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

Joel Robinson

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

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

WM Residences fills gap in Mordialloc townhouse market

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

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

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

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

NAB funds $1 billion Surfers Paradise apartment development, Palmera

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

First look: Aqualand joins St Leonards apartment party

Economy

jchancellor-FAypfDUnLy

Fixed income markets and the economy: RBA's Christopher Kent

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GUEST OBSERVER
The labour market has comprehensively strengthened over the past four months.
Trends in employment (including the composition of jobs growth), the unemployment rate, participation and hours worked suggest that output growth will accelerate over H2 2017.
Sustained strength in the labour market is a necessary condition for wage inflation to lift. 
Overview
After a soft 2016 the Australian labour market is on an encouraging trend. The latest ABS employment report was the fourth robust set of monthly jobs numbers in a row. The improvement is evident in a range of labour market indicators. And it suggests that GDP growth will lift over H2 2017. As a result, market pricing for another rate cut has faded to zero and a 65% chance of a hike within the next twelve months is now priced.
In this note we analyse the latest trends in the key metrics that relate to the labour market. We also take a brief look at outcomes by state. We conclude by presenting our views on what we think is in store for the labour market over the second half of 2017 and what it means for policy. 
Employment
We kick off with employment growth because job creation goes hand in hand with output growth (chart 1).
Click to enlarge
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.48.21%20AM.png" alt="">
Over the past four months there’s been a marked improvement in jobs growth. The ABS reports that employment has lifted by 154k over the four months to June and the average monthly gain has been 38.5k (chart 2). These results are strong. As a result, annual employment growth in the year to June 2017 accelerated to 2.0% - quite a bit higher than population growth (1.5%pa).
As we flagged a few weeks ago, Australia’s population growth has boosted headline growth rates and masked some per capita weakness in the economy. But if employment growth can continue to outpace population growth some of the per capita metrics related to the labour market and output will improve. From GDP perspective, the recent trend in jobs growth means we should see a lift in growth over H2 2017 after a soft 2016/17. 
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.49.33%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.49.33%20AM.png" alt="">
In addition to strong employment growth, the composition of jobs growth has been impressive. Taken at face value, full-time jobs have lifted by 179k over the past four months while part-time employment has fallen by 25k. As a result, the annual growth rates have converged (chart 3).
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.50.22%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.50.22%20AM.png" alt="">
There can be a fair bit of noise in the PT/FT split each month. But looking at the trend series indicates there has 4.0 recently been a solid lift in full-time jobs growth.
This is a welcome development and is reflective of some genuine strength in job creation. In addition, the pace of full-time job losses from the fall in mining-related employment has eased which means that the headwind on net full-time jobs growth has lessened. 
2. Unemployment  
There has been a modest improvement in the unemployment rate in recent month which reflects the combination of solid jobs growth dampened a little by a lift in participation. The trend unemployment rate, our preferred measure of the jobless rate, has come down by 0.2ppts over the past four months to be 5.6% in June (chart 4). The current level of the unemployment rate is not at a historically high 
one. But despite the fall it is above the non-accelerating inflation rate of unemployment (NAIRU) which the RBA recently estimated to be 5%. It suggests that there is still a fair way to go to take the economy back to the level we associate with full employment. But it’s moving in the right direction, albeit that it’s a slow grind.
Job security fears have remained stubbornly high despite the recent improvement in the labour market. It looks to us like the latest strength will need to be maintained if job security fears are to lessen. In fact, in may be the case that a lift in wages growth is also required for job security fears to recede. 
3. Underemployment and underutilisation 
Underemployment remains a problem in Australia. In May, the underemployment rate was 8.8% - just 0.1ppt off its record high (chart 5). To recap, people who are underemployed have a job but want to work more and can’t find the work.
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.51.26%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.51.26%20AM.png" alt="">
The number of additional hours of work wanted by underemployed workers has been stable at around two days (or 14hrs) per week since the mid-2000s. This compares with unemployed people who are on average looking for 33 hours of work per week. 
On Wednesday, when this note was in train, RBA Governor Philip Lowe gave a speech on The Labour Market and Monetary Policy which covered a lot of the themes here. One chart in the Governor’s speech depicted proportionately the reasons why people work part-time. The data came from the HILDA release and indicated that the bulk of people in part-time work have chosen to be there. Nothing surprising there. Interestingly, however, the proportion of people who are working part-time because they could not find full-time work was put at around 9% which marries up almost perfectly with the underemployment rate.
Data on underemployment is published by the ABS on a quarterly basis so we will need to wait until August for the next update. But the trend lift in full-time employment suggests that it’s more likely than not that the underemployment rate inches a little lower when the new data prints.
The sum of the unemployment rate and the underemployment rate produces the underutilisation rate which is the broadest measure of spare capacity in the labour market – using the latest unemployment and underemployment rates puts it at 14.4% in June. This is quite high and means that the economy is operating below its capacity and there is a negative output gap. We have known this for some time. What we are interested in from here is the direction in the underutilisation rate and there are tentative signs that it’s starting to decline. In our view, it’s going to need to come down materially to generate wages inflation. 
4. Employment to population and participation
The share of the Australian workforce in a job has recently lifted. The employment to population ratio has ticked up by 0.46ppts to 61.3% (chart 6). This shift upwards basically reflects employment growth running above population growth. Given the very solid jobs growth over the past few months we would have expected the unemployment rate to fall by more than 0.2ppts. But its decline was capped due to a lift in participation.
Labour force participation has picked since late 2016. There are structural and cyclical forces that drive participation and it looks like some of the cyclical headwinds have receded. At the end of 2016 the part. rates of WA and Qld had fallen quite a bit through the year as the big downturn in mining-related investment reduced job prospects for workers in these states. As a result, some local workers had given up looking for work which reflects the discouraged worker syndrome. But the recent lift in jobs in WA and Qld has been coupled with an increase in participation which suggests a touch more optimism for workers in these states. 
5. Hours worked
Hours worked, as you would expect, is strongly correlated with output, consumption and employment growth. It is also a key input into examining productivity growth because we can measure output per hour (or unit of labour).
Monthly aggregate hours worked is quiet volatile so we look to the annual change in trend terms to best gauge what’s been happening in that space (chart 7). The news is pretty decent. The data indicates that growth in total hours worked has accelerated to be 2.3% higher in the year to June 2017. For most of the last five years annual employment growth has been stronger than growth in hours worked because of the strong growth in part-time relative to full-time employment. But the recent strong lift in full-time employment has seen growth in hours worked pick up to be running ahead of employment growth. It’s still early days and we aren’t getting too carried away. But these type of developments are generally commensurate with an authentic lift in the demand for labour.
The increase in aggregate hours worked has been sufficient to see per capita hours worked lift from a multi-decade low (chart 8).
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.52.39%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.52.39%20AM.png" alt="">
 
