<p data-end="587" data-start="368">Queensland builder-developer MAYD has revealed the first look at its major North Kirra beachfront development, lodging amended plans that reduce the number of apartments and increase the proportion of larger residences.</p>

<p data-end="778" data-start="589">The project is planned across a substantial 4,742 sqm amalgamated site spanning seven lots at <a href="https://www.apartments.com.au/new-apartments/2-6-pacific-parade-bilinga-qld-4225">2-6 Pacific Parade</a> and 27-33 Golden Four Drive in Bilin​ga, directly opposite Nor​th Kirra Beach.</p>

<p data-end="907" data-start="780"><a href="https://www.apartments.com.au/developers/mayd-group">MAYD</a> secured the site for $32.5 million in 2025, in what was one of the Gold Coast's largest property transactions of the year.</p>

<p data-end="1052" data-start="909">The development will be delivered across two stages, with the first stage carrying an estimated gross realisation value of around $360 million.</p>

<p data-end="1311" data-start="1054">The latest amendments seek to reduce the overall apartment count and shift the project further toward the owner-occupier market, with larger residences designed for buyers wanting considerably more space than traditionally offered in a beachfront apartment.</p>

<p data-end="1451" data-start="1313">The residential mix will include townhomes, oversized two-bedroom apartments, substantial three-bedroom residences and four-bedroom homes.</p>

<p data-end="1676" data-start="1453">MAYD has appointed Cera Stribley to lead the architecture and interiors, with the Melbourne-based design practice drawing on the beachfront setting through a series of ocean-facing terraces and heavily landscaped balconies.</p>

<p data-end="1908" data-start="1678">Strong horizontal forms and curved balconies will define the exterior, with subtropical landscaping integrated throughout the building to soften the built form and increase the connection between the residences and the beachfront.</p>

<p data-end="2142" data-start="1910">The project will also include an extensive collection of resident wellness and lifestyle facilities, continuing the broader shift across the Gold Coast's luxury apartment market toward larger homes supported by resort-style amenity.</p>

<p data-end="2142" data-start="1910"><img alt="MAYD" data-entity-type="file" data-entity-uuid="d1bcbb05-e659-4b47-8bd4-1e595315e2ad" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%202.05.03%E2%80%AFPM.png?VersionId=jj0XEud1X1DuLt7_KyElhjMdZGOXmLHP" /></p>

<p data-end="2308" data-start="2144">MAYD Founder Todd Mould said North Kirra was increasingly appealing to buyers attracted to the more established, lower-density character of the southern Gold Coast.</p>

<p data-end="2648" data-start="2310">"North Kirra presents one of the most compelling luxury residential opportunities currently emerging in Australia, combining absolute beachfront with the character and authenticity that buyers are increasingly seeking, and the same sense of tight-knit community that defined Burleigh and Currumbin perhaps 10 or 15 years ago," Mould said.</p>

<p data-end="2797" data-start="2650">"With Gold Coast Airport on its doorstep, it also offers a level of accessibility that broadens its appeal across almost every market demographic."</p>

<p data-end="2938" data-start="2799">The project comes as the southern Gold Coast continues to attract an increasing share of high-end apartment development and buyer activity.</p>

<p data-end="3216" data-start="2940">Kirra in particular has emerged as one of the region's more tightly held beachfront markets, with its relatively low-density character, established surf and hospitality scene and proximity to Gold Coast Airport differentiating it from the higher-density markets further north.</p>

<p data-end="3325" data-start="3218">Mould said those characteristics had informed the approach MAYD and Cera Stribley had taken to the project.</p>

<p data-end="3442" data-start="3327">"We've worked closely with Cera Stribley to create a vision that is deeply connected to its surroundings," he said.</p>

<p data-end="3662" data-start="3444">"Inspired by the coastline itself, the architecture has been shaped around space, privacy and resort-style living, creating a collection of homes that reflects the next generation of luxury on the southern Gold Coast."</p>

<p data-end="3818" data-start="3664">MOTIV Managing Director Carly Cottam, who has been appointed to market the project, said buyer attention had continued to move south along the Gold Coast.</p>

<p data-end="4076" data-start="3820">"Purchasers who may once have defaulted to Broadbeach, Main Beach or Surfers Paradise are increasingly recognising the value of a genuine beachfront location that offers lower density, strong amenity and a more established sense of community," Cottam said.</p>

<p data-end="4375" data-start="4078">"Kirra has a powerful combination of growing demand and genuine scarcity. Beachfront supply is inherently constrained, the area remains relatively low density, and buyers are increasingly placing a premium on locations that feel established, uncrowded and authentic rather than heavily developed."</p>

<p data-end="4503" data-start="4377">Cottam said the proximity to Gold Coast Airport was also proving increasingly important for interstate and second-home buyers.</p>

<p data-end="4741" data-start="4505">"Being minutes from Gold Coast Airport makes it particularly compelling for interstate buyers, frequent travellers and second-home purchasers who can access an authentic coastal lifestyle almost immediately after stepping off a flight."</p>

<p data-end="4910" data-start="4743">The acquisition takes MAYD's active development portfolio to more than $500 million, with the North Kirra project representing one of its largest undertakings to date.</p>

<p data-end="4951" data-start="4912">MAYD is targeting an early 2027 launch.</p>


Joel Robinson

First look at MAYD's North Kirra mixed-use precinct

<main data-perf-region="main">
<p data-end="600" data-start="394">Castle Hill, the longtime hub of the Hills District, has been one of the major beneficiaries of Sydney's Metro expansion, with improved connectivity helping drive continued population growth, development and buyer demand across the Hills District.</p>

<p data-end="733" data-start="602">But despite that growth, the suburb has seen relatively few major new apartment projects brought to market over the past 18 months.</p>

<p data-end="970" data-start="735">Hills District developer Reve Group is looking to fill that gap with <a href="https://www.apartments.com.au/new-apartments/nova-r-ve-castle-hill-2-garthowen-crescent-castle-hill-nsw-2154">Nova Rêve</a>, a major new mixed-use precinct on the corner of Garthowen Crescent and Old Castle Hill Road, a short walk from Castle Hill Metro Station and Castle Towers.</p>

<p data-end="970" data-start="735">[smartcode_project:default project_id=152737 project_image_fid=377679]</p>

<p data-end="1159" data-start="972">The project will comprise three residential towers alongside a hotel, restaurants, cafes and a skybar, more than 1,600 sqm of ground-floor retail and almost an acre of landscaped gardens.</p>

<p data-end="1357" data-start="1161">It represents the largest project undertaken by Reve Group, the development arm of the Kassis family, which has been building across the Hills District for more than 30 years through Kassis Homes.</p>

<p data-end="3400" data-start="3216">[smartcode_project:default project_id=152737 project_image_fid=377675]</p>

<p data-end="3400" data-start="3216">Nova Rêve also represents a significant step up from the family's first apartment development, Grand Rêve, which was delivered nearby on Garthowen Crescent.</p>

<p data-end="1664" data-start="1517">Grand Rêve introduced larger, house-like apartment layouts and premium inclusions including Wolf and Sub-Zero appliances to the Castle Hill market.</p>

<p data-end="1826" data-start="1666">Nova Rêve takes that approach to a precinct scale, combining the residential component with hospitality, retail and substantial public and resident landscaping.</p>

<p data-end="1826" data-start="1666">[smartcode_project:default project_id=152737 project_image_fid=377685]</p>

<p data-end="2045" data-start="1828">Reve Group Managing Director Sam Kassis said the project reflected the family's three decades of building in the Hills, which has evolved from trophy homes on quarter-acre blocks to larger-scale apartment development.</p>

<p data-end="2269" data-start="2047">"Grand Rêve was our first apartment project here and it showed us what this pocket of Castle Hill could be. Nova Rêve is the refinement of that idea: not just apartments, but a place the whole suburb can use," Kassis said.</p>

<p data-end="2430" data-start="2271">A key part of that approach is the hotel, which has been designed to operate as an amenity for the wider Castle Hill community rather than solely hotel guests.</p>

<p data-end="2606" data-start="2432">It will include restaurants, cafes, skybars and all-day dining, alongside conference and event facilities catering to business functions, community groups and private events.</p>

<p data-end="2724" data-start="2608">At ground level, more than 1,600 sqm of shops and cafes will open onto the surrounding streets and landscaped areas.</p>

<p data-end="2892" data-start="2726">Almost an acre of gardens designed by Land and Form Studios will run through the precinct, incorporating pathways, seating, barbecue areas and children's play spaces.</p>

<p data-end="2892" data-start="2726">[smartcode_project:default project_id=152737 project_image_fid=377680]</p>

<p data-end="3004" data-start="2894">Reve Group's Romio Georges said creating an active ground plane had been central to the planning of Nova Rêve.</p>

<p data-end="3214" data-start="3006">"There are gardens with pathways, barbecues, seating and play areas, shops and cafes opening onto the street, and a hotel with restaurants and a skybar that anyone in Castle Hill can walk into," Georges said.</p>

<p data-end="3400" data-start="3216">The project's elevated position on one of Sydney's highest ridgelines will also provide apartments with outlooks toward the Sydney skyline, surrounding parkland and the Blue Mountains.</p>

<p data-end="3400" data-start="3216">More than 80 per cent of the apartments will occupy corner positions, with Turner responsible for both the architecture and interiors.</p>

<p data-end="3670" data-start="3538">&nbsp;</p>

<p data-end="3670" data-start="3538">[smartcode_project_cta:default project_id=152737]</p>

<h3 data-end="3697" data-section-id="q3n5ak" data-start="3672">&nbsp;</h3>
</main>


Nova Rêve arrives as Reve Group bets on Castle Hill's next growth phase

<p>A collection of just 25 large-format apartments and penthouses overlooking Goodwin Park is entering the Coolangatta market, with <a href="https://www.apartments.com.au/new-apartments/marea-residences-coolangatta-27-27a-dixon-street-coolangatta-qld-4225">Maréa Residences</a> combining a low-density, residential-only approach with uninterrupted park and Pacific Ocean outlooks.</p>

<p>Located at 27 Dixon Street, Maréa comprises three and four-bedroom residences alongside a limited number of dual-level penthouses, with the project positioned between Goodwin Park and <a href="https://www.apartments.com.au/developments/coolangatta-qld-4225">Coolangatta</a>’s coastal precinct.</p>

<p>Construction has commenced, with completion currently estimated for late 2027. Three-bedroom residences are priced from $1.8 million.</p>

<p>[smartcode_project:default project_id=150999 project_image_fid=374005]</p>

<p>The project has been designed around its northern outlook across the park, with the building’s architecture, landscaping and material palette intended to establish a connection with the neighbouring green space. The residences have been configured to maximise natural light and views across Goodwin Park towards the ocean.</p>

<p>Inside, the material palette incorporates timber, stone and brushed brass, complemented by curved detailing and ambient lighting. Kitchens and bathrooms carry the same natural material approach, while residences also include basement parking, storage and lift access.</p>

<p>Maréa’s penthouses are arranged over two levels and include private pools, adding another layer to the project’s focus on larger-format apartment living. Across the development, residences are configured with three or four bedrooms rather than the broader mix of smaller apartment types commonly found in larger projects.</p>

<p>[smartcode_project:default project_id=150999 project_image_fid=374010]</p>

<p>Resident amenity is concentrated at rooftop level, where landscaped entertaining terraces and pools take advantage of elevated views across Coolangatta and the Pacific Ocean.</p>

