Roseville is poised for a wave of new apartment development following the NSW Government's rezoning of land around Roseville Station under its Transport Oriented Development program.

The new planning controls have unlocked significant development potential within walking distance of the station, with a number of sites expected to be amalgamated and redeveloped in the coming years as developers seek to take advantage of the increased density allowances.

One of the more restrained developments in the precinct, and set among the first to be delivered having commenced well before the recent changes, is Hyecorp's Juliet. The boutique apartment project is already well under construction and remains on track to welcome residents by the end of the year, offering a markedly different proposition to many of the larger-scale developments now likely to emerge across the suburb.

[smartcode_project:default project_id=7395 project_image_fid=278194]

<a href="https://www.apartments.com.au/new-apartments/juliet-roseville-64-pacific-highway-roseville-nsw-2069">Juliet</a> will comprise just&nbsp;34 one-, two-, and three-bedroom apartments opposite Roseville Station. For Hyecorp, which has delivered projects across Sydney's Lower North Shore for more than three decades, Roseville presented a rare opportunity to address a growing gap in the market.

"<a href="https://www.apartments.com.au/developments/roseville-nsw-2069">Roseville</a> has long been one of the North Shore's most tightly held and desirable suburbs, offering a unique combination of village charm, established greenery, excellent transport connections, and proximity to some of Sydney's best schools and lifestyle amenities," Hyecorp said.

"We recognised a growing demand from local homeowners seeking to downsize without leaving the community they have built their lives around. The location presented a rare opportunity to create homes that cater specifically to that buyer profile."

[smartcode_project:default project_id=7395 project_image_fid=278196]

The six-level development has been designed by <a href="https://www.apartments.com.au/architects/pbd-architects">PBD Architects</a> as a collection of residences that feel more like homes than apartments. The brief centred generous floorplans, abundant natural light, quality finishes, and strong connections to outdoor space.

PBD Architects drew inspiration from Roseville's established garden suburb character, creating a building that sits comfortably within its surroundings rather than dominating them. The architecture incorporates natural materials, soft forms, layered landscaping, expansive balconies, and generous setbacks to strengthen the connection between residents and the suburb's leafy environment.

"The focus was on designing spacious, house-like residences for discerning owner-occupiers and downsizers who wanted to remain on the North Shore without compromising on comfort, privacy, or design," PBD said.&nbsp;

"Every apartment was to feel considered, timeless, and highly functional."

[smartcode_project:default project_id=7395 project_image_fid=278195]

Inside, residences feature engineered timber flooring, stone kitchen benchtops and splashbacks, integrated Fisher &amp; Paykel appliances, ducted air conditioning, and large outdoor entertaining areas designed to take advantage of district and treetop views.

Residents will also have access to a rooftop barbecue and lounge area, alongside practical amenities including parcel lockers, EV charging capability, bicycle storage, a dog wash bay, and a basement car wash facility.

The majority of purchasers so far have been local owner-occupiers from Roseville, Lindfield, Chatswood, Killara, and the broader Upper North Shore, many of whom are transitioning from larger family homes.

"Buyers are looking for spacious, house-like apartments that allow them to downsize without feeling like they are sacrificing comfort or functionality," Hyecorp noted.

"They value large kitchens, generous living areas, ample storage, quality finishes, secure parking, lift access, and low-maintenance living."

[smartcode_project:default project_id=7395 project_image_fid=278204]

Juliet sits directly opposite Roseville Train Station and within walking distance of Roseville Village, while Chatswood's retail and dining precinct is only minutes away. The development is also surrounded by some of Sydney's most established schools, including Roseville College, Ravenswood, Pymble Ladies' College, and Knox Grammar, as well as nearby parklands and golf courses.

Juliet is currently more than 75 per cent sold ahead of its anticipated completion in late 2026.

[smartcode_project_cta:default project_id=7395]

Joel Robinson

Juliet to sit quietly amid Roseville apartment boom

Sherpa Property Group has unveiled the third instalment of its Flourish series, securing full approval for the two-tower, $500 million Flourish Soleira development in Palm Beach.

<a href="https://www.apartments.com.au/new-apartments/flourish-soleira-1150-1154-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a> will rise from a prominent site in the commercial heart of Palm Beach, the long-time home of Cash Converters and a range of local retailers.

The project will introduce a new retail and dining precinct at ground level, beneath 286 apartments.

[smartcode_project:default project_id=150017 project_image_fid=370959]

“We’re very committed to not only providing affordable residential offerings that are much needed in Palm Beach, but also delivering a vibrant new commercial heart that complements the extraordinary growth of the southern Gold Coast,” Sherpa Property Group founder Christie Leet said.

The development will sit under Sherpa's Flourish brand, which is aimed at providing a pathway into the beachside suburb for locals, first-home buyers and downsizers. In a move designed to assist first-home buyers entering the market, Sherpa has reserved all one and two-bedroom, one-bathroom apartments exclusively for eligible first-home buyers.

[smartcode_project:default project_id=150017 project_image_fid=370964]

“Our vision through Flourish is to create a vibrant retail and lifestyle focal point within the Palm Beach centre zone, delivering thriving communities underpinned by lifestyle-rich locations,” Leet said.

“So far, Flourish has been an incredible success, and we hope to carry this momentum as we progress the next two Flourish projects in Palm Beach.”

[smartcode_project:default project_id=150017 project_image_fid=371430]

Located across 1150-1164 Gold Coast Highway and 3 Sixth Avenue, the development will comprise two towers. The northern tower will deliver 154 apartments, while the southern tower will add a further 132 residences, helping address ongoing demand for new apartments in the tightly held coastal suburb.

Flourish Soleira will also feature the most extensive rooftop amenity offering ever delivered in Palm Beach.

The two towers will be connected by a skybridge, with residents gaining access to a rooftop recreation deck featuring a full-width swimming pool, hot and cold plunge pools, wellness spaces, a gymnasium, private dining facilities, massage treatment rooms, barbecue areas, a basketball court, golf simulator, indoor and outdoor dining spaces, sun lounges and extensive landscaping.

LPS Group is expected to start construction later this year.

Sherpa is already well advanced on construction of its debut Flourish project, Flourish Amargo, located just around the corner from Soleira. Meanwhile, Flourish Oasis, positioned opposite Amargo, recently commenced construction and has nearly sold out its collection of 47 apartments.

[smartcode_project_cta:default project_id=150017]

Sherpa unveils $500m mixed-use Palm Beach precinct, Flourish Soleira

Are mortgage holders set to get a reprieve from the RBA in 2026?

Big Four bank NAB believes so. They are now expecting the next move from the RBA to be a cut, rather than a hike, which they had pencilled in for August. They are unsure of the timing of the cut however, they note in their latest&nbsp;NAB Economics RBA Watch.

NAB Chief Economist, Dr Sally Auld, said recent data suggests the economy has lost momentum and the outlook for rates has shifted, noting that the broader economic backdrop has changed since earlier in the year.

“The next move in the cash rate is likely to be down, but the timing is uncertain," Dr Auld said.

"In February, growth was above trend, the economy was operating above capacity and there was uncertainty over the restrictiveness of rates. None of these conditions exist today,” she outlined.

Dr Auld said recent data pointed to softer momentum across the economy while acknowledging that at the same time, uncertainty remains a key feature of the outlook.

