Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

Joel Robinson

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

&nbsp;

Developer GURNER™ Group has revealed $1.65 billion in residential sales nationally across the 12 months to December 2025, driven largely by the continued momentum of its Docklands wellness-focused precinct, Elysium Fields.

The sales result was generated across seven projects in Victoria and New South Wales, headlined by Elysium Fields, GURNER™’s $2.75 billion mixed-use precinct planned for Harbour Esplanade in Docklands.

The project has recorded more than $500 million in sales across the first three towers, equating to around 580 apartments sold.

The first tower, Helios, has now sold out of its 240 private residences, with GURNER™ preparing to release a premium penthouse collection comprising 15 three-bedroom penthouses in coming weeks.

[smartcode_project:default project_id=144441 project_image_fid=370975]

Elysium Fields is being developed on the long-held 20,000 sqm Docklands site at 208-226 Harbour Esplanade, which had remained undeveloped for more than two decades prior to GURNER™ taking over the project around four years ago.

Construction has now commenced across four towers ranging between 18 and 30 storeys, with Hamilton Marino and Maxcon appointed as builders.

Once complete, the precinct is expected to comprise around 1,100 residences, alongside retail, hospitality and public realm uses integrated throughout the site.

[smartcode_project:default project_id=144441 project_image_fid=370981]

Designed by Fraser &amp; Partners in collaboration with GURNER™ Design House, the project has been positioned around the developer’s broader focus on wellness-led residential living.

“We don’t sell apartments. We create a true luxury lifestyle that simply doesn’t exist elsewhere in the market today,” Founder and Executive Chairman Tim Gurner said.

“To deliver that requires an extraordinary level of detail, coordination and discipline across multiple verticals, from design and hospitality through to wellness and service.”

“We’ve always believed that living extends far beyond the physical residence. It’s about how you feel the moment you arrive, how you live day-to-day, and the ecosystem that supports that.” 
[smartcode_project:default project_id=144441 project_image_fid=370977]

The project’s design places a heavy focus on landscaping, wellness amenities and biophilic design principles.

Plans include around 3,700 sqm of landscaped gardens and open space throughout the precinct, alongside a retail and dining offering spanning approximately 5,000 sqm.

The broader public realm strategy centres around what GURNER™ describes as the “Path of Life”, an urban forest and landscaped pedestrian environment intended to connect the various buildings and wellness spaces across the precinct.

The apartments themselves will incorporate a range of wellness-focused inclusions, including purified air and water systems, circadian lighting, antimicrobial surfaces, and optional in-home wellness upgrades.

[smartcode_project:default project_id=144441 project_image_fid=370980]

Gurner said the company’s experience through its Saint Haven wellness clubs had directly informed the residential offering now being incorporated into Elysium Fields.

“We’re seeing a clear global shift toward longevity, performance and proactive health,” Gurner said.

“Our role is to deliver that in a way that feels seamless, highly private and beautifully resolved within the environments we create.”

A large component of the wellness offering is planned through the resident amenity and health facilities proposed within the precinct.

That includes plans for bathing and recovery facilities spread throughout the towers, incorporating mineral pools, saunas, steam rooms, flotation therapy, red light therapy and wellness lounges.

The developer is also seeking approvals for what it describes as a “reverse ageing medical clinic” within the precinct.

[smartcode_project:default project_id=144441 project_image_fid=370978]

According to project information released by the group, the proposed facility would include cryotherapy, IV infusion therapy, infrared and dry saunas, PEMF beds, MRIs, DEXA scans, brain scans and blood analysis services.

Within the first tower, Helios, residents will also have access to a dedicated amenity offering known as the Sky Private Club.

The upper 15 levels of the building will include private lounges, dining spaces, rooftop amenities and optional private wellness studios integrated within residences.

The Helios tower itself comprises 260 apartments ranging between 60 sqm and 300 sqm, including a collection of penthouses.

That includes a planned two-storey penthouse spanning around 600 sqm with uninterrupted bay views.

The Elysium Fields precinct is being delivered in partnership with Digital Harbour Holdings, a consortium that includes the Liberman family, which controls the development rights across the Docklands site.

[smartcode_project:default project_id=144441 project_image_fid=370979]

The sales result comes as GURNER™ continues expanding its national development pipeline beyond Victoria.

“We have a strong pipeline across Australia and are now focused on scaling into key markets including New South Wales and Queensland, while continuing to build on our Melbourne base,” Gurner said.

“We currently have more than $3 billion in the market, growing to over $5 billion by October, and expect to materially outperform last year in the 2026 calendar year.”

The result also reflects the continued strength of the upper-end apartment market in Melbourne, particularly for owner-occupier-focused product with large-scale amenity and lifestyle offerings.

[smartcode_project_cta:default project_id=144441]

Record result anchored by the Group’s “utopian” Elysium Fields precinct – defying market headwinds in Docklands.

Elysium Fields drive Gurner to $1.65 billion in apartment sales over 2025

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

NAB funds $1 billion Surfers Paradise apartment development, Palmera

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

First look: Aqualand joins St Leonards apartment party

Commsec

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EXPERT OBSERVER
The Consumer Price Index – the main measure of inflation in Australia – rose by 0.5% in the September quarter, in line with expectations. In seasonally adjusted terms the CPI rose by 0.3%. The annual rate of headline inflation lifted from 1.6% to 1.7%. The Aussie dollar was unchanged against the greenback in response.
The Reserve Bank monitors three measures to derive the underlying inflation rate. The trimmed mean rose by 0.4% in the September quarter (1.6% annual); the weighted median rose by 0.3% (1.2% annual) and the CPI less volatile items rose by 0.8% (1.9% annual).
Overall, underlying inflation rose by around 0.5% in the quarter and by around 1.5% over the year. Market goods and services less volatile items rose by 0.8% in the quarter (biggest rise in almost four years) to be up 1.8% on the year.
International holiday travel (+6.1%), tobacco (+3.4%), property rates &amp; charges (+2.5%) and child care (+2.5%) recorded the most significant price gains. The most significant offsetting price falls this quarter are automotive fuel (-2.0%), fruit (-3.1%), and vegetables (-2.5%).
What does it all mean?
Inflation remains contained. The headline annual inflation rate has bottomed, but it is creeping, rather than leaping, towards the Reserve Bank’s 2-3% target band. That is more than we can say about ‘underlying inflation’ which solidly remains near 1.5%.
Headline inflation may be boosted by the drought effects on food prices in coming quarters. Higher home prices may serve to lift some price measures in the ‘Housing’ grouping. Wage growth may remain low but it is still outpacing prices. And with productivity growth near zero, the positive real wage growth may be applying some upward pressure on prices – especially in the services sector.
The Reserve Bank has indicated that rate cuts are still possible. But the language from the policymakers suggest that they are very reluctant rate cutters from here. Rates are low enough and the rate cuts have actually been having the opposite to the desired affect – spooking Aussie consumers. And there is evidence to support the ‘gentle turning point’ view of the Reserve Bank. Unemployment fell last month and home prices are again barrelling higher in Sydney and Melbourne. 
The Reserve Bank is expected to wait until at least February 2020 to decide if more interest rate stimulus is required.
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>. 
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jrobinson-rf4aSBido9