<p>The project has so far been particularly well received by local owner-occupiers and downsizers, according to Urban Activation Property Sales and Marketing Director Matt George, with the residential-only format, construction quality and northern park outlook among the features resonating with purchasers.</p>

<p>“The uninterrupted northern aspect overlooking Goodwin Park has been a key point of difference, with buyers attracted to the sense of serenity and open space the park provides, while still enjoying easy access to the ocean and being within walking distance of the lifestyle and amenities Coolangatta has to offer,” George said.</p>

<p>[smartcode_project:default project_id=150999 project_image_fid=374002]</p>

<p>“The combination of high-quality construction, a residential-only building, park outlook and proximity to the beach has resonated strongly with the local downsizer market.”</p>

<p>The Dixon Street address is within walking distance of Coolangatta Beach and the broader southern Gold Coast coastline, including the surf breaks at Snapper Rocks and Kirra. Coolangatta’s cafés, restaurants and retail are nearby, while Gold Coast Airport is also within close proximity.</p>

<p>[smartcode_project_cta:default project_id=150999]</p>


Maréa Residences brings parkside apartments to Coolangatta

<p data-end="535" data-start="324">Melbourne developer PDG has secured Victorian Government approval for its $1.5 billion Southbank development <a href="https://www.apartments.com.au/new-apartments/the-one-1-queens-bridge-street-southbank-vic-3006">The One</a>, clearing the way for the long-dormant riverfront site opposite Crown to finally be developed.</p>

<p data-end="717" data-start="537">The Minister for Planning has approved the project at 1-29 Queens Bridge Street, with the Department of Transport and Planning issuing the planning permit following its assessment.</p>

<p data-end="918" data-start="719">The approval will allow PDG to develop the prominent 5,059 sqm site with a major mixed-use tower comprising premium apartments, including branded residences, a luxury hotel and boutique office space.</p>

<p data-end="1131" data-start="920">PDG acquired the site in late 2024, with its position directly opposite Crown's main entrance and near Melbourne's Arts Precinct making it one of Southbank's most significant remaining development opportunities.</p>

<p data-end="1131" data-start="920"><img alt="PDG" data-entity-type="file" data-entity-uuid="3933013e-6332-4386-b9be-089df05caf17" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%209.29.22%E2%80%AFAM.png?VersionId=sITIgBqDL0N3VNSMwWEmF5UA.uvcsRyu" /></p>

<p data-end="1318" data-start="1133">Designed by COX in collaboration with ODO and PDG, the tower's architecture draws on the movement of the Yarra River, with six vertical pleats running the height of the sculpted facade.</p>

<p data-end="1433" data-start="1320">The project will also see the heritage-listed Queens Bridge Hotel restored and incorporated into the development&nbsp;with new hospitality and public uses, including a rooftop venue.</p>

<p data-end="1658" data-start="1591">A significant component of The One will be its residential amenity.</p>

<p data-end="1864" data-start="1660">More than 5,000 sqm of resident facilities will be delivered across a single level, making it one of the largest consolidated residential amenity offerings proposed in an Australian apartment development.</p>

<p data-end="2011" data-start="1866">The planning approval also incorporates a major upgrade of Queensbridge Square, which PDG will deliver in partnership with the City of Melbourne.</p>

<p data-end="2011" data-start="1866"><img alt="PDG" data-entity-type="file" data-entity-uuid="73167fcd-1031-4b6f-a408-a064cfe45ed1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%209.29.17%E2%80%AFAM.png?VersionId=Pf1AEWxw6SNmBqR0zQW5lyEze.MtxgFp" /></p>

<p data-end="2191" data-start="2013">The existing square will be revitalised as a new civic and pedestrian space along the Yarra River, strengthening the connection between the project, Southbank and the riverfront.</p>

<p data-end="2365" data-start="2193">PDG Founder and Managing Director Vince Giuliano said the approval represented a major milestone for a site which has remained largely underutilised for more than 15 years.</p>

<p data-end="2473" data-start="2367">“This is the most significant Planning Permit approval Melbourne has seen in recent years,” Giuliano said.</p>

<p data-end="2775" data-start="2475">“For more than 15 years, this site has remained underutilised. This approval enables us to deliver a project that will contribute meaningfully to the revitalisation of Southbank, restore and reactivate an important heritage building, and create a new civic and hospitality destination for Melbourne.”</p>

<p data-end="2943" data-start="2777">The latest approval follows an earlier planning permit issued by the City of Melbourne covering demolition works across part of the site at 9-29 Queens Bridge Street. Those demolition and early works are already underway.</p>

<p data-end="3145" data-start="3001">PDG has also started generating early interest in the residential component from owner-occupiers ahead of a planned public launch in early 2027.</p>


PDG secures approval for $1.5bn Southbank apartment development, The One

<p>Local developer Harridan is seeking to turn its Woolloongabba apartment project into the first stage of a broader transformation of Burke Street, using a new 16-storey mixed-use building to establish a greener pedestrian connection toward the rapidly evolving Boggo Road transport and knowledge precinct.</p>

<p>The South East Queensland developer has filed plans for 154 apartments on the <a href="https://www.apartments.com.au/new-apartments/4-burke-street-woolloongabba-qld-4102">southern side of Burke Street</a>, where its proposal has been designed alongside a wider vision by LatStudios for the street.</p>

<p>That vision positions the southern side of Burke Street for buildings of 15 storeys and above, while envisaging lower-rise development of up to five storeys on the northern side to transition into Woolloongabba's existing character housing. It also proposes wider pedestrian verges, deep planting, new street trees and upgrades to the pedestrian approach to Boggo Road Station.</p>

<p>The Harridan development itself has been designed by Brisbane-based Arqus Design and will comprise 154 apartments across 16 storeys. The mix is weighted heavily toward two-bedroom apartments, with 121 proposed alongside 10 one-bedroom and 23 three-bedroom residences. There will typically be around 14 units per floor.</p>

<p>A lower-ground car park and three podium levels will accommodate 156 resident parking spaces, along with visitor and commercial parking. There will also be 154 resident bicycle spaces and 40 visitor bicycle parks.</p>

<p>&nbsp;</p>

<p>Harridan is a family-owned developer and part of the Holmwood Highgate Group, with more than three decades of development activity across South East Queensland. Its portfolio spans residential, commercial and industrial property, with current residential projects including Riverbank on Byron in Bulimba, Esperance Residences in Carina and The Precinct at Kinross Road in Thornlands.</p>

<p>Wooloongabba has been popular for apartment developers, particularly since the announcement of the 2032 Summer Olympics games in Brisbane.</p>

<p>While there have been a lot of development applications, it has failed to materialize into real supply.&nbsp;</p>

<p>Sarazin has been the major player in the area. They are under construction at Murcia Residences, on the fringe of East Brisbane and Woolloongabba. They have just launched <a href="https://www.apartments.com.au/new-apartments/the-stanley-residences-woolloongabba-8-trafalgar-street-woolloongabba-qld-4102">The Stanley Residences</a>, in Woolloongabba on Trafalagar Street. They also have Nuage coming soon on the nearby <a href="https://www.apartments.com.au/new-apartments/nuage-woolloongabba-14-wellington-road-woolloongabba-qld-4102">Wellington Road</a>.</p>


First look: Harridan plans Burke Street transformation beside Boggo Road transport hub

Commsec

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<div>
<p>EXPERT OBSERVATION</p>
<p>Engineering construction work done rose by 2.8 per cent in the March quarter to stand 13.7 per cent higher than a year ago. A month ago, it was estimated that engineering construction was up by 1.5 per cent in the quarter.</p>
<p>Engineering work done for the public sector rose by 6.3 per cent in the March quarter. Over the year to March, a record $35.8 billion of work was done for the public sector.</p>
<p>Excluding resources, engineering work yet to be done stands at $44.2 billion, just below record highs. Outstanding road and railway work are both at record highs.</p>
<p>The data on engineering construction work is important for builders, building material companies, professional services, developers, government businesses and other dependent sectors and industries.</p>
</div>
<div class="x_WordSection2">
<h1><span>What does it all mean?</span></h1>
<p>Those about to hit the road in the coming school holidays may need to add extra to expected travel times. A record amount of roadwork is evident across the country. Those affected by the delays will clearly be getting up close and personal with Australia’s infrastructure boom.</p>
<p class="x_Bullets">Click here <a href="https://www.propertyobserver.com.au/images/2018/6/28/roadwork.jpg" target="_blank">to enlarge.</a></p>
<p class="x_Bullets"><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/2018/6/28/roadwork.jpg" alt=""></p>
<p class="x_Bullets">The first construction boom was driven by the resource sector – with more mining and energy capacity created to meet global demand, especially China. The new construction boom is not mines or oil platforms but roads, railways, dams and electricity generation and distribution facilities.</p>
<p class="x_Bullets">And the centre of activity is no longer Western Australia, Northern Territory and northern Queensland, but rather the growing population centres of south-east Australia.</p>
<p class="x_Bullets">With so much construction underway – homes, commercial building and infrastructure, stresses are appearing, particularly the ability to attract and retain the necessary skilled staff. And clearly all the necessary staff aren’t available in Australia – more workers will be needed from overseas, creating fresh momentum for the economy.</p>
<p class="x_Bullets">Click here <a href="https://www.propertyobserver.com.au/images/2018/6/28/VIC-INF.jpg" target="_blank">to enlarge.</a></p>
<p class="x_Bullets"><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/2018/6/28/VIC-INF.jpg" alt=""></p>
<p class="x_Bullets">Anecdotal evidence of wage pressures in the construction industries is expected to become more widespread. The question is to what extent any spill-over effects will be evidenced in other sectors.</p>
<p class="x_Bullets">Those on the east coast probably never understood the “mining boom” of around a decade ago. But the building of roads, airports and railways will be more recognisable for those in capital cities.</p>
<h1><span>What do the figures show?<span class="Apple-converted-space"> </span></span></h1>
<p>Engineering construction work done rose by 2.8 per cent in real (inflation-adjusted) terms in the March quarter – the fourth gain in five quarters. Work done is up 13.7 per cent on a year ago. Previously, engineering work was reported as rising by 1.5 per cent in the March quarter to be 10.3 per cent higher over the year.</p>
<p>Value of work completed for the public sector rose by 6.3 per cent in the quarter whileprivate sector activity rose by 0.6 per cent.</p>
<p>Over the year to March a record $35.8 billion of infrastructure work was completed(engineering work for the public sector.)</p>
<p>Construction work rose in six of the states and territories in the March quarter: NSW (up 5.6 per cent); Victoria (up 19.2 per cent); Queensland (up 9.5 per cent); South Australia (up 6.0 per cent); Western Australia (down 11.7 per cent); Tasmania (up 8.6 per cent); Northern Territory (down 13.3 per cent); ACT (up 13.8 per cent).</p>
<p>Work yet to be done: There was $59.2 billion of engineering work yet to be done as at March 2018, up from $49.2 billion in the previous quarter. Excluding the resource sector (coal, oil, pipelines etc.) work to be done stands at $44.2 billion, just below the record high of $43 billion in December 2012.</p>
<p>As at March 2018 a record $20 billion of work was to be completed on roads and highways and a record $11.7 billion of railways.</p>
<p class="x_Bullets">Click here <a href="https://www.propertyobserver.com.au/images/2018/6/28/NEW-BOOM.jpg" target="_blank">to enlarge.</a></p>
<p class="x_Bullets"><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/2018/6/28/NEW-BOOM.jpg" alt=""></p>
<p class="x_Bullets">In original terms, engineering work commenced in the March quarter was $29.2 billion – the most in 5½ years – and up 66.2 per cent in the quarter. Almost $90 billion of engineering work was started in the past year.</p>
<h1><span>What is the importance of the economic data?</span></h1>
<p class="x_Bullets">The Bureau of Statistics releases quarterly estimates of<strong><span class="Apple-converted-space"> </span></strong>Engineering construction activity.The estimates include<span class="Apple-converted-space"> </span>value of engineering construction work done, commenced and yet to be done, classified by state or territory, commodity (roads, bridges, pipelines etc.), sector (public/private) undertaking the work, and sector for whom the work is being done.<span class="Apple-converted-space"> </span>The data is a comprehensive assessment of the infrastructure pipeline.</p>
<h1><span>What are the implications for interest rates and investors?</span></h1>
<p class="x_Bullets">Construction-dependent companies have plenty of work. The work may not be local, but it exists for those builders, tradespeople and construction firms willing to travel. Victorian engineering work is at record highs and NSW construction was just off the highs in the March quarter. And then there is a host of other engineering projects across the nation.</p>
<p class="x_Bullets">Demand for labour and materials in construction and construction-related sectors will increase over the coming year. It’s worth noting that state and federal governments have since added to the infrastructure workload after delivering budgets in the past two months.</p>
<p class="x_Bullets">CommSec expects official interest rates to remain stable until early 2019.</p>
<p class="x_Bullets"><em>Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.</em><span> </span></p>
</div>
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cjames-5S2v74qSNK

