was a pioneer of the area’s urban renewal. What was once a heavily industrial waterfront has become one of Sydney’s most successful examples of transit-oriented development.

<img alt="Billbergia" data-entity-type="file" data-entity-uuid="56093d7f-db18-42f4-bf9b-115bdf76f5f3" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-11-26%20at%2011.10.06%E2%80%AFAM.png?VersionId=pca77Mr.H83nwXbJexmaLUAqBewtQ7d9" />

Billbergia is now driving the peninsula’s next major evolution: the most ambitious project in its nearly four-decade history. They are planning the Rhodes Bay Masterplan, an eight-tower, mixed-use precinct on Leeds Street. Currently with the NSW Government’s Housing Delivery Authority which is now championing large-scale projects across the state, the Rhodes Bay Masterplan lays the groundwork for a generational reshaping of this important pocket of Sydney’s Inner West.

The masterplan spans more than 31,000 sqm of amalgamated industrial land along the foreshore, land that has been privately held and inaccessible to the community for more than a century. According to Billbergia’s Development Director, Saul Moran, reclaiming this land for public use is central to the company’s vision. 
 
“What’s so exciting is that we have over 300 metres of privately-held industrialised waterfront, land that’s been locked away for more than 100 years, which we’re bringing back to the community,” he says. “It’s taken many years to assemble sites like these, and the goal now is to transform them into meaningful public space where new homes can be built in an integrated, amenity-rich setting.”

At full completion, the Rhodes Bay Masterplan is expected to deliver over 2000 apartments, with the first 1000 to be completed by 2029. Billbergia’s design focused on nine slender towers, so they could give back more to the ground plane. There will be more than 16,000sq m of new parkland and recreation space, including sports fields, a foreshore play area and waterfront green links. Around 14,600 sqm of retail is also proposed, extending the precinct’s role as a true mixed-use hub.

<img alt="Rhodes Bay" data-entity-type="file" data-entity-uuid="240ffc41-4f26-421a-9606-5c56f6fc2d93" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-11-26%20at%2011.05.48%E2%80%AFAM.png?VersionId=BkBxZr7S8CAt1vgNa8AF3zjdc3YuVh0L" />

“Density only works when it’s paired with amenity, transport and open space, and that’s what’s made Rhodes such an amazing success story,” Moran says, adding that the demographic shift Billbergia has seen over the last two decades has informed their future development pipeline in the suburb.

“Rhodes has moved from being largely an investor market to a strong owner-occupier community,” Moran says. “There’s real demand for three-bedroom homes, flexible intergenerational layouts, and apartments people can grow into.”

&nbsp;“We’re designing taller, more slender towers to free up the ground level for sport, recreation and green space. High-density communities thrive when people have the best backyards in Australia, and that’s what we want to create here.”

Demand remains robust, evidenced by Billbergia’s recent results. “We achieved a record sale across the entirety of Rhodes Central just last week,” Moran says. “It shows the depth of confidence buyers have in what’s being built here.”

Billbergia’s vertically integrated model allows them to overcome the recent cost escalation and challenges in the build environment. “Having an in-house construction team lets us control feasibility, value management and quality from day one,” Moran says. “It’s critical in the current market, where construction escalation is at the forefront of every project’s viability.”

The company is also leveraging the NSW Government’s new Housing Delivery Authority process, which Moran describes as a more efficient pathway without compromising design standards. 
 
“We’re really applauding the NSW Government for its efforts to increase housing supply. There’s been a remarkable improvement in how they’re helping deliver more homes, more quickly.”

Billbergia has already commenced construction of Stage One of the Rhodes Bay masterplan. They will be lodging the State Significant Development Application before Christmas.

“We’re moving quickly, but with due care,” Moran says. “This is a generational precinct, and it needs to be done right.”

Billbergia smashes suburb record as Rhodes transformation continues

The sheer scale of the two skyscrapers at <a href="https://www.apartments.com.au/new-apartments/victoria-albert-broadbeach-20-albert-avenue-broadbeach-qld-4218">Victoria &amp; Albert</a>, soaring 40 and 64 storeys above the heart of Broadbeach, was always destined to deliver some of the highest and most luxurious apartments ever built in the suburb.

Now, builder-developer <a href="https://www.apartments.com.au/developers/iris-capital">Iris Capital</a> has unveiled the Horizon Collection, a selection of residences with the largest floorplans and most commanding views in the towers. The three-bedroom apartments, starting from $4.64 million, include butler’s pantries, multi-purpose rooms, and, in some layouts, master retreats with private sitting areas.

[smartcode_project:default project_id=107928 project_image_fid=3944]

The most prestigious apartments in the Horizon Collection are the sub-penthouses and penthouses. The two sub-penthouses on the 38th level of the Albert Tower are priced at $8.85 million.

Each features three bedrooms, a study, and a flexible multi-purpose room with a sliding partition that allows half the space to function as a games room.

The open-plan kitchen, living, and dining area, complete with a butler’s kitchen and private wine cellar, flows onto a full-width balcony framing panoramic coastal views.

[smartcode_project:default project_id=107928 project_image_fid=3943]

There is now just one sub-penthouse for sale on the 62nd level of the Victoria Tower, with one already secured by an expat owner-occupier. The remaining sub-penthouse, priced at $8.95 million, offers four bedrooms and a wraparound balcony that captures panoramic views up and down the Coast. vistas from every angle.

Crowning each tower is a full-floor penthouse offering multiple expansive indoor and outdoor living and entertaining spaces. Atop the Victoria building is Oceania, which measures over 735 sqm of living space, and Kurrara atop the Albert Tower, which is almost 800 sqm. They each have four bedrooms, including a master and guest suites, a full 360-degree panorama of the Gold Coast, and all the bells and whistles expected of a luxury penthouse. They are priced from a little over $18 million.

“Every detail, every finish has been thoughtfully considered to imbue the penthouses with the ultimate sense of luxury,” says Susan Rossi, Director of Interior Design at <a href="https://www.apartments.com.au/architects/dbi">DBI</a>, who led both the architecture and interiors for V&amp;A. “We shaped these skyhomes to embody the spirit of Gold Coast luxury.”

[smartcode_project:default project_id=107928 project_image_fid=234091]

Victoria &amp; Albert, colloquially known as V&amp;A, is the flagship Gold Coast development by the Sydney-based Iris Capital. Led by developer and hotelier Sam Arnaout, Iris Capital acquired the landmark Niecon Plaza site in 2021. At the time, Arnaout described the company’s expansion into Queensland as a strategic move to capitalise on one of Australia’s strongest growth markets.

“We were initially looking to expand into Victoria, but the massive migration to the regions that followed the pandemic created a new dynamic across the Australian market,” Arnaout said.

“From a strategic point of view, Queensland — and the Gold Coast in particular — is the perfect fit for our business. The fundamentals here are strong: genuine employment growth, high net migration, and an undersupply of apartments driven by strong demand. The Gold Coast has matured into a thriving, progressive regional city with a fantastic future.”