Inflation rate creeps towards RBA target zone: CommSec

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EXPERT OBSERVER
<div>
As expected, the US Federal Reserve’s Open Market Committee (“FOMC”) reduced the target range for the federal funds rate by 25 basis points (quarter of a per cent) to between 1.75-2.00 per cent – the second successive rate cut.
The FOMC cited “the implications of global developments for the economic outlook as well as muted inflation pressures” as the primary reason for the cut. FOMC members voted 7-3 to cut interest rates, with one member voting for a 50 basis point cut.
The FOMC’s updated quarterly “dot plot” federal funds rate projections showed officials divided about the future direction of interest rates. 
Seven FOMC decision makers projected another 25 basis point cut before year-end, but no further cuts in 2020 to 2022. While five FOMC policymakers see rates going back to between 2.00 per cent and 2.25 per cent by year-end.
In his press conference, US Federal Reserve Chair Jerome Powell opened the door to “more extensive sequences of [rate] cuts” if needed, but emphasised that the situation should viewed as one “which can be addressed and should be addressed with moderate adjustments to the federal funds rate.” But the Fed will “act as appropriate to sustain the expansion.” 
Changes in US monetary policy settings can affect rates in Australia as well as the sharemarket and currency.
</div>
<div class="WordSection2">
<h1>What did the US Federal Reserve decide and what does it all mean?</h1>
Global central bankers are lowering interest rates in response to slowing economic growth. The current US expansion - while the longest in post-war history - is losing momentum. The US-China trade war, including the imposition of ‘tit-for-tat’ tariffs on imports, has reduced trade volumes and contributed to a manufacturing recession in export-dependent economies, such as Germany, China and Japan.
Trade policy uncertainty has weakened US business investment and lowered export growth. The concern of course is that the dispute will remain unresolved, with the slowdown in manufacturing activity spilling-over into the larger services sector, eventually impacting still-solid jobs growth and buoyant consumer spending.
Household consumption remains the key driver of economic activity, growing at the fastest pace in the June quarter since 2014. Retail sales also increased by 0.8 per cent in July and 0.4 per cent in August, supported by solid job gains and wages growth. 
Despite the uncertain global geo-political backdrop, FOMC members raised their expectations for US economic growth, with GDP growth now expected to grow at a 2.2 per cent annual pace this year, up from a forecast of 2.1 per cent in June. That said, long-run growth forecasts are less optimistic at a more modest 1.9 per cent. Core inflation has lifted noticeably in recent months, driven primarily by increases in health care costs, but Federal Reserve officials left their inflation projections unchanged at 1.8 per cent for 2019 and 2.5 per cent over the longer run. 
<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/2019/9/19/CommSec%20Fed%20Easing.jpg" alt="">
Along with the rate cut, the Committee also cut the interest on excess reserves (“IOER”) by 30 basis points to 1.80 per cent in an attempt to lower the effective federal funds rate towards the lower-end of its 1.75-2.00 per cent target range. The New York Federal Reserve also announced additional intervention in the US money market in order to lower short-term interest rates.
<h1>What are the implications of today’s decision?</h1>
The near-term economic outlook for the US remains solid, but US Federal Reserve Chair Powell said interest rates were cut as “we [FOMC] took this step to help keep the US economy strong in the face of some notable developments and to provide insurance against ongoing risks.” Furthermore, “weakness in global growth and trade policy have weighed on the [US] economy.” Therefore, “moderate”policy moves may be required to sustain the US economic expansion.” 
Investors seized on the monetary policy uncertainty as few clues were offered by policymakers around the timing of future interest rate moves. Therefore, US sharemarkets fell in the aftermath of the decision with the Dow Jones index down by 211 points at one stage. But shares reversed earlier losses with Dow eventually closing up by 36 points or 0.1 per cent, the S&amp;P500 index was flat, but the Nasdaq fell by 8 points or 0.1 per cent.
Shorter-dated US treasuries weakened (yields higher) and the yield curve flattened after the FOMC’s decision. US 2-year yields rose by 3 points to near 1.76 per cent and US 10-year yields fell by 1 point to near 1.80 per cent. 
The Aussie dollar fell from highs near US68.53 cents to lows near US68.15 cents and was near US68.28 cents in late US trade.Commonwealth Bank Group economists still expect the FOMC to cut interest rates in December.
<h1>Comparing the two most recent statements</h1>
The statement from the July 2019 meeting is on the left; the statement from the September 2019 meeting is on the right. Emphasis has been added to highlight key points in the wording in the statements.
Ryan Felsman is a Senior Economist for CommSec.
 