“Both Q1 GDP data and the NAB business survey suggest momentum in the economy has slowed, meaning that growth has likely peaked for the cycle. That said, we are cognisant there is still considerable uncertainty around the outlook, both with respect to activity and inflation.”

Dr Auld said inflation risks and labour market outcomes would be important to watch.

“On the prices side, we are still forecasting above target core inflation through to mid-2027. Margins will compress and weaker labour market outcomes are a risk.”

She said tighter financial conditions are expected to weigh on housing and activity.

“Tighter financial conditions will be reflected in a slowing in house price growth and housing credit growth. In summary, we have greater conviction that the next move in rates is down, but less conviction on the timing.”

Mortgage relief? NAB forecasts RBA rate cut, not hike, after softer economic conditions

A local downsizer has splashed $6.5 million on a penthouse in Perifa's Alex &amp; Willow development in Crows Nest. 
&nbsp; 
The purchaser sold their long-held family home in the area before embarking on a six-month search for the right apartment. After inspecting a range of options across the Lower North Shore, the buyer returned to <a href="https://www.apartments.com.au/new-apartments/alex-willow-crows-nest-82-90-alexander-street-crows-nest-nsw-2065">Alex &amp; Willow</a>. 
&nbsp; 
The buyer profile reflects the project’s broader purchaser mix. <a>Alex &amp; Willow</a> has attracted predominantly local downsizers looking to transition from larger homes without compromising on space or quality, alongside a smaller cohort of upsizers and investors drawn to the project’s location and design credentials. 
&nbsp; 
The milestone sale comes as the project, developed by&nbsp;<a href="https://www.apartments.com.au/developers/perifa">Perifa</a>&nbsp;and delivered by <a href="https://www.apartments.com.au/builders/versatile-made-construction">Versatile Construction</a>, both part of Versatile Group, reaches 60 per cent sold.

[smartcode_project:default project_id=6680 project_image_fid=371325] 
&nbsp; 
Eddie Mansour, Managing Partner of <a href="https://www.apartments.com.au/project-marketer/ray-white-projects">Ray White Projects</a>, said the result demonstrates not only a headline price but also depth of demand. 
&nbsp; 
“This is an exceptional outcome and a clear reflection of sustained buyer demand for premium, well-located downsizer product,” Mansour said.

“We’re seeing a consistent pattern of local homeowners selling family residences and reinvesting into high-quality apartments that allow them to remain within their community. Alex &amp; Willow has resonated strongly with this group because it offers genuine scale, thoughtful design and immediate proximity to the village.” 
&nbsp; 
The sale reflects a broader and consistent trend of local downsizers actively seeking high-quality, low-maintenance residences close to established village centres. Agents report that demand for this product type has remained resilient, particularly where developments offer a rare combination of scale, design quality and walkable amenity. 
&nbsp;&nbsp; 
Fabrizio Perilli, Managing Director of Perifa and Versatile Group, said the sale marks a defining moment for the project. 
&nbsp; 
“The penthouse sale is a strong endorsement of the quality we have delivered, alongside our partners, and the clear demand from local downsizers for premium, boutique residences in this location,” Perilli said.&nbsp; 
&nbsp; 
“Most importantly, we’re proud to see the Alex &amp; Willow community beginning to take shape. As we move closer to completion, we’re looking forward to welcoming residents and seeing the project come to life.”&nbsp;

[smartcode_project:default project_id=6680 project_image_fid=338516] 
&nbsp; 
Designed by <a href="https://www.apartments.com.au/architects/nettletontribe">Nettleton Tribe</a> with interiors by <a href="https://www.apartments.com.au/interior-designers/richards-stanisich">Richards Stanisich</a>, Alex &amp; Willow is a boutique collection of generously sized two- and three-bedroom residences in the heart of Crows Nest village.&nbsp;

Completion is slated for early 2027.

[smartcode_project_cta:default project_id=6680]

Alex & Willow, Crows Nest penthouse sells off the plan for $6.5 million

Fresh from launching the first stage of its Wollongong precinct, <a href="https://www.apartments.com.au/new-apartments/keira-place-wollongong-120-122-smith-street-wollongong-nsw-2500">Keira Place</a>, builder-developer Urban Property Group has unveiled plans for the next phase of the masterplanned community.

Now on public exhibition through the NSW Government's Housing Delivery Authority pathway is a State Significant Development Application for a further 657 homes on the prominent gateway site opposite Beaton Park.

The proposal comprises three buildings, including two build-to-sell towers rising 25 and 30 storeys, delivering 391 apartments, alongside a 12-storey co-living building with 266 residences, making it one of the largest co-living proposals currently planned in regional New South Wales.

Of the apartments proposed in the build-to-sell towers, the majority, 310, are two-bedroom dwellings. The balance comprises 44 one-bedroom apartments and 37 three-bedroom residences. Apartment sizes range from around 50 sqm for one-bedroom homes to approximately 90 sqm for three-bedroom apartments.

<img alt="Smith St" data-entity-type="file" data-entity-uuid="19347059-1612-41a0-9c74-b86a657237f8" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-10%20at%2010.02.18%E2%80%AFAM.png?VersionId=sWXnaCcA.cIC6N8YT1dg5pJ2e1V3Z6z7" />

The submission says the proposal has evolved significantly from its original Housing Delivery Authority application following extensive consultation with the State Design Review Panel and Wollongong City Council.

The final scheme has been designed to align with the emerging vision for the Flinders Street Precinct, an area identified by Council as a future high-density mixed-use neighbourhood capable of accommodating substantial housing growth close to transport, employment and community infrastructure.

According to the design report prepared by COX Architecture, the development aims to "deliver a built outcome consistent with the future character of the Wollongong CBD while responding to the site's unique constraints and opportunities."

"Our vision for the next phase of the site evolution in Wollongong is grounded in three design pillars that guide the design response: place, natural environment and celebration," COX said.

"Inspired by its surroundings and grounded in the stories of place on Wodi Wodi Country, the design proposal acknowledges the established character of its setting while creating a unique and timeless identity that sits harmoniously within it.

"The design proposal responds to its specific site conditions, acknowledging the vegetation, climate, wind conditions and solar access of the site."

The architecture responds directly to the site's position between Wollongong's urban core and its natural landscape setting.

COX identified views towards Mount Keira and the Illawarra Escarpment as defining features of the site, while the upper levels of the towers will also capture expansive views across the city and out to the Pacific Ocean.

The design team has positioned the tallest buildings closer to the rail corridor, where overshadowing impacts can be better managed while establishing a landmark built form on the northern approach into the city.

<img alt="Smith St" data-entity-type="file" data-entity-uuid="79580d5b-500c-4ebf-9629-797146a4a694" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-10%20at%209.51.59%E2%80%AFAM.png?VersionId=WbTB1EKSG.KDfsfz0F3wp1QVa2oCMGR5" />

Urban Property Group secured the 11,000 sqm Smith Street site in 2022 and has since progressed plans for the broader Keira Place precinct.

Construction recently commenced on the first stage of Keira Place, which will deliver 150 apartments across two residential buildings, including 27 affordable housing apartments and 18 specialist disability accommodation dwellings, alongside activated ground-floor retail and commercial space.

Urban Co-CEO Patrick Elias said the commencement of construction marked a significant milestone for Wollongong and reflected the developer's long-term commitment to regional cities.