[smartcode_project:default project_id=107928 project_image_fid=234097]

Across its two towers, V&amp;A will deliver 425 luxury apartments, supported by a suite of resort-style resident amenities. These include a subtropical podium featuring a 25-metre lap pool, gym, yoga deck, residents’ lounge, kids’ play area, zen garden, and barbecue terraces with outdoor dining spaces.

<a href="https://www.apartments.com.au/project-marketer/colliers">Colliers</a> Queensland Director David Higgins, who has managed sales at V&amp;A since its 2021 launch, says the project has set a new benchmark for Broadbeach’s luxury apartment market. Colliers Queensland Director David Higgins, who has managed sales at V&amp;A since its 2021 launch, says the project has set a new benchmark for Broadbeach’s luxury apartment market.

“The premium market has definitely spoken, with V&amp;A having now reached over half a billion dollars in presales since our launch,” Higgins says, adding that over 65 per cent of V&amp;A is now sold.

“Our buyers continue to validate the success of the Victoria &amp; Albert development vision and the luxury amenity that comes along with their apartment purchase. Of course, Broadbeach’s most walkable location, just 100m from the Broadbeach surfing beach, makes this luxury apartment a compelling addition to your real estate portfolio.”

Last year, Iris Capital brought construction in-house through its new arm, Iris Built. Completion of the 40-level Albert Tower is scheduled for late 2027, with the 64-level Victoria Tower, the taller of the two, expected to follow in mid-2028.

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Victoria & Albert’s Horizon Collection takes Broadbeach living to new heights

Commsec

<h2>EXPERT INSIGHT</h2>

The word &lsquo;boom&rsquo; is used cautiously, principally because booms never end quietly. In other words, booms tend to be followed by busts. The case in point was the boom of the late 1980s that preceded the recession of 1991.

On Friday the Reserve Bank lifted its economic growth forecasts. The Reserve Bank now expects growth of 5.25 per cent on average over the 2021 calendar year. The growth forecast for the 2021/22 year is now 5.00 per cent, up from the 3.75 per cent forecast made in February. And growth in calendar 2022 is now tipped at 4.00 per cent, up from 3.25 per cent.

The jobless rate is now seen at 5 per cent at the end of 2021 before hitting the &ldquo;full employment&rdquo; level of 4.5 per cent at the end of 2022.

But over the next 18 months, underlying inflation is not expected to hit 2 per cent (1.75 per cent in late 2022).

[smartcode_project:default project_id=3233]

Economic nirvana? Perhaps. But it is also important to remember that growth and unemployment have bettered even the most optimistic Reserve Bank forecasts over the past year.

So it&rsquo;s worth considering the latest &lsquo;upside&rsquo; targets from the Reserve Bank. On the Reserve Bank&rsquo;s most optimistic assumptions, annual economic growth would hit 10.25 per cent in June and 6 per cent in December (admittedly from a low base). The jobless rate would hit the &ldquo;full employment&rdquo; threshold late this year but inflation still wouldn&rsquo;t exceed 1.5 per cent.

The Reserve Bank won&rsquo;t consider lifting rates until inflation is sustainably within the 2-3 per cent target band. So conceivably unemployment could hit 4.5 per cent by end year with the cash rate still locked at a record low of 10 basis points.

Too good to be true?

It&rsquo;s important to remember that these forecasts are from the Reserve Bank, one of the most cautious and conservative central banks.

But there appears a growing appreciation for the fact that inflation &ndash; not just here but across the globe &ndash; has been low for a number of years. And a key reason for that is technology &ndash; consumers can buy goods whenever they want from wherever they want. Also, organisations like Airtasker, Uber and Menulog have boosted completion and kept downward pressure on prices. In addition, businesses in white collar industries can also get work done offshore &ndash; and this is largely unaffected by Covid-19. While wage growth &ndash; a key component of inflation &ndash; hit record low levels in Australia at the end of 2020 &ndash; with the pace of pay rises easing since the height of the mining construction boom.&nbsp;

But what happened in 1988?

Cash rates had been falling ahead of the October 1987 sharemarket crash. The cash rate was around 18.8 per cent in August 1986 and had fallen to 11.3 per cent in October 1987. Rates hit lows of 10.65 per cent in February 1988.

But after the sharemarket crash, the feared economic downturn didn&rsquo;t arrive. Investors instead switched affections from shares to property, underpinned by lower interest rates. According to CoreLogic, home prices rose by 2.8 per cent in October 1987, lifting the annual rate from 5 per cent to 9 per cent. By late 1988, home prices were running at a 30-32 per cent annual rate &ndash; far higher than we are witnessing today.

To quell the &lsquo;irrational exuberance&rsquo; in housing and general &lsquo;conspicuous consumption&rsquo;, the Reserve Bank lifted cash rates over 1988 and 1989, with rates hitting highs of 18.2 per cent in November 1989.

Under the pressure of high interest rates, the economy contracted in December quarter 1989 and September quarter 1990 ahead of the recession in the first half of 1991. Interest rates were progressively cut from 1990 and didn&rsquo;t stop falling until 1994.

What are the implications for investors?

No two periods are alike. The environment in 1988 was starkly different to current times. But in all times, investors need to be aware of the risks and opportunities.

The Covid-19 pandemic shocked economies across the globe in 2020 and the response to the pandemic has varied. Those shocks are still reverberating. Australia has done well in suppressing the virus, and all levels of government and the Reserve Bank acted quickly in supporting businesses and families.

As a result, the economic recovery has been strong, but it is important not to be complacent. Risks lie to the upside and downside. For instance an extended closure of foreign borders may make it difficult for firms to fill open positions. Further, the longer that foreign borders are closed, the greater the risk that demand for homes will reduce, affecting the home building sector. Policymakers must be agile in continuing to watch for the threats to the economic recovery.

But if Australia continues on its current course, strong economic growth will boost employment and give increased security to those in work. A tighter job market should bring higher wage growth. Businesses are well placed to embrace low interest rates to lift investment. Low rates and government grants are boosting home construction and the buoyant house building should continue over 2021.

Note that the Reserve Bank won&rsquo;t be lifting interest rates until wage growth is closer to 3 per cent. At present wages are &ldquo;expected to pick up to a little under 2 per cent over 2021, before gradually increasing to around 2&frac14; per cent by mid 2023.&rdquo; Even on the &ldquo;upside&rdquo; scenario, wage growth won&rsquo;t hit 3 per cent before 2024, tempering &ldquo;boom&rdquo; expectations.

But whether you call it a &lsquo;boom&rsquo;, economic nirvana or just a strong economic recovery, the economic outlook seems bright.

The current investment environment is positive for consumer discretionary, construction, construction materials and information technology sectors of the Australian sharemarket. Financials will benefit from the expectation of firmer borrowing, but super-low interest rates will cap margins and revenue.

Based on traditional valuations, the sharemarket may seem expensive on the current share price to earnings ratio (PE ratio) of 20.97 (the long-term average is 15.5). But valuations are more difficult to make in an environment of near-zero interest rates. Continued strong economic growth would serve to boost corporate earnings and justify current share prices.

The All Ordinaries index has hit record highs on numerous occasions over the past month. The benchmark ASX 200 is also expected to make new highs in coming weeks. The ASX 200 index is tipped to end the calendar year at 7,200 points.