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US Fed cut a “moderate” policy move: CommSec

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EXPERT OBSERVER
<div class="WordSection1">
<h1>Construction work done</h1>
Construction work done fell by 3.8 per cent in the June quarter – the fourth straight decline. The value of construction work done is 11.1 per cent down on a year ago.
In the year to June 2019 (2018/19), construction work done was at record highs in Tasmania.
Construction costs rose by 0.5 per cent in the June quarter, with building costs up 0.4 per cent and engineering costs up by 0.7 per cent. On the year, construction costs were up 2.3 per cent – the slowest growth in just over two years.
What does it all mean?
</div>
<div class="WordSection2">
In the year to March (the full 12-month period), construction was at record highs in NSW, South Australia and Tasmania. In the year to June only one state can claim record construction work – Tasmania. In 2018/19, Tasmanian construction work topped $3 billion.
While construction costs in the engineering sector remain relatively high, there has been an easing of building inflation in home and commercial building in line with the slowdown of work, especially in the residential sector.
<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/2019/8/28/Construction%20activity%20levels%20CommSec.jpg" alt="">
A number of listed companies, such as Boral, have noted that the huge pipeline of infrastructure work, by now, should be offsetting the slowdown in home building. But project delays have meant this isn’t occurring, as shown by the latest data. This clearly is an issue for state and territory governments to ensure the Reserve Bank isn’t fully shouldering the burden for stimulating the economy.
<h1>What do the figures show?</h1>
Construction work done fell by 3.8 per cent in the June quarter – the fourth straight decline. Construction work done is 11.1 per cent down on a year ago.
Public sector construction work fell by 0.8 per cent in the quarter and private sector activity fell by 4.7 per cent.
Construction work fell across seven states and territories in the June quarter: NSW (down 1.9 per cent); Victoria (down 4.4 per cent); Queensland (down 6.0 per cent); South Australia (down 4.8 per cent); Western Australia (up 1.4 per cent); Tasmania (down 4.1 per cent); Northern Territory (down 12.3 per cent); ACT (down 13.1 per cent).
Engineering work fell by 1.1 per cent in the June quarter – the fourth straight decline. Work done is down 15.9 per cent over the year.
Commercial (non-residential) building fell by 6.6 per cent in the June quarter after rising by 3.8 per cent in the March quarter. Commercial work is down 3.3 per cent on the year.
Residential building fell by 5.1 per cent in the June quarter – the fourth straight decline. Work done is down 9.6 per cent over the year. Alterations &amp; additions fell by 2.9 per cent in the quarter, while new residential work fell by 5.4 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/2019/8/28/Slower%20home%20building%20CommSec.jpg" alt="">
Construction costs rose by 0.5 per cent in the June quarter, with building costs up 0.4 per cent and engineering costs up by 0.7 per cent. On the year, construction costs were up 2.3 per cent – the slowest growth in just over two years.
Annual building inflation was 1.7 per cent (6-year low) and engineering inflation was 3.3 per cent.
<h1>What is the importance of the economic data?</h1>
The Bureau of Statistics releases quarterly estimates of Construction work done. The estimates are based on a survey and cover around 85 per cent of the construction work done in the period. Revised estimates will be released in coming months. The data is useful largely for historical purposes but the work yet to be done estimates provide an early warning signal of future activity. The residential work figures give a good early guide to the strength of residential investment in the national accounts.
<h1>What are the implications for interest rates and investors?</h1>
Those investors that follow companies in construction, engineering and building materials sectors, need to carefully watch for work starting on the bevy of infrastructure projects. Rising home prices may also encourage more residential projects to start in regions of high population growth.
In terms of transport infrastructure, Macromonitor have pushed out the peak of work by 12 months to 2022/23. Queensland is expected to ramp up construction of projects over next year after activity fell in 2018/19.
CommSec expects interest rate cuts in both November 2019 and February 2020. Much will depend on how quickly infrastructure projects can be fast-tracked (and this may require more migrants to fill skilled job vacancies).
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>. 
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Construction eases from record highs: CommSec