"Today's groundbreaking is about turning approvals into homes and moving quickly to deliver much-needed housing in Wollongong's city centre," Elias said.

"Keira Place will provide a diverse mix of homes close to jobs, transport and services, while setting a high benchmark for quality, durability and consumer protection."

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/groundbreaking-marks-start-of-construction-at-keira-place-in-wollongong-cbd">Groundbreaking marks start of construction at Keira Place in Wollongong CBD</a>

&nbsp;

&nbsp;

&nbsp;

Urban Property Group unveils trio of towers for next stage of new Wollongong precinct, Keira Place

Consumer Spending

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GUEST OBSERVATION
Our economy has <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">grown</a> in the September quarter (the three months to September) after two quarters of going backwards.
Using the literal meaning of <a href="https://www.dictionary.com/browse/recession">recession</a>, we are no longer in one – economic output (the things we produce and consume) is no longer be going backwards.
But things won’t be like they were. Even a rebound in gross domestic product of <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/sep-2020">3.3%</a> (the biggest in 40 years) doesn’t make up for the 7% we lost in the previous quarter, meaning we’ll remain worse off than we were at the start of the year and much worse off than we would have been had the pandemic not happened.
Here are six things to expect as the economy recovers:
1. Consumer spending will recover first, but might need help
Consumer spending will to return to normal first, as <a href="https://budget.gov.au/2020-21/content/bp1/download/bp1_bs2.pdf">forecast in the budget</a>.
(Don’t be fooled by the forecast decline of 1.5% for 2020-21 compared to 2019-20. From where we stood in the June quarter 2020 – an enormous decline of 12% on the March quarter – this is a massive recovery.)
So far the signs are promising, but in part this might be because the stimulus payments are still flowing, keeping household disposable income above pre-COVID levels.
The coronavirus supplement that tops up JobKeeper and other benefits (originally A$225 per week) winds down to $75 per week after Christmas and <a href="https://theconversation.com/top-economists-want-jobseeker-boosted-by-100-per-week-and-tied-to-wages-150364">expires on March 31</a>.
<a href="https://treasury.gov.au/coronavirus/jobkeeper/extension">JobKeeper</a>, originally $1,500 per fortnight, became harder to get in October and will wind down to $1,000 per fortnight in January and $650 for part-time workers, before expiring on March 31.
Treasury expects wage growth to be slower than price growth for the next two years, so a household-led recovery is by no means guaranteed.
If the recovery stalls in the household sector, activities such as hospitality, retail and arts and entertainment will suffer a second blow and unemployment will remain high.
After the year we’ve had, the household sector could be forgiven for losing confidence.
The government should consider extending the coronavirus supplement payments, and be ready for further one-off stimulus payments if required.
Unlike the imminent income tax cuts, these measures are temporary and can be discontinued as soon as they are no longer required.
Governments can also stimulate demand directly. Victoria has announced an additional <a href="https://education.vic.gov.au/about/careers/teacher/Pages/tutors.aspx">4000 tutors</a> to assist school students left behind after an interrupted year. Other areas in which governments could usefully create meaningful jobs include the care sector and the arts.
2. Overseas demand won’t assist in the recovery
Exports face headwinds and are unlikely to recover over the next 18 months.
The International Monetary Fund expects the global economy to shrink by <a href="https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020">4.4%</a> in 2020 after growing 2.8% in 2019, a turnaround of more than 7%.
This will be apparent in all of Australia’s major customers including China and will depress demand for exports.
More importantly, travel bans have come close to eliminating “exports” of tourism and education, which together account for almost one fifth of Australian export income.
This income will remain weak until international travel properly restarts.
3. We will lose four years population growth
Before the crisis, the 2019 mid-year budget update predicted Australia’s population would grow from 25.6 million to <a href="https://budget.gov.au/2019-20/content/myefo/download/02_Part_2.pdf">28.4 million</a> by June 2026.
This year’s budget says we won’t get there until June 2030, a full four years later.
Even after travel resumes, net overseas migration is expected to remain lower than before due to economic uncertainty and weak labour market conditions.
Businesses will find it more difficult to get the staff they need through skilled migration, crating a greater role for higher education and vocational education.
By 2024 migration is assumed to return to normal, yet population growth will continue to be slow. This is because the birth rate is <a href="https://population.gov.au/docs/recent_impacts_on_australias_population_quick%20guide.pdf">projected</a> to be lower than usual for the remainder of the decade.
4. Business investment will be weaker, and different
2020 has been a difficult year, but it’s also been the year we’ve learnt to do things differently.
We have learnt about on-line shopping, working from home, telehealth and on-line entertainment, and we will continue to make use of what we have learnt after the pandemic is over.
These changes could drive the next genuine wave of productivity growth.
Bricks-and-mortar retail, commercial office space, roads, bridges and railways are all investments that facilitate the meeting and movement of people.
With new technologies and a smaller population that is learning to keep things local, these old-world investments won’t be as generate the same returns as they once might have.
Where we might see the investment dollars being spent is on home improvements, while government investment dollars could be spent on improving local amenities such as parks and community centres.
5. We’ll need to get more people into paid work
A year ago, 66% of Australia’s adult population was participating in the labour market, either by being employed or looking for work.
During the crisis the participation rate dipped below 63%.
It has since returned to 65.8%, a touch above where the budget expects it will stay. Other countries including <a href="https://data.oecd.org/emp/labour-force-participation-rate.htm">Canada, Britain, New Zealand and Germany</a> do better than us.
There’s room to get more unpaid carers (many of them women) into the paid workforce.
More than <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/barriers-and-incentives-labour-force-participation-australia/latest-release">900,000</a> people who perform significant unpaid caring work say they would like more paid employment.
In my work for the National Foundation for Australian Women, I found the net budgetary cost of increasing caring services was <a href="https://nfaw.org/wp-content/uploads/2020/10/Appendix-A.pdf">modest</a>, mainly because it brought about a strong increase in the tax-paying workforce.
6. One last dark cloud: the terms of trade
The terms of trade measure what we can buy for each unit of what we sell; how many imports we can buy for each unit we export.
The budget forecasts a fall of almost 11% in 2021-22 as a result of lower prices for iron ore.
Taking a long view, this may be nothing more than a correction, but it is as big a fall in a single year as we experienced in the <a href="https://www.blackincbooks.com.au/books/dog-days">dog days</a> after the end of mining boom when the terms of trade declined for four consecutive years, and we experienced four years without real growth in income growth per capita.
Population, participation and productivity are the “three P’s” that drive economic growth in the long run, but in the short run a big decline in the terms of trade poses a <a href="https://theconversation.com/myefo-projections-signal-a-deepening-income-recession-35539">real risk</a> to a household-led economic recovery.
Where to from here
In an effort to avoid more economic pain, the government has rightly abandoned fiscal restraint in the most recent budget.
Much of its recovery strategy (perhaps too much) is built around income tax cuts and investment incentives.
I see a need for a greater emphasis on temporary measures aimed at supporting household spending, given the role it will have to play in unwinding the recession.
<hr>
 Read more: <a href="https://theconversation.com/modelling-finds-investing-in-childcare-and-aged-care-almost-pays-for-itself-148097">Modelling finds investing in childcare and aged care almost pays for itself</a> 
<hr>
In the longer term, there is a case for paring back some of the larger income tax cuts to expand child care, aged care and disability care; measures that would support low-paid workers, boost labour force participation, and improve the standard of living for many Australians.<img src="https://counter.theconversation.com/content/148797/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
<a href="https://theconversation.com/profiles/janine-dixon-11006">Janine Dixon</a>, Economist at Centre of Policy Studies, <a href="https://theconversation.com/institutions/victoria-university-1175">Victoria University</a>
This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/6-things-to-watch-for-as-australia-crawls-out-of-recession-148797">original article</a>.
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j.ballantyne1990-6AQqhLzZaK

