Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

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

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

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

WM Residences fills gap in Mordialloc townhouse market

Economic Forecast

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EXPERT OBSERVER

2020 didn’t exactly turn out the way I or many expected a year ago. For Australia, the year started badly as severe drought had given way to the worst bushfires on record. But just as the bushfires were receding it gave way to the coronavirus pandemic. Every year has a big surprise - or what Dr Don Stammer has long called Factor X - but they don’t usually have such a profound impact as the coronavirus pandemic has.

- It caused a massive health crisis claiming at least 1.5 million lives, with many countries seeing at least two waves.

- It kept many confined to their homes and shut down big chunks of economies, driving the biggest fall in economic activity since the end of WW2 if not the Great Depression, with major economies seeing peak to trough falls in GDP of 10% to 20% and the Australian economy contracting by 7.3%. This saw unemployment surge and inflation plunge.

- Share markets had 35% or so plunges in February/March, commodity prices collapsed with the oil price going negative at one point as investors sought out safe havens like bonds.

- And it, or rather the poor management of it, lost President Trump the US election (even though he denies losing).

The pandemic also increased tensions with China and is likely to leave a longer term mark with a further set back to globalisation, more social tensions, bigger government and public debt, the risk that massive money printing eventually results in higher inflation, faster structural change due to an accelerated embrace of technology, more consumer caution and a lower population in Australia due to the hit to immigration.

However, while 2020 is a year many of us would prefer to forget and coronavirus continues to wreak havoc in much of the world, the end result for economies hasn’t been as bad as had been feared back in March and April. This reflected a combination of:

- An unprecedented and rapid fiscal stimulus that protected businesses, jobs and incomes;

- Debt forbearance schemes that headed off defaults;

- Massive monetary stimulus that saw interest rates plunge;

- Social distancing which has helped contain the virus enabling some reopening – albeit better in some countries (eg, Asia, Australia and New Zealand) than others.

This enabled economic activity to bounce back faster than expected through the second half as restrictions eased, even though it wasn’t always smooth (eg, in Victoria or in Europe and the US) and we still have a way to go to full recovery. As a result investment markets also performed far better than feared.

- While share markets plunged in March during the early stages of the pandemic, they then rebounded thanks to massive fiscal stimulus and reopening, low interest rates and bond yields that made shares cheap as well as good news on vaccines that enabled investors to look forward to further recovery in 2021.

- This all drove solid returns in global shares with Asian and US shares (which were boosted by a relatively a high exposure to IT and initially health care stocks which benefitted from the pandemic) outperforming. The more cyclical Japanese and European markets underperformed.

- Australian shares also unperformed due to the greater cyclical exposure of the Australian share market.

- Government bonds had reasonable returns as yields fell in response to central bank rate cuts and bond buying along with safe haven demand – which drove capital growth.

- Real estate investment trusts had negative returns as a result of a hit to property space demand and rents.

- It was the same story for unlisted commercial property and infrastructure, although industrial property did well.

- Home prices fell 3% around mid-year but then started to recover as low interest rates, government support measures and reopening swamped the hit to immigration, weak rental markets and higher unemployment. Houses, outer suburbs &amp; regions benefitted from “escape from the city.”

- Cash and bank term deposit returns were poor as the RBA cut the cash rate to just 0.1%.

- After a pandemic driven plunge to $US0.55 in March the $A rose reflecting higher commodity prices and a falling $US.

- Due to reasonable share returns but weak property and infrastructure returns balanced super funds have so far seen low but positive returns – but this followed a strong 2019.

<h2>2021 – recovery</h2>

Just as 2020 was dominated by the pandemic and this determined the relative performance of investment markets and stocks, 2021 is likely to be dominated by the recovery. This in turn will have a profound effect on investment markets. There are four reasons for optimism. First, massive fiscal and monetary stimulus is still feeding through economies with very high saving rates indicating pent up demand that can be spent once confidence improves, which will also help offset the wind down of some support measures like JobKeeper in Australia.

Second, the news on vaccines is positive. While uncertainties remain, by end 2021 or early 2022 there is a good chance the world will be approaching a degree of herd immunity.

Third, a new US president in Joe Biden should usher in a period of more stable and expert based policy making in what is still the world’s biggest economy. In particular, it will likely head off a return to trade wars that could have wreaked havoc in 2021.

A more diplomatic US approach to resolving differences with China could also help Australia move down a path to resolving its own differences with China.

Finally, Australia along with NZ has navigated 2020 remarkably well, controlling coronavirus far better than most comparable countries and seeing its politicians and institutions work well together. It also led to structural reforms that may help future growth (eg, property tax reform in NSW, IR reform nationally).

The combination of vaccines, policy stimulus and pent up demand is expected to see a supercharged cyclical rebound in global GDP of around 5.2% and 4.5% in Australia in 2021. This is likely to see strong double-digit rebounds in profit growth.