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EXPERT OBSERVER
When luxury vehicle sales are in retreat you can bet that home prices aren’t far behind. That has been the case since the early 1990s. So it is notable that – despite annual sales of new vehicles continuing to fall – luxury vehicle sales lifted in July for the first time in two years. And in the same month, home prices edged slightly higher.
It is early days, but it will be useful to monitor the situation closely over the next few months to gauge whether economic activity more broadly is starting to lift.
Sales of luxury vehicles have tracked movements in home prices over time. Monthly growth of national home prices started to slow in November 2016. After ebbing and flowing in late 2016/early 2017, growth of home prices slowed from mid-year with prices starting to fall in October 2017.
It is important to note however that the lead-lag relationship between vehicles and homes has shifted over time. In 2017 it was luxury vehicle sales that started to soften ahead of home prices. Double-digit annual gains in luxury vehicle sales had been in place from 2013. But in late 2016 gains in affordability peaked and vehicle sales slowed in line with a lower Australian dollar and stable interest rates.
Annual sales of luxury marques started falling in early 2017 and home price growth also slowed around the same time. In late 2017, and for the first time in 6½ years, home prices were falling in annual terms at the same time that sales of luxury vehicles were falling.
In the previous cycle, back in late 2012, luxury vehicle sales recovered as the benefits of a strong currency were passed through to car buyers in the form of cheaper prices. And both vehicle and home sales lifted from 2013-2016 in response to lower interest rates.
The CommSec Luxury Vehicle index
According to the Federal Chamber of Automotive Industries (FCAI), new vehicle sales peaked at 1,201,309 units in the year to March 2018. In the period since, new vehicle sales have fallen by 8.5 per cent. The rolling annual total is still falling, hitting 6½-year lows in July.
To get a gauge on the luxury market though, CommSec tracks the sales of 17 luxury marques: Aston Martin, Audi, BMW, Bentley, Ferrari, Hummer, Jaguar, Lamborghini, Lexus, Lotus, McLaren, Maserati, Maybach, Mercedes-Benz, Morgan, Porsche and Rolls Royce.
Sales of luxury marques hit peak levels of 106,658 units in the year to December 2016. And in the period to June 2019, rolling annual luxury vehicle sales fell by 19.7 per cent, hitting 4-year lows. But in July 2019, rolling annual sales lifted for the first time in two years.
Luxury vehicles now represent 10.4 per cent of all combined passenger vehicle and SUV sales, still below the record high of 11.5 per cent set in the year to December 2016. Until late 2016 the proportion of vehicle sales devoted to the luxury market had been steadily rising over time. Despite the recent slowdown, the luxury vehicle market share is still around double the levels of 13 years ago. Sales of all luxury marques now represent 7.8 per cent of all vehicles, down from the record high of 9.0 per cent in calendar 2016.
Using January 1995 as a starting point (January 1995=100) the CommSec luxury vehicle index stood at 716.1 in July 2019 versus 161.1 for the broader passenger/SUV market. In other words, while passenger/SUV sales are around 1.6 times higher than 23 years ago, the number of luxury vehicles sold has risen seven-fold over the same period.
Despite the recent slowdown, luxury vehicle sales are still healthy with rolling annual sales of Rolls Royce at record highs in July while annual sales of Lamborghini and Bentley marques were just off record highs.
Rising wealth &amp; affordability
The increased importance of luxury vehicles in the broader vehicle market is a function of rising wealth levels and better vehicle affordability. In real terms, per capita wealth has almost doubled over the past 14 years, broadly matching a similar increase in the share of luxury vehicle sales.
And while wage growth has slowed in recent years, Australian wage earners continue to enjoy a marked improvement in real wages, that is, wages outstripping prices. Average weekly earnings have risen by 38 per cent over the past decade, ahead of a 23 per cent increase in consumer prices.
For the new vehicle market as a whole, vehicle affordability has markedly improved in recent years. In fact, according to the CommSec Vehicle Affordability measure, vehicle affordability is at the best levels ever recorded. It now takes a worker on average earnings just under 21 weeks to buy a new Holden Commodore, down from 28 weeks of wages just five years ago and 32 weeks of wages a decade ago.
Until recently vehicle affordability hadn’t just been improving for the top volume selling vehicles. At the top end of the vehicle market, wealth and real wages had been rising solidly, while prices of luxury marques had been flat or falling. Wage earners had been looking to upgrade their rides over time, pushing more sales into the luxury vehicle category.
But a lower Australian dollar, flattening of wealth gains caused by lower home prices and slower growth of nominal wages have capped luxury vehicle affordability. Today it takes a worker on average earnings 42 weeks to buy a new BMW 320d. While around the same as seven years ago, affordability is off the best ever levels of 35.55 weeks in December 2018.
Luxury vehicles, houses &amp; spending: Past cycles 
Over time, luxury vehicle sales have proved useful as an indicator of consumer trends, reflecting their increased importance in the broader vehicle market. In fact, around a decade ago, luxury vehicle sales bottomed in annual terms, preceding a more general improvement in the vehicle market by around two months. But the lead-lag relationship has varied over time. Back in 2003, a slowdown in the luxury vehicle market was in evidence around a year before a downturn in the broader vehicle market.
The slowdown in the luxury vehicle market in 2008 coincided with a peak in the housing market, providing validation for the start of the slowdown. And the annual decline of home prices bottomed out in early 2009, again in line with that of luxury vehicle sales and ahead of the broader vehicle market. Moves by the Federal Government to support building, home sales and home prices were largely successful, also serving to boost consumer confidence and spending.
While there is a close relationship between trends in home prices and luxury vehicles, around 15 years ago a downturn in the housing market actually led the slowdown in new vehicle sales. That is, the decline in housing wealth led to weaker spending on goods such as vehicles. At that time, the Reserve Bank tightened monetary policy decisively between August and December 1994, causing home prices to flatten over 1995. Luxury vehicle sales then followed the softening of home prices, trending sideways over the 1995/96 financial year.
The annual growth rate of luxury vehicle sales peaked in December 2009 while annual growth of broader passenger vehicle sales peaked in April. Annual growth of home prices peaked in June 2010.
What are the implications for interest rates and investors?
The luxury vehicle market soared from 2013-16. Home prices similarly soared in many capital cities over the same period. From 2017 until recently both the luxury vehicle market and key capital city housing markets have been in consolidation mode.
The softening of new vehicle sales and home purchases in recent years wasn’t necessarily negative. Supply and demand constantly adjust over time. But with employment growth strong, real wages rising and with interest rates near record lows, fundamentals for car and home purchases remain solid.
There are now signs that luxury vehicle sales are lifting. Home prices in Sydney and Melbourne have also recently started to lift. The removal of election uncertainty and lower interest rates are supporting housing demand. Firmer home prices should also give motorists encouragement to upgrade their rides, although constrained by slow growth in nominal wages.
The relationship between luxury vehicle sales, home prices, broader new vehicle sales and broader consumer spending are worth close monitoring.
CRAIG JAMES is the Chief Economist at CommSec
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Luxury vehicle sales lift for first time in 2 years: Craig James

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EXPERT OBSERVER
The July 2019 State of the States report on economic performance by CommSec has New South Wales slipping to second spot after Victoria.
New South Wales has led the economic performance of Australia’s states as measured byCommSec for some time but has now slipped to second spot.
While NSW measures well on dwelling commencements at 14.9 percent against a decade average a detailed look at the figures indicates that Victoria is doing better on this measure.
In the July quarter Victoria commenced 15,899 dwelling commencements while NSW, which is 20 percent bigger, only produced 14,735 commencements. 
On top of this, dwelling approvals in NSW and particularly in Sydney have been falling fast. Year to date dwelling approvals for Greater Sydney in May 2018 were 53,665 but this has fallen to 41,365 by May 2019. 
This 22 percent drop in one year seems to be continuing due to slowing industry confidence, lending restrictions by banks and a slow planning system in Sydney. 
We are also concerned that the NSW Government will lift the cap on local infrastructure levies from July 1, 2020 and that this could add up to $70,000 extra to the cost of housing.
The Urban Taskforce believes the current slide in economic performance in New South Wales, asshown in the July CommSec data, may continue with big drops occurring in housing approvals in the state, and particularly in Greater Sydney. 
CommSec measures dwelling commencements that come from approvals in the past and the slowing housing approvals will inevitably flow intoreduced dwelling commencements in the months ahead.
The Urban Taskforce also believes that recent planning decisions by the state government to not approve the Ritz Carlton Hotel in Pyrmont or the St Leonards South medium density housing proposed by Lane Cove Council, are sending signals to the development industry that maintaining the existing character of neighbourhoods is more important that supporting new development.
CHRIS JOHNSON is the Urban Taskforce CEO
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CommSec data shows NSW sliding on economic performance:  Chris Johnson