Six things to watch for as Australia crawls out of recession

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EXPERT OBSERVER
The last time consumer prices fell by 1.9 per cent over a quarter – that is, over a three month period – was in 1931.
Back then it was the ‘C series index’ rather than the ‘consumer price index’. Just like today, those times – back in the late 1920s and early 1930s – were remarkable, being the time of a global depression. But fortunately policymakers today have responded differently to back then, applying significant fiscal and monetary stimulus to limit the length and severity of the economic downturn.
So prices are tipped to rebound in the current quarter. The last thing anyone wants to see is deflation – a sustained period of falling prices – because that could see the current economic downturn being extended.
Prices fell sharply in the June quarter for a number of reasons – principally, low rents, subsidised child care, free preschool and lower petrol prices. The best guide to underlying prices is the ‘trimmed mean’. This measure shows prices down 0.1 per cent in the quarter to be up 1.2 per cent over the year. So low annual inflation, not deflation.
In the current quarter – the September quarter – consumer prices are expected to lift from the lows. The headline rate of inflation is tipped to lift 1.4 per cent, pushing the annual growth rate up to 0.4 per cent. The annual trimmed mean is expected near 1.4 per cent.
While deflation is not expected to take hold, there is no room for complacency. Consumers should be given every encouragement to keep spending. If consumers start holding off on purchases on the hope of cheaper prices, then we will have a problem – a problem that would require more fiscal and monetary stimulus being applied.
The Reserve Bank has a long-run series on inflation back to 1922. Data can be found here:
<a href="https://www.rba.gov.au/inflation/measures-cpi" target="_blank">https://www.rba.gov.au/inflation/measures-cpi.html</a>
What do the figures show?
Overall result: The Consumer Price Index – the main measure of inflation in Australia – fell by 1.9 per cent in the June quarter (consensus: -2.0 per cent). It was the biggest ever quarterly fall for the CPI (since 1948). The last time consumer prices fell as much (C series index) was in September quarter 1931. In seasonally adjusted terms the CPI fell by 2.0 per cent in the June quarter. The annual rate of headline eased from a 5½-year high of 2.2 per cent to -0.3 per cent – the lowest result since September quarter 1997.
Underlying measures: The Reserve Bank monitors three measures to derive the underlying inflation rate. The trimmed mean fell by 0.1 per cent in the June quarter (1.2 per cent annual); the weighted median rose by 0.1 per cent (1.3 per cent annual) and the CPI less volatile items fell by 1.3 per cent (0.4 per cent annual). Overall, underlying inflation was flat in the quarter and rose by around 1.25 per cent over the year. Market goods and services less volatile items rose by 0.3 per cent in the quarter to be up 2.0 per cent on the year.
Capital cities: Sydney -2.3 per cent in the quarter (annual -1.0 per cent); Melbourne -0.8 per cent (+0.3 per cent); Brisbane -2.2 per cent (-1.0 per cent); Adelaide -1.0 per cent (+0.8 per cent); Perth -1.2 per cent (+0.1 per cent); Hobart -1.4 per cent (+1.3 per cent); Darwin -2.5 per cent (-1.8 per cent); Canberra -2.3 per cent (-0.6 per cent).
Main Negative Contributors:
The most significant price falls in the June quarter were child care (-95.0 per cent), automotive fuel (-19.3 per cent), preschool and primary education (-16.2 per cent) and rents (-1.3 per cent).
Child care: The ABS reported, “A fall of 95.0 per cent in child care was the main contributor due to free child care during the quarter. Excluding the impact of child care, this group would have risen 2.3 per cent.”
Housing: The ABS said, “Rents recorded the first quarterly fall since the series commenced in 1972. Weak rental market conditions as a result of COVID-19 lockdown restrictions and rising vacancy rates saw rents fall in most capital cities in the June quarter.”
The 2.5 per cent “fall in electricity was mainly driven by utility rebates in some capital cities to support households from the impacts of COVID-19.”
Automotive fuel: The ABS said, the “19.3 per cent fall in automotive fuel (was) due to low global demand resulting from COVID-19 restrictions. Automotive fuel fell in April (-15.9 per cent), and rose in May (+0.9 per cent) and June (+9.2 per cent)”
Education: The ABS said, “A fall of 16.2 per cent in preschool and primary education was the main contributor driven by free before and after school care and free preschool for term 2 in NSW, Victoria and Queensland.”
Food: the ABS said, “Falls of 1.4 per cent in vegetables and 1.1 per cent in beef and veal partially offset the rise this quarter. Improved weather conditions saw a range of fresh produce return to typical seasonal prices, while mince meat saw temporary discounts.”
Main Positive Contributors:
The most significant offsetting price falls June quarter were tobacco (+2.7 per cent), other non-durable household products (+4.5 per cent) and furniture (+3.8 per cent).
Furnishings, household equipment and services: the ABS said, “Rises of 3.8 per cent in furniture and 3.0 per cent in major household appliances partially offset the fall, due to strong demand for products such as home office furniture and fridges and freezers.”
Rises of 4.5 per cent in other non-durable household products and 6.2 per cent in cleaning and maintenance products were seen due to a reduction in specials and genuine price increases for toilet paper and cleaning products.
Recreation and culture: the ABS said, “A rise of 1.8 per cent in Audio, visual and computing equipment was due to strong demand for products such as TVs. This was the first quarterly rise in this series since 2015.”
Health: the ABS said, “falls of 0.5 per cent in pharmaceutical products and 0.2 per cent in medical and hospital services were the main contributors. The fall in pharmaceutical products was due to increases in the proportion of consumers who qualify for subsidies under the Pharmaceutical Benefits Scheme (PBS). The fall in medical and hospital services was due to a combination of increased bulk billing as well as a freeze on private health insurance premiums, which typically rise on 1 April each year.”
Food: the ABS said, “Rises of 0.8 per cent in take-away and fast foods, 3.8 per cent in fish and other seafood, 2.0 per cent in water, soft drinks and juices, and 6.1 per cent in other cereal products, were the main contributors this quarter. High demand saw a reduction in specials and genuine price increases on a range of long-life products such as canned tuna and canned meat, rice and pasta.” 
Prices of tradables: The tradables component of the ‘All groups CPI’ fell by 1.3 per cent in the June quarter to be down 0.5 per cent over the year.
Tradable goods component fell 1.3 per cent mainly due to automotive fuel (-19.3 per cent).
Tradable services component fell 1.9 per cent due to international holiday travel and accommodation (-2.0 per cent).
Prices of non-tradables: The non-tradables component of the ‘All groups CPI’ fell by 2.3 per cent in the June quarter to be down 0.2 per cent over the year.
Non-tradable goods component rose 0.2 per cent, due to tobacco products (+2.7 per cent).
Non-tradable services component fell 3.6 per cent, due to child care (-95.0 per cent).
In seasonally adjusted terms, the tradables component of the ‘All groups CPI’ fell 1.3 per cent and the non-tradables component fell 2.2 per cent.
Tradable goods are those items whose prices are largely determined on the world market. Non-tradable prices are more affected by domestic economic conditions.
What are the implications for interest rates and investors?
The Reserve Bank sets interest rates with a view of keeping inflation between 2-3 per cent over an economic cycle. Inflation is well below the lower bound of the range at present. And the expectation is that inflation will remain contained for some time. As a result, interest rates will spend an extended period at generational lows.
Super-low rates is a great result for borrowers. But it represents on-going challenges for savers. The added complication that listed companies are expected to slash dividends when they report over the next month.
Businesses that want an inflation guide for setting selling prices or rents are best advised to use the ‘trimmed mean’. The Reserve Bank expects annual trimmed inflation to be 1.25-1.50 per cent through to mid-2022.
Does it feel like deflation? Does it feel like the biggest quarterly fall in prices in 89 years? If you were outfitting your home office with furniture and computers, probably not. If you are renting, with children in child care, and paid electricity bills and health insurance premiums in the past quarter, then you probably noticed a big drop in outlays. Similarly if you drive a fair bit – petrol prices slumped in the quarter.
But apart from Victoria, expect more ‘normal’ growth of consumer prices in the months ahead. Petrol prices have certainly lifted and the period of free child care has come to an end.
The inflation measure ‘market goods and services, excluding volatile items’, rose 0.3 per cent in the quarter and 2 per cent over the year. This measure gives a better sense of ‘normal’.
CRAIG JAMES is the Chief Economist at CommSec
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CPI fell for the first time since 1931: CommSec's Craig James