Again, we are coming off a low base and there will need to be a sustained upward trend in per capita hours worked if Australia’s labour market is going to genuinely tighten. 
6. Labour market by state
In our view, one of the striking things about the latest jobs growth is that it’s been relatively broad-based (charts 9 and 10). For most of the past few years there has been a “two-speed” economy that comprises i) NSW and Victoria (driven largely by Sydney and Melbourne); and (ii) the rest of Australia. We wrote about this in late 2016.
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.53.59%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.53.59%20AM.png" alt="">
But the labour force data suggests that we may be seeing some convergence in outcomes. This is a particularly welcome development.
Jobs growth has been spectacularly strong in Victoria, driven by population growth. But there has also been solid growth in employment over the past few months in Qld, WA and SA, which had previously all looked soft. Employment growth in NSW has slowed, but that’s to be expected given Australia’s biggest state is close to full employment.
There is a little more divergence in terms of trends in the unemployment rate (chart 11). The trend jobless rate in NSW sits at a healthy 4.8%. In Victoria, despite strong employment growth, the unemployment rate has remained stuck above the national rate at around 6.0%. The jobless rate has also trended sideways in Qld while it’s unexpectedly fallen in WA. 
What does it mean for policy?
There are two key questions that need to be answered to determine what the recent labour market trends mean for monetary policy: (i) can they be maintained; and (ii) will they generate wages inflation.
On the former, the leading indicators suggests that the pace of job creation will ease from its current red-hot pace. But it should still be sufficient to match and slightly better the monthly increase in labour market supply (charts 12, 13 and 12. 14). The CBA PMIs, along with the NAB Business Survey and the vacancies  data, suggest that employment growth should average around 20k a month in the near term. That would be enough to exert some further mild downward pressure on the unemployment rate.
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.54.58%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.54.58%20AM.png" alt="">
There are still plenty of headwinds for the labour market to contend with over 2017. Namely, a gradual decline in dwelling construction, closure of the car industry and the completion of the final big resources projects. But there are also a few tailwinds at work like the continual ramp up in public investment, particularly in NSW, and the improvement in the global economy which is providing a boost to Australia’s tradables sector. 
On that basis, the first condition about ongoing labour market improvement is satisfied in our view and that takes another rate cut off the table. The focus therefore shifts to what the improvement in the labour market means for wages growth given a lift will be required to propel core inflation back to target. Here, we think that we are still some way from labour market slack being eroded sufficiently to put genuine upward pressure on wages.
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.55.49%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.55.49%20AM.png" alt="">
Our modified Philips curve, which puts underutilisation against wages growth, suggests that we probably need to see underutilisation fall comfortably below 14% for wages growth to lift (chart 15). In our view, that is unlikely to happen until early next year which would all but rule out a rate increase in 2017. In addition, because any improvement in wages growth is coming off a very low rate, we suspect that the RBA will not act to tighten until a solid uptrend is firmly in place. As a result, we don’t see the RBA raising rates until late 2018. 
Gareth Aird is economist at Commonwealth Bank and can be contacted <a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/gareth-aird/14/790/905">here</a>.
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Has the Australian labour market turned a corner? Gareth Aird