Inflation is likely to remain weak, reflecting still high levels of spare capacity which in turn means interest rates will remain low. While this is not good for those relying on bank interest, it benefits the household sector as a whole (with debt exceeding bank deposits) &amp; corporates, eases the servicing of high public debt levels and makes shares cheap. So, in a way we remain in the sweet spot of the investment cycle with improving growth but low rates. In Australia, the cash rate is expected to end 2021 at 0.1% but there is still a risk of more quantitative easing.

<h2>Implications for investors</h2>

Shares are at risk of a short term correction after having ran up so hard recently and 2021 is likely to see a few rough patches along the way (much like we saw in 2010 after the recovery from the GFC), but looking through the inevitable short term noise, the combination of improving global growth and low interest rates augurs well for growth assets generally in 2021. In particular, we are likely to see a continuing shift in performance away from investments that benefitted from the pandemic and lockdowns - like US shares, technology and health care stocks and bonds - to investments that will benefit from recovery - like resources, industrials, tourism stocks and financials.

- Global shares are expected to return around 8%, but expect a rotation away from growth heavy US shares to more cyclical markets in Europe, Japan and emerging countries.

- Australian shares are also likely to be relative outperformers helped by better virus control, enabling a stronger recovery in the near term, stronger stimulus, sectors like resources, industrials and financials benefitting from the rebound in growth and as investors continue to drive a search for year yield benefitting the share market as dividends are increased resulting in a 4.4% grossed up dividend yield. Expect the ASX 200 to end 2021 back around 7200.

- Ultra-low yields &amp; a capital loss from a 0.5-0.75% or so rise in yields are likely to result in negative returns from bonds.

- Unlisted commercial property and infrastructure are ultimately likely to benefit from a resumption of the search for yield but the hit to space demand and hence rents from the virus will continue to weigh on near term returns.

- Australian home prices are being boosted by record low mortgage rates, government home buyer incentives, income support measures and bank payment holidays but high unemployment, a stop to immigration and weak rental markets will likely weigh on inner city areas and units in Melbourne and Sydney. Outer suburbs, houses, smaller cities and regional areas will see stronger gains in 2021.

- Cash and bank deposits are likely to provide very poor returns, given the ultra-low cash rate of just 0.1%.

- Although the $A is vulnerable to bouts of uncertainty about coronavirus and China tensions and RBA bond buying will keep it lower than otherwise, a rising trend is still likely to around $US0.80 over the next 12 months helped by rising commodity prices and a cyclical decline in the US dollar.

<h2>What to watch?</h2>

The main things to keep an eye on in 2021 are as follows:

- Coronavirus and vaccines – problems with vaccines or their deployment could result in ongoing waves of new coronavirus cases &amp; slower recovery than we are assuming.

- US politics – a Democrat victory in Georgia’s January 5 US senate elections would risk more of a leftward tilt under Biden, although conservative Democrat senators will limit this. Trump could also try to throw a spanner in the works.

- China tensions – we expect a shift to a diplomatic approach here but there is a risk of misjudgement on either side which could start to slow our longer-term economic growth rate.

- Inflation – we are assuming it remains weak but if it rebounds faster than expected it will mean faster increases in bond yields and downward pressure on asset valuations.

- The hit to immigration in Australia – it’s hard to see 700,000 less immigrants out to mid-2023 having no impact on inner city Sydney and Melbourne property prices.

Dr Shane Oliver 
Head of Investment Strategy and Chief Economist AMP Capital
</body></html>

Just as 2020 was dominated by the pandemic and this determined the relative performance of investment markets and stocks, 2021 is likely to be dominated by the recovery

soliver

Outer suburbs, houses, smaller cities and regional areas will see strongest property gains in 2021: Shane Oliver

<html><body>
EXPERT OBSERVER
Westpac has lifted its economic growth forecasts for 2020 and 2021 from –3.0% and 2.8% to –2.0% and 4%, respectively. Our growth forecast for 2022 has been lowered from 3.5% to 3.0%.
As a result of this substantial near term boost to the growth forecasts we have also lowered our forecasts for the unemployment rate by December 2021 from 7.0% to 6.0% and 6.3% to 5.2% by December 2022.
Under these forecasts we expect that the level of consumer spending and the level of GDP will return to the “end 2019” levels by the June quarter 2021.
By end 2021 GDP will be around 2% above the end 2019 level but still around 3% below the level of GDP that would have been expected in the absence of covid.
These revisions follow the stronger than expected print for GDP growth in the September quarter (3.3%) compared to our forecast of 3.0% and our revised forecast growth rate in the December quarter of 2020 from 1.6% to 2.3%.
The dominant message from the September quarter national accounts was the 7.9% surge in consumer spending, including 9.8% for services and 5.2% for goods. Consumer spending actually contracted by 1.2% in Victoria while it lifted by 11% in the other states.
As the Victorian economy (around 25% of the national economy) reopens in the December quarter and momentum remains positive in the other states we expect consumer spending to lift by a further 5% in the December quarter.
The key to the revision for 2021 is the expectation that the recent lift in Consumer Sentiment to a seven year will be sustained; the increased momentum in the housing market will continue; a likely commitment by the government to continue to target a lower unemployment rate in the 2021 Budget; the huge boost to markets and global growth prospects with the advent of vaccines; the significant buffer of savings that will accommodate a large fall in the savings rate; ongoing reopening momentum; a likely upward revision to the government’s currently overly pessimistic net migration forecasts.
The headwinds from deferred loans and the tightening of insolvency laws are now seen to be less threatening for the economy as the economy has gathered such momentum in the second half of 2020.
BILL EVANS is the Chief Economist at Westpac
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bevans-rYk9SxEa4r

