A who's who of Australian surfing, business and entertainment has emerged on title records following the completion of Esprit Rainbow Bay, the latest boutique beachfront apartment development by former professional surfer Paul Gedoun's S&amp;S Projects.

The completed project has attracted an enviable collection of owners, many with long-standing ties to the southern Gold Coast and the surf culture that has helped define Rainbow Bay and neighbouring Kirra for generations.

Given Gedoun's own background in surfing, it perhaps comes as little surprise that some of Australia's most recognisable surfers have chosen to buy into the development overlooking one of the country's most celebrated stretches of coastline.

Pezet Matheson directors Jayde Pezet and Todd Matheson launched the project in late 2021, and have managed the sales campaign all the way through to its sell-out and recent completion.

<img alt="Esprit" data-entity-type="file" data-entity-uuid="08fc6261-b84e-4b09-8a44-66d3067fd0d1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-29%20at%208.51.05%E2%80%AFAM.png?VersionId=4AOcb6ETZwNUnMPdTtz1B3pZAIB_jgZ2" />

Former world champion Mick Fanning, who grew up in Coolangatta, secured an apartment in 2023. He paid&nbsp;$2.07 million. Last year he sold his Bilinga home for over $16 million.

Three-time world champion Joel Parkinson also purchased in the development, alongside big wave surfer Mark Mathews. Mathews bought the most expensive apartment in the building, spending just over $4 million.

Joining them is Rip Curl founder Doug Warbrick, whose company helped shape Australia's global surfing industry over the past five decades.

The appeal of Rainbow Bay has extended well beyond the surfing community.

International DJ Paul Fisher purchased an apartment through his investment vehicle, YLB Developments, an abbreviation of his trademark phrase "You Little Beauty".

The purchase comes as Fisher and his wife Chloe are developing their own luxury apartment project further north in Palm Beach. Their boutique beachfront development, Pescado, comprises just seven apartments on Jefferson Lane, which start from just shy of $6 million. The couple intend to retain the two-level penthouse as their Australian base between international touring commitments.

Melbourne Storm coach Craig Bellamy and his wife Wendy have also invested in Esprit, purchasing two apartments after spending decades holidaying on the southern Gold Coast. They also have a luxury apartment in Joe Adsett's Rockpool, less than 400m away from Esprit.

<h2>Boutique project draws owner-occupiers</h2>

Esprit launched in 2021 and sold strongly, with buyers drawn to its boutique scale, beachfront position and contemporary design.

The completed development comprises 94 apartments across 11 levels, offering expansive floorplans designed primarily for owner-occupiers rather than the investor market.

Crowning the building is Club Esprit, pitched as being the Gold Coast's first residential rooftop wellness centre. The roof features a&nbsp;25 metre magnesium lap pool, which is surrounded by wet daybeds and poolside cabanas,&nbsp;multiple barbecue areas,&nbsp;a yoga and relaxation play lawn, and a private dining room with a kitchen scullery, bar, lounges, and an outdoor terrace.

The wellness centre is&nbsp;fully equipped with a Technogym, ice bath, infra-red sauna, steam room, thermal room, and treatment room. The roof has views spanning&nbsp;Rainbow Bay, Snapper Rocks and the Pacific Ocean.

<h2>S&amp;S Projects continues to shape Rainbow Bay</h2>

S&amp;S Projects founder Paul Gedoun has become one of the key figures behind Rainbow Bay's evolution over the past several years.

After establishing S&amp;S Projects, Gedoun has focused on delivering lifestyle-driven apartment developments designed primarily for owner-occupiers seeking a permanent coastal home.

Esprit is Gedoun's third completed project in Rainbow Bay, following Flow and Awaken, both of which achieved record prices for the suburb.

He is now delivering <a href="https://www.apartments.com.au/new-apartments/radia-rainbow-bay-271-boundary-street-coolangatta-qld-4225">Radia Rainbow Bay</a>, a 38-apartment development on Boundary Street that is currently selling, and has no plans to leave the precinct anytime soon. S&amp;S Projects has also lodged plans for its fifth Rainbow Bay development, an 88-apartment project on Boundary Street featuring a strong wellness focus.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/qld/first-look-s-s-projects-proposes-88-apartment-wellness-tower-at-coolangattas-boundary-street">First look: S&amp;S Projects proposes 88-apartment wellness tower at Coolangatta's Boundary Street</a>

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Joel Robinson

Who's who of buyers revealed as Esprit Rainbow Bay settles

Nature Based Cities (NBC), the not-for-profit organisation focused on improving biodiversity and nature outcomes in urban development, has launched its latest industry design guidelines and accreditation framework, this time targeting precinct-scale residential communities.

The move extends NBC’s influence beyond its initial focus on medium and high-density residential developments. Several projects have already achieved NBC accreditation since the launch of its Medium &amp; High-Density Residential Guidelines in early 2025.

The expansion into masterplanned communities and new residential precincts reflects the growing need for stronger nature-positive benchmarks as Australia’s outer suburban growth corridors continue to expand at pace.

Paul Hameister OAM, NBC Founder and the Executive Chairman of Melbourne developer Hamton who itself leans heavily into nature and biodiversity in its developments, says the&nbsp;nature-first approach to mitigate the effects of climate change has become standard in other parts of the world such as the UK, but Australia is lagging.&nbsp;Australia’s environmentally sustainable design (ESD) rating tools have no minimum mandatory requirements for living landscapes.

“We’ve always wanted to do more, and we know other developers who want to do more, but the ESD rating tools just aren’t there,” Hameister says. “In Australia, you can have a five-green-star rated building that’s concrete and glass with not a blade of grass. 
 
“The focus is on reducing emissions, which is laudable, but there hasn’t been enough attention paid to protecting and re-establishing nature. We need both for the health of the environment and for communities.”

He says that having now&nbsp;made good progress in supporting developers of medium and high-density residential projects, NBC is now looking to bolster better nature-based decision-making and recognise developers of greenfield projects in the outer ring and large inner-ring brownfield precincts, who want to champion nature and living landscape as a defining feature.

Since 2022, the not-for-profit has sought to remove the roadblocks preventing developers from incorporating nature and living landscapes into their projects, shifting the conversation from the reduction of emissions and grey infrastructure, toward recognising nature as an essential infrastructure.

The New Communities Design Guidelines and Scorecard arm developers with the tools needed to deliver a nature positive outcome for their new communities. Intended to be adopted at the outset of the planning process, the guidelines are designed to help create communities that are cooler, healthier and more resilient while also enhancing social wellbeing and long-term economic value.&nbsp;

New Communities developers seeking accreditation will be independently assessed across a range of key criteria including ecology, tree canopy, biodiversity, and walkability. Once the masterplan is complete and submitted for approval, the scorecard is formalised based on proposed outcomes. Projects that meet the NBC criteria will receive either Commended or Exemplary accreditation outcomes, creating a clear benchmark for nature-positive new communities in Australia.&nbsp;

Janis Fischer, Director at Tract and NBC Advisory Council member, said the development of new communities in our suburbs can have a substantial impact on nature and biodiversity.

"By incorporating nature-based design principles at the inception of a project, developers and their design teams can achieve nature positive outcomes that are good for both people and the planet.’’&nbsp;

NBC accredited New Community projects will gain access to NBC branding and marketing tools to help communicate their nature-based credentials to purchasers and the broader market.&nbsp;

Nature Based Cities: A new Australian benchmark for developing nature-positive new communities

Apartment buildings are increasingly being designed around how people actually live day to day, not just how they want a building to look.

For buyers, that shift is showing up in practical inclusions that respond to changing habits. Work-from-home spaces, EV charging, wellness amenities, secure bike storage and parcel management are becoming part of the broader apartment conversation, reflecting a move toward buildings that reduce friction in everyday life.