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<div class="column">Reserve Bank Board minutes: The minutes from the July 4 Board meeting shows the Reserve Bank weighing up a raft of factors including the strength in the labour market, likelihood of higher wages, the level of household debt, and even the estimate of neutral interest rates for the economy.</div>
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<div class="column">Consumer confidence eases: The weekly ANZ/Roy Morgan consumer confidence rating eased from 113 to 112.5 in the week to July 16. Confidence is down 2.1 per cent over the year.</div>
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New vehicle sales: The Bureau of Statistics (ABS) reported that new vehicle sales rose by 1.2 per cent in June – the fourth consecutive gain. Annual sales of SUVs and “other vehicles”, like utes, are at record highs.
The Reserve Bank Board minutes provides guidance on interest rate settings. Consumer confidence data is important for retailers. The residential property price data is important for housing-dependent businesses. The car sales data provide perspectives on consumer spending as well as the auto sector of the sharemarket.
What does it all mean?
The Reserve Bank Board remains cautiously optimistic. In fact it could be argued that the latest minutes were certainly more optimistic than in prior months. Although it is unlikely to result in any change to interest rate setting any time soon. Board members considered all manner of factors at the July meeting with particular focus on the housing and job markets. </div>
<div class="column">Interestingly policymakers judged that the “that the strength of recent labour market data had removed some of the downside risk” to wage growth forecasts. While Reserve Bank liaisons “suggested conditions in the retail sector had improved”. And when it came to the APRA enforced prudential supervision measures it was too early to see the full impact.  </div>
<div class="column">The commentary on the Australian dollar was rather bland but since the meeting, the Australian dollar has lifted by almost 5 per cent and is now holding closer to US79 cents. It is more likely that policymakers will discuss concerns about the currency in coming months. The Reserve Bank has provided a bit more colour on the neutral cash rate for the economy – estimating it to be around 3.5 per cent. And if this is the case clearly monetary policy remains very expansionary.
<a href="https://www.propertyobserver.com.au/images/2017/07/19/Screen%20Shot%202017-07-19%20at%208.12.48%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/19/Screen%20Shot%202017-07-19%20at%208.12.48%20AM.png" alt="">
What do the figures show?
Reserve Bank Board minutes:
Last paragraph: “Members regarded the improvement in the world economy over the preceding months as a welcome development. Nevertheless, they assessed that current economic conditions in Australia, and the outlook for growth and inflation, meant that developments in the labour and housing markets continued to warrant careful monitoring. Taking into account all the available information, the Board judged that holding the accommodative stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.” 
“Members discussed the Bank’s work estimating the neutral real interest rate for Australia. The various estimates suggested that the rate had been broadly stable until around 2007, but had since fallen by around 150 basis points to around 1 per cent. This equated to a neutral nominal cash rate of around 31⁄2 per cent, given that medium-term inflation expectations were well anchored around 21⁄2 per cent, although there is significant uncertainty around this estimate.” </div>
<div class="column">“There had been further signs that investment was increasing and labour markets had tightened further in many advanced economies. This was expected to lead to a pick-up in growth in wages and prices over time.”</div>
<div class="column">
 “The recent improvement in labour market data had been a positive development. Members noted that the strength of recent labour market data had removed some of the downside risk in the Bank’s forecast of wage growth.”</div>
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 “Members recognised that it was too early for the prudential supervision measures announced by the Australian Prudential Regulation Authority, which were designed to help address the risks associated with high and rising levels of indebtedness, to have had their full effect.” “Members noted that the recent pick-up in growth in employment should also support a pick-up in household income growth, and therefore consumption growth, in the period ahead.”
Consumer sentiment
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The weekly ANZ/Roy Morgan consumer confidence rating eased from 113 to 112.5 in the week to July 16.
Confidence is down 2.1 per cent over the year and below the average of 113.2 since 2014.
Three of the five components of the index fell in the latest week:
<ul>
<li> The estimate of family finances compared with a year ago was down from +5 to +3;  The estimate of family finances over the next year was up from +21 to +26;</li>
<li> Economic conditions over the next 12 months was unchanged at -6;</li>
<li> Economic conditions over the next 5 years was down from +4 to +2;</li>
<li> The measure of whether it was a good time to buy a major household item was down from +41 to +38.</li>
</ul>
New vehicle sales
According to the Australian Bureau of Statistics (ABS), new vehicle sales rose by 1.2 per cent in June – the fourth consecutive gain. Passenger car sales fell by 1.4 per cent but sales of sports utility vehicles rose by 4.4 per cent. And sales of “other” vehicles (includes utilities, panel vans, cab chassis, goods carrying vans, rigid trucks, prime movers, non-freight carrying trucks, and buses) rose by 0.3 per cent.</div>
<div class="column">
 New vehicle sales are up by 3.6 per cent over the year. Passenger car sales are down by 7.4 per cent, while SUVs sales are up 12.3 per cent and “other vehicles” are up by 10.7 per cent.</div>
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<div class="column">In rolling annual terms, 1,179,545 new vehicles were sold over the year to June. Sales of SUVs (452,122) hit fresh record highs in annual terms, while annual sales of “other” vehicles also stood at record highs of 258,048. Sales of passenger vehicles fell to a 22-year low to 469,375 in the year to June. Across states and territories in June: NSW (down 0.1 per cent); Victoria (up 2.6 per cent); Queensland (up 3.1 per cent); South Australia (down 1 per cent); Western Australia (down 0.4 per cent); Tasmania (down 0.4 per cent); Northern Territory (up 7 per cent); ACT (up 6 per cent).
What is the importance of the economic data?
The Reserve Bank releases minutes of its monthly Board meeting a fortnight after the event. The minutes give a guide to Reserve Bank thinking on interest rate settings.
The Australian Bureau of Statistics (ABS) provides quarterly data on residential prices. The figures provide further perspectives on the state of the housing purchase sector.
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.
What are the implications for interest rates and investors?
CommSec expects the Reserve Bank to remain on the interest rate sidelines for an extended period. </div>
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Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>
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Reserve Bank Board remains cautiously optimistic: Savanth Sebastian