Westpac's Bill Evans optimistically revised 2021 unemployment forecast

<html><body>
EXPERT OBSERVER
We have revised our growth forecasts in 2020 and 2021 to reflect a more resilient consumer and labour market - particularly in Victoria.
We have revised our growth forecasts for the Australian economy in 2020 from minus 4.7% to minus 3.5%.
Forecast growth in the September quarter has been increased from flat to 1.8% while growth in the December quarter is revised down from 2.8% to 2.2%.
For 2021 we have revised down growth from 3.0% to 2.5%.
The unemployment rate that was expected to reach 8.5% by the end of 2020 has been lowered to 7.8%; while the forecast end 2021 rate has been held around 7.5%.
The GDP Report this week signalled that the Australian economy had contracted by a record 7% in the June quarter. Consumption contracted by a spectacular 12.1% and hours worked fell by 9.8%. The fall in consumption explained 98% of the overall reduction in activity.
Despite that collapse in hours worked total nominal wage income “only” fell by 2.5% and total nominal household income actually rose by 2.2%.
With a sharp fall in spending and an actual increase in incomes the savings rate rose to 19.8% from 6.0%, highlighting the significant improvement in household balance sheets which would be consistent with considerable pent up demand to spend.
BILL EVANS is the Chief Economist at Westpac
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Optimistic revision of economic growth forecasts: Bill Evans

<html><body>
EXPERT OBSERVER
The RBA will stay on hold in February, using the recent improvement in the unemployment rate to buy time – suggesting the bank will continue to react to the accumulation of evidence very gradually.
It is important to note that the framework for monetary policy still suggests that rates should be lower.
Inflationary pressure remains weak and recent headwinds – particularly for consumption and business investment - are likely to persist. Notwithstanding the recent dip in the unemployment rate, a large degree of spare capacity remains in the labour market with little progress having been made over the last year in reducing unemployment.
Nonetheless, unless the RBA wishes to move against market expectations, the February cut appears off the table.
Consequently, we have moved the timing of the next cut to April followed by a second cut around mid-year. Beyond that the risk of a move to ‘unconventional’ policy in H2 2020 will depend critically on whether the labour market deteriorates more significantly than we forecast.
By April, the RBA will have confirmation of another quarter of weak consumer spending with further evidence that interest rate and tax cuts to date have not done enough to boost spending.
We will review our GDP forecasts over the next week or so as more information comes in on the indirect effects of the bushfires and coronavirus on activity and ultimately the labour market. 
The stronger than expected December labour market data has provided time for the RBA to further assess the data flow. While the RBA staying on hold in February is expected by the market, we still think the RBA will regret not moving earlier this year – as was also the case in 2019 – as consumer spending trends remain very soft. The December NAB survey also suggests that private sector economic momentum, while it didn’t collapse in late 2019, remains stalled. 
Ultimately the RBA’s policy path will depend on where the economy and the labour market goes from here. We remain of the view that the economy – and consumer spending in particular - will continue to underperform and probably more than the RBA expects – albeit new RBA forecasts will be published later this week and will likely contain a softer near-term growth outlook. 
An early estimate of the short-term bushfire impact could well see average GDP growth in 2020 slow to around 1.5% or lower, with unemployment starting to rise to around 5.5% by H2 2020. While we will be assessing the indirect disruption effects of the fires over coming weeks it seems likely that Q1 GDP will be negative. We are quite worried that the January NAB Survey will further highlight that the indirect effects were larger than most expect.
Internal data on income growth suggests that wages growth may have weakened in late 2019. Indeed, our analysis suggests household cash flows weakened further in late 2019. It is too early to assess the impact of the Coronavirus but clearly it will also not be a positive. Next week we will formally review our GDP forecasts ahead of the next NAB business survey release. 
The bushfire rebuild will add somewhat to growth in the out years but we do not see that as significant in 2020 – rather it is likely to be a 2021 issue. Also, the fiscal outlay on the fires (at $2billion over two years) is not likely to be a game changer in terms of the near term macroeconomic outlook.
We still see scope for more support from a material fiscal package. That does not appear to be on the government’s agenda. Similarly, we think there is a need for renewed focus on structural policy to lift productivity growth over the medium term, which would in turn provide support for wage growth.
Whether the RBA moves to unconventional policy will very much depend on whether the economy strengthens in H2 2020 and unemployment continues its recent gains. We fear that will not be the case. Beyond that, the shape of the 2020/21 Federal Budget will be important.
While we can understand the RBA’s position of taking more time to assess the outlook, that in our view is only sustainable for a short period. By April it will be clear that private sector growth continues to flat line, consumer spending remains soft and potentially that recent unemployment gains are not sustained. That combination means that further stimulus will be needed.
ALAN OSTER is NAB Group's Chief Economist
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j.ballantyne1990-6AQqhLzZaK