Shift of infrastructure boom to growing south-east Australia: CommSec

<html><body>
<p>EXPERT OBSERVATION</p>
<div class="x_WordSection1">
<p class="x_CSbulletlv1">The Bureau of Statistics reports that Australian home prices fell by 0.7 per cent in the March quarter to stand 2.0 per cent higher over the year – the weakest annual growth rate since September 2012.</p>
<p class="x_CSbulletlv1"><span style="text-decoration: underline;">Record homes in South Australia:</span><span class="Apple-converted-space"> </span>At the end of March there were 40,600 more homes than at the end of December across Australia.  The number of homes in South Australia increased by 2,700 to 776,500 in the March quarter – the largest increase since the data series began in December 2011.  However, the number of homes in NSW increased by 7,800 to 3,096,900 in the March quarter – the smallest increase in 4 years.<span class="Apple-converted-space"> </span></p>
<p class="x_CSbulletlv1"><span style="text-decoration: underline;">Consumer confidence:</span><span class="Apple-converted-space"> </span>The weekly ANZ/Roy Morgan consumer confidence rating fell by 0.7 per cent to 122.1. Confidence is up by 9.2 per cent over the year and above the average of 113.9 since 2014 and average of 112.9 since 1990. Views on family finances are the best in 18 months at 132.5.</p>
<p class="x_CSbulletlv1"><span style="text-decoration: underline;">Reserve Bank Board minutes:</span><span class="Apple-converted-space"> </span>The minutes from the June 5 Board meeting were issued. The Board’s neutral policy bias remains intact with a period of record low interest rate stability ahead for the foreseeable future. It noted that<span class="Apple-converted-space"> </span><em>“recent data had been consistent with the Bank's central forecast for GDP growth to pick up to be above 3 per cent by the end of 2018.”</em></p>
<p class="x_CSbulletlv1"><em>Home price data is important for retailers, especially those focussed on consumer durables. The consumer confidence figures have implications for retailers, and other consumer-focussed businesses. The Reserve Bank Board minutes provides guidance on interest rate settings.</em></p>
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<p class="x_MsoNormal"><strong><span>What does it all mean?</span></strong></p>
<p class="x_Bullets">The rebalancing of the Aussie housing market continues. Today’s release from the Bureau of Statistics has been superseded by more timely monthly data issued on home prices by property analytics company, CoreLogic.</p>
<p class="x_Bullets">The Sydney and Melbourne markets have both slowed with prices falling in both cities. Data from CoreLogic confirms that national home prices have fallen by 0.4 per cent over the year to May – the first annual fall since October 2012. </p>
<p class="x_Bullets">But it’s not all bad news. Perth and Darwin home prices appear to have bottomed and modest price appreciation has been recorded in Adelaide, Brisbane and Canberra over the three months to May. And Hobart’s economic renaissance and strong population growth is pushing-up home prices. <span class="Apple-converted-space"> </span></p>
<p class="x_Bullets">Regional areas are also stand-out performers. The Melbourne and Sydney commuter belts of Geelong, Ballarat, Southern Highlands and Newcastle have recorded annual growth in property prices of 5-10 per cent to May.</p>
<p class="x_Bullets">The Reserve Bank is continuing to monitor developments, particularly around slowing housing credit growth, elevated household debt and the potential for tighter bank lending standards.</p>
<p class="x_Bullets">And the slowdown in the residential property market has seen the annual growth rate of the number of homes in Australia decelerate to 18-month lows in the March quarter. The stock of NSW homes rose by the slowest amount in four years. But it’s a different story in South Australia. The number of homes grew by the most on record during the March quarter.</p>
<p class="x_MsoNormal"><strong><span>What do the figures show?</span></strong></p>
<p class="x_Bullets"><strong><span style="text-decoration: underline;">Residential property prices</span></strong></p>
<p class="x_Bullets"><strong>The Bureau of Statistics (ABS)<span class="Apple-converted-space"> </span></strong>has released its Residential Property Price indexes for the March quarter.</p>
<p class="x_Bullets"><em>“The price index for residential properties for the weighted average of the eight capital cities fell 0.7 per cent in the March quarter 2018. The index rose 2.0 per cent through the year to the March quarter 2018.</em></p>
<p class="x_Bullets"><em>The capital city residential property price indexes fell in Sydney (-1.2 per cent), Melbourne (-0.6 per cent), Perth (-0.9 per cent), Brisbane (-0.6 per cent) and Darwin (-1.1 per cent) and rose in Hobart (+4.3 per cent), Adelaide (+0.5 per cent) and Canberra (+0.9 per cent).</em></p>
<p class="x_Bullets"><em>Annually, residential property prices rose in Hobart (+14.1 per cent), Melbourne (+6.2 per cent), Canberra (+3.8 per cent), Adelaide (+2.6 per cent) and Brisbane (+1.6 per cent) and fell in Darwin (-6.5 per cent), Perth (-1.5 per cent) and Sydney (-0.5 per cent).</em></p>
<p class="x_Bullets"><em>“The total value of residential dwellings in Australia was $6,913,636.6 million at the end of the March quarter 2018, falling $22,498.3 million over the quarter.”</em></p>
<p class="x_Bullets"><em>“The mean price of residential dwellings fell $5,100 to $687,700 and the number of residential dwellings rose by 40,600 to 10,052,600 in the March quarter 2018.”</em></p>
<p class="x_Bullets"><strong>CommSec estimates that the number of people per home increased from 2.47 in the December quarter to 2.48 in the March quarter.</strong></p>
<p class="x_Bullets"><strong>The number of homes in South Australia</strong><span class="Apple-converted-space"> </span>increased by 2,700 to 776,500 in the March quarter – the largest increase since the data series began in December 2011. </p>
<p class="x_Bullets"><strong>The number of homes in NSW<span class="Apple-converted-space"> </span></strong>rose by just 7,800 in the March quarter – the smallest lift in 4 years.</p>
<p class="x_Bullets"><strong><span style="text-decoration: underline;">Consumer Sentiment</span></strong></p>
<p class="x_Bullets"><strong>The weekly ANZ/Roy Morgan consumer confidence</strong><span class="Apple-converted-space"> </span>rating fell by 0.7 per cent to 122.1. Confidence is up by 9.2 per cent over the year and above the average of 113.9 since 2014 and average of 112.9 since 1990.<span class="Apple-converted-space"> </span></p>
<p class="x_Bullets"><strong>Three components<span class="Apple-converted-space"> </span></strong>of the index<span class="Apple-converted-space"> </span><strong>decreased</strong><span class="Apple-converted-space"> </span>last week:</p>
<p class="x_Bullets">- The estimate of family finances compared with a year ago was<span class="Apple-converted-space"> </span><strong>down</strong><span class="Apple-converted-space"> </span>from +9.1 to +3.8;</p>
<p class="x_Bullets">- The estimate of family finances over the next year was<span class="Apple-converted-space"> </span><strong>up<span class="Apple-converted-space"> </span></strong>from +28.5 to +32.5;</p>
<p class="x_Bullets">- Economic conditions over the next 12 months was<span class="Apple-converted-space"> </span><strong>down</strong><span class="Apple-converted-space"> </span>from +15.3 to +10.9;<span class="Apple-converted-space"> </span></p>
<p class="x_Bullets">- Economic conditions over the next 5 years was<span class="Apple-converted-space"> </span><strong>down<span class="Apple-converted-space"> </span></strong>from +18.0 to +17.0; <span class="Apple-converted-space"> </span></p>
<p class="x_Bullets">- The measure of whether it was a good time to buy a major household item was<span class="Apple-converted-space"> </span><strong>up<span class="Apple-converted-space"> </span></strong>from +44.0 to +46.3. <span class="Apple-converted-space"> </span></p>
<p class="x_Bullets">- The<span class="Apple-converted-space"> </span><strong>measure of inflation expectations</strong><span class="Apple-converted-space"> </span>two years ahead increased to 4.8 per cent – the equal highest level in 2½ years - up from 4.4 per cent in the previous week.</p>
<p class="x_Bullets"><strong><span style="text-decoration: underline;">Reserve Bank March Board minutes:</span></strong></p>
<p class="x_Bullets"><strong>Last paragraph:</strong><em><span class="Apple-converted-space"> </span>“The low level of interest rates was continuing to support the Australian economy. Further progress in the period ahead in reducing unemployment and returning inflation to the target was therefore expected, although this progress was likely to be gradual.”</em></p>
<p class="x_Bullets"><strong>On the labour market:</strong><span class="Apple-converted-space"> </span><em>“Forward-looking indicators of labour demand had continued to point to employment growth increasing to above-average rates in coming months.. The ratio of job vacancies to the number of unemployed workers had remained well below levels seen a decade earlier, which also signalled spare capacity in the labour market.”</em></p>
<p class="x_Bullets"><strong>On demographics: “</strong><em>The composition of net overseas migration had affected the age structure of the population. As a result, Australia's median age and old-age dependency ratios were projected to increase by less than those of other advanced economies, despite a relatively high life expectancy. This would make Australia one of the youngest populations within this group of countries.” </em></p>
<p class="x_Bullets"><strong>On inflation and wages growth:<span class="Apple-converted-space"> </span></strong><em>“Inflation remained low and was likely to remain so for some time, reflecting slow growth in labour costs and strong competition in the retail sector. However, a gradual pick-up in inflation to be above 2 per cent was still expected as the economy strengthens and wages growth increases.” </em></p>
<h1><span>What is the importance of the economic data?</span></h1>
<p class="x_Bullets">The<span class="Apple-converted-space"> </span><strong>Australian Bureau of Statistics (ABS)</strong><span class="Apple-converted-space"> </span>provides quarterly data on<span class="Apple-converted-space"> </span><strong>residential prices</strong>. The figures provide further perspectives on the state of the housing purchase sector.</p>
<p class="x_Bullets">The<span class="Apple-converted-space"> </span><strong>ANZ/Roy Morgan weekly survey of consumer confidence</strong><span class="Apple-converted-space"> </span>closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes<span class="Apple-converted-space"> </span>and is now closely tracked by the Reserve Bank.</p>
<p class="x_Bullets">The<span class="Apple-converted-space"> </span><strong>Reserve Bank</strong><span class="Apple-converted-space"> </span>releases minutes of its monthly Board meeting a fortnight after the event. The minutes give a guide to Reserve Bank thinking on interest rate settings.</p>
<h1><span>What are the implications for interest rates and investors?</span></h1>
<p class="x_Bullets">The Reserve Bank remains patient. According to the Board, the slowdown in the Aussie housing market through macroprudential measures and tighter credit standards<span class="Apple-converted-space"> </span><em>“has been helpful in containing the build-up of risk on household balance sheets”.</em><span class="Apple-converted-space"> </span>And policy makers expect the<em>“tightening [of lending standards] to be modest”.<span class="Apple-converted-space"> </span></em></p>
<p class="x_Bullets">While there are a combination of reasons for slowing property prices in Sydney and Melbourne, including tighter government and lender restrictions on foreign and interest-only investment, the overall stock of homes being built in NSW is growing at a slower rate. Modest additions to supply combined with strong jobs growth, firm population growth and record low interest rates should cushion against a significant market downturn. The Reserve Bank stressed in its minutes that “<em>Information from the Bank's liaison program suggested that demand for detached houses had remained strong, while off-the-plan apartment sales had slowed considerably as a result of weaker investor and foreign demand.” </em></p>
<p class="x_Bullets">Nevertheless, household consumption remains a key uncertainty for the monetary policy outlook. The recent uplift in the Aussie sharemarket is timely as it appears that wealth accumulation from residential housing has peaked for now.</p>
<p class="x_Bullets">Consumer confidence is just below the 4-year highs last seen in January. Petrol prices have fallen over the past two weeks, while winter department store sales, solid economic growth data and possible personal tax cuts have lifted spirits. Jobs growth is still strong, but goods prices remain low. Interest rates won’t lift in the near-term.</p>
<p class="x_Bullets">And the Aussie sharemarket is lifting after a period of relative underperformance to its global peers. The ASX200 index is now up by 1.0 per cent year-to-date, broadly in-line with the US Dow Jones index. So it’s little wonder that Aussie household views on family finances are the best in 18 months. Total returns from shares should continue to outperform residential property.  </p>
<p class="x_Bullets">CommSec expects interest rates to be unchanged until at least February 2019.</p>
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<p>Ryan Felsman is a senior economist at CommSec.</p>
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Record increase in South Australia homes as NSW slowest growth in four years: CommSec