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Remember when our retail spend was shifting from buying things to buying experiences? That was only four months ago.
Since then, Australians have been spending more at supermarkets and on consumer electronics than on apparel and at department stores. Our expenditure on experiences, in particular travel, has been almost non-existent. It was therefore interesting to hear that in China there has been a rebound in luxury spending post COVID-19 lockdowns.
(Spending excessively after a period when one has had limited opportunities to spend has emerged after the lockdown, where in several Chinese cities, consumers flocked the various brand outlets to beat the lockdown blues.)
The most recent retail trade data for May did show an element of ‘revenge spending’ by Australian consumers. After plunging 17.7% in April, spending bounced back 16.3% in May. June is likely to look similarly positive, although, the Melbourne lockdowns are likely to start to drag it back again in July.
At the beginning of the first lockdown in mid-March, I thought that the most impacted property sector would be shopping centres, but it has remained surprisingly resilient despite the enormous challenges for retailers.
While the sector has remained somewhat resilient, the vacancy rate has risen. According to JLL, the national average shopping centre vacancy rate rose to 5.1% in June from 3.8% six months earlier. This rate excluded temporary closures.
By far the most impacted precincts have been CBDs where the vacancy rate has now hit 10%. Working from home has been disastrous for CBD retailing. The other big shift has been the acceleration of online retailing. In a three-month time period, it has gone from 9% of retail sales to 10.5%. Not exactly a runaway pace but a sharp increase over a short time period.
For now, our expenditure on travel, eating out and entertainment outside the home is likely to remain far more muted. Meanwhile expenditure at supermarkets and on takeaway food is likely to be far more positive. While I can’t see myself rushing out to buy luxury brands any time soon, the rush to the shops in China is hopefully a good news story for shopping centres over the next 12 months.
NERIDA CONISBEE is the Chief Economist at REA
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Can revenge spending help save retail property? REA's Nerida Conisbee

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NAB data shows dramatic falls in consumption-based spending and business payment inflows post COVID-19 containment measures, with the pace of decline continuing to accelerate quite rapidly across many industries.
Spending in the year to date has fallen heavily in all states and territories, with Victoria leading the way.
By industry sector, spending is down most in Administration &amp; Support Services, Accommodation &amp; Food Services and Transport, Postal &amp; Warehousing, with Construction the only sector recording growth.
A handful of sub-industries have seen spending growth including - Internet Publishing &amp; Broadcasting, Construction Services, Gambling Activities, Food Retailing and Building Cleaning &amp; Pest Control. Business payment inflows into NAB merchants have also fallen sharply.
Corporates continue to outperform (particularly compared to medium and small business) and inflows remain positive, but have fallen steeply in April.
By industry, the hit to inflows has been most apparent in the Accommodation &amp; Food Services (particularly Clubs, Pubs, Cafes, Restaurants &amp; Takeaway Food) and Arts &amp; Recreation Services (particularly Amusement &amp; Other Activities and Sports &amp; Physical Recreation) - sectors that have borne the brunt of forced business closures and social isolation measures.
Inflows are also down heavily in Mining.
Inflows are holding up best in Wholesale Trade - the only sector recording growth in inflows.
Other industries holding up comparatively well include Health Care &amp; Social Assistance and Professional, Scientific &amp; Technical Services, although payment incomes are well down on the previous month.
Big falls have also been recorded in parts of Retail including Clothing, Footwear &amp; Personal Accessories, Department Stores and Motor Vehicles. Only two sub-sectors reported positive gains in payment inflows - Specialised Food Retailing &amp; and Hardware, Building &amp; Garden Supplies.
 Overall, consumption spending has fallen 19.5% (not seasonally adjusted) since the start of the year. Spending over the year to date has fallen heavily in all states and territories. The steepest falls over the year to date are in VIC (-23.0%), followed by the ACT (-20.7%), WA (-20.5%) and NSW (-20.4%). Spending is currently holding up best in TAS (-14.9%) and the NT (-15.0%).
 During these extraordinary times we have taken the decision to publish aggregated customer datacategorised by industry segment with the view of helping to provide clarity around which segments of theeconomy have been most affected by the broader macroeconomic trends at play. NAB takes data privacy veryseriously. All customer transaction data has been aggregated and no individual’s data is specificallyidentified or analysed as part of this process. The data used in this report will not be sold or made publiclyavailable, but insights from the data will be shared with the Australian people.NAB data shows dramatic falls in consumption-based spending and business payment inflows post COVID-19containment measures, with the pace of decline continuing to accelerate quite rapidly across manyindustries.Spending in the year to date has fallen heavily in all states and territories, with Victoria leading the way. Byindustry sector, spending is down most in Administration &amp; Support Services, Accommodation &amp; FoodServices and Transport, Postal &amp; Warehousing, with Construction the only sector recording growth. Ahandful of sub-industries have seen spending growth including - Internet Publishing &amp; Broadcasting,Construction Services, Gambling Activities, Food Retailing and Building Cleaning &amp; Pest Control.Business payment inflows into NAB merchants have also fallen sharply. Corporates continue to outperform(particularly compared to medium and small business) and inflows remain positive, but have fallen steeply inApril. By industry, the hit to inflows has been most apparent in the Accommodation &amp; Food Services(particularly Clubs, Pubs, Cafes, Restaurants &amp; Takeaway Food) and Arts &amp; Recreation Services (particularlyAmusement &amp; Other Activities and Sports &amp; Physical Recreation) - sectors that have borne the brunt offorced business closures and social isolation measures. Inflows are also down heavily in Mining.Inflows are holding up best in Wholesale Trade - the only sector recording growth in inflows. Otherindustries holding up comparatively well include Health Care &amp; Social Assistance and Professional, Scientific&amp; Technical Services, although payment incomes are well down on the previous month.Big falls have also been recorded in parts of Retail including Clothing, Footwear &amp; Personal Accessories,Department Stores and Motor Vehicles. Only two sub-sectors reported positive gains in payment inflows -Specialised Food Retailing &amp; and Hardware, Building &amp; Garden Supplies
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Consumption spending down 20% due to COVID-19 measures: NAB