NAB push back RBA rate cut prediction: Alan Oster

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CPI has risen in line with market expectations for September, according to the latest figures from the ABS.
The 0.5 per cent gains, described by many as "soft", were down from 0.6 per cent in the June quarter. 
"Despite the price falls for fruit and vegetables this quarter, the drought is impacting on the prices for a range of food products," ABS chief economist Bruce Hockman advised.
"Prices rose this quarter for meat and seafood (+1.7 per cent), dairy and related products (+2.2 per cent) and bread and cereal products (+1.3 per cent)." The CPI rose 1.7 per cent through the year to the September 2019 quarter. This follows a through the year rise of 1.6 per cent to the June 2019 quarter.
"Annual inflation remains subdued partly due to price rises for housing related expenses remaining low, and in some cases falling in annual terms. Prices for utilities (-0.3 per cent) and new dwelling purchase by owner-occupiers (-0.1 per cent) both fell slightly through the year to the September 2019 quarter, while rents (0.4 per cent) recorded only a small rise," Hockman noted.
 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/10/30/Headline%20CPI.jpg" alt=""> Source: James Foster @JFosterFM
The RBA prefer to measure core inflation, which eased to 1.4 per cent.
"No signs of an inflation breakout," Indeed APAC economist Callam Pickering suggested.
Westpac had forecasted 0.6 per cent in the September quarter, which even with that figure higher than the market forecasts, would be inline with their prediction for another rate cut before year end.
"While the RBA has been talking mostly about the unemployment rate in recent months, every CPI report is important for its forecasts which are updated just after the release," Westpac's Justin Smirk said.
"A core CPI reading in line with our expectations should keep markets pricing in a reasonable risk of another rate cut before year-end."
Alex Joiner, economist at IFM, said the figures were in line with RBA's data, which might give them another quarter to asses the data.
CommSec's Craig James says the headline inflation rate is creeping, rather than leaping, towards the Reserve Bank's two to three per cent target band.
"The Reserve Bank is expected to wait until at least February 2020 to decide if more interest rate stimulus is required," James said.
 
 
  
 
  
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jrobinson-rf4aSBido9

CPI rises 0.5 percent in September quarter, in line with forecasts

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EXPERT OBSERVER
As expected, the Reserve Bank Board decided to lower the cash rate by 25bps to 1.25%. This action is very much in line with Westpac’s forecast first set out on February 21, although comes two months earlier than our original timeline. The basis for the RBA decision was “to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target”. The major dynamic in that regard is to push harder on the unemployment rate to try to reach that point where wages growth lifts markedly.
The Governor has left open the prospect of further action, noting that “the Board will continue to monitor developments in the labour market closely and adjust monetary policy to support sustainable growth in the economy and the achievement of the inflation target over time”.
Regular readers will be aware that Westpac expects that there will be further cuts in this cycle in August and November. It is possible that the Board might choose to bring forward the cut we expect in August to July in the event of a particularly disappointing employment report on June 13. However, we expect that given the limited policy flexibility available, the prudent approach will be to await more information and provide a full explanation of the next cut at the August meeting. A further benefit will be to provide updated forecasts for inflation and growth in the August Statement on Monetary Policy.
However, the key point from our perspective is the clear message that more work needs to be done and only one more cut will be seen as insufficient.
The description of the labour market still has vestiges of the consistent upbeat message that has been a key aspect of the Governor’s Statements in the last few years. However, he is clearly disappointed that recent progress on unemployment appears to have stalled at a level which is clearly not consistent with a healthy acceleration in wages growth. It is interesting that despite the tick-up in the unemployment rate in April to 5.2% being attributable to a record participation rate, he chooses not to qualify the rise in the unemployment rate in that manner.
The commentary on inflation seems largely unchanged with current pressures being described as subdued, although a pick-up is anticipated and the 1.75% forecast for underlying inflation in 2019 remains intact. We expect that the June and September quarter inflation reports will make it untenable to maintain that forecast as well as the associated lift in 2020 to 2%, indicating the clear need for further policy responses.
A key area of uncertainty is the outlook for the housing market given the recent surprising political developments and this rate cut. In that regard, the Governor provides no real guidance, pointing to “conditions remain soft”. He does recognise that price declines have slowed and growth in housing credit has stabilised recently.
Superimposed on this caution around the domestic economy is recognition of the damage that the trade disputes are having on the global economy. While the RBA’s outlook for global growth “remains reasonable”, quite rightly, he emphasises downside risks, including weak international trade and soft investment intentions.
Conclusion
In February, Westpac surprised markets by forecasting two rate cuts in 2019. Recently we revised that forecast to anticipate three cuts. Today’s decision confirms the validity of those forecasts and goes some way to justifying our decision to increase the number of forecast cuts from two to three.
The labour market will remain the key focus for the policy profile, and the two additional cuts that we anticipate in August and November are consistent with our more downbeat view on the labour market.
BILL EVANS is the Chief Economist for Westpac
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RBA cash rate cut leaves prospects open for further moves: Bill Evans