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<div class="column">EXPERT OBSERVATION</div>
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<div class="column">The record economic expansion is well into its 27th year. The Australian economy grew by 1.0 per cent in the March quarter after growing by an upwardly-revised 0.5 per cent (previously 0.4 per cent) in the December quarter – the equal best quarterly growth rate since December 2011. Annual economic growth rose from 2.4 percent to 3.1 per cent – the strongest growth rate in 21 months.</div>
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<div class="column">The biggest contribution to growth came from net exports (+0.4pp), government consumption (+0.3pp), household consumption (+0.2 pp), dwelling investment (+0.1pp), non-dwelling construction (+0.1pp). Private equipment was flat. The only drag on growth came from public investment (- 0.1pp).</div>
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<div class="column">Real gross national income rose by 1.7 per cent in the March quarter to be up 2.4 per cent on the year. In nominal terms GDP increased by 2.2 per cent in the quarter and rose by 3.9 per cent over the year.</div>
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<div class="column">Gross value added per hours worked in the market sector rose by 1.0 per cent in the March quarter, but was down by 0.1 per cent on the year. Hours worked in the market sector fell by 0.2 per cent in the March quarter, but was up by 2.4 per cent on the year.</div>
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<div class="column">Thirteen of the 19 industry sectors expanded in the March quarter. Strongest growth was by Administration and Support Services (+3.0 per cent), Mining (+2.9 per cent) and Manufacturing (+2.4 per cent). Agriculture, forestry and fishing (-1.7 per cent) and Accommodation and Food Services (-1.3 per cent) recorded the biggest falls in output. Two sectors both added 0.2 percentage points to GDP growth and six sectors each added 0.1 percentage point to GDP growth. Only one sector detracted 0.1 percentage points.</div>
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<div class="column"><strong>What does it all mean?</strong></div>
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<div class="column">The Aussie economy is in rude health. Economic growth rebounded during the March quarter, recording the equal best quarterly growth rate since the December quarter of 2011. Annual growth lifted to 3.1 per cent, the best growth rate in almost two years.</div>
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<div class="column">We share the Reserve Bank’s view that growth will be stronger this year than last year. The economy is tipped to grow by “a bit above 3 per cent” in 2018 and 2019.</div>
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<div class="column">Aussie economic activity is being supported by still-firm household consumption, strong government spending on public transport-related and infrastructure projects and a pick-up in LNG exports. Business inventories also lifted during the quarter.</div>
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<div class="column">Today’s national accounts also highlighted that the drag from the end of the mining construction boom is receding. Growth in exports accounted for half of the quarterly uplift in growth. The mining sector and commodity prices are continuing to recover due to firm demand from China.</div>
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<div class="column">The Reserve Bank has reiterated that household consumption remains a “key uncertainty” for the economic outlook. While today’s contribution was mildly positive, developments in the housing market, where home prices in Sydney and Melbourne are falling, will need to be monitored closely. And household debt remains elevated.
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<p><span>Overall, we need to see economic growth stay near 3 per cent levels and the unemployment rate below 5 per cent to see sufficient tightening of the labour market to generate upward pay pressures on employers before interest rates can lift.</span></p>
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<p><strong>What do the figures show?</strong></p>
<p>The Aussie economy rose by 1.0 per cent in the March quarter after lifting by an upwardly-revised 0.5 per cent in the December quarter. It was the equal strongest quarterly growth rate since the December quarter of 2011.</p>
<p>The economy grew by 3.1 per cent over the year to March – the strongest annual growth rate in 21 months. Growth has averaged 2.6 per cent over the decade and averaged 2.8 per cent over the last 15 years.</p>
<p>The non-farm economy rose by 1.1 per cent in the March quarter after increasing by 0.6 per cent in the December quarter. Annual growth stands at 3.6 per cent.</p>
<p>Farm GDP fell by 1.9 per cent in the March quarter after declining by 1.8 per cent in the December quarter. Farm GDP fell by 14.9 per cent over the year.</p>
<p>At current prices, GDP rose by 2.2 per cent in the March quarter after 0.9 per cent increase in the December quarter. Annual growth stands at 3.9 per cent. As at March 2018, the Australian economy was valued at $1,815 billion.</p>
<p>The biggest contribution to growth came from net exports (+0.4pp), government consumption (+0.3pp), household consumption (+0.2pp), dwelling investment (+0.1pp), non-dwelling construction (+0.1pp). Private equipment was flat. The only drag on growth came from public investment (-0.1pp).</p>
<p>In terms of domestic price pressures, the household consumption implicit price deflator rose by 0.6 per cent in the March quarter after increasing by 0.6 per cent in the December quarter. Annual growth stands at 1.6 per cent. Real non-farm unit labour costs fell by 1.6 per cent in the March quarter after increasing by 0.5 per cent in the December quarter. Real non-farm unit labour costs rose by 1.1 per cent over the year.</p>
<p>Gross value added per hours worked in the market sector rose by 1.0 per cent in the March quarter, but was down by 0.1 per cent on the year. Hours worked in the market sector fell by 0.2 per cent in the March quarter, but was up by 2.4 per cent on the year.</p>
<p>The only data available is state final demand (more accurate data would include net exports but it is not available for all states and territories). In the March quarter, growth was strongest in Tasmania (up 2.0 per cent), Victoria (up 1.9 per cent), NSW (up 0.7 per cent) and Queensland (up 0.5 per cent). State final demand fell in South Australia (down 0.2 per cent), ACT (down 0.8 per cent), Western Australia (down 1.1 per cent) and in the Northern Territory (down 2.0 per cent).</p>
<p>Consumer spending lifts. Household spending rose by 0.3 per cent in the March quarter to be up 2.9 per cent for the year. Only four of the 17 sectors recorded weaker spending in the quarter. Spending rose most for Electricity, gas and other fuel (up 2.3 per cent) and Communications (up by 1.5 per cent). Spending fell most for Alcoholic beverages (down 2.0 per cent) followed by Hotels, cafes and restaurants (down by 1.8 per cent).</p>
<p>Thirteen of the 19 industry sectors expanded in the March quarter. Strongest growth was by Administration and Support Services (+3.0 per cent), Mining (+2.9 per cent) and Manufacturing (+2.4 per cent). Agriculture, forestry and fishing (-1.7 per cent) and Accommodation and Food Services (-1.3 per cent) recorded the biggest falls in output. Two sectors both added 0.2 percentage points to GDP growth and six sectors each added 0.1 percentage point to GDP growth. Only one sector detracted 0.1 percentage points.</p>
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<p><strong>Other points:</strong></p>
<p>Profit share rises. In seasonally adjusted terms, the ratio of profits to total factor income rose from 27.0 per cent to 27.8 per cent in the March quarter. The wages share fell from 52.9 per cent to 52.4 per cent.</p>
<p>Household savings ratio falls. The household saving ratio fell from 2.3 per cent in seasonally adjusted terms to 2.1 per cent in the March quarter – the lowest level since December 2007. In trend terms household saving rose from 2.1 per cent to 2.2 per cent.</p>
<p>Imports rose as a share of spending. The imports to sales ratio rose from 0.390 in the December quarter to 0.397 in the March quarter.</p>
<p>The inventory to sales ratio fell from 0.610 per cent to 0.603 per cent in the March quarter.</p>
<p><strong>What is the importance of the economic data?</strong></p>
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<p><span>The quarterly </span><span>National Income, Expenditure and Product release (national accounts) </span><span>from the Bureau of Statistics is an </span><span>assessment of Australia’s economic performance. Detailed </span><span>estimates are provided on incomes (wages, profits), spending (such as household, dwelling investment and trade (exports and imports) and production. Other data includes household saving and the economic performance of States and Territories. The main use of the national accounts figures is as a historical record of economic performance. The information has little forward-looking value for currency, interest rate or share markets. </span></p>
<p><span>What are the implications for interest rates and investors?</span></p>
<p>Australia’s record-breaking expansion continues. Importantly, economic growth is strengthening. After a below- par level of activity, largely due to weather disruptions to our export sectors in 2017, output rose back above long- term trend levels in early 2018.</p>
<p>The year has begun strongly with the equal best quarterly growth in output for over six years. And the annual growth rate is near the best in two years. The Reserve Bank is tipping annual growth of 3.25 per cent in 2018. We appear to be on track, though its early days.</p>
<p>Productivity continues to be a key focus and is a necessary ingredient to lift sluggish wages growth. And extra workers taken on by business need to start adding to output. Pleasingly, levels of productivity broadly picked-up over the quarter and year, despite remaining below long-term trend levels.</p>
<p>While the business sector is humming along nicely at the moment, complemented by the fiscal expansion from the government’s infrastructure projects, close attention will continue to be paid to the household sector. Home prices are falling for the first time in five years. Victorian and NSW households are still spending. But consumption remains weak in the mining states. Also, Aussies are drawing down on their savings in the face of weak income growth and rising cost of living pressures. But this may be a sign of confidence in the jobs market.</p>
<p>Employee compensation grew by 1.2 per cent in the March quarter, supported by rising company profits, up by 5.2 per cent – a trend that needs to continue in order to see wages lift sufficiently to boost inflation and interest rates. CommSec expects no change to official interest rates until February 2019.</p>
<p>Ryan Felsman is a senior economist at CommSec.</p>
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No change to official interest rates until February 2019: CommSec