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EXPERT OBSERVER
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As Christmas fast approaches, it will be great to see some signs of growing consumer confidence and Australians breaking the spending shackles for the festive season. 
Recently there have been some positive signs for the economy and a push by the federal government for banks to relax lending standards for small business. 
With official interest rates below one per cent for the first time in our history, the RBA can take a well-earned summer holiday as the rate cuts it has delivered this year have made an important contribution to boosting consumer confidence. 
Having upbeat consumers is the key to an economic turnaround and the domestic economy is still showing signs of improvement. It is good to see the government talking to the banks about the way they have been applying the responsible lending guidelines to small and medium-sized enterprises. By supporting more lending and our SMEs we should see positive signs of further economic improvement.
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In this environment there is no real need for the RBA to do much more until they get a better view of the economy in the first quarter of next year. 
In the lead up to the summer break, I again urge mortgage holders to regularly review their home loans to ensure they are getting the best possible deal. Mortgage holders should never be complacent about their home loan. With interest rates at record lows, lenders are willing to battle for your business. Contact a mortgage broker to make sure you are getting the best terms and, most importantly, saving money.
John Kolenda is the chief executive of mortgage broking giant Finsure and is the top shareholder in the listed real estate group The Agency.
 
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Upbeat consumers are the key to an economic turnaround: John Kolenda

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EXPERT OBSERVER
Do you distrust the companies that profit from the goods and services you buy? Research suggests most of us do.
Justin Welby, the archbishop of Canterbury, made headlines in the U.K. recently for <a href="https://www.archbishopofcanterbury.org/speaking-and-writing/speeches/archbishop-canterburys-speech-tuc" target="_blank">his speech</a> at the Trades Union Congress conference in Manchester, England.
His remarks were forcefully pro-union and strongly disapproving of corporations, the profit motive and the wealthy.
He singled out Amazon for not paying their fair share of taxes in the U.K. and the gig economy as a “reincarnation of an ancient evil.”
To the archbishop, capitalism, with its pursuit of profit and inequality of outcomes, is inherently immoral.
Other religious leaders have, over the years, made similar points. In 2015, Pope Francis <a href="https://nationalpost.com/news/world/dung-of-the-devil-pope-francis-denounces-capitalism-greed-and-the-pursuit-of-money" target="_blank">denounced capitalism</a> and the pursuit of money and, in 2008, the then-archbishop of Canterbury, Rowan Williams, wrote an article for a British magazine <a href="https://blogs.spectator.co.uk/2012/03/from-the-archives-rowan-williams-on-capitalism-and-idolatry/" target="_blank">criticizing capitalism</a> in the wake of the financial crisis.
Such negative views of business and profit are hardly uncommon.
A recent article in the Journal of Personality and Social Psychology documented widespread <a href="http://psycnet.apa.org/fulltext/2017-31434-001" target="_blank">anti-profit beliefs</a>.
In my research with some of my graduate students, I have found that people often take a dim view of businesses, interpreting many different actions —such as a <a href="http://acrwebsite.org/volumes/1010014/volumes/v39/NA-39" target="_blank">small price increase</a> or a <a href="http://tinyurl.com/ybptgtra" target="_blank">product recommendation</a> — as an attempt to take advantage of consumers.
<h2>Viewed as conscious entities</h2>
But what underlies these views? Why is business and the pursuit of profit so maligned?
We think the answer lies, in part, in how people view firms and the resulting inferences they draw from the attempts of these firms to make a profit. To the first point, people seem to view companies as conscious entities — as living, breathing organisms with thoughts, feelings, intentions and motives.
<a href="https://opinionator.blogs.nytimes.com/2015/06/15/do-corporations-have-minds/" target="_blank">Research using functional magnetic resonance imaging (fMRI) scanners</a> has found that patterns of neural responses when considering other people’s mental states (<a href="https://www.psychologytoday.com/ca/blog/socioemotional-success/201707/theory-mind-understanding-others-in-social-world" target="_blank">the parts of the brain involved in “theory of mind”</a>) are indistinguishable from the pattern of responses when considering the behaviour of organizations.
What this means is that people are likely to attribute distinctly human motives to business actions that are the product of entirely different processes.
In addition to viewing companies as people, consumers often view their transactions with firms as zero-sum — like sharing a pie, where more for one person means less for the other. This means that when companies are perceived to be making a profit, that profit is viewed as coming at the expense of customers.
<h2>Distrust of profitable firms</h2>
This is where profiting becomes problematic. Because we mentally view firms as people, this is seen as a wilful act — a deliberate attempt to take advantage of customers — and it violates an important norm of interpersonal conduct, a moral norm even, that forbids benefiting at another’s expense.
We have found that a wide range of actions by businesses appears to be interpreted in this light: price increases, <a href="https://www.sciencedirect.com/science/article/pii/S002243591100090X" target="_blank">discounts for other people</a>, product recommendations and even advertisements.
Even when people don’t buy goods or services from a company, and therefore no profit is made, perceptions that a firm tried to profit lead to negative responses.
<h2>Even sales clerks are suspect</h2>
In one extreme example, we found that even when a salesperson recommended the cheaper of two alternatives, customers still assumed it was to benefit at their expense.
Our research has not yet investigated how firms can mitigate such reactions or whether they even can. If our results are anything to go by, some readers may think that these are legitimate reactions that should not be curtailed.
However, we would point out that a purchase is a consumer decision. No company is forcing consumers to buy their products against their will.
What’s more, businesses bear the burden of the risk in offering products for consumers’ consideration; the products that they make available to us are often a tremendous source of value in our lives; and, ultimately, the only reason companies develop and offer such products is to make a profit. Otherwise, what would be the point of going into business?<img src="https://counter.theconversation.com/content/103977/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
<a href="https://theconversation.com/profiles/laurence-ashworth-559676" target="_blank">Laurence Ashworth</a>, Associate Professor, Marketing, <a href="http://theconversation.com/institutions/queens-university-ontario-1154" target="_blank">Queen's University, Ontario</a>.
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/why-we-think-businesses-are-out-to-get-us-103977" target="_blank">original article</a>.
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Most of us dislike companies making a profit from us: Laurence Ashworth