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No surplus, no share market growth, no lift in wage growth. Economic survey points to bleaker times post-election.
Things will continue to look good enough for long enough to help the government fight the election. Beyond that, the Conversation Economic Panel is worried.
The Australian economy will remain healthy for long enough to enable the government to claim it as a strength in the lead-up to the May election, but the first Conversation Economic Survey points to a fairly flat outlook beyond that, with a 25% chance of a recession in the next two years.
The Conversation has assembled a forecasting team of 19 academic economists from 12 universities across six states. Among them are macroeconomists, economic modellers, former Treasury and Reserve Bank economists, and a former member of the Reserve Bank board.
Taken together their forecasts point to no recovery in the share market during 2019, no recovery in wage growth, no further improvement in the unemployment rate, further modest home price falls in Sydney and Melbourne, and to a budget deficit next financial year despite the official forecast of a surplus and Treasurer Josh Frydenberg’s commitment that the government will fight the election <a href="https://www.afr.com/news/politics/josh-frydenberg-reaffirms-2019-budget-surplus-in-sydney-institute-election-pitch-20190122-h1aboo" target="_blank">continuing to forecast a surplus</a>.
Weighing heavily on Australia’s economy during 2019 will be a much weaker US economy, with what the forecasting team says is the possibility of a US recession, and weaker growth in China. Australian consumer spending is forecast to continue to grow during 2019, but no faster than it did during 2018. The best measure of living standards is forecast to advance at a crawl.
Most of the team expect the Reserve Bank to sit on its hands throughout all of 2019, leaving its cash rate unchanged at the all-time low of 1.5% for what will be a record 40 months.
Economic growth
The panel expects the Australian economy to grow more slowly in the year ahead, by 2.6%, down from recent annual growth of 2.8% and 3.1%. None of the panel expects growth to exceed 3%. One, Steve Keen, formerly of the University of Western Sydney and now at University College London, expects growth of only 1%.
Most of the panel expect China’s growth to continue to slow, from the annual growth of 6.7% typical over recent years to just 6.2%, the weakest growth since the 2008 global financial crisis and the weakest calendar year growth since 1990.
Former Treasury economist Nigel Stapledon now at the University of NSW nominates China as the biggest threat to Australian and global growth. He says it has a good record of stimulating its economy to get out of difficult corners but one day it might get it wrong.
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The panel expects US economic growth to hold up at 2.8% during the year ahead but to weaken or go into reverse by year’s end as the “sugar hit” from the Trump tax cuts goes into reverse.
Former Treasury and International Monetary Fund economist Tony Makin points to US high public debt that will need to be rolled over, soaking up funds that could have been more productively used for investment, to higher US interest rates imposed by a central bank concerned about inflation, and to the escalating trade war with China.
ANU modeller and former Reserve Bank board member Warwick McKibbin says the US economy is “very likely” to begin to go backwards towards the end of the year. Craig Emerson, a former Australian trade minister now with Victoria University, says the US is likely to enter a recession in 2020. Former Treasury economist Mark Crosby at Monash University says if there is a US recession, it won’t hit until late 2019, with the impact greatest in 2020.
Rebecca Cassells from the Bankwest Curtin Economics Centre says a lot depends on the outcome of the US-China trade war: “The two biggest economies are going head to head, but both are almost as reliant on the other to sustain their growth trajectories,” she says.
Australia should look to other parts of the world to drive its economic growth. “India is one of them, and is rising rapidly with no downgrading of its growth trajectory of 7.75% for 2019.”
Living standards
Nominal GDP, the money earned in Australia unadjusted for price changes, is forecast to grow more slowly in 2019, by 4.5%, down from recent growth in excess of 5%, reflecting weaker iron ore prices.
The best measure of living standards, real net disposable income per capita, is expected to barely grow, climbing just 1.1% over the year to December, much less than recent growth in excess of 3%, but much more than its performance in the dismal years between 2012 and 2016 when it went backwards.
Forecasts for the unemployment rate cluster around its present 5.1%, with only four below 5% and one above 6%.
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Wages and prices
Wage growth is forecast to climb no further in 2019, finishing the year at its present 2.3% instead of climbing to 2.75% on its way to 3% by mid 2020 as forecast in the budget update.
Rebecca Cassells points out that much of the increase we have had has been driven by the Fair Work Commission’s decision to lift the minimum wage 3.5% from June 2018, suggesting very low growth elsewhere. Disturbingly, she says more and more enterprise bargains are being terminated, with employees falling back on awards.
Overwhelmingly, our panel is of the view that the only thing that will lift wage growth out of its slump (and budgets have been incorrectly forecasting a bounce out of the slump for eight years now) is higher productivity: producing more per worker.
Victoria University economic modeller Janine Dixon notes that the December budget update actually downgraded its forecast of productivity growth, from 1.5% to 1%, and so is not optimistic.
She says even if productivity growth did pick up, excessive market power in some industries combined with weakness in labour market institutions means it might not easily be passed on to workers.
Tony Makin, a supporter of company tax cuts, says the best thing to lift productivity would be new (perhaps foreign) investment embodying productivity-enhancing technology.
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The saving grace for workers facing yet another year of historically-low wage growth is that price increases will also remain low.
Inflation has been right at the bottom of (or below) the Reserve Bank’s 2% to 3% target band for four years now, meaning that even at the continuing low rates of wage growth forecast, wages should continue to climb just faster than prices.
The panel expects consumer spending to climb by only 2.5% in real terms in 2019, most of which will reflect population growth of 1.6%.
The average forecast for inflation is at the very bottom of the Reserve Bank’s target band. Only two panel members expect inflation to edge back up to the middle of the band. They are Warwick McKibbin and former Treasury and ANZ Bank chief economist Warren Hogan, at the University of Technology Sydney.
Interest rates and the budget
Without either a lift in inflation or a substantial weakening in the economy there is little reason for the Reserve Bank to move interest rates in either direction.
Governor Philip Lowe took the job in September 2016, just after the board cut the cash rate to a record low of 1.5%. He hasn’t moved the cash rate since, although on several occasions he has said the next move is <a href="https://www.smh.com.au/business/the-economy/next-move-is-up-and-it-ll-shock-says-rba-20180411-p4z91s">most likely to be up</a>.
Five of the panel do expect at least move up this year, including the two who think inflation might approach the bank’s target. Three expect cuts, taking the rate below 1.5%.
The remaining eleven expect no change, all year.
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The government says it will deliver a budget surplus next financial year, of A$4.1 billion, the first surplus in a decade.
The panel doesn’t think so, all but one member predicting a lower budget surplus than the government, and seven predicting deficits. The average forecast is for a deficit of A$3.5 billion rather than a surplus of A$4.1 billion.
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Monash University macroeconomist Solmaz Moslehi identifies optimistic wage growth, weaker than expected mining investment and a hit to consumer spending from the housing downturn as the biggest risks to the forecast surplus.
Julie Toth, adjunct professor at Deakin University’s Master of Business Administration program and chief economist at the Australian Industry Group, says the latest indicators suggest that neither employment nor wage growth will accelerate by as much as the government expects.
Michael O’Neil from the South Australian Centre for Economic Studies says the biggest immediate risk to the forecast surplus is thermal coal prices, given China’s efforts to cut coal imports and the shift to renewables in China and India.
The biggest long term risk is the scale of the company tax cuts and the ongoing shift of income from highly-taxed labour to more lightly-taxed capital.
Margaret McKenzie of Federation University identifies the biggest risk to the surplus as a change of government, something she says she welcomes because with extensive idle capacity and underemployment, a surplus would be unhelpful.
Home prices
The panel expects Sydney home prices to fall by another 5.8% and Melbourne prices by another 5.1% in 2019, taking the slides over two years to 14.7% and 12.1%.
Only Macquarie University and former Reserve Bank economist Jeffrey Sheen expects prices to move back up throughout 2019, by 2% and 3%.
Reassuringly, none of the forecast falls are bigger than 10%. The biggest are predicted by Steve Keen, Tony Makin, Margaret Mckenzie and Craig Emerson.
The lower prices will be accompanied by much slower growth in housing investment, expected to climb only 2.1% in 2019 after climbing more than 7% in the year to September 2018.
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Business
Non-mining business investment is forecast to grow more slowly this year, by 5.7% instead of 11.4%, and mining investment is expected to keep sliding, losing a further 3.4% after losing 11.2% last year rather than climbing as the government’s budget update predicts.
Five of the team believe that mining investment to turn the corner in line with the budget forecast. Nine expect it to fall further.
The Australian share market will for practical purposes not grow not at all during 2019 according to the average forecast, which is for barely perceptible growth of 0.1%. A steady share market would come as a relief to super funds and share owners after last year’s slide of about 7%.
The range of forecasts for the ASX 200 is wide, from slides of more than 6% to gains of more than 6%.
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Markets
Fortunately for a government the panel expects to need to continue to borrow more in order run continued budget deficits, what it pays for to borrow via the 10-year bond rate is expected to remain little changed at 2.6%. Only Warwick McKibbin expects a much higher bond rate, of 3.5%.
The panel’s average forecast is for an broadly unchanged Australian dollar, of around 70.5 US cents. The highest forecast is for US$0.80, the lowest for US$0.62.
The iron ore price, at present close to US$74 a tonne, is expected to fall to around US$64. Only one panelist, Warwick Mckibbin, expects it to stay near where it is, at US$75. The government itself is cautious, using a price of US$55 in its budget forecasts, a number it might lift in the April budget, allowing it to forecast more revenue.
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The risk of recession
On average, the panel believes there is a 25% chance of a conventionally-defined recession within the next two years.
Half of the probability estimates are between 20% and 30%. Averaging all of them together other than Steve Keen’s estimate of 95% produces an estimate of 22%.
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A recession is conventionally defined as two consecutive quarters in which gross domestic product falls instead of rises. Australia hasn’t had two consecutive quarters of negative growth since 1991.
The most recent negative quarter was in September 2016. Before that there was one in March 2011, and before that in during the global financial crisis in December 2008.
Ross Guest of Griffith University makes the point that his estimate of 20% should be considered low. There will always be a risk of a recession. By itself two quarters of negative growth needn’t be a disaster. The impacts on the government and on consumer and business confidence would be more important than the downturn itself.
Guay Lim of the Melbourne Institute of Applied Economic and Social Research assigns the lowest probability of any of our panel to a recession, 5%, saying the most likely catalyst would be a global trade war.
Warren Hogan assigns the highest probability to a recession after Steve Keen, 40%, saying Australia is facing the end of a major construction boom and has heavily indebted households. It will be vulnerable to any negative shocks and especially vulnerable to higher inflation and interest rates.
Steve Keen says the only thing that has kept Australia afloat since the China boom has been the housing bubble, which the banking royal commission has been discovering was built on fragile, and in places fraudulent, foundations.
Nigel Stapledon says the biggest drag on the economy will be the collapse in the construction of residential investment units. Labor’s proposed increase in capital gains tax will make it worse, notwithstanding Labor’s decision to exempt new construction from its crackdown on negative gearing.
Rebecca Cassells says on the bright side Australia is set to become the world’s biggest exporter of liquefied natural gas, the biggest exporter of iron ore to India and the world’s biggest producer of lithium, needed for batteries.
And if there is a global economic downturn within the next few years, she says another positive is that Labor is likely to be in power, making the successful deployment of a stimulus package more likely than if the Coalition had been in office.
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The Conversation Economic Panel
Click on economist to see full profile.
<iframe style="border: none;" src="https://cdn.theconversation.com/infographics/368/924e6755a686ec80378dcc381368eb0ee0c37f39/site/index.html" frameborder="0" width="100%" height="400"></iframe><img src="https://counter.theconversation.com/content/110315/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/au/team#peter-martin" target="_blank">Peter Martin</a>, Editor, Business and Economy, <a href="http://www.theconversation.com/" target="_blank">The Conversation</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/no-surplus-no-share-market-growth-no-lift-in-wage-growth-economic-survey-points-to-bleaker-times-post-election-110315" target="_blank">original article</a>.
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Economic survey points to bleaker times post-election: The Conversation's Economic Survey