The Reserve Bank has lifted its 2021 calendar year economic growth forecast from 4.00 per cent to 5.25 per cent

cjames

Is Australia headed for economic boom or economic nirvana?

<html><body>
Expert Observer

<h2>National accounts</h2>

‘V-shaped’ recovery: The Australian economy (as measured by gross domestic product or GDP) grew by 3.1 per cent in the December quarter (consensus: +2.5 per cent) after rising 3.4 per cent in the September quarter and contracting 7 per cent in the June quarter. It was the biggest six-month lift in GDP since quarterly records began in 1959. GDP is still 1.1 per cent smaller than a year ago.

Annual result: In 2020, the economy contracted 2.5 per cent (biggest fall since 1947) after growing 1.9 per cent in 2019.

Contribution to growth: The biggest contributions to growth came from household spending (+2.3 percentage points); business equipment (+0.3pp); ownership transfer costs, dwellings, government consumption (all +0.2pp); and public investment (+0.1pp). But detracting from growth was net exports, commercial construction and inventories (all -0.1pp).

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Income: Real net national disposable income rose by 4.9 per cent in the December quarter and was up by 2.1 per cent on the year. In nominal terms GDP rose by 4.2 per cent in the quarter and rose by 0.6 per cent over the year.

Productivity: GDP per hours worked was flat in the December quarter but was up by 2.5 per cent on the year.

Industry sectors: Seventeen of the 19 industry sectors grew in the December quarter. The biggest contribution to the overall increase in output came from Agriculture, Forestry and Fishing (+0.5 percentage points) from Professional, Scientific and Technical Services and Administrative and Support Services (both +0.3pp). Output fell 1.0 per cent in Mining in the quarter with Electricity, Gas, Water and Waste Services down 0.9 per cent.

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<h2>What does it all mean?</h2>

It has been a most curious period for the Australian economy. After entering recession in the first half of 2020, the economy roared back in the final six months of the year. Clearly it has been all about Covid-19. Australian governments and the central bank responded quickly in locking down the economy and in providing the support and stimulus to families and businesses. The moves to suppress the virus were effective as were the support and stimulus measures.

<img alt="" height="977" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/record_gdp_commsec.jpg" width="1200">

The ‘V-shaped’ nature of the recovery is everywhere to see – economic growth, the job market, retail spending and the housing market. The Reserve Bank acknowledges that the recovery has been stronger than expected.

But the job is not done. The economy is still around 1 per cent smaller than a year ago. Unemployment is still too high; inflation and wage growth are still too low. But the forward indicators like job ads and business and consumer surveys are positive.

We expect the economy to rebound 4.2 per cent in 2021 after contracting 2.5 per cent in 2020. Much still depends on Aussies doing the right thing with social distancing measures. The vaccine roll-out is in the infancy. And then there is the risk posed by mutant strains of the virus.

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Stimulus and support measures are still very much required, and any scale-back needs to be carefully managed. The Reserve Bank certainly hasn’t changed its rhetoric. Rates will remain low for another three years. Bond buying will continue. Cheap loans will remain under offer to business.  

The all-important jobless rate is expected to ease from 6.4 per cent currently to 5.7 per cent by the end of 2021. While still high, clearly it is moving in the right direction. But spare capacity will remain in the job market for a few more years, keeping the cash rate anchored at 0.1 per cent.  

Craig James is the chief economist at CommSec
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We expect the economy to rebound 4.2 per cent in 2021 after contracting 2.5 per cent in 2020

Biggest economic rebound on record: CommSec's Craig James

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EXPERT OBSERVER

The Reserve Bank (RBA) has left the target rates for both the cash rate and 3-year government bond yield at 0.10 per cent. The RBA will purchase an additional $100 billion of bonds issued by the Australian Government and states and territories when the current bond purchase program is completed in mid-April. 
 

<h2>What has changed since the last RBA Board meeting on December 1?</h2>

• Joe Biden was sworn in as the 46th US President.

• ANZ job advertisements rose by 2.3 per cent in January to 161,582 available positions. Ads have lifted for eight successive months to be up 5.3 per cent from a year ago.

• Employment rose by 50,000 in December after increasing by 90,000 jobs in November. Full-time jobs rose by 35,700 and part-time jobs rose by 14,300. The unemployment rate fell from 6.8 per cent to 6.6 per cent in December.

• Preliminary retail trade fell 4.2 per cent in December (9.4 per cent annual) after rising 7.1 per cent in November.

• The weekly ANZ-Roy Morgan consumer confidence rating rose to a 15-month high.

• The NAB business confidence index fell from a 31-month high of +12.7 points to +4.5 points in December. But the business conditions index lifted from +7.0 points to 28-month highs of +14.2 points.

• The International Monetary Fund expects the global economy to expand by 5.5 per cent in 2021, which is 0.3 percentage points higher than the October 2020 forecast.

• The Consumer Price Index rose by 0.9 per cent in the December quarter to be up by 0.9 per cent on the year. The trimmed mean (underlying) measure rose 0.4 per cent in the quarter to be up 1.2 per cent on the year.

• Private sector credit (effectively outstanding loans) rose by 0.3 per cent in December to be up 1.8 per cent over the year.

• In the full twelve months to December the underlying Commonwealth Government cash balance was $186,120 million (9.5 per cent of GDP). The budget deficit for the six months to December was $9.5 billion lower than the ‘profile’ deficit.

• A retail trading frenzy for highly shorted stocks led to volatility on global sharemarkets and spilled over into the silver market.

• The Aussie dollar has lifted from US73-74 cents to US75-77 cents.

<h2>The Assessment</h2>

The Reserve Bank Board is not expecting to increase the cash rate until 2024 “at the earliest”. The first Tuesday in the month will never be the same.

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<h2>Perspectives on interest rates</h2>

The Reserve Bank left the cash rate at 0.10 per cent after cutting the rate from 0.25 per cent on November 3. The RBA previously cut the cash rate on March 3 and March 19, 2020, each by 25 basis points. The target rate for 3-year bond yields was left at 0.10 per cent.

On November 3 the RBA cut the 3-year bond target from 0.25 per cent to 0.10 per cent. The RBA implemented the 0.25 per cent target rate for 3-year bond yields on March 19, 2020. There have been 18 cash rate cuts since November 2011 with the cash rate cut from 4.75 per cent. Previously cash rates rose seven times from October 2009 to November 2010 from 3.00 per cent to 4.75 per cent.

<h2>What are the implications of RBA's decision?</h2>

• The Reserve Bank used the word, “strong”, five times in the statement. The economic recovery, employment and retail spending were all described as “strong”.

• The Reserve Bank Governor will go into more depth about the economic recovery in a speech tomorrow. Further, Governor Lowe gives testimony to the House of Representatives Economics Committee on Friday. On the same day the RBA issues the quarterly Statement on Monetary Policy that includes the latest forecasts. We received some inkling of the forecasts today: “In underlying terms, inflation is expected to be 11⁄4 per cent over 2021 and 11⁄2 per cent over 2022.”; “the central scenario is for unemployment to be around 6 per cent at the end of this year and 51⁄2 per cent at the end of 2022.”; the central scenario being for GDP to grow by 31⁄2 per cent over both 2021 and 2022.