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Arts, music and eating out have emerged as the favourite spends for Australians looking for experiences to spend their disposable dollars on, according to new data released by NAB. 
The Customer Spending Behaviours report, based on around 2.7 million daily consumer transactions, found creative services such as performing arts and music had the fastest growth at 35.3 per cent followed by accommodation and food at 26.7 per cent. Experiences include buying theatre and concert tickets, eating at cafes and restaurants and staying at hotels.
NAB chief economist Alan Oster said the report gave an important insight into household budgets across the country. The report analysed the spending behaviours of its customers, excluding things such as mortgages, other credit repayments and government services.
“By examining such a large number of daily transactions, we can show where spending is growing fastest, even down to a postcode, and what our customers are spending it on,” Oster said. 
<a href="https://www.propertyobserver.com.au/images/2017/09/26/NABSpending1.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/26/NABSpending1.png" alt="">
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<img src="https://www.urban.com.au/images/2017/09/26/NABSpending2.png" alt="">
The report also found consumers had boosted their average monthly spending during the quarter to $2,064 in metropolitan areas ($1,997 in Q1 2017) and $1,918 in regional areas ($1,866 in Q1 2017). 
In addition, it showed spending on consumption-based goods and services by NAB customers grew by 3.9 per cent over the year to Q2 2017, accelerating from 2.0 per cent over the year to Q1 2017. 
“Customer spending growth improved in all metropolitan and regional areas (except Tasmania), with overall spending growth in regional areas continuing to outpace cities,” Oster said. 
“Perhaps lower mortgage debt in regional areas is freeing up more disposable income for these consumers resulting in faster growth.” 
<a href="https://www.propertyobserver.com.au/images/2017/09/26/NABSpending3.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/26/NABSpending3.png" alt="">
Oster said retail trade is still a key part of the spending patterns but growth is increasingly coming from consumers wanting to head out to have meaningful experiences. 
“We can see consumers are getting out of the house, spending their disposable income on eating out, staying at hotels and enjoying music and the performing arts,” Mr Oster said. 
“This was particularly seen in Victoria, where growth was fastest in the suburbs of Hurstbridge and Garfield, followed by Quakers Hill in NSW.” 
Customer spending growth improved in Q2 2017 in all metropolitan and regional areas (except TAS). By state, VIC, NSW and QLD contributed around 98% of total growth in customer spending in Q2. Growth was fastest for Arts &amp; Recreation and Accommodation &amp; Food. 
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Consumers spending their disposable dollars on experiences: NAB 

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GUEST OBSERVER
The Westpac Melbourne Institute Index of Consumer Sentiment rose 2.5% to 97.9 in September from 95.5 in August. 
The consumer mood remains downbeat with September marking the tenth consecutive month that pessimists have outnumbered optimists.
Pressures on family finances, concerns around interest rates, deteriorating housing affordability and rising energy prices have all weighed on confidence in 2017. These factors are more than offsetting the boost from an improved outlook for jobs particularly when a stronger labour market has not been associated with increased wages growth.
The survey detail shows family finances remain a key area of concern. The ‘finances vs a year ago’ sub-index rose 6.1% but was coming from a very weak read in August (a three year low). Meanwhile the sub-index tracking expectations for ‘finances over the next 12 months’ fell 2.1%, reversing all of last month’s gain.
<a href="https://www.propertyobserver.com.au/images/2017/09/13/Screen%20Shot%202017-09-13%20at%2011.02.45%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/13/Screen%20Shot%202017-09-13%20at%2011.02.45%20AM.png" alt="">
Consumer expectations for the economy showed more consistent gains. The ‘economic conditions, next 12 months’ sub-index rose 2.7% and the ‘economic conditions, next 5 years’ sub-index posted a robust 5.1% gain.
While both are still in pessimistic territory below 100 they are now marginally above long run average levels. The improved but still ‘lukewarm’ sentiment towards the economy likely reflects the somewhat mixed picture from recent data including the June quarter national accounts which showed a reasonably solid 0.8% gain in GDP but subdued annual growth and notable areas of weakness around household incomes and consumer spending.
Consumers were slightly more positive towards major purchases, the ‘time to buy major a household item’ sub-index rising 2.1% in September. However again the rise was small and, coming off a weak August read, the sub-index remains well below its long run average.
The September survey included additional questions on news recall that provide further insight into the factors shaping sentiment. Interestingly, recall levels have fallen significantly over the last three years suggesting consumers may be getting less exposure to news in general.
In September the topic areas with the highest recall were ‘economic conditions’ (21%); ‘budget and taxation’ (17%); interest rates (16%); inflation (16%); jobs (15%); and international conditions (12%). While news on all fronts was viewed as unfavourable, consumers rated news on inflation and international conditions as much more negative than three months ago – likely reflecting sharp increases in energy costs and developments around North Korea. The only material improvement was around jobs where news was viewed much less negatively than in June.
The improved labour market situation was also broadly apparent in the Westpac Melbourne Institute Unemployment Expectations Index. Although the index edged up 0.9% in the month, at 133.6 it is still down 4.8% from its June level and the second lowest reading since 2011 (recall that lower reads mean more consumers expect unemployment to fall in the year ahead).
Consumer views around housing were mixed in September. The ‘time to buy a dwelling’ index rose 0.8% but at 95.2 remains at very low levels by historical standards. State indexes continue to vary widely, ranging from a very weak read in NSW (81.3) to a strongly positive result in WA (130.4). Consistent falls in prices in WA over recent years may be finally restoring affordability to attractive levels.
The Westpac Melbourne Institute Index of House Price Expectations dipped 2.8% but at 141.5 remains high overall. Of those consumers with a view, 57% expect prices to rise in the year ahead, 31% expect no change and 12% expect prices to decline.
Responses to additional questions on the ‘wisest place for savings’ continued to indicate risk aversion. Nearly two thirds of consumers still favour safe options – deposits, superannuation or paying down debt – with only 10.5% nominating real estate, a new 40 year low, and 9% nominating shares. More consumers favour ‘pay down debt’ (23.5%) than real estate and shares combined.
<a href="https://www.propertyobserver.com.au/images/2017/09/13/Screen%20Shot%202017-09-13%20at%2011.18.40%20AM.png" target="_blank">Click to enlarge</a>
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The Reserve Bank Board next meets on October 3. There is no doubt that the Board will continue to leave the cash rate on hold.
Of more interest is the medium term outlook for interest rates. While those commentators favouring rate hikes next year point to record business conditions we are starting to see a considerable gap open up between business conditions and business confidence. Persistent weak consumer sentiment, consistent with weak consumer demand, may be worrying businesses around the sustainability of current strong conditions.
From our perspective prospects for consumer spending and residential construction appear soft. We do not expect that economic conditions in Australia in 2018 will be consistent with the need for the Bank to raise rates. 
 
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BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>. 
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Time to buy a dwelling index up, still at very low levels: Bill Evans