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EXPERT OBSERVATION 
Australia’s record economic expansion has almost completed its 28th year. Interest rates have fallen to fresh record lows; wages are growing near 2.5%; underlying inflation is around 1.5%; the jobless rate is 5.2%.
Total returns on Australian shares (All Ordinaries Accumulation index) have lifted by 11.4% over 2018/19 (20-year average +9.5%) to a smidgen below record highs.
What does it all mean?
The 2018/19 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.
Overall, the global economy has slowed over the past year, largely restrained by the US-China trade conflict. Central banks are now favouring rate cuts over rate hikes largely because inflation remains low.
The US economy generally remains in good shape. But Chinese authorities have been stimulating their economy in response to the slowdown caused by the trade dispute with the US.
The Australian economy is currently growing at a 1.8% annual pace – the slowest pace in 9.5 years. Just like other major economies, growth slowed over the year. Uncertainty over the Federal Election result also slowed activity ahead of the May 18 poll. Activity is expected to lift with election uncertainty resolved.
The Reserve Bank has re-assessed policy settings in response to stubbornly low inflation. The Reserve Bank now believes that unemployment can fall to 4.5% before igniting inflationary pressures.
As a result the Reserve Bank cut the cash rate by 25 basis points in June to 1.25% and has flagged another rate cut in coming months.
Inflation is expected to edge higher to around 2% in 2018/19 with unemployment 4.50-5.00%. But much will depend on the global trade environment.
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Returns on shares have lifted by just over 11% in 2018/19 and growth of 7-11% is expected in 2018/19.
The Australian dollar should support the record economic expansion, largely holding in the late 60s/early 70-cent range against the greenback.
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What does the data show?
<ul>
<li>Interest rates</li>
</ul>
The cash rate was reduced from 1.50% to 1.25% in June. It was the first rate change since August 2016.
The market-determined 90-day bank bill rate has held between 1.21% and 2.10% over 2018/19 and is ending the year near record lows.
Yields on the long bond – 10-year government bonds – have held in a range of between 1.29% and 2.79% and yields are ending the year near record lows.
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<ul>
<li>Currencies</li>
</ul>
The Aussie dollar has fallen around 6% over 2018/19. The Aussie started the year around US74 cents and is ending the year near US69 cents.
We have calculated that the Aussie is ranked 103rd strongest against the US dollar of 120 currencies tracked.
The currencies of Thailand, Egypt, Uganda, Mexico, Philippines and Japan all have lifted around 3-7%.
The weakest currencies have been in the emerging economies of Venezuela, Argentina and Haiti. Only 24 currencies have lifted against the greenback over the year.
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In the first six months of 2019, the Aussie dollar has fallen by around 2% against the US dollar, making it the 97th strongest of 120 currencies tracked.
The currencies of Russia, Egypt, Thailand, Central Africa and Canada have lifted around 3-10%.
The weakest currencies have been the emerging economies of Haiti, Argentina, Turkey, Pakistan and Ghana. Only 42 currencies lifted against the greenback over the year.
The Aussie has gradually trended lower for around two years. Over most of the period US policy interest rates were rising while the Aussie cash rate was left unchanged.
The Aussie fell from around US80 cents to US68 cents (if the January 2019 ‘flash crash’ to US67.43 cents is ignored).
<ul>
<li>Commodities</li>
</ul>
Commodity prices eased over the second half of 2018 in line with slower global growth but recovered some lost ground in 2019.
The Commodity Research Bureau futures index has fallen by 11% over the year, but the CommSec daily index is up 3%.
The difference between the two indexes is basically iron ore, with its price up 81% over 2018/19 while gold and coking coal gained 12%.
Base metal prices fell 10-20%; oil is down 23% while spot natural gas has slid 58% and thermal coal fell 37%.
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Sharemarket
The Australian sharemarket started 2018/19 with the All Ordinaries at 6,289.7 and the ASX200 at 6,194.6.
The All Ords currently stands at 6,734.3 points (up 7.1%) with the ASX200 is at 6,650.8 (up 7.4%). We estimate that Australia is 19th of 72 global bourses.
So far 35 bourses have recorded gains in 2018/19. The best performer has been hyperinflation-affected Zimbabwe but Argentina and Brazil have lifted more than 40%. The US Dow Jones has lifted by around 10%.
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The worst performers have been West Africa, Nigeria, Kenya, Ghana, Lebanon and Pakistan and Egypt. The Irish sharemarket has fallen 12%.
In the first six months of 2019, the All Ordinaries has risen by 18%, ranking Australia 8th of 73 nations. Greece, Argentina, Russia and China have been amongst the top performers (up around 20-37%) while Lebanon, Sri Lanka and Oman are amongst countries recording the biggest declines.
<ul>
<li>Investment returns</li>
</ul>
Total returns on Australian shares (All Ordinaries Accumulation index) have so far lifted by 11.4% over 2018/19, hitting record highs in recent days.
Returns on dwellings have declined by 3.6% to date in 2018/19 while returns on government bonds have lifted by 10.4%.
<ul>
<li>Sectors &amp; size groupings</li>
</ul>
Of the 22 identified industry sub-sectors, only eight have recorded declines in 2018/19.
Leading the gains have been Consumer durables &amp; apparel and Telecom (both up by near 41%) followed by Commercial services (up 21%) with Software &amp; services and Transportation (up 20%).
At the other end of the scale, Household &amp; personal products has fallen by over 36%, followed by Autos &amp; components (down 21%) and Energy and Capital goods (both down 8%).
Of the size categories, the ASX50 has outperformed (up over 9%) from the ASX100 (up 8%) and the Small Ordinaries and MidCap50 (up 1%).
What are the implications for investors?
Returns on shares are near record highs. In fact sharemarket returns have only fallen once in the past 10 years. So an investor that has employed a diversified strategy across asset classes would be well pleased with the performance over recent years.
The outlook for the sharemarket remains positive. The Federal Election is in the background for another three years. And the Reserve Bank has adopted a stimulatory monetary policy.
The Reserve Bank now believes that the economy can operate at a faster pace, thus generating greater job growth with the hope of driving the jobless rate to 4.5%.
The cash rate was cut by a quarter percent in June and a similar decline is expected in the next few months.
But the Reserve Bank doesn’t believe it can do it all alone – it is calling on greater fiscal stimulus.
Certainly Federal and State governments are being active in advancing new infrastructure projects. And with budgets broadly balanced or in modest surplus, there is scope for even more fiscal stimulus to be applied.
Over the coming year, infrastructure building and net exports will add to economic growth.
The Reserve Bank hopes that the stimulatory policy settings will lead to stronger household spending as well. Weaker home building will be the main factor weighing on growth.
Last year we noted: “Over the coming year CommSec expects the All Ordinaries index to be near 6,400-6,600 points in December 2018 and 6,600-6,800 points in June 2019”. The December forecast proved too ambitious but the June forecast looks to be safely achieved.
Over the coming year CommSec expects the All Ordinaries index to be near 6,800-7,000 points in December 2019 and 7,100-7,300 points in June 2020.
Housing markets across the nation are continuing to rebalance to reflect the increase in supply (new home construction).
Lower home prices and rate cuts will ensure that first home buyers remain active.
Investors are also expected to return although sharemarkets are expected to remain more attractive in the short run.
Over 2019/20, national home prices may post small gains between 0-4%. Since the Federal Election there have been signs of stabilisation of Sydney and Melbourne home prices.
The low inflation/low interest rate environment is entrenched, meaning that lower nominal investment returns are also here to stay. So investors will need to remain flexible and alert to the returns achieved across sharemarket sectors and across asset classes to ensure that their savings are keeping pace with the cost of living.
The ‘triple L’ theme (low unemployment, low inflation, low interest rates) will also dominate global markets over the coming year.
In fact the US Federal Reserve is already contemplating rate cuts despite delivering the last rate hike just over six months ago.
The Aussie dollar is expected to largely trade in the late 60s/early 70s against the US dollar over most of the coming year. But interest rate differentials between the US and Australia and the US-China trade discussions are the two factors that could move the Aussie out of the tight range.
At the time of writing, financial markets were waiting on the next instalment of US-China trade talks.
Successful completion of the talks should lead to a major upgrade in prospects for the global economy.
If agreement remains elusive, expect stimulatory monetary policies to remain in place in China as well as advanced global economies.
Craig James is Chief Economist at CommSec. 
Ryan Felsman is Senior Economist at CommSec.
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Economic growth slows with more stimulus on the way: CommSec's year in review 