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GUEST OBSERVER
The 2016/17 financial year is now complete and it is an opportune time to see how investments, financial markets and economies have performed over the past year.
Overall, the year was remarkable for being unremarkable. At least as far as the economy and financial markets performed. The year started with the fall-out from Brexit.
There was a domestic election and the US Presidential election. In 2017 there has been a raft of elections in Europe. And there was the OPEC production agreement.
<a href="https://www.propertyobserver.com.au/images/2017/07/03/Screen%20Shot%202017-07-04%20at%208.16.09%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/03/Screen%20Shot%202017-07-04%20at%208.16.09%20AM.png" alt="">
But despite the challenges, returns on shares and residential property lifted over the past year while interest rates are lower and the Aussie dollar is little changed from a year ago. In fact the Aussie dollar has tracked a range of US6.25 cents – the least volatile year in 27 years. The sharemarket has had the least volatile year in 16 years. And the record (and world-leading) Australian economic expansion continues.
The economy has grown by around 1.75-2.00 per cent in 2016/17 and we expect growth of around 3.0 per cent in 2017/18. Infrastructure will be a key driver of growth in 2017/18 alongside exports, while home building continues, especially in Sydney, Melbourne &amp; Brisbane. Underlying inflation may lift from 1.7 per cent to 2.0 per cent over the coming financial year while unemployment may ease modestly from 4-year lows of 5.5 per cent currently to the 5.0-5.5 per cent range. Official interest rates may remain on hold for another year.
<a href="https://www.propertyobserver.com.au/images/2017/07/03/Screen%20Shot%202017-07-04%20at%208.17.31%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/03/Screen%20Shot%202017-07-04%20at%208.17.31%20AM.png" alt="">
It is clear that Australia is well placed. Inflation is under control; interest rates are at record lows, the Aussie dollar is supportive and the record expansion continues 
What does the data show?
Interest rates
The cash rate stands at a record low of 1.50 per cent, down from 1.75 per cent in June 2016, and courtesy of a quarter per cent rate cut in August 2016.
The market-determined 90-day bank bill rate has fallen from 1.97 per cent to 1.72 per cent over 2016/17. Yields on the long bond – 10-year government bonds – have held between 1.85 per cent and 2.99 per cent. Long-bond yields hit record lows on August 11 2016 and now stand at 2.39 per cent.
Currencies
The Aussie dollar has risen around 3.6 per cent over 2016/17. The Aussie started the year around US74.26 cents and ended the year at US76.92 cents. We have calculated that the Aussie is 22nd strongest against the US dollar of 117 currencies tracked. The strongest currencies have been the Icelandic króna (up 17 per cent), Swazilabnd lilangeni (up 11.3 per cent), South African rand (up 11.1 per cent), and Israeli shekel (up almost 10 per cent). Weakest currencies have been Syrian pound (down 138 per cent), Egyptian pound (down 104 per cent) and Turkish lira (down 22 per cent).
<a href="https://www.propertyobserver.com.au/images/2017/07/03/Screen%20Shot%202017-07-04%20at%208.18.35%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/03/Screen%20Shot%202017-07-04%20at%208.18.35%20AM.png" alt="">
In the six months of 2017, the Aussie dollar is rose just over 6 per cent against the US dollar, making it the 25th strongest of 117 currencies tracked. The strongest currencies have been the Mozambique metical (up 16 per cent), Mexican peso (up 13 per cent), and Poland zloty (up 11 per cent). Weakest currencies have been the Tunisian dinar (down 5 per cent), Ethiopian birr (down 4 percent) and Agentinian lec (down 3.9 per cent).
The high for the Aussie dollar in 2016/17 was US77.77 cents in November 2016 and the low was US71.52 cents in December 2016. The US6.25 cent range for the Aussie dollar is the smallest in 27 years.
Commodities
Commodity prices have been decidedly mixed over 2016/17. The Commodity Research Bureau futures index has fallen 9 per cent over the year, under-performing the Aussie dollar (up 3.6 per cent)
The price of oil is down almost 5 per cent, gold is down 6 per cent and sugar is lower by 32 per cent. But iron ore prices have lifted 15 per cent, thermal coal has risen by 36 per cent, beef is up 10 per cent and base metal prices have generally firmed over the period with lead, zinc and copper up between 22-31 per cent.
Sharemarket
The Australian sharemarket started 2016/17 with the All Ordinaries at 5,327.0 and the ASX200 at 5,246.6. The All Ords ended the financial year at 5,764.0 points (up 8.5 per cent) with the ASX200 at 5,721.5 (up 9.3 per cent). We estimate that Australia is 55th of 73 global bourses and only five bourses recorded declines in 2016/17. The best performer has been hyperinflation-affected Venezuela (up 860 per cent) but notably Greece is up 52 per cent and Austria is up 48 per cent. The worst performers have been West Africa, Oman, Qatar and South Africa. 
In the six months of 2017, the All Ordinaries has risen by 0.8 per cent, ranking Australia 61st of 73 nations. Commodity producers have recorded the weakest performances such as Qatar, Canada, South Africa, Saudi Arabia and Brazil. Best performers include Greece, Austria, Argentina, Nigeria and Turkey.
Investment returns
Total returns on Australian shares (All Ordinaries Accumulation index) rose 13.1 per cent over 2016/17. Returns on dwellings are up 13.2 per cent while returns on government bonds have fallen by 0.8 per cent. The returns on bonds, was the weakest result in 23 years.
Sectors &amp; size groupings
 Of the 21 identified industry sub-sectors, only five recorded declines in 2016/17.
Leading the gains has been Consumer Durables &amp; Apparel (up by over 40 per cent) followed by Food, Beverages &amp; Tobacco (up 29.1 per cent) and Capital Goods (up 26.3 per cent)
At the other end of the scale, Telecom has fallen by over 26 per cent, followed by the Real estate sector (down almost 9 per cent) and Autos &amp; Components (down 6 per cent).
Of the size categories, the MidCap 50 index has again out- performed, (up 14.2 per cent), from the ASX100 (up 9.7 per cent), ASX 50 (up 9.1 per cent) and Small Ordinaries (up 3.7 per cent).
What are the implications for investors?
Returns on shares are set to record the best gain in three years. And that means that sharemarket returns have only fallen once in the past seven years. So an investor that has employed a diversified strategy across asset classes would be well pleased with the performance over the past year.
The economic and financial metrics remain encouraging. Australia has underlying inflation below the Reserve Bank’s 2- 3 per cent target band at 1.7 per cent. Economic growth is low at 1.7 per cent but that reflects a raft of elections in 2016/17 as well as bad weather. Business conditions are near 9-year highs. The cash rate is at record lows. And unemployment is at a 4-year low of 5.5 per cent,
Housing is providing the momentum for the economy with home building and purchase especially driving the NSW, Victorian and ACT economies. Over the coming year, infrastructure will be a key driver of economic activity. 
Over the coming year more and more apartments will be completed with more stock hitting the market. It has taken a little longer than expected, but supply and demand for homes are likely to prove more balanced in 2017/18, restraining growth in home prices.
Last year we noted: “CommSec expects the All Ordinaries index to be near 5,500-5,700 points at end-December 2016 and 5,700- 5,900 points in June 2017.” The December forecasts was realised and similarly the June forecast should has been realised.
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<img src="https://www.urban.com.au/images/2017/07/03/Screen%20Shot%202017-07-04%20at%208.19.50%20AM.png" alt="">
Over the coming year CommSec expects the All Ordinaries index to be near 5,900-6,100 points at end-December 2017 and 6,000-6,200 points in June 2018.
Home prices nationally are likely to grow by 5-7 per cent in 2017/18 with inflation around 2.0 per cent. The Aussie dollar is expected to remain in the mid 70s against the US dollar over most of the coming year.
The low inflation/low interest rate environment is entrenched, meaning that lower nominal investment returns are also here to stay. So investors will need to remain flexible and alert to the returns achieved across sharemarket sectors and across asset classes to ensure that their savings are keeping pace with the cost of living.
The issues to watch over the coming year include Donald Trump; Oil prices; Australian home prices; Wages &amp; Jobs; and Geopolitics.
US President Trump was elected vowing to cut taxes, repeal the Obamacare health reforms and spend more on infrastructure. Global sharemarkets have rallied on the expectation that extra stimulus in the US will boost revenues and profits.
 But we are still waiting for the tax cuts. Infrastructure spending has been announced – now it is a case of gauging the impact on the economy. The Federal Reserve will take its time lifting interest rates back to more “normal” levels for the simple fact that inflation is well contained.
A soft landing for Australian housing is possible. But there is also the risk of indigestion if too much supply comes onto the market at one time. Overall, regulators and banks have done well in restraining buyer effervescence.
We assume that Aussie households will gradually get used to the new reality of 2 per cent wage growth, especially as wages are still out-pacing prices and the job market is lifting in line with strong business conditions.
There are all manner of geopolitical risks. But these can never be adequately factored into forecasts. As always investors need to be alert, not alarmed.
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>. 
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Remarkable for being unremarkable: CommSec