• The Reserve Bank Board’s central scenario requires significant job gains and a return to a tight labour market to stoke inflation. And that is not expected until 2024 at the earliest.
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The RBA has left the target rates for both the cash rate and 3-year government bond yield at 0.10 per cent, with an increase not expected until 2024 "at the earliest"

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RBA interest rates - Set the watch for 2024: CommSec's Craig James

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Australia is again building the biggest houses in the world, data commissioned by CommSec from the ABS has found.
The average new house built in 2019/20 was 235.8 square metres, up 2.9 per cent on the year and the biggest increase in 11 years.
Latest data from the US, from 2019, saw their average house size build drop to 233.1 square metres, the fourth year in a row the figure has declined. Its most recent contraction was three per cent.
<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/2020/12/Houses%20v%20US.jpg" alt="">
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It's not just housing which is getting bigger either.
The average size of an apartment in Australia is six per cent higher over the year, hitting a decade high of 136.8 square metres.
The ACT built the biggest houses in Australia in 2019/20, ahead of Victoria, New South Wales and Western Australia.
<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/2020/12/Houses%20Built%20jpeg.jpg" alt="">
<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/2020/11/9/Houses%20Commsec.jpg" alt="">Despite lifting six per cent last year, the average house in NSW is six per cent smaller than Victoria.
The smallest new houses built were in Tasmania, an average size of 179 sqm.
<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/2020/11/9/AU%20houses%20state.jpg" alt="">The biggest 'other dwellings', which incorporates townhouses and apartments, are found in Victoria, with an average of 155 sqm, followed by Western Australia at 150.5 sqm.
New South Wales (121.3 sqm) and Tasmania (132.5 sqm) have the smallest apartments and townhouses.
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CommSec chief economist Craig James says that before last year, Aussie home buyers had been building progressively smaller houses on average. 
"Aussies had embraced apartments as well as smaller houses on smaller lot sizes. In fact the size of the average house built last year (2018/19) was the smallest in 17 years," James says.
“So while Aussies built bigger homes over the past year, the big question is whether the decade-long downtrend in home size has ended. And COVID-19 may play a big role in answering that question.
“Government-imposed lockdowns in response to the COVID-19 virus have prompted more Aussies to re-assess their housing needs. With more time spent at home for both leisure and work, some Aussies are looking for bigger homes. Others are coming to the belief that the layout of their home needs changing.”
In 2009 Australia was building the biggest detached houses they had ever built, the biggest in the world. But they relinquished that title in 2013.
 
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Australian houses are the world's biggest: CommSec

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EXPERT OBSERVER
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<h2>What does it all mean?</h2>
The Federal Government has had one mantra over the COVID-19 environment: to keep business in business and keep people in jobs. And despite the budget headed for the biggest deficit in 75 years, that mantra will continue to echo in the upcoming budget. A deficit of around $220 billion or 11 per cent of GDP is expected this year (2020/21).
Based on usual leaks, pre-announcements and speculation, the budget will be focussed on jobs. Other key measures include tax cuts, cash handouts for payments, significant spending on infrastructure, a new apprenticeship &amp; trainee program, investment in manufacturing and a Digital Business Plan.
One on-going issue will be wage subsidy schemes. There is growing debate on how the schemes should be structured. Some are concerned that jobseekers will be pushed into poverty if the programs are wound back too quickly. But others are concerned that the programs are too generous – and if kept in place too long it will lead to jobseekers staying out the job market and thus becoming less employable over time. The latter situation has been a constant feature of past recessions.
Budget speculation: What do we know so far?
Ahead of each budget, AAP newswires compiles the ultimate guide. And this year is no different. Paul Osborne from AAP has compiled the following report.
Also Newscorp press yesterday reported that tax cuts could be brought forward to begin July 2020.
<img src="https://www.urban.com.au/images/2020/10/6/Budget%20GDP.png" alt="">
Today, the Government announced that half the salary of new apprentices and trainees in any industry will be paid for by the federal government for one year under a wage scheme to create jobs. The scheme is reported to cost $1.2 billion to employ 100,000 new workers and will begin Monday October 5.
Media is also reporting a focus in the budget on boosting female employment.
The AAP report from Paul Osborne:
THE BIG PICTURE
Prime Minister Scott Morrison and Treasurer Josh Frydenberg say it will be a "jobs budget" with the aim of driving the recovery out of the first recession since the 1990s
Estimated budget deficit of $200 billion
Debt edging upwards of $800 billion
<img src="https://www.urban.com.au/images/2020/10/6/Revenue%20slump.png" alt="">
Expected $140 billion in stimulus over four years
INFRASTRUCTURE
Funding to expand two NSW dams, Wyangala and Dungowan.
$53 million funding for gas infrastructure as part of a national plan
$211 million for domestic fuel security facilities
More flexible rules for the Northern Australia Infrastructure Facility to invest
HIP-POCKETS
Possible bringing forward of personal tax cuts due to start in 2022
2.5 million pensioners to get extra help to make up for an inflation-related rise not going ahead
HomeBuilder package likely to be extended
No changes to the JobSeeker dole payments. Government wants more data on economic conditions before deciding.
BUSINESS
$112 million in fringe benefits tax changes to ease burden on small business
Consideration of a business investment allowance
Wage incentive for small and medium-sized businesses to take on new workers
$1.5 billion manufacturing strategy
$800 million aimed at helping individuals and businesses work online
$53 million funding for television and film production and new content rules
Possible rule changes around "loss carry-back" for businesses
HEALTH
Extension of telehealth and e-prescription services
Extra funding for aged care, ahead of the receipt of the royal commission report
New strategy to get young people out of residential aged care
$9 million for research into cancer in children and young adults
REGIONS
$100 million for new Regional Recovery Partnerships (projects in areas hit by drought, bushfires and coronavirus)
$30 million for the Regional Connectivity Program (local telecommunications projects)
$50 million Regional Tourism Recovery initiative (assist businesses in regions heavily reliant on international tourism)
$200 million for an additional round of the Building Better Regions Fund
$50 million extra in rebates for farmers seeking to put in bores and dams
EDUCATION
Extra $326 million to provide 12,000 more university places for domestic students
WELFARE
$7.6 million for parents experiencing stillborn babies or the death of a child under 12 months of age
700 new safe places for women and children escaping domestic violence under $60 million "safe places" initiative
ENVIRONMENT
$61.7 million for nature-based tourism.
<h2>What are the implications for investors?</h2>
Stimulus is expected to continue. Governments and central banks will continue to do all that it takes to get the economy back to a sense of normalcy. Interest rates will stay low for three years. And the government won’t start crafting plans to wind back deficits and debts until the jobless rate is comfortably below 6 per cent.
<img src="https://www.urban.com.au/images/2020/6/10/economy%20long%20run.png" alt="">
Investors can largely ignore economic and budget forecasts longer than a year away. So much can change in a short space of time in the pandemic recession.
The budget will be judged on the ability to create and sustain jobs and keep business in business, rather than being judged on meeting specific fiscal and economic forecasts.
Retailers, building &amp; construction trades, manufacturing, pensioners, young people and middle-income workers look to be the main winners from the budget.
CRAIG JAMES is the chief economist at CommSec.
 