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<div class="column">Council approvals to build new homes fell by 5.0 per cent in April after rising by an upwardly- revised 3.5 per cent rise in March (previously +2.6 per cent). Over the year, building approvals fell from a record high $126.7 billion in March to $126.2 billion in April.</div>
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<div class="column">House approvals rose by 0.7 per cent and were up by 11.3 per cent over the year to April, the strongest annual growth rate in over three years.</div>
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<div class="column">In April, council approvals are at record highs for Melbourne (62,160 units) and Adelaide (10,759 units) and at 61⁄2-year highs for Hobart (1,346 units) in rolling annual terms.</div>
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<div class="column">The approvals data has implications for banks, retailers, developers, building and building material companies.</div>
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<div class="column"><strong>What does it all mean?</strong></div>
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<div class="column">All eyes will be on Friday’s May update on Australian home prices. The housing market is rebalancing. Sydney dwelling prices are likely to have fallen for the ninth consecutive month and Melbourne prices have probably fallen for a sixth month in-a-row.Why are home prices falling? Overseas’ buyer demand is slowing, bank lending standards have been tightened, housing credit is slowing and there is a greater supply of houses available for sale, as evidenced by softer auction clearance rates.</div>
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<div class="column">So it is no surprise that overall council building approvals continue to fall. That said, the much-discussed slowdown in approvals for detached houses has failed to materialise. In fact, annual approvals for houses are at the highest level since October 2014.</div>
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<div class="column">Strong population growth, low vacancy rates and a still-strong preference for Aussies to own their castles is supportive of residential construction.</div>
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<div class="column">A quick sample of the capital cities reaffirms this view. Building approvals on a rolling 12-month annual basis are at record highs in Melbourne and Adelaide. Hobart approvals are the highest in almost seven years (82 months).</div>
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<div class="column">The building pipeline continues to expand. And this is before government-sponsored infrastructure projects are added to the total.</div>
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<div class="column">Construction companies are already claiming they can’t find the staff they need. There will be upward pressure on wages. The question is how much of the wage pressure will spill over to other areas</div>
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<div class="column"><strong>What do the figures show?</strong></div>
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<p><strong>Building Approvals</strong></p>
<p>Council approvals to build new homes fell by 5.0 per cent in April after rising by an upwardly-revised 3.5 per cent rise in March (previously +2.6 per cent). House approvals rose by 0.7 per cent and were up by 11.3 per cent over the year to April, the strongest annual growth rate in over three years.</p>
<p>Apartment approvals fell by 11.6 per cent.</p>
<p>In trend terms, overall approvals fell by 0.1 per cent. But trend house approvals rose by 0.9 per cent, the 15th consecutive monthly increase.</p>
<p><strong>Over the past year 227,900 new homes were approved</strong> – a 13-month high but down from the record high of 242,775 in the year to August 2016.</p>
<p><strong>Dwelling approvals across states/territories in April</strong>: NSW (+5.1 per cent); Victoria (-8.4 per cent); Queensland (+1.2 per cent); South Australia (+4.2 per cent); Western Australia (+21.0 per cent); Tasmania (+6.0 per cent). Trend terms: Northern Territory (+6.7 per cent); ACT (+14.8 per cent).</p>
<p>The <strong>value of all commercial and residential building approvals</strong> fell by 4.2 per cent in April and are down by 4.8 per cent on the year. Residential approvals fell by 4.3 per cent; new building was down 4.8 per cent; and alterations &amp; additions fell by 0.3 per cent. Commercial building fell by 4.0 per cent in April after falling by 5.3 per cent in March.</p>
<p>Over the year, building approvals fell from a record high $126.7 billion in March to $126.2 billion in April. Annual commercial building approvals stand at $47.4 billion in April, down from a record high $48.3 billion in March.</p>
<p><strong>What is the importance of the economic data?</strong></p>
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<p><span>The Bureau of Statistics' monthly </span><span>Building Approvals </span><span>release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. </span><span>Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. </span><span>An increase in approvals would point to stronger future activity for construction-related companies. </span></p>
<p><span>What are the implications for interest rates and investors?</span></p>
<p>Building approvals have declined from their peaks in August 2016, but approvals for houses are the strongest in annual terms in over three years.</p>
<p>But will these houses actually get built? That will largely depend on land availability. State governments, like New South Wales, have been selling off both land plots and state-owned housing across Sydney suburbs, raising revenue amid a decline in stamp duty receipts.</p>
<p>Strong population growth is supporting council approvals in Melbourne and Hobart. In a sign that the South Australian economy is picking-up, Adelaide approvals are at record highs on rolling annual basis.</p>
<p>The solid pipeline of residential and commercial building implies that the construction sector will continue to be a key driver of the Aussie economy in 2018/19. Rising building costs and strong job ads growth for engineers and construction workers suggests that inflationary pressures are building.</p>
<p>CommSec expects no change to official interest rates until early 2019. The extremely slow lift in wage and goods price growth suggests the first rate hike in the new cycle won’t occur until next year.</p>
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<p>Ryan Felsman is a senior economist at CommSec.</p>
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House approvals at three year highs: CommSec

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<p><span>EXPERT OBSERVATION</span></p>
<p>Currently someone on the average wage needs to work for 23.2 weeks to afford a Ford Falcon – the best (lowest) result on record. Four years ago the same worker would have needed to work almost three weeks longer to afford the same purchase.</p>
<p>The weekly ANZ/Roy Morgan consumer confidence rating fell for the first time in seven weeks, dropping 3.2 per cent to 117.7. Confidence is still up by 4.3 per cent over the year and above the average of 113.8 since 2014.</p>
<p>Consumer confidence figures have implications for retailers, and other consumer-focussed businesses. Car affordability data is helpful in analysing spending trends.</p>
<p><strong>What does it all mean?</strong></p>
<p>Seven was a bridge too far. Consumer confidence rose for six straight weeks, but a weaker sharemarket, global uncertainties (such as US-North Korea talks) and a spike in petrol prices have serve to dull consumer optimism.</p>
<p>Too often, investors and analysts focus on the slower growth of wages rather than comparing wages with the prices of key goods and services. One reason that Aussie consumers are devoting extra dollars to buying homes is because the affordability of a raft of other items has improved – such as cars, whitegoods, phones, TVs, food and clothing. It’s also important to note that the quality or features of goods like cars and electrical goods is vastly better than similar purchases made five or 10+ years ago.</p>
<p>And it’s not just the ‘run of the mill’ goods. Over the past 20 years the number of weeks a person on the average wage has had to work to buy a luxury car like the BMW 318i has halved.</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/5/30/affordable.jpg" target="_blank">to enlarge.</a></p>
<p><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/2018/5/30/affordable.jpg" alt=""></p>
<p><strong>What do the figures show?</strong></p>
<p>The National Roads and Motorists Association (NRMA) in NSW has published data on car prices in its Open Road magazine for over 25 years. The data is sourced from the Glass’s Guide. When measured against wages we are able to derive measures of car affordability.</p>
<p>Currently someone on the average wage needs to work for 23.2 weeks to afford a Ford Falcon – the best (lowest) result on record. Four years ago the same worker would have needed to work almost three weeks longer to afford the purchase.</p>
<p>It’s not just Ford Falcons; consistent price data exists for the Toyota Corolla, Holden Commodore and the BMW 318i. In fact affordability of a BMW 318i has improved over the past four years from 41.5 weeks of wages (for someone on the average wage) to 36.5 weeks currently.</p>
<p>Since 1999 the average wage has more than doubled, up 111 per cent. Over the same period, a BMW 318i (and similar models and variants) have increased in price by just 2 per cent.</p>
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<p><strong>Affordability more generally</strong></p>
<p>Over the past five years the average wage has lifted by 12.4 per cent – an increase of $176 a week or $9,152 a year. Interestingly over the same time, clothing has become cheaper – down by 5.6 per cent.</p>
<p>Amongst other goods to have become cheaper are cars (down 1.2 per cent), household appliances (down 6.1 per cent), communication equipment (down 33.1 per cent), toys &amp; games (down 5.9 per cent).</p>
<p>Overall the cost of consumer goods lifted by 8.2 per cent, meaning consumers are in front.</p>
<p>Less affordable over the past five years has been education (cost up 25 per cent), tobacco (up 74.8 per cent), electricity &amp; gas (up 23.4 per cent) and transport services (up 16.6 per cent).</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/5/30/cars%20v%20houses.jpg" target="_blank">to enlarge.</a></p>
<p><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/2018/5/30/cars%20v%20houses.jpg" alt=""></p>
<p><strong>Consumer Sentiment</strong></p>
<p>The weekly ANZ/Roy Morgan consumer confidence rating fell for the first time in seven weeks, dropping 3.2 per cent to 117.7. Confidence is still up by 4.3 per cent over the year and above the average of 113.8 since 2014.</p>
<p>All of the five components of the index fell in the latest week:</p>
<p>The estimate of family finances compared with a year ago was down from +10.1 to +7.1;</p>
<p>The estimate of family finances over the next year was down from +27.8 to +22.5;</p>
<p>Economic conditions over the next 12 months was down from +13.2 to +10.5;</p>
<p>Economic conditions over the next 5 years was down from +15.3 to +12.4;</p>
<p>The measure of whether it was a good time to buy a major household item was down from +41.7 to +36.2.  The measure of inflation expectations 2 years ahead rose from 4.2 per cent to 4.7 per cent.</p>
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<p><span>What is the importance of the economic data?</span></p>
<p>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.</p>
<p>CommSec maintains a database of car prices in order to measure affordability over time. If cars are more affordable, more vehicles are likely to be purchased. And more affordable cars free up more spending power to purchase other goods and services.\</p>
<p>What are the implications for interest rates and investors?</p>
<p>Saudi Arabia and Russia are taking about increasing crude output. As a result, crude prices are easing and this could lead to lower prices for products like petrol and jet fuel. Consumer-focussed stocks and transport companies like airlines have potential to benefit if fuel prices fall.</p>
<p>The prices of some imported vehicles have lifted in recent months in response to a lower Aussie dollar. So the affordability of some makes has weakened modestly. But in a longer-term framework cars remain super-affordable. Auto-dependent companies continue to face favourable operating conditions.</p>
<p>Consumers are saving by buying clothes, cars, household goods and phones. But ‘nasties’ like electricity bills, education fees, train &amp; bus fares and insurance premiums have been getting dearer. And because many of these are ‘everyday’ items, they tend to influence sentiment to a greater extent than less frequent purchases.</p>
<p>Overall the average Aussie remains in front, but they may not feel it to the extent that they should.</p>
<p>C<em>raig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.</em><span> </span></p>
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Car affordability at record lows: CommSec