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EXPERT OBSERVER
Economies are constantly changing – just ask the Reserve Bank hierarchy. A year ago the Reserve Bank thought that the next move in interest rates would be up. But, encouraged by tame inflation, the Reserve Bank has just cut interest rates, concluding that the economy can grow faster and create more jobs.
Twenty-five years ago the situation was far different. The economy was accelerating, creating the risk of higher inflation. In August 1994, the Reserve Bank lifted the cash rate from 4.75% to 5.50%. By the end of the year the cash rate stood at 7.5%. Inflation hit 5.1% in the second half of 1995.
While economies will always fluctuate in the short term, the more important issue is whether the standard of living is enhanced over time. Certainly the standard of living is much a much broader concept than merely focusing on changes in economic variables. But it is still an important part of the equation.
Arguably those in their mid-40s and above – ‘Baby boomers’ and Generation X – have experienced a tremendous improvement in economic and financial circumstances over the past 25 years. Wages have soared in real terms, together with the value of assets like shares and homes. Inflation is low, unemployment is near decade lows and interest rates are the lowest since the mid-1960s. And the record economic expansion is in its 28th year.
The improvement in economic fortunes have occurred under Labor and Coalition governments, and despite a raft of global challenges like the Asian Financial Crisis, Technology boom and bust and the Global Financial Crisis.
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Higher wealth has led to changes in spending
Arguably the extent of the improvement in economic circumstances has been almost unprecedented. Lack of consistent longer-term data prevents economists from declaring the improvement as the best ever.
But clearly the gains in real income and wealth have caused changes in how Aussies spend their money. Housing costs – paying the rent or the mortgage – now occupy a bigger share of household spending. Over time the relative cost (or affordability) of so-called essential items like food, clothing, cars and household goods has fallen, allowing Aussies to buy bigger and better homes.
And importantly the rising value of homes has added to household wealth and incomes and allowed ‘Baby boomers’ and GenX to embrace more discretionary goods and services over time.
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Over the past 25 years, Aussies have increased their share of spending on housing, insurance, education, health, medicines and electricity/gas. But Aussie consumers have trimmed the share of spending devoted to food, clothing, furniture, household appliances and the purchase of cars and operation of cars.
Lower tariffs, globalisation and technology have served to reduce the relative cost of goods such as cars, fridges, furniture and floor coverings. With extra disposable income, Aussies have chosen to upgrade homes, the schools their children attend and their elected doctors, hospitals and specialists. Higher prices have lifted the share of spending going to utilities. The ageing of the population has also lifted relative spending on health and insurance.
Income &amp; wealth
Over the past 25 years wages have risen by 165%, well ahead of inflation, up just over 85%. Over the same period, household income per capita (per person) has lifted by 181%, ahead of per capita consumer spending, up 176%. And wealth per capita has lifted by 326%, not far from the greatest generational lift in wealth that occurred just over a year ago with a 370% per capita lift in wealth.
Over the past three years there has been a slowdown in income and wealth gains, arguably from an unsustainable pace. With globalisation serving to restrain inflation, wage growth has also eased. Consumers have drawn down on savings to adjust to the slower growth environment. On average household income grew at a 2.9% annual rate over the past three years, behind a 3.9% lift in spending.
<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/2019/6/11/CBA3.jpg" alt="">
Also making it difficult for Aussie consumers, taxation has risen at a 5.7% annual rate over the past three years. Tax now takes 14.7% of household income – a near 13-year high – reflecting ‘bracket creep’ and tougher enforcement by tax authorities.
What are the implications for investors?
Australia has one of the highest standard of living in the world. Income has outpaced inflation over time and wealth has soared. The lift in income and wealth have prompted many to upgrade their homes. People can afford more expensive and better quality homes because interest rates have fallen to record lows and a smaller proportion of household budgets now goes to ‘essentials’.
Advertisements from 1994 highlight some of the gains made in affordability over time. Beer and meat are more affordable now than 25 years ago and chicken is one item that can be purchased at a cheaper price now than in 1994.
The current generation of 20-30 year old Aussies are faced with more expensive homes but also enjoy the same smaller proportion of spending devoted to ‘essentials’ than in the past. But GenZ and Millennials also have different priorities, favouring travel, ‘experiences’ and smaller homes.
The question being asked by many across the globe is whether we have entered a new era of lower inflation, lower interest rates and lower growth of both income and wealth. The faster that people adjust to a lower growth environment, the lower the risk of economic shock.
Companies are having to adjust to the new realities of global competition and slower growth of sales and incomes. The risk is that some companies may over-react by cutting expenses too far (particularly wages and employment) rather than seeking to maintain or increase market share.
Investors may also need to adjust to the new realities of slower growth of share prices and dividends. Over the past three years dividends have increased at a 1.5% annual rate. From 2013-2016, annual growth of dividends averaged 3.7%.
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>. 
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How the Australian economy has changed over the past 25 years: CommSec's Craig James