Online shopping has become one of the clearest examples of that change.

Australians spent a record $82.6 billion online in 2025, with nearly one in four retail dollars now spent online. That has made parcel delivery a regular part of apartment living, rather than an occasional inconvenience.

For apartment residents, however, the delivery process can be less straightforward than it is for detached homes. Parcels may be left in lobbies, redirected to Post Offices, missed entirely, or placed under the responsibility of building managers and concierge teams.

That is why secure parcel infrastructure is increasingly being considered alongside more familiar apartment amenities.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/-VjjLwoViX0?si=A3k7ws9NX35Uac7_" title="YouTube video player" width="560"></iframe>

Australia Post Parcel Lockers offer one way to address the issue. When a parcel arrives, residents receive a notification through the AusPost app or SMS, then collect it using a QR code or one-time PIN. The parcel is kept secure, accessible and removed from common areas.

The broader Parcel Locker network now includes more than 1,500 locations across Australia, positioned at Post Offices, shopping centres, supermarkets, transport hubs and other accessible locations.

For new apartment projects, the relevance is clear. A building’s amenity offering is no longer only about lifestyle spaces, but also about convenience, security and functionality.

As buyer expectations evolve, secure parcel delivery is becoming part of the same design conversation as flexible working, sustainable transport and resident wellbeing.

It is one less thing for residents to worry about, and another example of apartment design adapting to the way Australians now live.

Apartment design is adapting to the way Australians shop

While school holidays and trips to Europe tend to define the winter property market, there's been no cold snap at <a href="https://www.apartments.com.au/new-apartments/the-walden-north-sydney-177-walker-street-north-sydney-nsw-2060">The Walden</a> in North Sydney.

Developer-builder&nbsp;<a href="https://www.apartments.com.au/developers/aland">ALAND</a> sold more than $35 million worth of apartments throughout June, including a $6.8 million apartment that now ranks among the highest apartment sales ever recorded in North Sydney.

SRM Residential agent Ben Stewart said buyer demand throughout June reflected a mix of improving market confidence and longer-term thinking from owner-occupiers.

"We're seeing strong demand from owner-occupiers who are taking a longer-term view," Stewart said.

"Many recognise the opportunity to secure an apartment in an iconic building and premium location while values remain attractive. They may initially lease the property, but the intention is to eventually move in themselves, rather than purchasing purely as an investment."

[smartcode_project:default project_id=134323 project_image_fid=367129]

Located at 177 Walker Street, The Walden will deliver 161 one, two, three and four-bedroom residences across a 30-storey tower designed by Rothelowman. Every apartment occupies a corner position, maximising natural light, cross ventilation and views across Sydney Harbour, the Opera House, Sydney Heads and the northern districts.

Rather than a traditional balcony, the residences feature winter gardens that seamlessly extend the open plan living areas, creating versatile spaces for relaxing or entertaining throughout the year. Floor-to-ceiling glazing draws in natural light while showcasing sweeping views from the building's elevated Walker Street position.

Every apartment features high-end Calacatta marble, bespoke joinery, and fully integrated appliances.

The larger residences have been planned with distinct entertaining and private zones, with many master suites positioned on corners to capture natural light and harbour views. Walk-in dressing rooms, freestanding baths and refined stone finishes reinforce the house-like feel that has resonated with downsizers and owner-occupiers.

[smartcode_project:default project_id=134323 project_image_fid=6393]

Rothelowman Principal Ben Pomroy said the project was designed to make the most of its unique position overlooking the harbour.

"The Walden is a celebration of all things beautiful, curated for those who expect nothing less than exceptional," Pomroy says.

"Meticulously designed entertaining spaces and light-filled living areas that capitalise on capturing the natural beauty of Sydney's iconic harbour."

Residents will also have exclusive access to The Pavilion, a dedicated amenity building featuring a rooftop pool, wellness studio, gymnasium, sauna, concierge service, residents' lounge, private dining spaces and work-from-home facilities.

[smartcode_project:default project_id=134323 project_image_fid=6402]

The project marks ALAND's first major luxury apartment development in Sydney's inner-city market after more than two decades delivering residential communities across Greater Sydney.

Founder and CEO Andrew Hrsto previously said the rarity of the Walker Street site made it an opportunity the company could not overlook.

"This is a rare opportunity to bring a truly exceptional project to life in one of Sydney's most iconic locations, and to showcase our craftsmanship and design expertise at a world-class level," Hrsto said.

[smartcode_project:default project_id=134323 project_image_fid=6383]

The Walden has been introduced to the market at a time when demand for living in North Sydney is at an all-time high. Billions of dollars have been invested in infrastructure, including the recently opened Victoria Cross Metro station, located just 300 metres from The Walden, providing residents with direct access to the Sydney CBD in just minutes.

Private investment has also transformed the area through the arrival of new retail and dining destinations, elevating the lifestyle offering in what was once considered primarily a commercial precinct rather than an aspirational residential address.

The Walden is currently under construction and is scheduled for completion in 2028.

[smartcode_project_cta:default project_id=134323]

ALAND records $35 million in sales in North Sydney as The Walden bucks quiet winter selling season

The long-awaited redevelopment of the former Eastlakes Shopping Centre site has reached a major milestone, with Conquest's plans for a new mixed-use precinct officially placed on public exhibition.

The State Significant Development Application would transform the 1.7-hectare site at <a href="https://www.apartments.com.au/new-apartments/19a-evans-avenue-eastlakes-nsw-2018">19A Evans Avenue</a> into one of Sydney's largest urban renewal projects, delivering 736 apartments above a new shopping centre anchored by Woolworths, alongside specialty retail, dining, commercial space and new public open spaces.

The public exhibition marks the next chapter for the project after <a href="https://www.apartments.com.au/developers/conquest">Conquest</a> acquired the stalled Stage Two development from Crown Group, who completed the first stage across the road prior to their voluntary liquidation.

<img alt="First look: Conquest unveils plans for 736-home Eastlakes Shopping Centre redevelopment" data-entity-type="file" data-entity-uuid="5fca22c5-d1ed-4e2c-8801-03f7df1eafc8" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/eastland%20podium.png?VersionId=uomwr41nF8CmLUZRDcu3mHQechlbxucS" />

&nbsp;

Designed by DKO Architecture, the proposal comprises four residential buildings ranging from 14 to 18 storeys above a two-level retail podium. The development would deliver 736 apartments, including 74 affordable homes, 215 Build-to-Rent apartments and 521 market residences. Provision has also been made for dual-key apartments, which could increase the total number of dwellings to 877.

At ground level, the shopping centre has been designed as the suburb's new meeting place, anchored by a full-line Woolworths and complemented by a curated mix of fresh food retailers, cafés, restaurants, health services and everyday convenience shopping. Generous pedestrian links and landscaped public spaces will connect the retail precinct through to Jack Mundey Reserve, creating a more walkable and connected neighbourhood.

Conquest CEO Michael Akkawi said the redevelopment was about far more than replacing a shopping centre.

"Eastlakes has been overlooked for too long, and this is the community’s moment. We are building a shopping centre and homes, a genuine heart for the suburb, and we genuinely want locals to help shape it."

"We enrich communities through the creation of homes, places, and experiences designed for life, built to last, and owner for generations. That starts with listening, so we warmly encourage everyone with a connection to Eastlakes to view the plans and share their thoughts."

<img alt="First look: Conquest unveils plans for 736-home Eastlakes Shopping Centre redevelopment" data-entity-type="file" data-entity-uuid="22f6fb20-54fb-4bd7-8a92-48fafdd00608" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/eastland.png?VersionId=cugp7s9hrMHGJJdYzkeAkrFoQgnF4GXf" />

DKO said the design had been shaped by the site's landscape setting and surrounding open space.