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<div class="column">The weekly ANZ/Roy Morgan consumer confidence rating rose by 0.7 per cent to a 15-week high of 121.6. Confidence is up by 8.4 per cent over the year and above the average of 113.8 since 2014.</div>
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<div class="column">Sentiment towards family finances over the past year rose by 2 per cent to a 3-month high of 110.1. And views on whether it is a ‘good time to buy’ a major household item rose by 2.6 per cent to 141.7 over the week.</div>
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<div class="column">Consumer confidence figures have implications for retailers, and other consumer-focussed businesses.</div>
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<div class="column">Click here <a href="https://www.propertyobserver.com.au/images/2018/5/23/sentiment.jpg" target="_blank">to enlarge.</a>
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<div class="column"><strong>What does it all mean?</strong></div>
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<div class="column">Aussie consumers are feeling pretty good about things. Sentiment has increased for six straight weeks. If this momentum continues we’ll be back at the best levels in four years in no time.</div>
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<div class="column">But the pessimists are telling us that we aren’t going to get pay rises any time soon, job creation is slowing and that we are all mired in mortgage debt.</div>
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<div class="column">So why are Aussies more optimistic? Job security is improving. 332,200 Aussies have been gainfully employed over the past year. Unemployment expectations are at the best levels in seven years. Real wages are still positive with annual wages growth including bonuses at 3-year highs (data released last week).</div>
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<div class="column">And there is the small matter of the ‘wealth effect’. The housing market is rebalancing on the east coast of the country. Dwelling prices were down by 3.4 per cent in Sydney over the 12 months to April. But are still up by 87.1 per cent since April 2009. Hobart is going gangbusters and Perth home prices are stabilising.</div>
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<div class="column">The Aussie share market (ASX200 index) is up by 1.3 per cent so far this month and 3.3 per cent over the past four weeks (both to May 21). Energy, materials and health care shares collectively have performed well.</div>
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<div class="column">Aussie consumers have also reacted positively to the Federal Budget. Tax cuts, albeit modest, may encourage increased spending on household goods, as evidenced by the rebound in sentiment around the question ‘is it a good time to buy a household item?’</div>
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<div class="column">Click here <a href="https://www.propertyobserver.com.au/images/2018/5/23/aussie-finances.jpg" target="_blank">to enlarge.</a>
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<div class="column"><strong>What do the figures show?</strong></div>
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<div class="column">Consumer Sentiment</div>
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<div class="column">The weekly ANZ/Roy Morgan consumer confidence rating rose for the sixth consecutive week, up by 0.7 per cent to a 15- week high of 121.6. Confidence is up by 8.4 per cent over the year and above the average of 113.8 since 2014.
<p><strong>Four of the five components</strong> of the index increased in the latest week:</p>
<p>The estimate of family finances compared with a year ago was up from +7.9 to +10.1;</p>
<p>The estimate of family finances over the next year was up from +27.1 to +27.8;</p>
<p>Economic conditions over the next 12 months was unchanged at +13.2;</p>
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<p><span>Economic conditions over the next 5 years was </span><span>down </span><span>from +17.5 to +15.3;<br></span></p>
<p><span>The measure of whether it was a good time to buy a major household item was </span><span>up </span><span>from +38.1 to +41.7. </span><span> </span><span>The measure of inflation expectations 2 years ahead rose from 4.1 per cent to 4.2 per cent.</span></p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/5/23/tax-cuts.jpg" target="_blank">to enlarge.</a></p>
<p><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/2018/5/23/tax-cuts.jpg" alt=""></p>
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<p><strong>What is the importance of the economic data? </strong></p>
<p>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.</p>
<p><span>What are the implications for interest rates and investors?</span></p>
<p>Aussies are a resilient bunch. The number of optimists still outweigh the number of pessimists.</p>
<p>Rising petrol prices, anaemic income growth, elevated household debt and a weaker currency are a combined weight on household budgets. However, this is counterbalanced by improving job security, better bonuses and tax relief for some. Households are still spending.</p>
<p>And according to CoreLogic, Aussie home prices held steady last week. Sydney and Melbourne home prices, especially at the top end of the market, continue to decline. But what about the rest of the country?</p>
<p>Prices in Adelaide and Brisbane have risen modestly over the past year. Hobart continues to benefit from its improving economy and better relative affordability.</p>
<p>Perth home prices are declining, but at a slower pace, signalling a potential bottoming. According to the WA Chamber of Commerce, business confidence is the best in seven years. Profits in the mining sector are rising and job ads are increasing.</p>
<p>And when it comes to share markets, so much for the ‘sell in May and go away’ cliché! While some well-known blue chip companies have underperformed recently, savvy Aussie investors have positioned themselves in stocks with specific positive catalysts, paying decent dividend yields. Corporate profits are at record highs and the Aussie economy is improving.</p>
<p>However, broader inflationary pressures remain fairly benign. Therefore, CommSec expects official interest rates to be stable for the foreseeable future.</p>
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<p>Ryan Felsman is a senior economist at CommSec.</p>
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The wealth effect: rising sharemarket, steady home prices and bonuses boost consumer sentiment: CommSec

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<p>EXPERT OBSERVATION</p>
<p>According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 1.4 cents last week to 143.8 cents per litre.</p>
<p>The Singapore gasoline benchmark price is holding at 31⁄2-year highs, pointing to higher pump prices in Australia in coming weeks.</p>
<p>The petrol figures have implications for retailers, especially petrol marketing groups.</p>
<p><strong>What does it all mean?</strong></p>
<p>Aussie drivers continue to approach petrol stations with trepidation. And with good reason. Pump prices are above $1.40 across large swathes of the country and likely to stay there.</p>
<p>Global oil prices are on the march. The Singapore price of unleaded petrol is the key petrol benchmark for Australia. Last week the Singapore gasoline price surged to a fresh 31⁄2-year high of US$91.70 a barrel. And Brent crude oil futures, considered the international price benchmark, breached US$80 per barrel last Thursday, its highest level since November 2014.</p>
<p>Oil prices have risen for six consecutive weeks and are anticipated to increase in the short-term due to supply disruptions. The potential for additional US sanctions on Venezuela following yesterday’s disputed presidential election could crimp OPEC output even further. OPEC oil producers have successfully limited market supplies, supporting prices.</p>
<p>Strengthening global economic activity has also been an important factor pushing up oil prices. But elevated prices could eventually reduce appetite for oil, despite record US shale output.</p>
<p>The International Energy Agency last week revised down its global oil demand forecast by 40,000 barrels per day to 1.4 million barrels per day to average 99.2 million barrels in 2018.</p>
<p>And for good reason. Oil prices have surged by nearly 20% so far this year and around 75% since mid-2017. Soaring petrol and diesel prices are stoking inflationary pressures across the globe at a time when interest rates are rising in countries like the US, UK and Canada.</p>
<p>Developing nations are particularly sensitive to rising oil prices after many countries phased out fuel subsidies when prices were much lower. Therefore, an overall dampening in global oil consumption is likely in the coming months.</p>
<p>Suburban motorists aren’t the only Aussies feeling the petrol and diesel bowser pain at present.</p>
<p>Our farmers are seeing their profits eroded by rising diesel prices. Diesel fuel is necessary for planting, harvesting and shipping crops to market.</p>
<p>In the US, farmers are estimated to spend US$15.3 billion on fuel and oil in 2018, up 8% according to the US Department of Agriculture.</p>
<p>And jet fuel prices have climbed by 15% so far this year according to S&amp;P Global Platts, pushing up airline fuel bills. Fuel costs are second only to labour costs.</p>
<p><strong>What do the figures show?</strong></p>
<p>According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 1.4 cents to 143.8 cents a litre in the past week.</p>
<p>The metropolitan petrol price fell by 2.2 cents to 142.0 cents per litre, but the regional price rose by 0.3 cents to 147.5 cents per litre. The gross retail margin fell from 13.82 cents to 12.82 cents.</p>
<p>Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 1.7 cents to 140.2 c/l), Melbourne (down by 1.9 cents to 139.5 c/l), Brisbane (down by 0.8 cents to 143.5 c/l), Adelaide (down by 14.7 cents to 140.7 c/l), Perth (up by 1.8 cents to 146.9 c/l), Darwin (up by 0.1 cents to 151.0 c/l), Canberra (up by 0.1 cents at 148.3 c/l) and Hobart (up by 1.2 cents to 153.3c/l).</p>
<p>The national average Australian price of diesel petrol rose by 2.1 cents to 150.2 cents per litre. The metropolitan price rose by 2.3 cents to 151.1 c/l and the regional average price rose by 2.0 cents to 149.5 c/l.</p>
<p>Today, the national average wholesale (terminal gate) unleaded petrol price stands at a 31⁄2-year high of 135.2 cents a litre, up by 2.5 cents over the week. The terminal gate diesel price stands at 138.7 cents a litre, up by 2.7 cents over the past week.</p>
<p>Last week the key Singapore gasoline price rose by US$4.50 or 5.2% to US$91.70 a barrel. In Australian dollar terms the Singapore gasoline price rose by $6.22 or 5.4% to a 31⁄2-year high of $121.96 a barrel or 76.70 cents a litre.</p>
<p>MotorMouth records the following average retail prices for capital cities today: Sydney 152.1c; Melbourne 151.7c; Brisbane 155.3c; Adelaide 136.8c; Perth 139.0c; Canberra 148.8c; Darwin 151.0c; Hobart 149.6c.</p>
<p><strong>What is the importance of the economic data?</strong></p>
<p>Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory's metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.</p>
<p><strong>What are the implications for interest rates and investors?</strong></p>
<p>Petrol prices have fallen a smidgen over the past two weeks, but remain elevated.</p>
<p>Developments in global oil markets together with a weaker Aussie dollar are supporting domestic petrol prices weighing on household budgets.</p>
<p>Aussie farmers are feeling the pain too. Rising diesel prices are pushing up their input costs. Food could become more expensive if these costs are passed on to the consumer.</p>
<p>And airline travel may become dearer as jet fuel prices surge. Fuel prices are up by 60% over the past year. That summer holiday in Europe or the US could become more expensive.</p>
<p>CommSec expects interest rates to be unchanged for the foreseeable future.</p>
<p><em><strong>Ryan Felsman</strong> is a senior economist at CommSec.</em></p>
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Aussie drivers approach petrol stations with trepidation: CommSec's Ryan Felsman