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GUEST OBSERVER
Growth bounces back (again)
After another (weather related) soft patch in the March quarter, Australian economic growth bounced back in the June quarter with quarterly growth of 0.8%, up from 0.3%. However, annual growth is still subdued at 1.8% year on year, which is well below potential of around 2.75%.
In the quarter, growth was helped by a pick-up in consumer spending and business investment, strong public investment and a contribution from net exports after a detraction in the March quarter. 
<a href="https://www.propertyobserver.com.au/images/2017/09/07/Screen%20Shot%202017-09-07%20at%208.35.03%20AM.png" target="_blank">Click to enlarge</a>
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Australia continues to defy the doomsters’ endless recession calls. Against this, economic and underlying profit growth is lagging that seen in major economies. However, there are some positives pointing to a pick-up in growth.
Threats, risks and worries 
<a href="https://www.propertyobserver.com.au/images/2017/09/07/Screen%20Shot%202017-09-07%20at%208.36.39%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/07/Screen%20Shot%202017-09-07%20at%208.36.39%20AM.png" alt="">
Putting global threats aside, Australia’s worry list is well known:
Housing construction is starting to slow with falling approvals pointing to a further slowing (see next chart). 
Related to this, there is the risk of a house price crash “as seen” on Four Corners. However, there have been endless property crash calls since around 2004. In the absence of a stronger supply surge, the Reserve Bank of Australia (RBA) making a mistake and raising rates too high and/or unemployment surging, our view is that a slowdown in Sydney and Melbourne is likely, but not a crash.
Consumer spending is constrained by record low wages growth and high levels of underemployment. While consumer spending has been running faster than income growth, as rising wealth has allowed consumers to run down household savings (to now just 4.6%) this is unlikely to continue as the wealth effects flowing from property price gains in Sydney and Melbourne slow. Rapid power cost increases and high debt are also not helping. All of which is driving low consumer confidence.
Mining investment is still falling with business investment intentions pointing to another 22% fall this financial year.
The Australian dollar is up 16% from last year’s low and at around $US0.80 (and threatening to go higher) it is at risk of slowing growth (and investment) in trade-exposed sectors like tourism, agriculture and manufacturing.
Underlying inflation is too low and risks staying below target for longer due to record low wages growth, a rising $A, competitive pressures &amp; weak rents as new supply hits.
Our political leaders seem collectively unable to undertake productivity-enhancing economic reforms and take decisive action (eg, on energy policy). With the citizenship crisis threatening an early election, it’s unlikely we will see an improvement any time soon. 
Five reasons to expect growth to improve
These worries are well known and despite them we remain of the view that recession will be avoided and growth will pick up over the year ahead 
First, the growth drag from falling mining investment is nearly over. Mining investment peaked at nearly 7% of GDP four years ago and has since been falling at around 25% per annum (pa), knocking around 1.5% pa from GDP growth. At around 2% of GDP now, its weight in the economy has collapsed reducing its growth drag to around 0.4% this year and it’s near the bottom (see next chart). 
<a href="https://www.propertyobserver.com.au/images/2017/09/07/Screen%20Shot%202017-09-07%20at%208.37.45%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/07/Screen%20Shot%202017-09-07%20at%208.37.45%20AM.png" alt="">
Second, non-mining investment is likely to rise this year. Comparing corporate investment plans for this financial year with those made a year ago points to a decline in business investment this year of around 3.5% (see next chart). But this is the best it’s been since 2013 and once mining investment is excluded this turns into an 8% gain for non-mining investment.
Third, public investment is rising strongly, up 14.7% over the last year, reflecting state infrastructure spending.
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<img src="https://www.urban.com.au/images/2017/09/07/Screen%20Shot%202017-09-07%20at%208.39.22%20AM.png" alt="">
Fourthly, net exports are likely to continue adding to growth as the completion of resources projects boosts mining and energy export volumes and services sectors like tourism and higher education remain strong.
Finally, profits for listed companies are rising again after two years of falls. This is a positive for investment and the flow of dividends helps household incomes.
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<img src="https://www.urban.com.au/images/2017/09/07/Screen%20Shot%202017-09-07%20at%208.40.33%20AM.png" alt="">
These considerations should ensure that the Australian economy continues to avoid recession and that growth should pick up to around a 2.5% to 3% pace over the year ahead. This should be enough to head off further cuts in the cash rate. But with growth still a bit below RBA forecasts, wages growth likely to pick up only slowly, inflation likely to remain subdued abstracting from higher electricity prices, and the RBA likely wanting to avoid pushing the $A higher, our view remains that the RBA will keep the cash rate unchanged at 1.5% out to the December quarter 2018 at least before starting to raise rates.
Implications for investors
There are several implications for Australian based investors. First, a return to reasonable growth is positive for growth assets. Australian shares are vulnerable to a short term US-led share market correction – given North Korean and Trump risks – but we remain of the view that it will be higher by year end.
Second, bank deposits are likely to provide poor returns for investors for a while yet, highlighting the case for yield-focussed investors to continue to look for superior sources of yield. The yield gap between Australian shares and bank deposits remains wide, driving a strong source of demand for shares. After Telstra cut its dividend, just make sure you get a well-diversified portfolio of stocks paying decent dividends though. 
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<img src="https://www.urban.com.au/images/2017/09/07/Screen%20Shot%202017-09-07%20at%208.41.38%20AM.png" alt="">
Third, while Australian shares are great for income, global shares are likely to remain outperformers for capital growth. In fact, global shares have been outperforming Australian shares since October 2009. This reflects relatively tighter monetary policy in Australia, the commodity slump, the lagged impact of the rise in the $A above parity in 2010, and a mean reversion of the 2000 to 2009 outperformance by Australian shares.
<a href="https://www.propertyobserver.com.au/images/2017/09/07/Screen%20Shot%202017-09-07%20at%208.42.39%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/07/Screen%20Shot%202017-09-07%20at%208.42.39%20AM.png" alt="">
 
And of course, abstracting from volatile resource company earnings, underlying profit growth at around 5-6% in Australia is well below that in the US (at around 11%) and Europe and Japan (at around 20-30%) so the underperformance of Australian shares may have a while to go yet. Which all argues for a continuing decent exposure to global shares relative to Australian shares. 
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
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Five reasons why some further pick up is likely and implications for investors: Shane Oliver

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<div class="column">GUEST OBSERVER</div>
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<div class="column">Consumer confidence fell further in the past week to the lowest levels in almost a year. Why the gloom? Well, data showed wage growth remaining near 2 per cent, well below the levels of a few years ago.</div>
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<div class="column">Still, data in the past week showed the job market to be in good shape with job growth in the past five months the best for an equivalent period in 121⁄2 years.</div>
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<div class="column">Consumer confidence is also tied to the fortunes of the Aussie dollar and the currency has backed away from US80 cents.</div>
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<div class="column">Aussie consumers are fretting about slower wage growth, rising energy bills and higher healthcare costs. Of course at the same time the affordability of a rash of spending categories has improved such as food, clothing, travel and transport.</div>
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<div class="column">Consumers may say they are gloomy, but importantly they are still spending. It’s a case of watch what they do, not what they say. Real retail trade posted the best growth in the June quarter for any June quarter in the past eight years. At the same time, measures of economy-wide spending continue to show firm growth. Certainly if consumer spending was slowing, this would be reflected in business conditions and confidence – but both those metrics remain strong.</div>
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<div class="column">One key positive in the past week – the measure of whether it was a good time to buy a major household item rose to +35, above the long-term average of +33.</div>
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<div class="column">What do the figures show?</div>
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<div class="column">Consumer sentiment
The weekly ANZ/Roy Morgan consumer confidence rating eased 2.2 per cent from 111.7 to a near 12-month low of 109.2 in the week to August 20. Confidence is down 10.3 per cent over the year and below the average of 113.2 since 2014.
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 Four of the five components of the index fell in the latest week: 
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  The estimate of family finances compared with a year ago was down from +5 to +3; 
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  The estimate of family finances over the next year was down from +23 to +16; 
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  Economic conditions over the next 12 months was down from -5 to -6; 
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  Economic conditions over the next 5 years was down from +5 to -2; 
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  The measure of whether it was a good time to buy a major household item was up from +30 to +35. 
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 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.
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What are the implications for interest rates and investors?
Consumers say that they aren’t overly confident at present. But they are still spending. Whilever wage growth is exceeding price growth then consumers will spend.
Retailers need to watch measures of consumer sentiment but not unduly worry about survey results. 
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
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