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<h3 class="post-title entry-title"> </h3>
It's sometimes under-appreciated how Australia's free floating dollar, monetary policy autonomy, flexible labour force, and comparatively low government debt have allowed the economy to adjust through a seriously tumultuous period.
At the peak of the resources construction boom in the third quarter of calendar year 2012 engineering construction activity peaked at $34.8 billion, yet by the end of 2016 had dropped by some 43.3 per cent to under $20 billion. 
This is what some people termed the "mining cliff", essentially the period through which resources projects transitioned from the construction phase through to production. 
And through all of that we never really did get all that close to a recession, though admittedly rising private debt levels did help to grease the wheels a bit.
Rebound
More than four years on, and engineering construction actually began to rise again in early 2017.
Some of this was to do with infrastructure projects - rail, road, and highways - and some was related to ongoing resources investment in existing projects. 
Activity rose quite strongly by +2.8 per cent to $20.3 billion in the first quarter.
Engineering work in the public sector was +10.2 per cent higher over the year, while the quarterly rebound was also helped by a +3 per cent rise in private sector activity in Q1. 
<a href="https://www.propertyobserver.com.au/images/2017/07/03/B2.jpg" target="_blank">Click to enlarge</a>
<div id="post-body-8977417442327794616" class="post-body entry-content">
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 <div>State versus state</div>
<div> </div>
<div>Queensland took most of its medicine back in 2014 as a number of major LNG projects approached the production phase, but the worst has now passed and annual construction activity levels in the Sunshine State have now been rising for four quarters consecutively.</div>
<div> </div>
<div>Annual construction activity has also been rising steadily in New South Wales and Victoria since 2015. </div>
<div> </div>
<div>At least as importantly, Western Australia is now at last getting pretty close to the nadir, meaning that WA is no longer suffering the chronic declines that have characterised that past three years. </div>
 <div class="separator"><a href="https://www.propertyobserver.com.au/images/2017/07/03/B1.jpg" target="_blank">Click to enlarge</a></div>
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 <div>No boom on the horizon, then, but arithmetically speaking this is positive news for the economy, simply because engineering construction is no longer acting as a drag.</div>
<div> </div>
<div>The next pressing challenge will be whether construction employment can remain at today's elevated levels through a combination of residential building and infrastructure projects. </div>
 
PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.
His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank">Four Green Houses and a Red Hotel</a>.
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Engineering construction no longer an economic drag