 
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Federal budget to keep focus on jobs: CommSec's Craig James

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EXPERT OBSERVER
<div>
According to the Housing Industry Association, private house sales rose 3.6 per cent in August. Sales for the three months to August were up 36.5 per cent on a year ago.
In the first 16 days of September, home prices in the five mainland capital cities were down 0.2 per cent compared with the end of August. Prices were mixed across the cities: Sydney (-0.3 per cent); Melbourne (-0.5 per cent); Brisbane and Adelaide (both up 0.3 per cent); Perth (up 0.1 per cent).
Data on home prices influences spending and wealth. Used vehicle prices affect consumer wealth and affect vehicle affordability. New home sales are a guide into conditions in home building construction.
</div>
<div class="x_WordSection2">
<h1>What does it all mean?</h1>
- New home sales have soared over the past three months under the influence of the HomeBuilder Scheme. Used vehicle prices have soared in response to higher demand and lower stock levels. And home prices continue to hold up, supported by bank lending and low interest rates.
Up to May, Sydney and Melbourne home prices led the way higher alongside Hobart. Now Sydney and Melbourne prices are correcting and it’s the turn of Brisbane and Adelaide to drive national home prices higher. While the jobless rate has risen, interest rates are at generational lows and banks continue to lend,
<h1>What do the reports and figures show?</h1>
New Home Sales
According to the Housing Industry Association private house sales rose 3.6 per cent in August. Sales for the three months to August were up 36.5 per cent on a year ago.
<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/2020/9/16/Prince%20Index.jpg" alt="">
The HIA report:
·        “New home sales for the six months to August 2020 were 8.7 per cent higher than in the same period the year before.
·        New Home Sales in Western Australia were 91.1 per cent higher in the past six months than in the same period last year and 4.2 per cent higher in Queensland for the same period of time.
·        New Home sales were static or lower for the past six months in Victoria, New South Sales, and South Australia as the pickup in sales due to HomeBuilder have not offset the losses due to the COVID recession.
·        Sales in WA at this time in 2019 were at record low levels following the bottom of the mining investment cycle, a situation that was exacerbated by the credit squeeze in 2018.
·        The combined impact of HomeBuilder, the WA State Government’s Building Bonus and pent-up demand for housing will see home building pull the WA economy forward. The surge in home building work from as early as the December quarter will see more skilled workers return to WA pursuing employment opportunities which will also underpin demand for this new housing stock.”
CoreLogic Daily home value index
In the first 16 days of September, home prices in the five mainland states were down 0.2 per cent compared with the end of August.
Prices were mixed across the cities: Sydney (-0.3 per cent); Melbourne (-0.5 per cent); Brisbane and Adelaide (both up 0.3 per cent); Perth (up 0.1 per cent).
What is the importance of the economic data?
The Housing Industry Association compiles a New Home Sales report each month. The data provides insights into the home construction sector.
CoreLogic maintains a daily index of home values that provides insights into consumer spending and the state of the established housing market.
<h1>What are the implications for investors?</h1>
Investors have a raft of relatively new indicators to watch to get a sense of how individual sectors and companies are faring, as well as the broader economy.
The Reserve Bank, governments and both regional and major banks are playing key roles in supporting economic recovery. However, there is still some way to go.
CRAIG JAMES is the Chief Economist at CommSec
 
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House sales up 3.6 per cent in August: CommSec