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EXPERT OBSERVATION
The economy grew at a strong pace over the first half of 2018 – with output expanding by over 4% in annualised terms.
Looking forward, we expect growth to slow in annual terms, though still at a pace which should erode spare capacity.
Public sector demand – both infrastructure spending and NDIS-related consumption will remain strong. We also expect non-mining business investment to benefit from additional spill-overs.
Exports are expected to continue to grow relatively strongly - as the last of the large LNG projects reach full production capacity – and then level off.
<img src="https://www.urban.com.au/images/2018/11/14/NAB%20GDP.JPG" alt="">
Mining is a potential upside factor to the forecasts, with that sector now clearly reporting the strongest conditions and confidence, commodity prices having remained high and the drag from the unwinding of the boom now fading.
Despite the above special factors adding to growth, our main concern remains weak consumption growth - which is likely to weigh on broader economic growth (accounting as it does for over half of all economic activity).
With an already low savings rate, weak wage growth, high debt levels and some anxiety from slower growth in household wealth - we see a very cautious household sector over the next couple of years.
The construction cycle is also expected to move down but, only moderately and as such its impact on growth will be small.
<img src="https://www.urban.com.au/images/2018/11/14/NAB%20GDP%202.JPG" alt="">
On a more positive note, recent data suggest that the labour market remains healthy with trend employment growth tracking at around 25-30 k per month.
This should be enough to see the unemployment rate decline further after falling to a 6-year low of 5.0% in September.
Despite the strong growth and tightening labour market, the September quarter CPI suggests that inflationary pressure remains weak.
While a number of one off adjustments to administered prices drove the weakness in headline inflation, our overall read is that both imported and domestic inflation remain subdued.
We have left our outlook for interest rates unchanged this month but our view remains heavily data dependent.
While growth has been strong and progress has been made on reducing the unemployment rate, the RBA will likely want to see further evidence of a pickup in wages growth and inflation.
There has been some progress on this front but the process has been gradual and is likely to remain so, with still some spare capacity in the labour market and the economy more broadly.
Readings on the WPI for Q3 and labour market data for October will provide important updates on the current pace of wage growth and momentum in the labour market.
ALAN OSTER is NAB's Chief Economist
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NAB forecast economic growth to slow: Alan Oster