"Our vision for the site embraces its unique Bidjigal identity by blending the residential living with generous landscaping and a material palette inspired by the Bidjigal locality, and celebrating the panoramic views to Botany Bay and the wetlands reserves."

"Taking cues from Country, we seek to harmonise built form with the landscape and lightly touch the earth. By reconnecting, retaining and regenerating existing ecology, and weaving in natural elements, we can deepen our connection to Country."

The landscape strategy extends across the podium and rooftops, incorporating communal gardens, children's play areas, lawns, community gardens, family gathering spaces and extensive tree planting. New landscaped links will also strengthen the connection between the precinct and Jack Mundey Reserve, while publicly accessible open spaces have been integrated throughout the development.

The proposal builds on Conquest's broader placemaking strategy for the site. Through an ongoing partnership, local artist Joe Rashbrook has been appointed Urban Art Curator, working alongside young residents to transform the project's site hoardings into a public art gallery that allows the community to engage with the redevelopment before construction is complete.

Conquest has rapidly expanded its development pipeline since acquiring the Eastlakes site, with more than $6 billion worth of mixed-use projects now in planning across Sydney, including Stanmore, Castlecrag and Waterloo.

Conquest CEO Michael Akkawi said the redevelopment was about far more than replacing a shopping centre.

First look: ‘Far more than replacing a shopping centre’ as Conquest unveils 736-home Eastlakes redevelopment

Consumer Spending

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GUEST OBSERVER
Annual Australian growth slowed to 1.7 percent in the March quarter hit by bad weather &amp; weak consumer spending. 
A declining drag from falling mining investment, strong public infrastructure spending and a likely resumption of trade contributing to growth should all help keep Australia out of recession. However, soft consumer spending and a slowing in the housing cycle will act to constrain growth to below Reserve Bank of Australia (RBA) and Government forecasts. As such, there is far more chance of another RBA rate cut than a hike over the next year.
Australian shares will likely be higher by year end. But global shares are likely to continue outperforming. 
Growth slows again
Despite numerous forecasts for an “unavoidable” recession following the end of the mining boom early this decade, the Australian economy has continued to defy the doomsters and keep growing. However, recently it seems to have hit a bit of a rough patch. After contracting in the September quarter, the economy bounced back in the December quarter only to falter again in the March quarter.
While there was relief that we didn’t see another contraction, as had been feared, and the economy has now had 103 quarters without a recession, it would be wrong to get too excited. March quarter growth was just 0.3% quarter on quarter and annual growth slowed to 1.7% year on year, its slowest since the global financial crisis (GFC). 
<a href="https://www.propertyobserver.com.au/images/2017/06/14/Screen%20Shot%202017-06-15%20at%208.38.38%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/14/Screen%20Shot%202017-06-15%20at%208.38.38%20AM.png" alt="">
Bad weather and bad wages growth
Cyclone Debbie and its aftermath disrupted housing construction &amp; trade in the March quarter and this will pass. But before it does, the weather impact on trade will worsen in the current quarter – as indicated by a 45% collapse in coal exports in April, which is unlikely to be made up for in May and June – resulting in another quarter of poor growth. More fundamentally though:
Consumer spending is heavily constrained by record low wages growth and high levels of underemployment resulting in real household disposable income growth of just 0.4% over the last 12 months. While real consumer spending grew more strongly than income at 2.3% over the last year, this was only possible because of a fall in the household savings rate to 4.7% from 6.9% a year ago.
Rapid increases in the cost of electricity, talk of an increase in the Medicare levy and high debt levels are probably also not helping. All of which is showing up in relatively low levels of consumer confidence.
The housing cycle is starting to slow. Falling building approvals point to a downtrend in housing construction activity (see next chart). Similarly, the wealth effects from home price gains are likely to slow if, as we expect, Sydney and Melbourne property price growth has now peaked under the weight of bank rate hikes, tighter lending standards, rising supply and poor affordability. 
<a href="https://www.propertyobserver.com.au/images/2017/06/14/Screen%20Shot%202017-06-15%20at%208.39.45%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/14/Screen%20Shot%202017-06-15%20at%208.39.45%20AM.png" alt="">
The impact of the housing cycle on the Australian economy is regularly exaggerated. Last year it contributed around 0.3% directly to GDP growth (via housing construction) and indirect effects look unlikely to have been more than another 0.3%. In other words, not a huge amount. But nevertheless it will be a drag on growth when it slows. 
Offsetting positives
However, while the consumer and the housing cycle look like becoming a drag on Australian growth in the year or two ahead, several considerations will provide an offset: 
The big drag on growth from falling mining investment is nearly over. Mining investment peaked at nearly 7% of GDP four years ago and has been falling at around 30% per annum, knocking around 1.5% pa from GDP growth (and a lot more in Western Australia). While it’s still falling rapidly, at around 2% of GDP now, its weight in the economy has collapsed reducing its drag on growth to around 0.5% for the year ahead and it’s getting close to the bottom. 
<a href="https://www.propertyobserver.com.au/images/2017/06/14/Screen%20Shot%202017-06-15%20at%208.40.42%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/14/Screen%20Shot%202017-06-15%20at%208.40.42%20AM.png" alt="">
Secondly, public infrastructure investment is rising strongly, up 9.5% over the last year, in response to state infrastructure spending much of which is financed from the privatisation of existing public assets.
Finally, net exports or trade is likely to return to contributing to growth as the impact of Cyclone Debbie fades, resource projects including for gas complete and services exports continue to strengthen.    Recession avoided, but growth to remain subdued    These considerations should ensure that the Australian economy continues to grow and avoids recession.
<a href="https://www.propertyobserver.com.au/images/2017/06/14/Screen%20Shot%202017-06-15%20at%208.41.46%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/14/Screen%20Shot%202017-06-15%20at%208.41.46%20AM.png" alt="">
However, the drag from soft consumer spending and an end to the east coast housing boom will likely leave growth stuck around 2 to 2.5%. This is below Government and RBA expectations for a return to 3%, posing downside risks to the inflation outlook.  In an ideal world and given the declining potency of monetary policy (and the fear of reigniting home prices gains), this would be the time to consider income tax cuts (or “cheques in the mail”) to help shore up consumer spending. The Government could consider financing this by dropping/delaying the cuts to corporate tax for large companies that are stalled in the Senate.
However, since the corporate tax cuts were due to kick in much later, the budget deficit would still blow out in the short term and it’s doubtful the Government would want to allow this given the risk of a ratings downgrade.  As a result, the pressure to do something if growth remains sub-par and underlying inflation stays below target will fall back to the RBA.
As such our view is that the chance of an interest    rate hike in the next 12 months is very low and the probability of another rate cut has pushed up to around 40-50% (well above the probability implied by the money market of 11%). Yes, the RBA remains reluctant to cut rates again and showed no signs of an easing bias in its June post-meeting statement, but then again it’s been a reluctant rate cutter all the way down since 2011.
Key things to watch for another rate cut are: a softening in jobs data; continued weak consumer spending; another downwards revision in RBA growth and inflation forecasts; significant cooling in the Sydney and Melbourne property markets; and the Australian dollar remaining relatively resilient.  Implications for investors  There are two major implications for Australian based investors.
<a href="https://www.propertyobserver.com.au/images/2017/06/14/Screen%20Shot%202017-06-15%20at%208.42.56%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/14/Screen%20Shot%202017-06-15%20at%208.42.56%20AM.png" alt="">
First, continue to favour global over Australian shares. While US and global share indices are hitting new record highs, Australian shares remain well below their pre-GFC peak. In fact, Australian shares have been underperforming global shares since October 2009. See the next chart. This reflects relatively tighter monetary policy in Australia (the US had money printing and zero rates and Australia had neither), 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. While the underperformance has reversed half of the 2000 to 2009 outperformance, it looks like it has further to go reflecting weaker growth prospects in Australia.
<a href="https://www.propertyobserver.com.au/images/2017/06/14/Screen%20Shot%202017-06-15%20at%208.43.49%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/14/Screen%20Shot%202017-06-15%20at%208.43.49%20AM.png" alt="">
We see the ASX 200 higher by year end, but global shares are likely to do better.    Secondly, maintain a decent exposure to foreign currency. A simple way to do this is to leave a proportion of global shares unhedged. Historically the $A has tended to fall against the $US when the level of interest rates in Australia relative to the US is falling. See the next chart. With the Fed likely to continue (gradually) raising rates and the RBA on hold or potential cutting rates again, the risk for the $A remains down.      
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
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soliver-smf6LQXgW9