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<p><span>EXPERT OBSERVATION</span></p>
<p><strong>Housing finance (March)</strong></p>
<p>The number of loans (commitments) by home owners (owner-occupiers) fell by 2.2 per cent in March – the sixth fall in seven months. Loans are down by 3.5 per cent on the year.</p>
<p>The value of new housing commitments (owner occupier and investment) fell by 4.4 per cent in March from six-month highs.</p>
<p>In trend terms the value of loans to budding home owners hit a record high of $21.23 billion in March. Victorian and Tasmanian loans are at record highs.</p>
<p>The proportion of first-time buyers in the home loan market fell from 17.9 per cent to a six-month low of 17.4 per cent (decade-average 17.8 per cent)</p>
<p>The home loan data have implications for builders, housing-reliant businesses, finance providers, retailers, and companies dependent on consumer and business spending.</p>
<p><strong>What does it all mean?</strong></p>
<p>On average, around $21 billion in new home loans are made to budding home owners every month. The figure bobs around from month to month. But overall, there is still healthy interest by Aussies in buying or building their dream home. And that is shown by the trend value of home loans hitting record highs.</p>
<p>In trend terms investment loans are down almost 11 per cent on a year ago with loans to budding owners up almost 5 per cent. There has been a distinct shift in the home loan market. Clearly investors are re-doing sums. The prospect of strong price appreciation for investment properties has moderated in many parts of the country. And then there is the question of getting or retaining tenants.</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/5/11/record%20lending.jpg" target="_blank">to enlarge.</a></p>
<p><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/2018/5/11/record%20lending.jpg" alt=""></p>
<p>Housing market activity has become more sustainable with a fundamental re-assessment occurring on future prospects. Fewer loans are being made to fund new builds. And that means that new home starts will ease in coming months. Work will be harder to get. And building operators may switch interest to commercial and engineering prospects.</p>
<p><strong>What do the figures show</strong></p>
<p><strong>Housing finance – number (March)</strong></p>
<p>The number of loans (commitments) by home owners (owner-occupiers) fell by 2.2 per cent in March – the sixth fall in seven months. Loans are down by 3.5 per cent on the year.</p>
<p>Excluding refinancing of dwellings, the number of loans fell by 1.7 per cent.</p>
<p>Loans by owner-occupiers for the construction of homes decreased by 4.4 per cent – the sixth decline in eight months.</p>
<p>Loans to buy newly-erected dwellings fell by 1.4 per cent after lifting by 6.3 per cent in February.</p>
<p>Loans for the purchase of established dwellings (excluding refinancing) fell by 1.1 per cent – the third fall in four months.</p>
<p>The number of refinancing transactions fell by 3.2 per cent – the third straight fall.</p>
<p>Changes in home loans across the country: NSW (down 2.9 per cent); Victoria (down 1.5 per cent); Queensland (down 0.3 per cent); South Australia (down 8.6 per cent); Western Australia (down 2.3 per cent); Tasmania (up 1.9 per cent); Northern Territory (down 10.4 per cent); ACT (up 2.6 per cent).</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/5/11/victoria%20lending.jpg" target="_blank">to enlarge.</a></p>
<p><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/2018/5/11/victoria%20lending.jpg" alt=""></p>
<p><strong>Housing finance – value (March)</strong></p>
<p>The value of new housing commitments (owner occupier and investment) fell by 4.4 per cent in March from six-month highs.</p>
<p>Owner-occupier loans fell by 1.9 per cent and investment loans slumped by 9.0 per cent.</p>
<p>The value of loans by owner-occupiers and investors to build new homes decreased by 10.4 per cent in March to a 15-month low of $2.84 billion.</p>
<p><strong>Housing finance – other statistics</strong></p>
<p>The value of cancelled loans totalled $1.3 billion in March, down from $1.4 billion a year earlier.</p>
<p>Commitments actually advanced (loans made) totalled $19.1 billion, down from $19.3 billion a year earlier.</p>
<p>The proportion of first-time buyers in the home loan market fell from17.9 per cent to a six-month low of 17.4 per cent (decade-average 17.8 per cent).</p>
<p>The proportion of fixed rate loans fell from 14.4 per cent to a 12-month low of 14.2 per cent.</p>
<p>And the average home loan across Australia stood at $388,100, up by 5.4 per cent on the year.</p>
<p><strong>What is the importance of the economic data?</strong></p>
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<p><span>Housing Finance </span><span>data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market. </span></p>
<p><strong>What are the implications for interest rates and investors?</strong></p>
<p>Investors have adopted a cooler stance on housing. More stock has come on the market, reducing the prospect of out-sized capital gains in the short term. But budding owners are still active. Population continues to rise and more people are finding jobs.</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/5/11/investment-cools.jpg" target="_blank">to enlarge.</a></p>
<p><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/2018/5/11/investment-cools.jpg" alt=""></p>
<p>Builders and real estate agents will need to work harder for business in many parts of the country. Clearly conditions are tough in the Northern Territory. But Victoria and Tasmania remain strong.</p>
<p>CommSec expects interest rates to remain stable until at least November. In fact the first rate hike may now occur in February next year.</p>
<p><em>Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.</em></p>
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Record home loans, but investor demand cools: CommSec

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<p class="x_MsoNoSpacing">As widely expected, the Fed increased the target range for the federal funds rate by 0.25 per cent to 1.50-1.75 per cent. This was the sixth increase in interest rates of the current monetary policy tightening cycle.  The decision by the Fed voters was a unanimous 8-0.</p>
<p class="x_CSbulletlv1"><span style="text-decoration: underline;">US interest rates higher than the Aussie cash rate:</span><span class="Apple-converted-space"> </span>The federal funds target rate is higher than the Reserve Bank’s official cash rate of 1.50 per cent for the first time in over 17 years.<span class="Apple-converted-space"> </span></p>
<p class="x_CSbulletlv1"><span style="text-decoration: underline;">US interest rate outlook:</span><span class="Apple-converted-space"> </span>The Fed is forecasting two further rate increases in 2018 and three further hikes in 2019. The 2020 projection is for two interest rate hikes.<span class="Apple-converted-space"> </span></p>
<p class="x_CSbulletlv1"><span style="text-decoration: underline;">US economic outlook revised higher:</span><span class="Apple-converted-space"> </span>Economic growth (GDP) forecasts were increased to 2.7 per cent in 2018, up from the previous forecast of 2.5 per cent. The 2019 forecast was moved higher to 2.4 per cent, up from 2.1 per cent previously. Growth is projected to decelerate to 2.0 per cent by 2020.</p>
<p class="x_CSbulletlv1"><span style="text-decoration: underline;">US at full employment:</span><span class="Apple-converted-space"> </span>The unemployment rate is expected to fall to 3.8 per cent in 2018, down from 3.9 per cent in 2018. The unemployment rate is expected to fall further to 3.6 per cent in 2019-2020.</p>
<p class="x_CSbulletlv1"><span style="text-decoration: underline;">Inflation to reach target in 2019:</span><span class="Apple-converted-space"> </span>Inflation is expected to remain below the Fed's 2 per cent target this year at 1.9 per cent. But the Fed expects the core Personal Consumption Expenditures (PCE) deflator (inflation) to increase to 2.1 per cent, above previous projections for 2.0 per cent in 2019 and 2020. </p>
<p class="x_CSbulletlv1"><em>Changes in US monetary policy settings can affect rates in Australia as well as the sharemarket and currency.</em></p>
<p class="x_CSbulletlv1"><em>Click here <a href="https://www.propertyobserver.com.au/images/2018/3/22/RATES1.jpg" target="_blank">to enlarge.</a></em></p>
<p class="x_CSbulletlv1"><em><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/2018/3/22/RATES1.jpg" alt=""></em></p>
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<h1><span>What happened and what does it all mean?</span></h1>
<p class="x_Bullets">The US central bank, the US Federal Reserve, increased the target range for the federal funds rate by 0.25 percentage points to 1.50-1.75 per cent, as expected. More interest rate increases are forecast due to the improving economic outlook.<span class="Apple-converted-space"> </span></p>
<p class="x_Bullets">The US unemployment rate is at a 17-year low. Now US interest rates have increased above Aussie interest rates for the first time in over 17 years.</p>
<p class="x_Bullets">The last time the US federal funds target rate was above the Reserve Bank’s official cash rate was December 2000. US interest rates were higher than Aussie cash rates for the period July 1997 – December 2000. How the world has changed since then.<span class="Apple-converted-space"> </span></p>
<p class="x_Bullets"><span class="Apple-converted-space">Click here<a href="https://www.propertyobserver.com.au/images/2018/3/22/INFLATION2.jpg" target="_blank"> to enlarge.</a></span></p>
<p class="x_Bullets"><span class="Apple-converted-space"><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/2018/3/22/INFLATION2.jpg" alt=""></span></p>
<p class="x_Bullets">Back in those days the cash rate in both countries was well above 6 per cent and the Aussie dollar slumped to just US48 cents in early 2001.</p>
<p class="x_Bullets">Fast forward to 2018 and the Aussie economic expansion is now into a record 27th year, while the slow-but-steady increase in US output is into its ninth year. Should the US expand for another year, it will exceed the 10-year economic boom of the 1990s – the last time US interest rates were higher than their Aussie counterparts.</p>
<h1><span>US Federal Reserve decision</span></h1>
<p class="x_Bullets">Today’s decision by the US Federal Reserve was well telegraphed and uniformly expected by financial markets. The gradual tightening of monetary policy and removal of stimulus continues in the new Jerome Powell era.<span class="Apple-converted-space"> </span></p>
<p class="x_Bullets">It was just three weeks ago that influential Federal Reserve Board Governor Lael Brainard spoke at Harvard University and opined:<span class="Apple-converted-space"> </span><em>“Mounting tailwinds at a time of full employment and above-trend growth tip the balance of considerations. With greater confidence in achieving the inflation target, continued gradual increases in the federal funds rate are likely to be appropriate.” </em></p>
<p class="x_Bullets">Since then the US labour market has continued to strengthen. Consumer sentiment has hit new post-Global Financial Crisis highs and core inflation, while still below the Fed’s 2 per cent target, has lifted sequentially. The Fed’s preferred measure – core PCE inflation – is now a quarter percentage point higher in annualised terms than its low in mid-2017.</p>
<p class="x_Bullets">Retail sales and housing data has been weak at the beginning of 2018, but the US Federal Reserve has decided to look through this data and potentially a weaker March quarter economic growth print.</p>
<p class="x_Bullets">Click here <a href="https://www.propertyobserver.com.au/images/2018/3/22/EMPLOYMENT3.jpg" target="_blank">to enlarge.</a></p>
<p class="x_Bullets"><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/2018/3/22/EMPLOYMENT3.jpg" alt=""></p>
<p class="x_Bullets">In terms of the Federal Open Market Committee’s (FOMC) press release, the FOMC reiterated that future interest rate adjustments will be data dependent and that<span class="Apple-converted-space"> </span><em>“economic conditions will evolve in a manner that will warrant gradual increases in the federal fund rate”</em>. The FOMC acknowledged that the<span class="Apple-converted-space"> </span><em>“economic outlook has strengthened in recent months.”<span class="Apple-converted-space"> </span></em>Inflation is expected<em>“to move up in the coming months”</em>. And<span class="Apple-converted-space"> </span><em>“job gains have been strong in recent months, and the unemployment rate has stayed low”</em>. Though household spending and business investment<span class="Apple-converted-space"> </span><em>“have moderated”</em><span class="Apple-converted-space"> </span>from late last year.<span class="Apple-converted-space"> </span><em> </em></p>
<p class="x_Bullets">The median path for the fed funds rate was changed in 2019-2020. The FOMC’s Summary of Economic Projections shows the median interest rate projections (the “dot plot”) still implies two further 0.25 per cent interest rate increases in 2018 (to 2.125 per cent); three 0.25 per cent interest rate increases in 2019 (to 2.875 per cent); and two 0.25 per cent interest rate increases in 2020 (to 3.375 per cent).</p>
<p class="x_Bullets">The policy-relevant core PCE deflator inflation projection were little changed. Core PCE inflation is still expected to run at 1.9 per cent in 2018. The FOMC lifted its core PCE forecast by 0.1 per cent to 2.1 per cent in 2019 and 2020.</p>
<p class="x_Bullets">The FOMC upgraded its GDP forecasts and lowered its unemployment rate projections. The FOMC projects GDP growth of 2.7 per cent in 2018 (previously 2.5 per cent) and 2.4 per cent in 2019 (previously 2.1 per cent). Meanwhile, the FOMC expects the unemployment rate to be 3.8 per cent in 2018 (previously 3.9 per cent) and 3.6 per cent in both 2019 (previously 3.9 per cent) and 2020 (previously 4.0 per cent).</p>
<p class="x_Bullets">The Fed continues to unwind its huge balance sheet. Holdings have declined to around US$4.4 trillion, the lowest since September 2014. The Fed plans to shrink the balance sheet by US$10 billion per month then accelerate the pace of reduction every three months. Eventually, holdings will be reduced by around US$50 billion per month until a “new normal” balance sheet holding is achieved. Fed Chair Jerome Powell has estimated that the balance sheet could drop to US$2.4-US$2.9 trillion after several years of cuts. </p>
<p class="x_Bullets">US sharemarkets reacted positively initially to the well telegraphed outcome - especially given a fourth rate hike was not added in 2018 - with the Dow Jones Industrial Index briefly trading higher 250 points. However, shares declined into the US market close on weaker sentiment. Investors would be comforted that the FOMC largely left its interest rate outlook unchanged and US economic projections are stronger. US 10-year Treasury yields rose to 2.91 per cent before rallying back to 2.88 per cent. The US dollar fell and the Aussie dollar rallied from overnight lows<span class="Apple-converted-space"> </span>near US76.70 cents and was near US77.66 cents in late US trade.</p>
<h1><span>What are the implications for interest rates and investors?</span></h1>
<p class="x_Bullets">The US economy is in rude health. We expect growth to remain above potential at around 2.8 per cent this year – the fastest pace of growth following the Global Financial Crisis.</p>
<p class="x_Bullets">Despite recent sharemarket volatility, financial conditions are still very accommodative and supportive for growth. The University of Michigan current economic conditions index for March was at record high (since 1978).</p>
<p class="x_Bullets">The Trump Administration’s fiscal expansion will likely lend support to late cycle US economic growth. The ‘leg-up’ from US$1.5 trillion worth of<span class="Apple-converted-space"> </span><span lang="EN">corporate tax cuts and additional government spending of around US$10 billion per year on infrastructure is expected to add around 0.5 percentage points to growth in 2018. Robust business investment and consumer spending, and a soft US dollar are additional growth sources.<span class="Apple-converted-space"> </span></span></p>
<p class="x_Bullets">One of the challenges for Fed policy makers this year is to determine the full impact of the Trump tax-cut plans. The recent fiscal stimulus has probably not been fully baked into economic forecasts. And with US output and the labour market at near full capacity, concerns are building about an overheating economy. <span class="Apple-converted-space"> </span></p>
<p class="x_Bullets"><span class="Apple-converted-space">Click here<a href="https://www.propertyobserver.com.au/images/2018/3/22/BEST4.jpg" target="_blank"> to enlarge.</a></span></p>
<p class="x_Bullets"><span class="Apple-converted-space"><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/2018/3/22/BEST4.jpg" alt=""></span></p>
<p class="x_Bullets">The Fed will also be contending with a deteriorating US budget deficit and government debt situation. The US posted its largest budget deficit in six years in February at US$215 billion. And the deficit for the fiscal year that began in October 2017 widened to US$391 billion compared with a US$351 billion shortfall the same period a year earlier. The US gross government debt load has breached US$21 trillion or 106 per cent of GDP.</p>
<p class="x_Bullets">US President Trump’s tax policy is expected to reduce US federal revenue by more than US$1 trillion over the next decade, while a US$300 billion spending deal reached by the US Congress in February could push the deficit higher. So the corporate tax cuts will be funded by an increase in the US budget deficit, resulting in an increase in the issuance of US Treasury bonds. </p>
<p class="x_Bullets">And the Fed’s interest rate hikes will likely expand the budget deficit even further by raising the Trump Administration’s cost of issuance, thereby further increasing the supply of US Treasuries. Rising supply, especially shorter dated bills, is already weighing on fixed income markets. And around US$425 billion of bonds will be maturing this year with the Fed only reinvesting US$195 billion of this amount. Who will pick up the shortfall?</p>
<p class="x_Bullets">If the Fed meets market pricing expectations for potential interest rate hikes, it will probably succeed in flattening the yield curve further – especially with the term premium curve flat already – then more likely we’ll see further episodic market volatility.<span class="Apple-converted-space"> </span></p>
<p class="x_Bullets">With inflation running below 2 per cent, doubts over the Fed’s forward guidance will persist. However, base<span lang="EN-US"><span class="Apple-converted-space"> </span>effects from wireless phone services’ price discounting, potential US dollar depreciation, tighter labour markets and a closing output gap should push annual inflation higher from mid-2018.<span class="Apple-converted-space"> </span></span></p>
<p class="x_Bullets">Overall, we see the US economy growing above potential, supported by fiscal stimulus, still-low inflation and synchronised global growth. US President Trump’s policies, especially around trade, are the major ‘wildcards’. However, Fed Chair Jerome Powell said that US trade policy should not affect the economic outlook.    </p>
<p class="x_Bullets">CommSec expects two further US interest rate hikes in June and September this year.</p>
<p class="x_Bullets"><span>Ryan Felsman is a senior economist at CommSec.</span></p>
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US interest rates break 17-year drought: CommSec