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EXPERT OBSERVER
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The value of home loans rose by 8.9 per cent in July after a 6.4 per cent rise in June (consensus: up 2 per cent). It was the biggest back-to-back increase in home loans in 18 years of records. First home buyer numbers are at a 10½-year high.
The Westpac-Melbourne Institute Index of Consumer Sentiment rose 18 per cent in September, lifting from 79.5 to 93.8. A reading below 100 points denotes pessimism. 
Consumers believe that the wisest place for extra savings is in the bank (32.7 per cent of respondents). But 8 per cent say that they don’t know the wisest place for savings – the second highest level on record.
Chinese consumer prices rose 0.4 per cent as expected in August to be up 2.4 per cent on the year. Producer prices fell 2 per cent over the year as expected
The lending figures have implications for builders, housing-reliant businesses, finance providers, retailers, and companies dependent on consumer and business spending. The consumer confidence figures have implications for retailers, and other consumer-focussed businesses.
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<h1>What does it all mean?</h1>
<ul>
<li>Today’s economic data can be filed in the ‘encouraging’ category. Consumers are more chipper, home loan data is healthy and average home loans are still bigger than a year ago. There are more first home buyers taking out loans than at any point over the past decade. Also expectations of future house prices lifted almost 22 per cent last month.</li>
<li>We have said this many times – this is not your traditional recession. Spending is rising at double digit annual rates and people are still confident enough to be buying and building more homes.</li>
<li>The Reserve Bank strategy is working. Super-low interest rates and an expectation that they are not going to rise for three years are encouraging people to buy and build homes.</li>
<li>If you had a saving windfall, what would you say is the wisest place to put it? In the latest survey, 8 per cent say they don’t know – the second highest reading on record (25 years). </li>
</ul>
<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/2020/9/11/home%20loan%20values.jpg" alt="">
<h1>What do the figures show? </h1>
Lending - July
<ul>
<li>The value of home loans rose by 8.9 per cent in July (consensus: up 2 per cent) with owner-occupier loans up by 10.7 per cent and investor loans up by 3.5 per cent. The accompanying table has the details of lending per category.</li>
<li>The value of loans to first home buyers in July rose by 10.6 per cent and was 26.6 per cent higher for the year.</li>
<li>The number of owner occupier first home buyer loan commitments rose by 14.4 per cent in seasonally adjusted terms.</li>
<li>By value, first home buyer loan commitments accounted for 38.7 per cent of all owner-occupier home loans in July (excluding refinancing) – a 10½-year high.</li>
<li>
Personal finance fixed term loan commitments rose by 6.9 per cent in July after rising 5.2 per cent in June. Commitments were down 3.9 per cent on a year ago. Car loans fell by 0.9 per cent after rising 61.2 per cent in the two prior months. </li>
<li>
Personal lending from revolving sources (including credit cards) fell by 11.1 per cent in July after falling 13.5 per cent in June. Loans were down by 40 per cent over the year.</li>
<li>
New finance leases fell by 14.1 per cent in July after dropping 6.1 per cent in June. Finance leases were down 3.3 per cent on the year.</li>
<li>The value of new loan commitments to businesses for construction fell by 25.1 per cent in July after rising by 57.3 per cent in June. Loans were down 16.6 per cent on the year.</li>
<li>
Loans for the purchase of property by business fell by 14.2 per cent in July after falling 15.3 per cent in June to be down by 25.4 per cent over the year.</li>
</ul>
Consumer confidence – September
<ul>
<li>The Westpac-Melbourne Institute Index of Consumer Sentiment rose by 18 per cent from 79.5 to 93.8 points in September. A reading below 100 points denotes pessimism.</li>
<li>The current conditions index rose by 14 per cent. And the expectations index rose by 21 per cent.</li>
<li>
All five major components of the index rose in September.</li>
</ul>
<img src="https://www.urban.com.au/images/2020/9/11/Westpac%20Melb%20sentiment.png" alt="">  
<ul>
<li>The survey was based on responses from 1,200 people and conducted in the week from August 31 to September 6, 2020.</li>
<li>
Wisest place for savings: Overall 32.7 per cent of respondents believe the wisest place to put new savings is in the bank – down from a 5½-year high of 34.8 in June. Only 9.2 per cent of consumers nominated shares – down from a 6½-year high of 11.4 per cent in June. And 9.9 per cent believe the wisest place for savings is real estate, up from 9.0 per cent in the June quarter.</li>
<li>Also in the latest quarterly survey, 8 per cent say that they don’t know the wisest place for savings – the second highest level on record. Consumers are less keen on paying down debt – the reading of 17.1 per cent was a 5-year low. Only 3.4 per cent thought ‘spend it’ was the best use for new savings – down to a near 7-year low. Those electing ‘superannuation’ as the wisest place for savings lifted from 4.5 per cent to 6.9 per cent</li>
<li>
“Lending Indicators” is released monthly by the Bureau of Statistics and contains figures on new housing, personal, commercial and lease finance commitments. The importance of the data lies in what it reveals about the appropriateness of interest rate settings, confidence and spending levels in the economy.</li>
<li>Westpac and the Melbourne Institute release the Index of Consumer Sentiment each month. The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes. Confident consumers may be more inclined to spend, especially on major items. </li>
<li>These are strange times. And the fog doesn’t look like lifting any time soon. Mask-wearing Aussies are buying homes and indulging in retail purchases against the biggest downturn in the economy since World War II.</li>
<li>It just shows that the stimulating policies of the Federal Government and Reserve Bank are working perfectly.</li>
<li>Interest rates are set to remain low for three years – the Reserve Bank Governor’s own words. Aussie consumers are responding by buying and building homes. We just need businesses to recognize the different times and take back workers from their hibernation and take on new staff.</li>
<li>The housing market outlook is improving. There was a 3 per cent lift last month on the question of whether it was a good time to buy a home. And there was a 21.7 per cent lift in house price expectations.</li>
<li>All in a recession.</li>
</ul>
<h1>What is the importance of the economic data?</h1>
“Lending Indicators” is released monthly by the Bureau of Statistics and contains figures on new housing, personal, commercial and lease finance commitments. The importance of the data lies in what it reveals about the appropriateness of interest rate settings, confidence and spending levels in the economy.
Westpac and the Melbourne Institute release the Index of Consumer Sentiment each month. The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes. Confident consumers may be more inclined to spend, especially on major items.
<h1>What are the implications for investors?</h1>
 These are strange times. And the fog doesn’t look like lifting any time soon. Mask-wearing Aussies are buying homes and indulging in retail purchases against the biggest downturn in the economy since World War II.
It just shows that the stimulating policies of the Federal Government and Reserve Bank are working perfectly.
Interest rates are set to remain low for three years – the Reserve Bank Governor’s own words. Aussie consumers are responding by buying and building homes. We just need businesses to recognize the different times and take back workers from their hibernation and take on new staff.
The housing market outlook is improving. There was a 3 per cent lift last month on the question of whether it was a good time to buy a home. And there was a 21.7 per cent lift in house price expectations.
All in a recession.
<img src="https://www.urban.com.au/images/2020/9/11/CommSec%20average%20mortgage%20size.png" alt="">
CRAIG JAMES is the Chief Economist at CommSec
 
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Home loan values see biggest jump in 18 years: CommSec