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EXPERT OBSERVER
Three months ago we said “It all gets down to jobs.” And that point has clearly been emphasised by the Reserve Bank in the period since. If the Reserve Bank is tempted to cut interest rates in coming months it will be because there is clear evidence that the jobless rate is trending higher, while at the same time there is disappointment on the wages paid by employers.
You have to admire the Reserve Bank’s stoicism with its forecasts. Over the past six months the Reserve Bank has downgraded short-term economic growth and inflation forecasts and pushed-out its expectations by around a year.
Confusingly Reserve Bank “domestic forecasts are conditioned on the technical assumption that the cash rate moves in line with market pricing, which implies two 25 basis point cuts to the cash rate.” Despite that, inflation struggles to get to 2 per cent and the jobless rate stays at 5 per cent. The Reserve Bank needs to provide a clearer explanation of his views and assumptions.
Reserve Bank remains confident on outlook: 
The full Statement on Monetary Policy can be found here: <a id="LPlnk836631" href="https://www.rba.gov.au/publications/smp/2019/may/pdf/statement-on-monetary-policy-2019-05.pdf" target="_blank" rel="noopener noreferrer" data-auth="NotApplicable">https://www.rba.gov.au/publications/smp/2019/may/pdf/statement-on-monetary-policy-2019-05.pdf</a>
<ul>
<li>Key Paragraph: “At its recent meeting, the Board focused on the implications of the low inflation outcomes for the economic outlook. It concluded that the ongoing subdued rate of inflation suggests that a lower rate of unemployment is achievable while also having inflation consistent with the target. Given this assessment, the Board will be paying close attention to developments in the labour market at its upcoming meetings.”
</li>
<li>Growth &amp; inflation: “Growth in the Australian economy has slowed and inflation remains low.”
</li>
<li>Spending: "The near-term outlook for consumption growth has been revised lower because weaker housing market conditions and income growth are likely to continue to drag on spending."
</li>
<li>Household spending: “Subdued growth in household income and the adjustment in the housing market are affecting consumer spending and residential construction. Despite this, the labour market is performing reasonably well, with the unemployment rate steady.”
</li>
<li>Incomes: "Some recovery in income growth is likely, because employment growth is expected to remain solid, wages are expected to increase and the tax offset for low and middle-income taxpayers is set to come into effect in the second half of this year."
</li>
<li>Incomes: “Disposable income growth is also expected to be supported by lower net interest payable owing to the lower cash rate assumption.”
</li>
<li>Home prices &amp; spending: "The deterioration in housing market conditions is expected to continue to weigh on consumption in coming quarters."
</li>
<li>Home building: "There is a risk that dwelling investment declines by more than currently forecast in the near term."
</li>
<li>Home building: …“information from the liaison program points to a significant slowdown in activity in the early stages of residential development.”
</li>
<li>Inflation: Core inflation is “expected to remain low in coming quarters, largely because the weakness in housing- related items is expected to persist for a while.”
</li>
<li>Global: “The global growth outlook has been revised slightly lower and the risks remain tilted to the downside.”
</li>
<li>China: “The outlook for China continues to be an important source of uncertainty for the external environment facing Australia’s economy. The Chinese authorities face significant policy trade-offs and it is unclear how various policy changes will play out.”  “The outlook for trade policy remains uncertain and negative developments could harm global growth.”
</li>
<li>Wage pressure: “…there has been some upward pressure on inflation as a result of the decline in labour market spare capacity.”
</li>
<li>Wages: “The moderate increase in wages growth forecast over the next year is consistent with information from the Bank’s liaison program.”
</li>
<li>Jobs: “A number of other indicators suggest that labour market conditions remain positive and that spare capacity is being absorbed. There has been a notable decline in the rate of medium-term unemployment (between 13 weeks and one year)…”
</li>
</ul>
Implications for interest rates and investors:
CommSec doesn’t expect a change in interest rates for a few months yet. But a cut in rates is factored into Reserve Bank forecasts, presumably on a softer job market.
The Reserve Bank says that “The domestic forecasts are conditioned on the technical assumption that the cash rate moves in line with market pricing, which implies two 25 basis point cuts to the cash rate.” While the RBA always notes that forecasts are based on technical assumptions, this time it is quite explicit with the rate cut assumptions.
The Reserve Bank is no doubt hoping that fiscal stimulus is applied over the next year through tax cuts and targeted spending. The 
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
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Infrastructure boom fundamental in driving the economy: CommSec's Craig James

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EXPERT OBSERVER
The Reserve Bank has left the cash rate at a record low of 1.50 per cent for the 31st straight month (28th meeting).
The last rate change was a quarter percent rate cut on 2 August 2016.
What has changed since the last meeting? 
The Australian jobless rate remained at a 7½-year low at 5 per cent in January. 
The NSW jobless rate fell to a record low of 3.9 per cent in January. 
The CoreLogic national home price index fell by 6.3 per cent over the year to February 2019. 
Building approvals rose by 2.5 per cent in January.  Annual credit growth stands at 4.3 per cent – the slowest rate recorded in 5 years.
Australian business conditions rose from a 4-year low of 2.6 points to 6.6 points in January.
The Australian sharemarket has lifted, with investors digesting results for the earnings season.
Business investment rose 2.0 per cent in the December quarter.
Construction prices are rising at the fastest rate in 9 years.
Company profits hit record highs in 2018.
Wages rose 2.3 per cent over the year to December. Including bonuses: 2.8 per cent – highest in four years. 
The Australian dollar has fallen from US72.50 cents to around US71 cents. 
Investors are encouraged by reported progress on a US-China trade agreement The assessment 
The Reserve Bank remains sidelined.
Continued job market strength is critical to the economic and interest rate outlook.
While the Board acknowledged that “the slower pace of [economic] growth has continued into 2019”, it still expects “growth of around 3 per cent this year”.
The Bank continues to note that the labour market is “strong”.
One key uncertainty is consumer spending, but even on this point the Reserve Bank expects spending to be supported by “a pick-up in growth in household income.”
Perspectives on interest rates
The Reserve Bank has left the cash rate at 1.50 per cent. The previous move was a rate cut in August 2016 (25 basis points).
There have been 12 rate cuts since November 2011, with the Reserve Bank cutting rates from 4.75 per cent to 1.50 per cent. 
The Reserve Bank had previously lifted rates seven times from October 2009 to November 2010 from 3.00 per cent to 4.75 per cent.
 What are the implications of today’s decision?
 It’s important to stress the Reserve Bank is forwardlooking.
If the Bank believes that current settings will produce stronger growth, then there is no need to alter policy.
Watch the job market and consumer spending as they are keys to any change in rates in months ahead.
CRAIG JAMES is CommSec's Chief Economist
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Upbeat Reserve Bank sees stronger growth: CommSec's Craig James