Australian economy hits another rough patch: Shane Oliver

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The latest NAB Consumer Anxiety Index shows consumer anxiety has eased with fewer Australians choosing to cut back spending on non-essentials.
According to the Index, one in four have refused to spend less on lifestyle purchases with young people as reluctant to cut back spending than the middle aged.
<a href="https://www.propertyobserver.com.au/images/2017/05/24/Screen%20Shot%202017-05-24%20at%2011.19.06%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/24/Screen%20Shot%202017-05-24%20at%2011.19.06%20AM.png" alt="">
The Consumer Anxiety Index measures concerns about future spending and savings factoring in job security, health, retirement, cost of living and government polices. It fell to a survey low 55.9 points in Q1 2017 (58.7 in Q4 2016).
<a href="https://www.propertyobserver.com.au/images/2017/05/24/Screen%20Shot%202017-05-24%20at%2011.17.52%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/24/Screen%20Shot%202017-05-24%20at%2011.17.52%20AM.png" alt="">
Alan Oster, chief economist, NAB Group, said lower anxiety was reported across all survey measures in the March quarter. 
"NAB’s measure of Consumer Spending Behaviour improved from -13 to -10, suggesting fewer consumers cut back their spending during Q1," he said.
“This was led by an increase in the number of consumers spending more on essentials and a reduction in the number of consumers cutting back on many non-essentials, especially home improvements, entertainment, travel and major household items.
“While stress levels arising from the cost of living and government policy also fell, around 1 in 4 consumers reported “very high” anxiety in relation to both these issues.
 Consumers were also asked for the first time about their attitudes to “lifestyle spending” (e.g. holidays, coffee, eating out, etc.) and which of these they would be prepared to sacrifice in order to improve their financial position.
<a href="https://www.propertyobserver.com.au/images/2017/05/24/Screen%20Shot%202017-05-24%20at%2011.20.12%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/24/Screen%20Shot%202017-05-24%20at%2011.20.12%20AM.png" alt="">
"While the majority of consumers are prepared to cut back lifestyle spending to improve their finances, almost 4 in 10 are not. 
“Surprisingly, young people are no more willing to cut back lifestyle spending than middle aged consumers."
The index said areas where consumers were most prepared to spend “much less” include transport (taxis, Uber, etc.), take-away food, fitness and alcohol and least prepared to curb their spending on internet and mobile phones.
NAB expects consumption growth of around 2 percent in 2016-17 and 2017-18 and a modest improvement to 2.2 percent in 2018-19. 
<a href="https://www.propertyobserver.com.au/images/2017/05/24/Screen%20Shot%202017-05-24%20at%2010.39.04%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/24/Screen%20Shot%202017-05-24%20at%2010.39.04%20AM.png" alt="">
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jonathanchancellor-7SQnKwU6yx

One in four Australians refuse to spend less on lifestyle purchases: NAB

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GUEST OBSERVER
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<div>The Commonwealth Bank Business Sales Indicator (BSI) – a measure of economy-wide spending – rose by just 0.1 percent in trend terms in February, the slowest growth in two years.</div>
<div>
 Spending had lifted at an unsustainable pace of 0.7-0.8 percent between September to November last year before slowing over the past three months.</div>
<div>
 Annual trend growth in sales stood at 5.0 per cent, down from 5.3 percent in January and the slowest growth pace in five months.</div>
<div>
 The more volatile seasonally adjusted BSI rose by 0.6 percent in February after falling by 0.4 percent in December and January. Annual growth stands at 4.5 percent.</div>
<div>
 At a sectoral level, 11 of the 19 industry sectors expanded in trend terms in February, down from 14 sectors in both December and January. And sales rose in five of the eight states and territories in February.
The Commonwealth Bank BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities. The BSI covers spending broadly across the economy rather than just retail sales, including spending on automobiles, personal services and airlines.
What does it all mean?
Spending growth looks weak, but that represents some statistical payback from above-average growth late last year. Annual growth near 5 per cent is still healthy.
Still, it does appear that consumers are cautious, reflected in recent confidence or sentiment surveys. But spending growth is solid in Tasmania due to strong tourism flows. And that strength is also represented in spending at hotels and motels across the country.
What does the data show?
Economy-wide spending slowed further in February. The Commonwealth Bank Business Sales Indicator (BSI) – a measure of economy-wide spending – rose by 0.1 percent in trend terms in February after lifting 0.3 percent in January and expanding 0.5 percent in December.
Over 2016, sales lifted at a soft 0.2 per cent month pace from March to June before picking up to a monthly 0.7-0.8 per cent growth pace between September and November. Spending growth has averaged 0.4 per cent a month over the past year.
Annual trend sales growth slowed from 5.3 per cent to a 5- month low of 5.0 per cent in February.</div>
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<div class="column">The more volatile seasonally-adjusted BSI rose by 0.6 percent in February after falling by 0.4 per cent in December and January. Annual growth stands at 4.5 per cent.
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<div>The Commonwealth Bank BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities. And in line with the practice of the Bureau of Statistics with retail trade data, seasonally adjusted and trend estimates of the BSI are obtained by applying statistical software. The seasonally adjusted and trend BSI results permit analysis of the broader underlying trends that may be hidden in the raw data.</div>
<div>
 Across sectors, 11 of the 19 industry sectors rose in trend terms in February. The biggest drop in sales occurred at Mail Order/Telephone Order Providers (down 0.9 percent) from Business Services (down 0.6 percent) and Retail Stores (down 0.5 percent).</div>
<div>
 On the other side of the equation, the strongest gains in sales occurred in Service Providers (up 1.4 percent) from Automobiles &amp; Vehicles (up 1.1 percent).</div>
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<div>Other notable trend increases in sales occurred in Hotels &amp; Motels (up 0.9 percent) and Professional Services &amp; Membership Organisations (up 0.6 percent).</div>
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<div>In annual terms in February, only three of the 19 industry sectors contracted: Mail Order/Telephone Order Providers, Transportation and Retail Stores.</div>
<div> </div>
<div>At the other end of the scale, sectors with strongest annual growth in February included: Hotels &amp; Motels (up 15.1 percent), Service Providers (up 13.0 percent) and Automobiles &amp; Vehicles (up 12.8 percent).</div>
<div>
 Across states and territories in February, sales were stronger in five states and territories. Strongest were Tasmania (up 1.1 percent), followed by Victoria (up 0.5 percent), South Australia (up 0.4 per cent), Western Australia and Northern Territory (up 0.1 percent).</div>
<div> </div>
<div>Spending was flat in Queensland and sales fell 0.3 percent in NSW and fell 0.2 percent in the ACT.</div>
<div>
 Spending has consistently increased in Western Australia for 69 months, for 67 months in South Australia and for 61 months in Tasmania. In annual terms all states and territories had sales above a year ago. Strongest growth was South Australia (up 9.0 per cent) from ACT (up 7.3 per cent), Tasmania (up 7.0 per cent), Western Australia (up 6.1 per cent), Queensland (up 5.8 per cent), NSW (up 4.5 per cent), Victoria (up 3.7 per cent) and Northern Territory (up 0.7 per cent).
 