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GUEST OBSERVER
The economy grew by 0.3 percent in the March quarter after rising 1.1 percent in the December quarter.
Annual economic growth eased from 2.4 percent to 1.7 percent. The economy has not experienced a recession for more than 25 years. Four years ago Australia passed the Netherlands to secure the title of longest economic expansion by an advanced nation in the modern era. 
Contribution to growth: The biggest contribution to growth came from inventories (+0.4 percentage points) from household consumption (+0.3pp), government consumption and non-residential building (+0.2pp). The biggest drag on growth was from net exports (down 0.7pp), dwelling construction (down 0.3pp) and equipment investment (down 0.1pp).
Income: Real gross national income rose by 1.1 percent in the March quarter to be up 5.2 percent on the year. In nominal terms GDP lifted 2.3 percent in the quarter and rose by 7.7 percent over the year.
Productivity: Gross value added per hours worked in the market sector grew by 0.2 percent in the March quarter after rising 0.9 percent in the December quarter. Annual growth was 2.1 percent.
Industry sectors: Fifteen of the 19 industry sectors expanded in the March quarter. Seven sectors added 0.1 percentage points to growth. Three sectors each reduced growth by 0.1pp. Agriculture, forestry and fishing production fell 5.6 percent in the quarter.
What does it all mean?
The Australian economy has had to contend with a lot of factors in the past year – geopolitics, weather events, the on-going unwinding of the mining construction boom and variable housing markets. So economic growth has trekked a zig-zag path. But importantly the record expansion remains on track. Especially positive is the health of the business sector with business conditions the best in nine years. The hope is that employment and investment will continue to lift, maintaining economic momentum. 
The March quarter growth rate may seem modest at 0.3 percent but this followed the strongest growth in five years. The bottom-line is that the doomsayers will need to find another target. The record expansion continues and the outlook remains positive. Particularly encouraging is the fact that annual income growth is the fastest in six years and productivity growth is still above 2 percent. 
Ahead of today’s data there was much focus on Australia possessing the longest economic expansion of any major economy in the modern era. OECD data shows we actually passed the Netherlands to secure this record four years ago. But the positive focus on the achievement is well deserved. 
The outlook for the economy is encouraging. Strong spending on infrastructure as well as keen demand for our exports will support economic growth. And add into the mix the on-going lift in home building – especially on the east coast. Consumers are drawing down saving to spend but in part this reflects an adjustment to the new ‘normal’ wage growth of 2 percent, rather than 3-4 percent. 
The Reserve Bank is always looking ahead and so must we. The outlook for the economy remains bright.
The Reserve Bank expects the economy to grow near its ‘potential’ rate of 3 percent by the end of 2017. That is our expectation also. We continue to believe that interest rates will remain on hold over the rest of 2017.
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
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Record economic expansion continues: Craig James

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GUEST OBSERVER
With the release of the March quarter national accounts, there have been reports the Australian economy could break the Netherlands’ “world record” for continuous growth. But there are three problems with this assertion.
It’s now been 103 quarters (25 years and 9 months) since Australia last had consecutive quarters of negative growth in real gross domestic product (GDP), in the March and June quarters of 1991. 
Contrary to much-repeated claims, the Netherlands didn’t experience more than a quarter-century of economic growth without consecutive quarters of negative real GDP growth between the early 1980s and the global financial crisis.
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<img src="https://www.urban.com.au/images/2017/06/06/Screen%20Shot%202017-06-07%20at%208.04.52%20AM.png" alt="">
The Netherlands’ real GDP declined by 0.3 percent in the June quarter of 2003, and by 0.01 percent in the September quarter of that year, according to data published by Statistics Netherlands and, separately, by the OECD. So, at best, the Netherlands went for only 22 years without experiencing a recession. Australia surpassed that benchmark in 2013.
Yes, that second quarterly decline in 2003 was almost imperceptible. But sporting records are delineated by margins as small as one one-hundredth of a second, so we can’t blithely discount a -0.01 percent fall in real GDP as “not relevant”.
Even if you blinked and missed that tiny second successive decline in real GDP in the September quarter of 2003, the Netherlands still wouldn’t hold the record for the longest run of continuous economic growth. That belongs to Japan – which, according to OECD data, went from the March quarter of 1960 to the March quarter of 1993 without ever registering two or more consecutive quarters of negative growth in real GDP. That’s 133 quarters, or more than 33 years. 
Indeed, if Japanese GDP data were available on a quarterly basis earlier than 1960 it’s likely that this run of continuous economic growth would have been even longer, perhaps as long as 38 years, inferring from annual data available back to 1955. So Australia would need to avoid consecutive quarters of negative real GDP growth until at least 2024 if it is truly to be able to claim this “world record” as its own.
<a href="https://www.propertyobserver.com.au/images/2017/06/06/Screen%20Shot%202017-06-07%20at%208.06.30%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/06/Screen%20Shot%202017-06-07%20at%208.06.30%20AM.png" alt="">
Even more importantly, the definition of a technical recession as (two or more consecutive quarters of negative growth in real GDP) is, as former RBA Governor Glenn Stevens said, “not very useful”. It was originally proposed in December 1974 by Julius Shishkin, who at that time was the head of the Economic Research and Analysis Division of the US Census Bureau (now the Bureau of Economic Analysis, which publishes the US national accounts). 
It’s not used to identify recessions in the US. It takes no account of differences over time, or as between countries, in the rates of growth of either population or productivity – which are the key determinants of whether a given rate of economic growth is sufficient to prevent a sharp rise in unemployment. This is something which most people (other than economists) would use to delineate a recession.
While Australia has avoided consecutive quarterly contractions in real GDP since the first half of 1991, we’ve had two periods of consecutive quarterly declines in real per capita GDP (in 2000 and 2006). We’ve also had two periods of consecutive quarterly declines in real gross domestic income or GDI, which takes account of income gains or losses accruing from movements in Australia’s terms of trade (in 2008-09, and in 2014). Perhaps most meaningfully of all, Australia has had two episodes where the unemployment rate has risen by one percentage point or more in 12 months or less (in 2001 and 2009).
That’s still a better track record than almost any other advanced economy during the past quarter-century or so – and it reflects well on the quality of economic management (and the nature of our luck) over this period. Nonetheless, we shouldn’t be in the business of awarding ourselves prizes to which we’re not entitled.
Saul Eslake is vice-chancellor’s Fellow, University of Tasmania and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/saul-eslake-665" target="_blank">here</a>.
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There’ll be no records set this week by Australian economic growth figures: Saul Eslake