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EXPERT OBSERVER
Following the strong GDP Report Westpac has lifted its growth forecasts for 2018 and also revised slightly its forecasts for 2019 and 2020.
However, the key themes that growth will slow in 2019 and remain below the 2018 pace in 2020 are intact.
The June quarter GDP report was released this week. Due to upward revisions of around 0.5 percentage points, the Australian economy was revealed to be much stronger than we had been led to believe.
Real GDP expanded by a solid 0.9% in the June quarter and annual growth printed 3.4% – well above potential of around 2.75%. Markets were expecting annual growth of around 2.8% with most of the lift being attributed to revisions of earlier quarters.
These accounts have prompted a review of our growth outlook.
We have lifted our growth forecast for 2018 from 2.7% to 3.3%.
The growth forecast for 2019 has been lifted from 2.5% to 2.7% and the 2020 forecast has increased from 2.8% to 3.0%.
While the levels of the growth forecasts have been lifted, the profile of an economy that will slow into 2019 and lift modestly in 2020 remains.
Furthermore, these growth rates (following 2.4% in 2017) are insufficient to make any meaningful impact on the spare capacity in the economy and therefore our inflation and wages forecasts remain essentially unchanged.]
Bill Evans is the Chief Economist for Westpac
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Westpac still expects a growth slowdown in 2019 despite recent strong GDP report: Bill Evans