 
What is the importance of the report?</div>
<div> </div>
<div>The Commonwealth Bank releases its Business Sales Index around the 20th each month. The data provides a broader perspective of consumer spending. The Business Sales Indicator includes transactions made at traditional retail establishments such as supermarkets, clothing stores and cafes &amp; restaurants and as such is more comparable to the ABS Household Final Consumption Expenditure released on a quarterly basis.</div>
<div> </div>
<div>The Business Sales Indicator also covers businesses such as airlines, car dealers and utilities such as water and electricity companies as well as motels, business, professional and government services and wholesalers.
 
What are the implications for interest rates and investors?
CommSec expects no change in official interest rates for the foreseeable future.</div>
<div>
 The outlook for spending remains favourable with interest rates low, rising home prices boosting wealth, wage 
growth still exceeding that of prices and job ads near 5-year highs. </div>
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<div><a href="https://www.propertyobserver.com.au/images/2017/03/19/Screen%20Shot%202017-03-20%20at%208.10.52%20AM.png" target="_blank">Click to enlarge</a></div>
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<div><img src="https://www.urban.com.au/images/2017/03/19/Screen%20Shot%202017-03-20%20at%208.10.52%20AM.png" alt=""></div>
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Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx">CommSec</a>. 
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cjames-5S2v74qSNK

Cautious spending patterns return: Craig James

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GUEST OBSERVER 
In February, more new sports utility vehicles (SUVs) or four-wheel drive vehicles were sold than passenger cars for the first time.
Yes, SUVs have overtaken cars and the gap is likely to grow over time. Buyers are liking the riding position, versatility and fit-out of SUVs and there are now a variety of model sizes to suit all preferences.
  There is a bit of conjecture about which country holds the record for the longest economic expansion. The latest OECD data suggests that Australia already holds the record. The Netherlands had an expansion of 86 quarters (December quarter 1981 to March quarter 2003) while Australia has notched up 102 quarters (September quarter 1991 to December quarter 2016).
The Reserve Bank is unlikely to settle the matter, downplaying the importance of whether Australia has the world’s longest expansion. Still, the bottom line is that the economy is doing well and has done so for quite some time.
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<img src="https://www.urban.com.au/images/2017/03/06/Screen%20Shot%202017-03-06%20at%201.40.46%20PM.png" alt="">
Consumers are spending, not splurging. But the pace of sales is certainly sustainable. The lift in spending in January of 0.4 per cent matched the average pace over the past six months and this exceeds both the 5-year and decade-average sales growth of 0.3 per cent a month. 
Spending at takeaway food stores continues to be remarkable – up 1.6 percent in January and up 11.9 percent on a year ago. Competition is strong, keeping prices down, and that is causing people to sample the wares of the large range of food outlets. Ann increased range of “healthy choices” is also causing people to try the new offerings.
Job advertisements have been choppy in recent months while employers work out what their labour requirements are likely to be over 2017. Despite a dip in the seasonally adjusted number of job ads, trend growth is still rising and in fact annual trend growth is the best in seven months. The jobless rate looks set to hold between 5.5-6.0 percent.
National retail petrol prices have eased around 6 cents a litre from recent highs, in line with wholesale prices and Asian import prices. The wholesale price is near 116 cents a litre and that should be a guide for motorists to the cheapest prices that may be offered by retailers – usually at the peak of the discounting cycle in southern and eastern capital cities. 
What do the figures show?
Retail trade
Retail trade rose by 0.4 percent in January after falling by 0.1 percent in December. Annual sales growth lifted from 3.0 percent to 3.1 percent (5-year average gain was 4.0 percent)
Non-food retailing rose by 0.6 per cent in January after falling by 0.5 per cent in December. Non-food retail spending is now up 2.9 per cent on a year ago.
Spending rose the most at Electrical and electronic goods retailing (up 2.4 per cent) from Takeaway food services (up 1.6 per cent). Spending fell most at Pharmaceutical, cosmetic and toiletry goods retailing (down 1.4 per cent) from Department stores and Newspaper &amp; book retailing (both down 0.5 per cent).
Spending at takeaway food services was up 11.9 per cent on a year ago.
<a href="https://www.propertyobserver.com.au/images/2017/03/06/Screen%20Shot%202017-03-06%20at%201.50.36%20PM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/03/06/Screen%20Shot%202017-03-06%20at%201.50.36%20PM.png" alt="">
Sales by chain-store retailers and other large retailers rose by 0.8 per cent In January after falling 0.1 per cent in December. Sales are up 4.2 per cent over the year (5-year average gain was 5.2 per cent).
Sales rose in six of the eight states and territories: NSW (+0.2 per cent), Victoria (+1.1 per cent), Queensland (unchanged), South Australia (+0.6 per cent), Western Australia (+0.3 per cent), Tasmania (+0.4 per cent), Northern Territory (-0.8 per cent), ACT (+1.2 per cent). Job Advertisements
Job advertisements fell 0.7 per cent in February from 5-year highs to 165,643 ads. Advertisements have been volatile in the past four months. In trend terms, ads rose by 0.4 per cent in the month to be up 6.6 per cent over the year.
New vehicle sales
There were 89,025 new vehicle sales in February, down 7.7 per cent on a year ago (one less selling day in 2017 than 2016). Sports Utility Vehicles (SUV) totalled 35,497 sales during February to record a 39.9 per cent share of total industry sales. Passenger cars totalled 34,740 for a 39.0 per cent share. Light commercials were the third largest segment with an 18.5 per cent share.
State data compared with a year ago: “In percentage terms, Western Australia showed the most marked fall. Its market dropped by 13.7 per cent, or 1,199 vehicle sales, followed by the Northern Territory (-10.7 per cent), South Australia (-10.6 per cent), New South Wales (-7.4 per cent), Victoria (-7.0 per cent) and Queensland (-6.6 per cent). Tasmania (+1.1 per cent) and the ACT (+0.3 per cent) were the only two markets to show an increase.”
Petrol price
According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 2.9 cents to 128.7 cents a litre in the past week. The metropolitan petrol price fell by 3.9 cents to 126.5 cents per litre while the regional price fell by 0.8 cents to 133.2 cents per litre.
Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 3.9 cents to 131.5 c/l), Melbourne (down by 2.1 cents to 120.8 c/l), Brisbane (down by 1.9 cents to 123.2 c/l), Adelaide (down by 12.1 cents to 123.7 c/l), Perth (down by 1.0 cents to 130.6 c/l), Darwin (flat at 139.9 c/l), Canberra (flat at 139.6 c/l) and Hobart (down by 0.2 cents to 143.3 c/l).
The national average Australian price of diesel petrol fell 0.1 cents to 130.6 cents per litre in the week to March 5. The metropolitan price fell 0.2 cents to 130.8 c/l, while the regional average price fell 0.2 cents to 130.3 c/l.
  The national average wholesale (terminal gate) unleaded petrol price fell to an 11-week low of 115.7 cents a litre on Monday, down 0.9 cents a litre over the week. The terminal gate diesel price stands at 115.3 cents a litre, broadly flat over the previous week.
  Last week the key Singapore gasoline price fell by US$3.55 or 5.2 per cent to a 13-week low of US$64.85 a barrel. In Australian dollar terms the Singapore gasoline price fell by $2.88 a barrel or 3.3 per cent to $85.76 a barrel or 53.94 cents a litre.
  MotorMouth records the following retail prices for capital cities today: Sydney 128.6c; Melbourne 119.6c; Brisbane 121.4c; Adelaide 118.7c; Perth 123.3c; Canberra 138.5c; Darwin 138.5c; Hobart 142.6c.
What is the importance of the economic data?
  The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
  The monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.
  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.
  The Federal Chamber of Automotive Industries releases estimates of car sales on the third business day of the month. The figures highlight the strength of consumer spending as well as conditions facing auto &amp; components companies.  
What are the implications for interest rates and investors?
The economy is chugging along nicely. Retail spending is growing at a monthly pace just above the long-term average, vehicle sales are healthy and trend growth of job ads has lifted. The Reserve Bank has no reason to lift or cut interest rates.
Petrol prices have retraced from recent highs, and not surprisingly consumer confidence has also lifted – especially the question on family finances.
  The recent falls in petrol prices are positive for retailers – especially discretionary retailers.
  The only thing exercising minds at present is the housing market with conditions varying markedly across the country.
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx">CommSec</a>.
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jchancellor-FAypfDUnLy