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Retail investment for Q1 2017 totalled $1.1bn, up 23 percent on the same period last year according to Cushman &amp; Wakefiled's Retail Investment Snapshot for the quarter.
According to the report Queensland accounted for 43 percent ($457m) of the national investment volume. 
"In contrast, New South Wales and Victoria recorded $262m and $221m, both below respective longer- run averages, as limited available stock was on the market," the report said.
"Foreign investment rebounded strongly in Q1 2017 to $533m, up from $297m in Q4 2016.
"Foreign investors were active across different centre types and sizes. This was highlighted by German- based Deka Immobilien’s purchase of the Canberra Outlet Centre for $135.5m, with a further $160m committed to a Redbank Plains sub regional centre by Rockworth Capital Partners, and $87m into two neighbourhood centres.
"With a lack of activity in larger core retail assets, where yields are tighter, average transaction yields remained stable for the quarter at 6.3 percent.
"Many of the trends evident in 2016, such as retail property’s relative value proposition and competition to secure assets, remain in place into 2017.
"However, we expect more stock to come to market as established owners sell non-core assets to recycle capital into existing assets. Equally, active traders are likely to dispose of assets to seek new opportunities.
"Not only will this bring increased liquidity, and support overall transaction volumes, but also provide opportunities for new market entrants all along the risk curve. 
"In December 2016, Moving Annual Turnover (MAT) grew 3.4 percent, though continued the downward trend from a peak of 5.7 percent in late 2014.
"Retail turnover growth has been limited by weak employment and income growth though consumer sentiment has bounced back to 99.6 reflecting a more positive attitude towards national economic growth."
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Retail investment for Q1 2017 totals $1.1b: Cushman & Wakefield

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<img src="https://counter.theconversation.edu.au/content/75625/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
The Fair Work Commission is considering whether to increase Australia’s minimum wage.
The Australian Council of Trade Unions is arguing for a A$45-a-week rise. Industry, arguing that currently business has limited ability to afford wages increases, wants the increase capped at 1.5 percent (closer to $10 a week).
While I suspect most people immediately focus on wages as a cost of production for business, it’s worth clarifying precisely what economic roles wages play. There is more than one.
Indeed, wages are certainly a cost. More precisely, their significance for business as a cost is as one component of something economists call “real unit labour cost”.
This is the cost of employing a person in terms of the value of the goods and services a business would produce. Crudely put, this means the proportion of the value of a day’s production that would be needed to pay for a day’s labour. This depends on two things.
Two key influences: productivity and real wages
The first is the real wage – the purchasing power of the worker’s pay packet, which brings into play prices of goods and services. The second is the productivity of the worker – how much the worker produces over a given time.
The real cost of employing a person over time depends on how these two things change. If productivity is growing, then the real wage can grow without an increase in the real cost of labour for business.
But a couple of other economic considerations are relevant when assessing the economic impact of changes in the worker’s wage. The first is that productivity also depends on investment. Changes in technology that allow for greater productivity are often embodied in the new plant and equipment that firms invest in.
Yet what governs investment? This is an age-old question in economics, and perhaps one of the least agreed areas within the profession. But any stab at this question would conceivably point to the expected rate of return on the investment relative to the so-called cost of capital. An economist would typically measure the cost of capital by reference to interest rates, among other things.
However, the rate of return is critically dependent on how much demand there is for the goods and services produced by the new plant and equipment the business invests in.
There is also a competitive imperative which links demand growth and investment. Maintaining market share requires a business to be able to respond to growing demand. Optimally, this requires increasing capacity and thus undertaking investment.
Wages growth and investment
But demand growth varies with spending power and the income that flows to the population, a significant portion of which comes from wages. In other words, wages have a flipside. They’re not just a cost of production; they’re also a source of spending and thus of revenue and profit for business.
This is an important point in economics, specifically about how what we see at the micro level does not automatically replicate itself for the economy as a whole. Looked at from the perspective of a single business, wages appear as a cost. But to only look at things this way is inadequate if you are interested in the impact of changes in wages on the overall economy. For that you also have to consider wages as income and a source of demand.
Expectations about future demand growth are presumably as critical to the investment decision for firms as are expectations about factors such as taxes on business income.
A reduction in business taxation may well increase prospective after-tax rates of return on investment. But, as already mentioned, this assumes people with income to spend are ready to buy the output produced with newly installed plant and equipment.
Looked at from this angle, one could argue that growth in demand and in turn wages growth will be required to warrant producers undertaking investment and in turn the kind of changes to production that underpin productivity growth.
One can go a little further. Assuming a government’s intention is to wind back its contribution to demand in the economy (via government spending) through what is euphemistically termed “fiscal consolidation”, and assuming our trade is not significantly changing, a certain real wage growth is required to generate sufficient growth in demand to warrant sustained investment and productivity growth.
It’s the flipside to this scenario that is worrying. To the extent that increasing profitability through increased productivity is not shared in the form of increased real wages, the economy faces the danger of its productive capacity growing faster than demand. This kind of danger was highlighted long ago by the noted Italian economist Luigi Pasinetti.
In this scenario the profit of each unit of output may increase initially as productivity grows, but demand does not keep pace, in which case the increase in profitability is likely to be short-lived. More worrying in this case is that employment growth suffers and consequently the unemployment rate is likely to rise.
Some economists would counter that real wages would fall in order to absorb any increased unemployment, though this claim has always been contentious.
It supposes that unfettered markets will always provide demand for whatever amounts of goods and services are produced – in itself a controversial position in economics.
Of course, none of this deals with the moral or ethical imperative of a minimum wage which ensures a liveable real wage. Rather, the point here is that, quite aside from the moral or ethical case, there are economic arguments to be had for ensuring an appropriate rate of growth of real wages.
Graham White, associate professor, School of Economics, University of Sydney and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/graham-white-8139" target="_blank">here</a>.
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How wage growth contributes to the economy