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<div class="column">The CoreLogic Home Value Index of capital city home prices fell by 0.3 per cent in February to stand 2.0 per cent higher over the year. The national home price index fell by 0.1 per cent in February to be up 2.2 per cent over the year. It was the smallest annual growth in national prices in 18 months.</div>
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<div class="column">Prices fell in six of the eight capital cities in February. Hobart prices rose the most, up by 0.7 per cent, while Darwin prices fell the most, down by 0.9 per cent. Hobart leads annual gains in home prices, up 13.1 per cent in the year to February. Darwin home prices remained in the doldrums, falling by 7.4 per cent over the year.</div>
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<div class="column">Apartment prices across capital cities are up by 3.6 per cent over the year to February, producing a total return of 7.7 per cent. Apartments are outperforming houses which rose by 1.5 per cent over the year with total returns up 4.6 per cent.</div>
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<p style="display: inline !important;"> </p>
<p style="display: inline !important;">The CBA/Markit Manufacturing index rose from 55.4 to 55.6 in February. The Australian Industry Group manufacturing index eased from 58.7 to 57.5 in February. Readings above 50.0 indicates that the manufacturing sector is expanding.</p>
<p>Home price data is important for retailers, especially those focussed on consumer durables. The manufacturing data provides guidance for companies in the Industrials sector.</p>
<p>What does it all mean?</p>
<p>Housing is all about supply and demand. Demand for homes is strong in Hobart, outpacing supply, and prices are rising. In contrast, the previously high-flying Sydney market is experiencing a correction in prices. More new homes are on the market, giving buyers greater choice. As a result, prices are adjusting to more realistic and sustainable levels. Home prices in Sydney are now lower than a year ago.</p>
<p>The rebalancing of the housing market should be closely watched, but it is not a cause for concern. Supply and demand are always in adjustment in housing markets</p>
<p>Sydney prices may ease a little further and Melbourne prices also have potential to soften over 2018.</p>
<p>There are more anecdotes of “rent-vesting” occurring where young people from Sydney and Melbourne are buying in other capital cities and regional areas and using rent proceeds to offset their costs of leasing in inner-city Sydney and Melbourne.</p>
<p>Latest survey data shows that the manufacturing sector is in strong shape. As always, the focus now is to gauge whether wage and price pressures are starting to creep through.</p>
<p>Ai Group said “many manufacturers are now looking to employ more staff but are finding it difficult to find skilled workers for their locations or specialisations”.</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/3/1/commsec1.jpg" target="_blank">to enlarge.</a></p>
<p><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/2018/3/1/commsec1.jpg" alt=""></p>
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<p><span>What do the figures show? </span></p>
<p><span>Home prices</span></p>
<p>The CoreLogic Home Value Index of capital city home prices fell by 0.3 per cent in February to stand 2.0 per cent higher over the year.</p>
<p>The national home price index fell by 0.1 per cent in February to be up 2.2 per cent over the year. It was the smallest annual growth in national prices in 18 months.</p>
<p>In capital cities, house prices fell by 0.4 per cent in February and apartment prices were flat. House prices were up 1.5 per cent on a year ago and apartments were up by 4.3 per cent.</p>
<p>In regional areas, home prices rose by 0.4 per cent in February to be up 2.8 per cent on the year.</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/3/1/commsec2.jpg" target="_blank">to enlarge</a></p>
<p><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/2018/3/1/commsec2.jpg" alt=""></p>
<p>The average Australian capital city house price (median price) was $694,478 and the average unit price was $578,244.</p>
<p>Dwelling prices fell in six of the eight capital cities in February: Home prices fell in Darwin (down 0.9 per cent) from Sydney (down 0.6 per cent), Canberra (down 0.3 per cent), Perth (down 0.2 per cent) and Melbourne and Brisbane (both down 0.1 per cent). Prices were flat in Adelaide. Prices rose 0.7 per cent in Hobart.</p>
<p>Home prices were higher than a year ago in six of the eight capital cities. Prices rose most in Hobart (up 13.1 per cent); followed by Melbourne (up 6.9 per cent); Canberra (up 3.2 per cent); Adelaide (up 2.2 per cent); Brisbane (up 1.8 per cent). Prices fell in Darwin (down 7.4 per cent), Perth (down by 2.7 per cent) and Sydney (down by 0.5 per cent).</p>
<p>Total returns on capital city dwellings rose by 5.4 per cent in the year to February with houses up 4.6 per cent on a year earlier and units up 7.7 per cent.</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/3/1/commsec3.jpg" target="_blank">to enlarge.</a></p>
<p><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/2018/3/1/commsec3.jpg" alt=""></p>
<p>Manufacturing Purchasing Managers’ Indexes</p>
<p>The CBA/Markit Manufacturing index rose from 55.4 to 55.6 in February. Readings above 50.0 indicate that the sector is expanding.</p>
<p>CBA/Markit notes: “Australian manufacturers are benefiting from the positive global backdrop. New export orders were up sharply in February. This extra demand is driving strong jobs growth. But capacity pressures remain evident in the rundown of finished goods stocks, lengthening supplier delivery times and rising backlogs of work. Rising input and output prices are one outcome.”</p>
<p>The Australian Industry Group manufacturing index eased from 58.7 to 57.5 in February. The month of February marked the 17th month of expanding or stable conditions for the manufacturing sector.</p>
<p>Ai Group said that all of the seven activity subindexes contained in the report improved in February.</p>
<p>“This marks a fourth consecutive month in which all seven activity sub-indexes have expanded,” the group said.</p>
<p>“Five of the seven activity indexes slowed in February, however, with only the employment and exports sub- indexes accelerating.”</p>
<p>What is the importance of the economic data?</p>
<p>The CoreLogic Hedonic Australian Home Value Index is based on Australia’s biggest property database. Unlike the ABS Index, which excludes terraces, semi-detached homes and apartments, the CoreLogic Hedonic Index includes all properties. Home prices are an important driver of wealth and spending.</p>
<p>The Australian Industry Group compile the Performance of Manufacturing Index and Performance of Services index each month. CBA and Markit also compile purchasing manager surveys for manufacturing and services sectors. The surveys are amongst the timeliest economic indicators released in Australia.</p>
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<p><span>The surveys are useful not just in showing how key sectors are performing but also in providing some sense about where they are headed. The key ‘forward looking’ components are orders and employment. </span></p>
<p><span>What are the implications for interest rates and investors?</span></p>
<p>In the housing sector, prices of established homes are easing in many parts of the country. In the manufacturing sector there are reports of skilled shortages, potentially leading to higher wages and prices. Welcome to 2018 where the world is on watch for higher inflation rates despite mixed messages.</p>
<p>CommSec expects official interest rates to be stable until late 2018. But as always, the outlook for rates is data dependent. It will be a case of monitoring each economic indicator very closely to see if there are signs of inflationary pressures emerging.</p>
<p><em>Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.</em><span> </span></p>
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