More SUVs sold than cars: Craig James

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GUEST OBSERVER
 
Current Account: The broadest measure of the trade accounts – the current account – improved in the December quarter (smaller deficit), with the deficit falling from $10.2 billion to $3.85 billion – the smallest deficit in over 15 years.
 
Stronger trade sector: Net exports (exports less import_s) will contribute 0.2 percentage points to economic growth in the December quarter. CommSec estimates that the economy grew by 0.7 percent in the December quarter to be up 1.9 per cent over the year.
 
Consumer confidence hits 6-week high: The weekly ANZ/Roy Morgan consumer confidence rating rose by 6.1 points (4.7 percent) to a 6-week high of 119.1 in the week to February 26.
 
Government sector GDP: Overall, spending by the government sector rose by 1.5 percent in the December quarter and should contribute 0.3 percentage points to December quarter economic growth.
 
Lending lifts: Private sector credit rose by 0.2 percent in January after a 0.7 percent gain in December. Investor housing finance lifted 0.6 percent in January to stand 6.6 percent higher over the year – the fastest growth in 11 months.
 
The balance of payments data has implications for trade-exposed businesses and companies vulnerable to changes in the Aussie dollar. The consumer confidence figures have implications for retailers, and other consumer-focussed businesses. Private sector credit figures have implications for finance providers, retailers, and companies dependent on business spending.
 
WHAT DOES IT ALL MEAN?
 
The Australian economy may have gone backwards in the September quarter, but the result for the December quarter is likely to be the polar opposite. Based on all the components currently available, the economy looks to have grown by a healthy 0.7 percent in the December. And while forecasts do have a margin for error the strength in dwelling investment, government spending, household consumption and net exports should ensure that Australia managed to stay clear of a technical recession. More importantly it is clear that activity levels have continued to improve in the past couple of months.
 
The shift from an economic contraction to an expansion is more important for household and business confidence. And in that context the latest reading on weekly consumer confidence is encouraging. Confidence levels lifted by almost 5 percent in the past week and are now holding at 6-week highs. Interestingly the outlook on family finances was far more positive – despite the news last week on the cuts to penalty rates.
 
The latest lending (private sector credit) figures suggest a modest pullback in borrowing. But it is import_ant to point out that lending recorded the biggest lift in 15 months in December and only partially gave some of that back in January. The weakness was largely due to a modest slide in business credit which would be expected given the slowdown in financing in the post-Christmas period.
 
Interestingly home lending continues to lift, dominated by investor credit growth. In fact annual growth in investor finance is now at an 11-month high. The measures taken by regulators to curb investment lending had a temporary impact that is now fading.
 
Overall the Reserve Bank is unlikely to be surprised with the latest results. No doubt policymakers will continue to discuss key issues like housing affordability, but overall the central bank seems upbeat on the medium-term outlook for the Australian economy. CommSec expects no change to interest rates over the rest of 2017.
<a href="https://www.propertyobserver.com.au/%20Image%20URL%09%20%20http:/www.propertyobserver.com.au/images/2017/03/1/1%20eo.jpg" target="_blank" style="font-size: 12.16px;">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/1/1%20eo.jpg" width="247" height="185">
What do the figures show?
BALANCE OF PAYMENTS
The broadest measure of Australia's external position - the current account – improved in the December quarter (smaller deficit), with the deficit falling from $10.2 billion to $3.85 billion.
The balance of goods and services was in deficit by $4.7 billion in the December quarter after a $3.5 billion deficit in the September quarter.
At the end of the December quarter, net foreign equity was $1.4 billion – essentially Australians own more assets overseas than foreign investors own here in Australia. But the positive net foreign equity position weakened by $5.8 billion over the December quarter.
The trade sector (exports less import_s) will contribute 0.2 percentage points to economic growth in the December quarter.
Terms of trade (ratio of export to import_ prices) rose by 9.1 cent to a 27-month high of 102.9 in the December quarter after a 2.3 percent increase in the June quarter. The terms of trade for goods rose by 11.3 percent and the terms of trade for services rose by 1.3 percent.
Net foreign debt fell from $1,048.6 billion to $1,023.1 billion as at the end of the December quarter.
GOVERNMENT FINANCES
<ul class="ul1">
<li class="li3">Government consumption spending was flat in the December quarter after a 0.2 per cent fall in the September quarter. Total public investment rose by 7.7 per cent in the December quarter after falling by 7.8 per cent in the September quarter. Overall, spending by the government sector rose by 1.5 per cent in the December quarter.</li>
</ul>
CONSUMER SENTIMENT
The weekly ANZ/Roy Morgan consumer confidence rating rose by 6.1 points (4.7 percent) to a 6-week high of 119.1 in the week to February 26. Confidence is up 7 percent over the year and above the average of 119.1 since 2014.
All five components of the index rose in the latest week
The estimate of family finances compared with a year ago was up from +2 to +11;
The estimate of family finances over the next year was up from at +26 to +34;
Economic conditions over the next 12 months was up from 0 to +5;
Economic conditions over the next 5 years was up from +5 to +7;
The measure of whether it was a good time to buy a major household item was up from +36 to +40:
The reading of inflation expectations two years ahead rose from 4.5 percent to 4.7 percent. Inflation expectations have now held above 4 per cent for the past 11 weeks.
PRIVATE SECTOR CREDIT
Private sector credit (lending) rose by 0.2 percent in January after a 0.7 percent gain in December. Annual credit growth eased from 5.6 percent to 5.4 percent.
Housing credit grew by 0.5 percent in January to be up 6.3 percent on a year ago – equalling the December result and the slowest annual growth in 30 months.
Owner occupier housing credit rose by 0.5 percent in January to stand 6.3 percent higher than a year ago – the slowest growth in 15 months. Investor housing finance lifted 0.6 percent in January to stand 6.6 percent higher over the year – the fastest growth in 11 months.
Personal credit fell by 0.2 percent in January to be down 1.3 percent over the year – near the biggest annual decline in 4 ½ years.
Business credit fell by 0.3 percent in December after rising by a sizeable 1.1 percent in November. Business credit is 4.7 percent higher than a year ago.
<a href="https://www.propertyobserver.com.au/images/2017/03/1/2%20ex%20obs.jpg" target="_blank">Click to enlarge</a>
<a href="https://www.propertyobserver.com.au/images/2017/03/1/2%20ex%20obs.jpg"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/1/2%20ex%20obs.jpg" width="519" height="185"></a>
WHAT IS THE IMPORTANCE OF THE ECONOMIC DATA?
The quarterly Balance of Payments figures have few short-term effects on financial markets. The importance of the data is merely to highlight Australia’s trading position with the rest of the world as well as the contribution of foreign trade (exports less import_s) to the latest estimates of economic growth.
The Australian Bureau of Statistics releases the quarterly Government Finance Statistics near the start of March, June, September and December. The data details public sector consumption and investment spending and indicates the sector’s contribution to economic growth.
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.
Private sector credit figures are released by the Reserve Bank on the last working day of the month. Credit is separated into three categories – housing, other personal and business. Private sector credit is effectively the amount of loans outstanding in the economy. If growth in lending is strong then it suggests that credit from financial institutions is freely available, underlying demand for assets such as cars and houses is firm and that the price of credit (interest rates) is attractive.
WHAT ARE THE IMPLICATIONS FOR INTEREST RATES AND INVESTORS?
The improvement in our broadest trade measure – the current account – is expected to continue. The mining investment boom has left us with expanded productive capacity. And exports of liquefied natural gas (LNG) will ramp up over the next year or so.
The ongoing strength in exports and improvement in the current account deficit will keep upward pressure on the Aussie dollar. No doubt the Reserve Bank would prefer a lower Australian dollar to help rebalance the economy away from mining to the non-mining sector.
The jobless rate is at a multi-year lows, interest rates are super-low, more homes are being built than ever before, retail spending is lifting and the farm sector prospects are bright. Even the global picture is brightening.
Interest rates will remain on hold over the rest of 2017.
<a href="https://www.propertyobserver.com.au/images/2017/03/1/3%20exp%20obs.jpg" target="_blank">Click to enlarge</a>
<a href="https://www.propertyobserver.com.au/images/2017/03/1/3%20exp%20obs.jpg"> </a><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/1/3%20exp%20obs.jpg" width="519" height="185">
Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>
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Economy set to rebound, consumers confident: Savanth Sebastian 