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EXPERT OBSERVATION
The 2019/20 financial year is almost complete and it is an opportune time to see how investments, financial markets and economies have performed over the past year.
Not to put too fine a point on it, the past year has been difficult.
The US-China trade stoush and Brexit dominated in the first half of 2019/20, causing businesses and consumers to restrain spending, employment and investment.
And, just when there were signs of hope that these two factors would be less depressing for the global economy, the coronavirus emerged.
It is now acknowledged that COVID-19 poses the biggest threat to the global economy in 90 years.
Central banks have slashed interest rates and governments have provided unprecedented amount of fiscal support and stimulus for their economies.
Governments started to impose lockdown measures on businesses and the movement of people from late January with the strictest measures applied from March to May. Countries have had varying success in suppressing the virus, but the financial year is ending with countries coming out of lockdown and returning their economies to some sense of normalcy.
Over 2019/20 there have been four interest rate cuts, each of 25 basis points.
The cuts occurred on July 3, October 2, March 4 and March 20.
The cash rate now stands at a record low of 0.25 per cent or 25 basis points.
The rate cuts in July and October, 2019 were made with the intention of speeding up the economy and driving unemployment lower.
The rate cuts in March 2020 were designed to shore up the economy against the depressing economic effects of COVID-19.
On March 20, the Reserve Bank also set a target for the 3-year government bond yield at 25 basis points.
The Reserve Bank also implemented a term funding facility designed to provide financial assistance for small and medium sized businesses.
The Aussie dollar began the financial year near US70 cents and is ending the year near US69 cents. But those values mask some volatility, especially in 2020.
The high for the Aussie was US70.82 cents on July 19.
The low (actually a 17-year low) was set on March 19 at US55.06 cents.
The low point largely corresponded to lows for global sharemarkets and marked the peak of the virus panic – the fears about the spread of the virus and the implications for economies.
It has been the most volatile year for the currency in five years.
Over 2019/20 we have calculated that the Aussie is the 70th strongest currency against the US dollar of 120 currencies tracked (down 1.7 per cent).
The currencies of Netherlands Antilles, Taiwan, Afghanistan and Malawi all rose 4.0-5.5 per cent.
The weakest currencies were from the economies of Argentina, Brazil, Zambia, the Seychelles and South Africa. Only 19 currencies of 120 currencies have lifted against the greenback over the year.
In the first six months of 2020, the Aussie dollar has also fallen 1.6 per cent against the US dollar, making it the 73rd strongest of 120 currencies tracked.
The currencies of Japan, Switzerland and Taiwan have lifted by around 1-2 per cent.
The weakest currencies are from the economies of Brazil, Zambia, the Seychelles and South Africa.
Only 13 currencies have lifted against the greenback so far this year.
Commodity prices eased over the second half of 2019/20 as COVID-19 fears dominated.
The Commodity Research Bureau futures index fell by 24 per cent over 2019/20, but the CommSec daily index eased by only 13 per cent.
The difference between the two indexes is gold, with its price up 26 per cent over 2019/20 while beef has risen by 7 per cent and sugar is down by only 4 per cent.
Amongst base metal prices, nickel has lifted by almost 1 per cent and copper is down 1.5 per cent.
Oil has fallen 31 per cent, while spot natural gas has slid 54 per cent and iron ore is down by 13 per cent.
The Australian sharemarket started 2019/20 with the All Ordinaries near 6,700 points and the ASX 200 near 6,620 points.
The All Ords is ending the year near 6,060 points (down 9.4 per cent) with the ASX 200 near 5,950 points (down 10.0 per cent).
 If we focus on the ASX 200, the index hit record highs of 7,162.5 on February 20 with lows hit around a month later on March 23 at 4,546 points.
We have estimated that Australia (-9.4 per cent) is the 39th strongest of 72 global bourses so far in 2019/20.
Interestingly only 15 of the 72 bourses have recorded gains over the year.
The best performers were hyperinflation-affected Zimbabwe and Venezuela but Denmark is up 26 per cent.
Notably the US Dow Jones fell by 3 per cent while the NASDAQ has lifted 24 per cent. New Zealand has risen by 12.4 per cent and has been the 5th strongest bourse.
The worst performers include Cyprus, Lebanon, Kenya, Colombia and Greece.
In the first six months of 2020, the All Ordinaries has fallen by almost 11 per cent, ranking Australia 31st of 72 nations.
Only 8 of 72 bourses are up so far this year.
Again Denmark and New Zealand are amongst the out-performers with Cyprus, Greece, Austria, Colombia and Kenya amongst the laggards.
Total returns on Australian shares have fallen by 6.4 per cent over 2019/20 which, if maintained, would be the first decline in returns in eight years.
Returns on dwellings have lifted by 12.3 per cent while returns on government bonds have lifted by 4.3 per cent.
Of the 22 identified industry sub-sectors, only eight have recorded gains in 2019/20.
Leading the gains is Consumer durables &amp; apparel (up by 45.9 per cent) followed by Pharmaceutical &amp; Biotech (up 32.3 per cent), Software &amp; services (up 19.9 per cent) and Retailing (up 15.2 per cent).
At the other end of the scale, Energy has fallen the most (down 29.2 per cent) from Banks (down 27.9 per cent) and Insurance (down 23.9 per cent).
Of the size categories, the MidCap50 has out-performed (down 2.1 per cent) from the Small Ordinaries (down 5.4 per cent), the ASX100 (down 10.6 per cent) and the ASX50 (down 12 per cent).
Now it’s all about COVID-19.
The economic outlook depends on the success or otherwise achieved by governments, health authorities and communities in suppressing the spread of the virus.
If the virus is contained and the active case load remains manageable, then more parts of the economy can re-open and a degree of normality can return to society and the economy.
As economies re-open, setbacks can be expected in suppressing the spread of COVID-19. There is no road map to follow, governments will need to quickly respond to changes in circumstances.
Ideally, a vaccine or treatment will be found.
But economies can still rebound from lockdown-driven lows in the absence of a vaccine. If and when a vaccine is found, it will still take time for testing and commercialisation.
The main short-term implication of finding a vaccine is a boost to confidence, encouraging businesses to invest and hire workers and encouraging consumers to spend.
Prospects for sharemarkets will depend on businesses returning to normal and people returning to their workplaces.
CommBank Group economists tip a 3.2 per cent fall in the global economy in 2020 and then a 4.7 per cent lift in 2021.
In Australia, the economy is tipped to fall 3.9 per cent in 2020 before recovering 3.0 per cent in 2021.
The recovery in Australia will be restrained by the drying up of external migration, affecting tourism, education and real estate markets.
We assume that Australian governments and the Reserve Bank will live up to the promise of doing “whatever it takes” to restore the economy to full health – especially restoring health to the job market. This means leaving the cash rate at record lows and continuing to provide fiscal support measures.
Governments will need to balance health risks with economic risks.
But we expect the Federal Government to live up to the mantra of protecting jobs. There are still a few weeks until the July 23 Budget update where the Government will assess whether to extend JobKeeper in some form.
We expect the unemployment rate to peak near 8.4 per cent in the September quarter before easing toward 7 per cent by December quarter 2021.
The good news for the government is that the Budget was balanced before the virus crisis hit.
That has allowed the Federal – as well as State and Territory governments – to provide all the necessary support for economies. We estimate that around $295 billion of fiscal and financial support (almost 15 per cent of GDP) has been provided by all governments and the Reserve Bank.
Budget deficits near $130 billion are expected in 2019/20 and 2021/21 (around 7 per cent of GDP). Net debt may lift from around 20 per cent of GDP to around 30-35 per cent of GDP – still low compared with other advanced nations.
The cash rate is expected to remain at 0.25 per cent until 2022.
In terms of the sharemarket, last year we noted: “Over the coming year CommSec expects the All Ordinaries index to be near 6,700-7,000 points in December 2019 and 6,800-7,100 points in June 2020.” The first forecast was achieved. Clearly COVID-19 has ensured that the June 2020 forecast won’t be achieved.
Over the coming year CommSec expects the All Ordinaries index to be near 6,100-6,400 points in December 2020 and 6,500-6,800 points in June 2020.”
The Aussie dollar is expected to trend higher over the coming year in line with expectations of economic recovery at home and abroad.
CommBank currency strategists are tipping the Aussie dollar to lift to US72 cents by December 2020 and US76 cents by June 2021.
But the strategists warn “The increasingly fraught relations between US China and Australia China will be an intermittent downside risk to AUD/USD. Some of these tensions reflect ‘great power’ rivalry between the US and China that will not go away soon.”
Craig James is the Chief Economist at CommSec
Ryan Felsman is a Senior Economist at CommSec
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The 2019/2020 financial year in review: CommSec's Craig James