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EXPERT OBSERVER
In the 2018 year, the number of dwelling approvals fell by 5.5 per cent to 210,772. The biggest decline was in Western Australia (down 16.9 per cent).
The biggest lift in approvals was in the ACT (up by 64.3 per cent).
NSW and Victoria dominate the list of regions with both the biggest gains and declines in approvals.
The approvals data has implications for banks, retailers, developers, building and building material companies.
<img src="https://www.urban.com.au/images/2019/2/14/CS%201.JPG" alt="">
What do the figures show and what does it all mean?
Australia is well past the peak of home building activity in the current cycle. In the year to August 2016, 242,779 approvals were granted by local governments to building new homes – the largest ever total for dwelling approvals in a 12- month period. In previous cycles, annual approval numbers had not passed 200,000 approvals.
In 2018, almost 211,000 approvals were granted to build new homes. This figure is still historically high. So while approvals have retreated from highs, there is still a lot of building being done and will be done over 2019.
The number of homes currently being built across Australia is only just below record highs.
The building cycle tends to start with council approval to build the new dwelling. Finance is secured around the same time. And the actual building phase can take over a year in the case of high-rise apartment developments or 6-12 months in the case of free-standing homes.
Different trades and businesses are impacted a different points of the business cycle. So knowledge of which regions are expanding at any point in time is important.
<img src="https://www.urban.com.au/images/2019/2/14/CS%202.JPG" alt="">
As pent-up demand for homes is met, the building cycle will change from new construction to renovation activity. That assumes that people are less inclined to move home when home prices are softening and rather choose to extend or enhance their current home.
The Hills Shire (NSW), the ACT and the Central Coast (NSW) were stand-out regions in 2018 in terms of building activity.
Encouraged by infrastructure developments, dwelling approvals in the Hills Shire largely doubled in 2018.
The Australian Bureau of Statistics (ABS) classifies around 570 local government areas (LGAs).
CommSec has ranked the LGAs by the number of dwelling approvals in 2018 and then sorted to find those big building regions with the fastest and slowest growth over 2018.
While home building work will remain firm in 2019 in regions like the Hills Shire in NSW, Logan in Queensland and Geelong in Victoria, capital city apartment construction is set to slow. Dwelling approvals in Sydney fell by 60 per cent in 2018 and fell by 37 per cent in Melbourne.
<img src="https://www.urban.com.au/images/2019/2/14/CS%203.JPG" alt="">
In 2018, there were 73 LGAs in Australia where there wasn’t one approval to build a new home. There were 173 regions with fewer than 10 homes approved for construction. The 30 regions with the largest number of dwelling approvals account for half of all new approvals in Australia. 
The big building regions in 2018 were Blacktown (NSW), Wyndham (Victoria), Brisbane City (Queensland), Port Adelaide-Enfield (South Australia), Swan (Western Australia), Clarence (Tasmania) and Palmerston (Northern Territory). 
What are the implications for interest rates and investors? 
Housing supply has responded to the lift in demand. In other words more homes have been built to meet the increasing demand for accommodation from firm population growth. With more supply or choice, buyers have greater negotiating power over vendors (individual owners and developers).
<img src="https://www.urban.com.au/images/2019/2/14/CS%206.JPG" alt="">
As a result, there is downward pressure on prices – especially prices that lifted to unsustainable levels in Sydney and Melbourne suburbs when demand was well in excess of supply. 
But interest rates remain low and the job market is healthy and these factors will act as fundamental supports for home prices. As is always the case, housing moves from periods of under-supply to over-supply. Over the coming year new apartment developments will be completed and some buyers may see the market value of their acquisition is below purchase price.
Buyers, lenders and developers will need to work through this ‘digestion’ process. 
Changing conditions in housing markets are being watched carefully by the Reserve Bank (RBA). Some investors may also need to adjust desired rents in order to attract tenants. First home buyers and budding tenants will be amongst the winners in the softening market conditions. 
<img src="https://www.urban.com.au/images/2019/2/14/CS%204.JPG" alt="">
The RBA noted in the Statement on Monetary Policy: ..”the number of building approvals has been trending lower for more than a year to be around its lowest level since 2013.
"Information from the Bank’s liaison program also points to a slowing in the earlier stages of residential development over the past year."
"In particular, demand for new, off-the-plan apartments in Sydney and Melbourne has declined, driven by weaker demand from domestic investors and foreign buyers. Greenfield land sales have also fallen over the past year. Many property developers cite tighter access to credit as a dampening factor.” 
<img src="https://www.urban.com.au/images/2019/2/14/CS%205.JPG" alt="">
In terms of prices &amp; rents the RBA said: “A large supply of new dwellings in some cities has also placed downward pressure on housing price growth and rents. In general, supply has been concentrated in cities where there has been relatively strong population growth, which should continue to support the underlying demand for new dwellings."
"In the rental market, the national vacancy rate is a little below average. This partly reflects the low vacancy rate in Melbourne as population growth continues to absorb the supply of new dwellings.
"In contrast, the vacancy rate in Sydney has risen, particularly in the middle-ring suburbs as new supply has come online; advertised rent inflation has declined. In other capital cities, rental vacancy rates have fallen and advertised rents have generally risen.”
<img src="https://www.urban.com.au/images/2019/2/14/CS%207.JPG" alt="">
The Reserve Bank recently changed interest rate policy from a tightening bias to a neutral stance.
One reason for the change was the “uncertainty” about how the changing housing conditions will affect consumer spending and employment. 
To date, builders, developers and lenders haven’t reported major issues with defaults or delinquencies from new developments.
Mirvac recently reported that it settled 1,067 residential lots in the six months to December and was on track to meet the target of 2,500 residential lot settlements in 2018/19.
Mirvac noted “Defaults in the period remained below 2 per cent.” AV Jennings noted a low level of unsold stock and didn’t note any major issues with settlements.
CommSec expects interest rates to be unchanged for the foreseeable future.
CRAIG JAMES is the Chief Economist of CommSec
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