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GUEST OBSERVER
The recent lift in retail sales has sustained into October, a 0.5 percent gain in the month outstripping expectations of a more moderate 0.3 percent gain.
That follows back to back 0.6 percent monthly gains in August and September.
The detail suggests an expected dampening effect from price discounting did not materialise. Price gains accounted for all of the sales gain in Q3 and recent indicators suggested some food price increases have partially unwound in recent months.
However, food retail posted a solid 0.6 percent gain in the month, anchoring the overall result (basic food retail, i.e. supermarkets, account for about 40 percent of retail sales).
Other categories were a bit so-so with a solid but unspectacular rise for household goods retail (+0.7 percent/mth), declines for clothing (–0.4 percent) and the beleaguered department store category (–0.4 percent) but reasonable enough gains for ‘small ticket’ discretionary categories ‘other retail’ (+0.8 percent) and cafes &amp; restaurants (+0.4 percent).
By state, Qld was a standout with a surprisingly strong 0.8 percent lift.
Overall, the result suggests consumer demand may has retained some momentum although as always disentangling retail specific effects from wider patterns of demand remains tricky.
Matthew Hassan is senior economist with <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Queensland a standout with a surprisingly strong lift in retail sales

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GUEST OBSERVER
The Westpac–Melbourne Institute Index of Consumer Sentiment dipped 1 percent in June to 102.2 from 103.2 in May.
Coming after an 8.5 percent surge in May, the small decline in June mostly represents a consolidation at improved levels.
Last month’s surprise rate cut from the RBA was the main catalyst behind May’s rally and although confidence has slipped back a touch in June this is a fairly common pattern following an interest rate driven bounce. At 102.2 the Index is still in slightly ‘positive’ territory overall – recall that readings above 100 indicate optimists outnumber pessimists.
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Responses to additional questions on ‘news recall’ point to a somewhat calmer backdrop compared to March although the majority of consumers still assessed news as being unfavourable. The highest recall levels were for news on ‘economic conditions’ (27.8 percent) and ‘Budget &amp; tax’ (25 percent) but both were notably lower than in previous quarters. That is despite the May Budget and campaigning in the lead up to next month’s Federal election.
News on ‘international conditions’ was also much less prominent with the 10 percent level of recall on this item the lowest read in over a decade. Unsurprisingly, there was higher recall for news on ‘interest rates’ (16.5 percent) with the news on this topic viewed less negatively than in the previous four quarters.
Responses to additional questions on the ‘wisest place for savings’ showed a slightly less risk averse tone but attitudes still appear to be more conservative than seen throughout 2015. The proportion of consumers nominating ‘pay down debt’ fell from 24.4 percent in March to 20 percent in June.
This compares to an average reading of 17 percent in 2015. Consumers continue to heavily favour ‘safe’ options as well, with the proportion nominating bank deposits rising from 27.4 percent in March to 29.5 percent in June. That contrasts with continued lower readings for the proportion nominating real estate (15.8 percent in June vs 14.7 percent in March and average 25.4 percent in 2015) and shares (8.0 percent in June vs 7.6 percent in March and an average of 8.9 percent in 2015).
Consumers’ assessments of labour market conditions also consolidated on recent improvements. The Westpac Melbourne Institute Index of Unemployment Expectations declined 0.1 percent from 136.3 in May to 136.2 in June. This Index measures respondents’ assessments of the outlook for the unemployment rate so lower reads indicate improved confidence in the employment outlook. The Index has fallen 7.5 percent over the last three months and is now down 10.9 percent on levels a year ago but is still 4.9 percent above its long run average – assessments have shown a steady improvement but are still more negative than usual.
The component detail behind the headline sentiment index showed firmer reads on ‘family finances’ but a softening in expectations for the economy. Most notably, the sub-index tracking respondents’ assessments of ‘family finances compared to a year ago’ – a component the RBA has emphasised as an indicator of demand – increased 4.3 percent. The sub-indexes tracking the one and five year outlook declined 3.8 percent and 5.2 percent respectively, with falls following particularly strong gains in May, of 13.2 percent and 14.8 percent respectively. The ‘time to buy a major household item’ sub-index was unchanged.
Consumer views on housing also consolidated in June. The ‘time to buy a dwelling’ index declined 2.7 percent but the retracement followed a strong 12.1 percent surge in May. Price expectations firmed in the month with the Westpac Melbourne Institute Index of House Price Expectations up 3.6 percent to the highest level since September 2015. Both buyer sentiment and price expectations are still well below the readings seen a year ago but have shown a clear firming from the weak levels in early 2016, the RBA’s May rate cut clearly a supporting factor.
The Reserve Bank Board next meets on July 5. A move at that meeting is highly unlikely. The key considerations for the Bank are around the outlook for inflation. On its current forecasts the RBA does not expect inflation to return to the bottom of the band until 2017, and that is on the assumption of a further rate cut given that the Bank’s forecasts are based on ‘market pricing’ for rates.
The most important and immediate information about whether the RBA’s May assessment is correct will come from the June quarter inflation report which prints on July 27, after the July Board meeting but ahead of the August 2 meeting. It is our assessment that the information in this report will confirm to the Board that another cut is indeed necessary.
 