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EXPERT OBSERVATION 
Inflation: The Consumer Price Index – the main measure of inflation in Australia – rose by 0.3 per cent in the March quarter (consensus: 0.2 per cent). In seasonally adjusted terms the CPI rose by 0.4 per cent. The annual rate of headline inflation lifted from 1.8 per cent to 2.2 per cent – the strongest pace in 5½ years. 
Underlying measures: The Reserve Bank monitors three measures to derive the underlying inflation rate. The trimmed mean rose by 0.5 per cent in the March quarter (1.8 per cent annual); the weighted median rose by 0.5 per cent (1.7 per cent annual) and the CPI less volatile items rose by 0.5 per cent (2.1 per cent annual). Overall, underlying inflation rose by around 0.5 per cent in the quarter and by around 1.7 per cent over the year. Market goods and services less volatile items rose by 0.3 per cent in the quarter to be up 2.1 per cent on the year.
Main changes: The most significant price rises in the March quarter were for food and non-alcoholic beverages (+1.9 per cent), alcohol and tobacco (+1.6 per cent), education (+2.6 per cent) and health (+1.7 per cent). The most significant offsetting price falls this quarter are automotive fuel (-6.0 per cent), domestic holiday travel and accommodation (-3.1 per cent) and international holiday travel and accommodation (-3.0 per cent).
<h2>What does it all mean?</h2>
Aussies venturing out to buy essentials at supermarkets during the peak of the coronavirus (COVID-19) crisis would’ve noticed that food had become more expensive. In fact, prices of food and non-alcoholic beverages surged by an annual growth rate of 3.2 per cent in the March quarter – the strongest rate in 5½ years – propelling overall headline consumer prices higher. Why? Supply shortages due to the drought and bushfires – fruit and vegetable prices lifted sharply. 
The Bureau of Statistics said, “There were some price effects of COVID-19 apparent in the March quarter due to higher purchasing of certain products towards the end of the quarter, as restrictions came into effect. Most notably, rises were seen in, other non-durable household products (+3.4 per cent), which includes toilet paper; personal care products (+2.2 per cent), which includes soap and hand sanitiser; and other cereal products (+4.4 per cent), which includes rice and pasta.”
The lift in grocery prices broadly aligns with Coles’ sales report today. The supermarket chain not only reported a record 12.9 per cent lift in sales to $9.2 billion during the March quarter, but it also announced that its grocery and food prices rose by 2.6 per cent during the quarter, or by 1.8 per cent excluding tobacco and fresh foods. Why? COVID-19 panic buying saw a surge in shopper demand so the company scaled-back promotional activity with consumers preferring to purchase smaller grocery pack sizes in the frenzy.
But before anyone gets too excited about the headline annual inflation rate hitting the lower end of the Reserve Bank’s 2-3 per cent target band, the demand shock from the virus crisis is about to plunge Australia into the deflationary world, a world experienced by Japan and Europe in recent years. In fact, Reserve Bank Governor Philip Lowe warned last week that, “it is quite likely that year-ended headline inflation will turn negative in June. If so, this would be the first time since the early 1960s that the price level has fallen over a full year.”
 A sharp decline in crude oil and petrol prices, supportive government measures to cap and reduce prices - such as free childcare – tepid wage growth and weaker home rental prices are all likely to be disinflationary. Given the size of the housing cost basket within the consumer price index - around 23 per cent – falling home prices, higher vacancy rates and weaker rents could persist for the rest of 2020, weighing on consumer prices. 
Slow wage growth and falling prices of consumer goods – such as electronics, clothing and footwear – have been a feature of low-inflation for several years now. And businesses have been reluctant to pass on the rising cost of imported goods (due to the weaker Aussie dollar) amid consumer spending caution and intense competition. The huge impact of the economic shutdown will see deflation persist for a few quarters. In fact, Commonwealth Bank Group economists are forecasting the annual headline rate to fall to just 0.5 per cent in 2020 after turning negative in the June quarter. But the annual underlying inflation measure (trimmed mean) is estimated to hold up at 1.3 per cent in 2020.
RYAN FELSMAN senior economist at CommSec
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Highest headline inflation in 5½ years: Ryan Felsman

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EXPERT OBSERVER
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Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating fell by 2.8 per cent to a 4-year low of 106.8 points. Sentiment is below both the average of 114.3 points held since 2014 and longer term average of 113.1 points since 1990.
Consumer views on the economic outlook over the next 5 years are the most pessimistic since the weekly survey commenced in August 2008.
The Reserve Bank Deputy Governor delivered a speech: “Employment and Wages”<a href="https://www.rba.gov.au/speeches/2019/sp-dg-2019-11-26"> </a>
The consumer confidence figures have implications for retailers, and other consumer-focussed businesses.
<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/2019/11/26/Roy%20Morgan%20confidence.jpg" alt="">
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<h1>What does it all mean?</h1>
- This would worry the Reserve Bank. Consumer sentiment is at 4-year lows, however it is hard to find catalysts for either the sharp drop in the past week or the weakness over the past months. Interest rates are steady; the sharemarket is edging closer to record highs; there is continuing optimism about a US-China trade deal; and the Aussie dollar has been reasonably steady in a US67-69 cent range.
- While not a factor affecting personal finances or the economy in a broader sense, the bushfires would have been a factor generally affecting consumer mood over the past week. Then there is the on-going drought. The sharp increases in petrol prices in eastern and southern mainland capital cities would also certainly be making people more apprehensive. And consumers always prefer a stronger Aussie dollar to a weaker currency.
- Aussies are at risk of talking themselves into an economic downturn. And when you review the evidence there is no justification for pessimism. Inflation is low, tax cuts are flowing, the budget is balanced, the trade surplus is at record highs and record low interest rates are driving down borrowing costs.
- But most consumers seem to be sending a message that interest rates are low enough and don’t need to go further. The Reserve Bank has seemingly got the message that rate cuts are bad for confidence: at the last meeting the Board “recognised the negative effects of lower interest rates on savers and confidence.”
- All eyes will now be focussed on the Reserve Bank Governor’s speech tonight. Governor Lowe would be best to turn the speech into a ‘pep talk’ and rule out new special initiatives to drive the economy. Most people just want to know that rates will remain low for an extended period.
- Reserve Bank Deputy Governor Guy Debelle expects annual wage growth to persist in the 2s (2.0-2.9 per cent). Encouragingly he says: “I don't think there is much risk in the period ahead that aggregate wages growth will move any lower.”
- But the Reserve Bank is not expecting much of a lift in wages either: “What we know from our liaison program is that the proportion of firms expecting stable wages growth in the year ahead is around 80 per cent and only around 10 per cent anticipate stronger wages growth.”
- The Deputy Governor also said “The Bank is trying to understand what has been driving these macro developments using some newly available micro data sources. This greater understanding should help inform our outlook for the labour market.”
<h1>What do the figures show? </h1>
Consumer Sentiment
- The weekly ANZ-Roy Morgan consumer confidence rating fell by 2.8 per cent to 106.8 points. It was the biggest weekly fall in two months. Sentiment is below both the average of 114.3 points held since 2014 and the longer term average of 113.1 points held since 1990. 
All of the five major components of the index fell last week:
- The estimate of family finances compared with a year ago was down from +10.9 points to +10.8 points; 
- The estimate of family finances over the next year was down from +25.8 points to +20.3 points;
- Economic conditions over the next 12 months was down from -9.4 points to -10.6 points;
<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/2019/11/26/Economic%20outlook%20CommSec.jpg" alt="">
- Economic conditions over the next 5 years was down from +0.8 points to -3.8 points; 
- The measure of whether it was a good time to buy a major household item was down from +21.1 points to +17.1 points. 
- The measure of inflation expectations was steady at 3.8 per cent. 
<h1>What is the importance of the economic data?</h1>
- The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is now closely tracked by the Reserve Bank.
<h1>What are the implications for interest rates and investors?</h1>
- The Reserve Bank can cut rates again. The question is whether it should cut rates again. The promise of an extended period of record low rates may serve a better purpose.
- The Federal Government is well placed to provide stimulus to the economy. But the measures applied must directly boost business activity and consumer spending rather than just encourage or influence actions.
- The latest consumer confidence data offers no joy for retailers. Retailers must work extra hard to secure the affection of consumers. Good deals at the Black Friday and Cyber Monday sales would help.
- Also downbeat for retailers, this from the Reserve Bank Deputy Governor: “surveys suggest that promotions can be a key source of earnings growth for individuals. On average, a promotion leads to a 5 per cent boost in hourly wages, which is comparable to the wage rise a worker gets when switching firms. Since 2012, there has been a broad-based decline in the proportion of employees that are getting promoted at work or switching jobs. This means that a smaller fraction of the workforce are receiving these wage rises.”
CRAIG JAMES is the Chief Economist at CommSec.
 
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