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<h1>Richard Holden, UNSW</h1>
Vital Signs is a weekly economic wrap from UNSW economics professor and Harvard PhD Richard Holden (@profholden). Vital Signs aims to contextualise weekly economic events and cut through the noise of the data affecting global economies.
This week: the housing market is still cooling, but not disastrously so, consumers remain optimistic, but business is cautious, and all eyes will soon turn to Christmas retail sales.
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Since housing is the main thing that Australians seem to talk about (even when the Ashes is on), let’s start with that.
The ABS <a href="https://www.propertyobserver.com.au/http://www.abs.gov.au/ausstats/abs@.nsf/mf/6416.0" target="_blank">residential house price index</a> for the September quarter showed a small decline Australia wide, with prices falling 0.2%. Sydney prices were down 1.4%, while Melbourne was still up 1.1%.
This was, as we are now used to, met with press commentary about how the <a href="https://www.propertyobserver.com.au/http://www.abc.net.au/news/2017-12-12/house-prices-off-the-boil-will-population-keep-things-simmering/9250146" target="_blank">housing boom is well-and-truly over</a>, and with various other shrieks of angst. Really? Melbourne just didn’t grow as fast is it did before. And Sydney, though down 1.4% on the quarter, is still up a whopping 9.4% over the past 12 months.
On one level, the reaction makes no sense at all. On another, as I wrote <a href="https://theconversation.com/vital-signs-the-spooky-mortgage-risk-signs-our-bankers-are-ignoring-85591" target="_blank" style="font-size: 12.16px;">in a previous column</a>, the implications of even modest falls could be large, given how residential lending is structured. If Australia’s banks are lending people a massive chunk of their disposable income, marking-to-market on a regular basis and issuing a lot of interest-only loans, then even small falls can have big effects on household spending and even defaults. And. They. Are.
The Westpac consumer sentiment index came in stronger than expected, rising 3.6% in December to 103.3 points (recall 100 in these indices is the breakeven between optimists and pessimists). Westpac’s chief economist Bill Evans said:
This is a surprisingly strong result and confirms the lift we have seen in the index over the last three months.
This contrasted with the news on business confidence. The <a href="https://business.nab.com.au/wp-content/uploads/2017/12/201711-nab-business-survey.pdf" target="_blank">NAB Monthly Business Survey</a> business conditions index dropped 9 points. This still left it at +12, however, which is above the long-run average of +5 index points. Moreover, it appeared that some of the business concern was about wages edging higher, which would be a good thing for workers and the economy more generally.
As I have said in Vital Signs many times, sluggish wage growth has been a persistent problem among advanced economies, and Australia is no exception. Even early signs of an increase bode well for the economy more broadly – and business will ultimately benefit from that. But these are very early signs.
Unemployment in Australia remained stubbornly high at 5.4% in November. A large 61,600 jobs were created, but the labour force participation rate rose to 65.5%, leaving the overall unemployment rate unchanged. It will be important to see in coming months if that pace of job creation can be maintained – for that is a prerequisite for a genuine drop in unemployment.
Thursday morning Australian time, the US Federal Reserve raised interest rates for the third time this year, bringing the target Fed Funds Rate to the 1.25-1.50% band.
The Fed also suggested in <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20171213a.htm" target="_blank">its statement</a> that we can expect further, gradual rises, in 2018, saying:
The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.
Most market participants interpret this as meaning we can expected three 25 basis point hikes next year.
As has been the case for some time now, the recovery in the US looks to be self-sustaining and robust. In Australia, we continue to see very mixed signals across different aspects of the economic map.
The housing market looms as a huge potential problem, with regulators only taking action relatively recently to begin to rein in the extravagant lending of a decade or more. And pretty modest action at that.
<img src="https://counter.theconversation.com/content/89144/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">The next major thing to watch for in Australia is the all-important holiday season retail sales figures. And, as ever, the housing market.
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a>, Professor of Economics and PLuS Alliance Fellow, <a href="http://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a>
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/vital-signs-australia-heads-into-2018-with-mixed-economic-signals-89144" target="_blank">original article</a>.
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