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The latest state economic handbook by National Australia Bank predicts the end of the mining investment downswing may be nearing in mining states Western Australia and Queensland.
Riki Polygenis, NAB Head of Australian economics said the report said some indicators are stabilising.
“What we can see in today’s update is that Victoria and NSW will continue to benefit from buoyant population growth, strong services activity and infrastructure expenditure," she said.
"Non-mining business investment in these states has also started to strengthen and will gradually pick up speed. 
“Mining states like Western Australia and Queensland are currently receiving an income boost from higher bulk commodity prices, which are flowing through to corporate profits and state government revenue, although the flow on effects to investment and employment are expected to be limited given the temporary nature of the commodity price surge.
"Looking forward, Victoria and New South Wales will remain ahead of other states, while Queensland will experience the strongest growth overall thanks to resource exports. 
State breakout
NSW
Solid consumption growth, combined with private and public investment has helped NSW retain its mantle as the fastest growing state in the country. Final demand growth rose 4.1 percent in the last quarter of 2016, well above the national aggregate.
“While some of the timely economic partials are now painting a mixed picture, we remain generally optimistic about NSW’s prospects,’’ said Ms Polygenis.
“Overall, Gross State Product (GSP) growth is expected to moderate to around 23⁄4 percent in 2016-17 and then pick up slightly to 2.9 percent in 2017-18 (from 31⁄2 percent in 2015-16), but remain a standout (together with Victoria) in terms of state final demand.”
“We expect the all-important housing market to shift down a gear going forward, as the residential construction boom approaches its peak and price gains slow – reflecting greater supply, credit constraints and affordability constraints,’’ said Ms Polygenis.
“While a severe property price correction is not expected, growth in Sydney housing prices is expected to slow after four consecutive years of double digit growth.’’
VIC
Victoria will also remain a standout across the states despite some moderation expected, with growth neck and neck with NSW. Employment and population growth (particularly from overseas and interstate migration) is expected to continue, while infrastructure spending, services activity and exports and a gradually recovery in non-mining investment will be key pillars of growth. Residential building approvals have peaked, and dwelling construction is not expected to add as significantly to growth going forward.
“House price growth in Victoria is also forecast to ease through 2017, while apartment prices are expected to decline modestly as extra supply comes on line. However current strong momentum in the housing market, and measures to reduce stamp-duty for some first home buyers do suggest some upside risk,” said Ms Polygenis.
TAS
The Tasmanian economy has slowed into 2016-17 despite strength in tourism, agricultural and fisheries industries, although should improve moderately into 2017-18.
“A depreciating AUD would also be supportive of export-oriented industries in Tasmania. However an ageing population, low levels of educational attainment and a concentrated industry structure remain headwinds,” said Ms Polygenis
ACT
The ACT economy continues to improve post the earlier Federal public sector job cuts and has recorded stronger state final demand growth over the past two years.
“We expect the ACT economy to continue to recover, with higher population growth, stronger household consumption and increased dwelling investment underpinning its GSP growth. However with Federal Budget repair still very much on the radar, downside risks remain,’’ said Ms Polygenis.
We expect GSP (Gross State Product) growth to pick up modestly to 21⁄4 percent and 21⁄2 per cent in 2016-17 and 2017-18. The ACT unemployment rate is expected to remain below the national average at 4.3 percent in 2016-17 and 2017-18.
NT
Since construction on the Ichthys LNG terminal peaked last year, project employment has begun to slide, with significant knock-on effects for the NT economy.
Business investment is currently strong, but will slow down sharply once the Icthys LNG project is complete, while volatility in the housing market makes 2017 tricky to predict.
“Tourism statistics for the NT continue to present mixed picture, although we note that domestic tourism is booming with interstate visitors up 22 percent to 361,000 in the year ended September 2016,” said Ms Polygenis.
SA
In 2015-16, SA net exports (in real terms) grew significantly on the back of a depreciated AUD, with services exports rising by a record rate of 12 eprcent in the year, while merchandise exports expanded by the fastest rate since 2010-11 at 11 percent.
“South Australia will experience moderate growth, with infrastructure spending and shipbuilding to provide some offset to the impact of auto manufacturing closures this year. The state has some long-term challenges, including an ageing population and negative interstate migration, but employment and consumer spending are holding up for now,” said Ms Polygenis.
QLD
“The Queensland economy’s transition post the mining boom continues to gain traction and the state will experience the strongest rate of economic growth in 2016-17 owing to a surge in LNG exports and strength in tourism and education,” said Ms Polygenis.
However, business and labour market conditions remain subdued as the state economy continues to transition post the mining investment boom.
Regional Queensland (especially north Queensland), faced with variable commodity prices and drought conditions, is still struggling with depressed business activity, subdued house price growth and elevated unemployment.
WA
“Economic indicators are still extremely weak in WA, with the weakness relatively broad-based across the economy as the mining cycle continues to dominate economic trends. However there is some sign of stabilisation in business conditions, indicating a reduced pace of decline. The current surge in iron ore prices is unlikely to spur additional investment or employment, but is having a positive impact on government finances,” said Ms Polygenis.
Overall, we expect very weak real GSP growth in 2016-17 and a moderate rebound in 2017-18 as LNG exports add to growth.
Despite signs that the property market may soon stabilise, property prices are expected to underperform again in 2017, while the unemployment rate expected to stay around current levels before seeing only a gradual improvement. 
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