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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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Consumer sentiment consolidates after post-rate cut bounce: Bill Evans

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
It is well known that retail sales have regular cycles that can be disrupted by external events, such as federal elections. While anecdotally it has been suggested that uncertainty around elections causes shoppers to close their wallets and purses, there appears very little evidence either domestically or globally to support the claim that an election campaign will negatively impact consumer spending.
<h2>The Blame Game</h2>
Retailers are notorious at playing the “blame game” when it comes to their sales and profit reporting. They too quickly point the finger at Mother Nature, for being too hot or too rainy, the releasing of blockbusters that distract shoppers, and even customers themselves for being too price conscious, chasing discounts that erode their margins.
This month, Myer CEO Richard Umbers warned that the election campaign is expected to hit consumer sentiment and negatively affect Myer’s outlook.
Surprisingly, Australia’s other large department store, David Jones, remained silent. It appears David Jones is just getting on with business and delivering store sales growth twice the rate of the Australian department store sector. Seemingly, there are other factors affecting retail stores sales, other than an impending federal election.
<h2>Is there evidence?</h2>
Researchers from Princeton University and the University of Chicago found elections had little impact on how consumers actually spend. In their study, spanning four presidential elections, their initial findings identified a correlation between a voters’ “ideological opposition towards a winning candidate” (measured by a voter-ideology score) and a lower score on the Michigan Consumer Sentiment Survey.
However, the correlation did not prove causality. For example, when President George W. Bush was elected in 2000, negative sentiment had no effect on consumers’ self-reported spending plans or on their subsequent automobile purchases and credit-card use. Consumers ideologically opposed to President Bush were not happy about the election outcome, but this slump in sentiment had no effect on what they planned to spend, or actually spent.
It is a similar picture here in Australia, where commentators are looking a little more closely at claims elections stifle retail spending. A review of the ANZ – Roy Morgan Consumer Confidence Index demonstrates a similar phenomenon to that in the US. With the exception of September to October lead into the November 2001 election, marred by the 9/11 attacks in New York and the collapse of Ansett, in most cases, confidence remained positive.
Prior to the October 9 2004 election, the September consumer confidence grew by over 6 percent on August. Similarly, October 2007 was up nearly 6.5 percent on September in the lead up to the November 24 election.
<h2>Confident but deferred</h2>
The operative word used among consumers during times of uncertainty is “deferred”. IBISWorld chairman Phil Ruthven finds that shoppers tend to take a “wait-and-see approach” during election campaigns, which sees spending curtailed on big ticket items like cars, consumer electronics and high-end fashion, but household basics such as food and basics generally remain insulated. In most cases, consumer confidence tends to bounce directly after elections.
There are far too many variables in play to suggest that an extended federal election alone will derail consumer confidence and stifle retail spending. In fact, some consumers who expect to be the recipients of election sweeteners such as tax cuts, infrastructure projects and or job opportunities, may actually increase spending. The power of suggestion is strong with such consumers. Once consumers anticipate a specific positive outcome will occur, they believe their subsequent thoughts and behaviours will actually help to bring about that outcome.
<h2>What retail categories are most affected?</h2>
Food, groceries, fuel and basic clothing generally remain well protected during uncertain times. Despite increasing price competition between the players, the food and grocery division remain moderately strong.
Ultimately, shoppers still need to put fuel in their cars and food on the table. However, most exposed are “big ticket” retailers selling furniture, consumer electronics and automobiles. Fashion clothing and accessories are expected to struggle as such purchases are tied to discretionary spending.
<h2>Other factors?</h2>
Granted, the combination of unseasonable warmer weather across Australia and the growth of global fashion retailers like H&amp;M, Uniqlo, Zara, Forever 21 and Top Shop in the domestic market, will definitely pose a challenge for retailers.
This year incumbent players like Myer, David Jones, Premier Investment and Specialty Retail Group are not just competing with one another, but also these new entrants. This year, more than ever before, shoppers have more choice.
While most consumers remain confident, some retailers are certainly looking towards challenging times ahead. Granted, this is the first federal election held during winter in 20 years and timed “smack bang” in the middle of half yearly, stocktake sales. With an eight week election period well underway, shoppers will continue to buy the basics, but will defer upgrading big ticket items until an outcome is announced on July 3.
An unseasonably warm autumn and a glut of global fashion retailers in the market, will encourage incumbent retailers to cut prices little deeper this year. Great for shoppers, but tough on the books. It is looking to be a tough year ahead for retailers.
Gary Mortimer senior lecturer, QUT Business School, Queensland University of Technology and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/gary-mortimer-1322" target="_blank">here</a>.
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Keep calm and keep shopping – how elections impact retail sales

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GUEST OBSERVER
Airfares: In smoothed terms, discount fares fell by 7.0 percent over the year to March. But business class airfares rose at a smoothed 7.4 percent annual rate with “restricted economy” fares up by 4.5 percent.
The airfares data provides insights on the airlines sector and insights on consumer spending.
What does it all mean?
There are still good deals to be had with discount airfares. Latest data shows that discount fares in March were 13 percent down on a year ago – or down seven percent if you smooth out the bumps that can occur in the monthly series. However business class and restricted economy airfares are higher, not lower than a year ago.
Over the past two years business class airfares have been lifting at a near 10 percent annual rate with restricted economy airfares rising at a 6.6 percent annual rate.
The lift in all airfares except discount fares as well as lower jet fuel prices and modest wage growth highlights the positive operating conditions that currently exist for airlines.
 
<a href="/images/2016/03/18/Screen%20Shot%202016-03-18%20at%2012.20.24%20PM.png" target="_blank">Click to enlarge</a>
 
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For budding air travellers there continues to be value in shopping around for the best deals. In real (inflation adjusted) terms, discount airfares are only 5 percent above the lowest levels recorded in the 22-year history of the series.
The Head of the Reserve Bank’s Financial Stability Department, Luci Ellis, has delivered a deep and thoughtful speech covering a range of topics associated by financial market cycles. In the speech Luci Ellis said that she wasn’t concerned by ‘doom and gloom’ talk, specifically: “people who shout ‘bubble’ every time asset prices rise. Read it here.
If it gives a few other people pause and makes them open their eyes to the real risks, it is not such a bad thing. I would rather that, than if everyone were egging the boom on.”
There were some subtle warnings in the speech for property investors as well as those who are tempted to take on too much debt. The comments seem to suggest that the Reserve Bank still remains conflicted about the role of monetary policy in boom/bust events.
What do the figures show?
Airfares
The Bureau of Infrastructure, Transport and Regional Economics (BITRE) reports that business class airfares rose by 0.1 percent in March to stand 8.1 percent higher than a year ago, slightly down from the fastest growth in 10 months. In smoothed terms, business class airfares are up 7.4 percent on the year, the fastest growth pace in 12 months.
“Restricted economy” airfares rose by 0.1 percent in March after falling by 1.6 per cent in February. Restricted economy airfares are up 5.7 percent on a year ago. In smoothed terms restricted economy fares are up 4.5 percent over the year. Airfares have been rising at a 6.6 percent average annual pace for the past two years.
Discount airfares  fell by 6.6 percent in March after rising by 7.5 percent in February. Discount fares are 13.0 percent lower than a year ago. In smoothed terms, discount airfares are down 7.0 percent on a year ago, close to the biggest annual decline recorded in the past 40 months.
In real terms, discount airfares are only 4.7 percent above the lowest levels recorded.
What is the importance of the economic data?
The Bureau of Infrastructure, Transport and Regional Economics (BITRE)  “provides economic analysis, research and statistics on infrastructure, transport and regional development issues to inform Australian Government policy development and wider community understanding.” The airfares data is useful in gauging inflation trends and providing insights on the aviation sector.
What are the implications for interest rates and investors?
Low discount airfares merely highlight that Aussie consumers are saving on some purchases, allowing them to spend more in other areas. More specifically while housing has become less affordable, consumers continue to rack up savings on cars, petrol, travel, food and clothing, freeing up dollars to be spent on buying or renting homes.
The operating environment for airlines remains broadly favourable, but recent increases in oil prices and the Aussie dollar needs to be watched carefully.
 Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
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