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

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Australia's heavily-indebted economy is at risk from Trump-style protectionism and potential fallout from badly roiled financial markets, according to the International Monetary Fund (IMF).
The IMF warns that Australia hasn't escaped worldwide symptoms of financial sickness, despite having survived the end of the resources boom relatively well.
Dr Thomas Helbling, mission chief for the Australia-New Zealand division of the IMF, said the organisation's main fear is that Trump-like protectionism, that slams global trade, would reverse globalisation.
"Nations will turn inward and there will be less global trade," Helbling said.
The federal government was challenged to do more to lift productive infrastructure investment.
The IMF team of economists warned that the RBA no longer has much interest rate ammunition to stave of a potential downturn.
The fund recommends the RBA should lengthen its forecast horizons beyond two years to reinforce its longer-term view that inflation will return to its 2-3% range.
They urged the Turnbull government to ramp up its commitment to restricting the country's debt, which they suggested was getting out of control, by introducing a 'longer-term debt anchor'.
"Rather than have vague notions of debt in the room it might be helpful to be specific about the debt objective and feed this back to what this means for the conduct of fiscal policy," Helbling said. 
Helbling also warned that Australia as an open economy could be hurt by any reversals.
"We would for example expect that if there were less trade, that global growth would slow, [and] commodity prices would decline with corresponding implications for Australia," he told The Australian Financial Review.
While overall threats to the economy have lessened since the fund's last comprehensive assessment in early 2015, its analysts warn that decision-making by the federal government will be "critical" to cutting employment in a "fragile global environment".
Helbling suggested that a tighter policy would also help frame the need for spending decision that will emerge as the population ages.
The fund also urged the government to increase plans for a pipeline of infrastructure investments to prepare for the next major crisis.
The IMF team's preliminary report will now be turned into a formal so-called Article IV report due in early 2017.
</body></html>

jchancellor-FAypfDUnLy

Trump-style protectionism will hurt economy: IMF

<html><body>
GUEST OBSERVATION
Australia's economic success over recent decades reflects both the underlying fundamentals and our ability to ride out various shocks.
The fundamentals that have helped us are well known. They include our openness to trade and investment, our generally favourable demographics, our diverse and talented people, our abundance of natural resources, our ability to undertake structural reform to boost productivity and our links with the fast-growing Asian region. But also important to our prosperity is the fact that over the past quarter of a century, our economy has not been seriously derailed by economic shocks. After all, nothing undermines prosperity like a severe recession in which large numbers of people lose their jobs and see their wealth decline.
It is not as if there has been a shortage of shocks that could have derailed us. There was the Asian crisis, the bust of the US tech boom and the global financial crisis. We also experienced a once in a century surge in our terms of trade and the subsequent decline.
The point is that we have been able to ride out these and other shocks without too much difficulty. In part this is because of the flexibility of our exchange rate, monetary policy and the labour market. We have also avoided the build-up of large financial imbalances. But this resilience is also because when the shocks hit we have had buffers to absorb them. Because of these buffers, we had options that not all other countries have had.
Today, many business people tell us they feel the heavy weight of uncertainty. The long list of factors we hear includes: uncertainty about the transition in the Chinese economy; the future direction of technology; the political environment, both abroad and at home; the impact of high debt levels on future consumer demand; and uncertainty about where the extraordinary global monetary expansion will ultimately end. Understandably, when people feel uncertain, they sometimes feel that it's best to delay making decisions, especially if those decisions are difficult to reverse. We want to seek out more information before proceeding. We want to wait.
Australians have managed pretty well over the past quarter of a century, but we feel a bit uncertain about the future.
In my view, despite the uncertainties, we should still be looking forward to the future with some optimism. Here in Australia, with our long track record of good economic growth and our demonstrated ability to adjust to a changing world, we have a set of advantages that not all countries have. Our collective challenge is to capitalise on those advantages. Ensuring a strong focus on lifting productivity is surely the key here.
As we work out how to do this, though, we obviously can't ignore the uncertainties. But neither can we let those uncertainties force us to retreat, to withdraw from the world. If we do this, then we, and our children, will be poorer as a result. Rather, we need to deal with, and prepare for, those uncertainties. Part of our preparation is to ensure that we have adequate buffers in place to deal with future shocks wherever they come from. These buffers provide us with options when challenges arise.
Article continues on the next page
<hr class="system-pagebreak">
<h2 id="financial-system">Financial System</h2>
One area where it is particularly important to have adequate buffers is in the financial sector.
The financial sector can either act as a cushion for adverse shocks or it can act as an amplifier. Which one it turns out to be depends upon how well the system is prepared to deal with bad events. If the system has skimped on liquidity and is carrying too little capital, then it is likely to amplify shocks. Conversely, if the financial system has adequate buffers, it is better able to support the economy in difficult times.
The aftermath of the global financial crisis is a good example of what can happen. The chart below (Graph 1) shows how bank lending has grown – or in the case of Europe, contracted – since the financial crisis in 2008. Many banks in Europe and the United States simply did not have large enough buffers for the events that unfolded. Even today, capital levels remain an issue for some European banks. Insufficient capital means that some banks are constrained in their ability to provide finance and helps explain why banks have not taken advantage of the European Central Bank's offer to lend them money at an interest rate below zero. The European economy has suffered as a result. In the United States, the picture is more positive, partly because there were more successful efforts early on to rebuild the buffers in the system.
Graph 1
<img src="https://www.rba.gov.au/speeches/2016/images/sp-gov-2016-11-15-graph1.gif" alt="Graph 1: Total Banking Lending">  
In Australia, it has been a different story. The banking system did have the capacity to support the economy during the global crisis, although it is important to point out that it did this with the assistance of the Australian government through various guarantee schemes following the freezing of global capital markets.
Around the world, the experience of recent years has rightly caused banks and their regulators to think again about how large the buffers should be. The answer has been that they should be larger than they were before. This has been true in Australia too, despite the starting point here being better than in many other countries.
Since the beginning of 2015, the major banks have raised around $28 billion from new equity and retained earnings, significantly increasing their capital relative to their assets (Graph 2). Banks are also holding a larger share of their assets in liquid form and have changed the composition of their funding towards more stable sources (Graph 3). During 2016, liquid assets have accounted for around 20% of the major Australian banks' total assets, up from an average of around 15% in the years preceding the financial crisis. Banks have also increased their use of deposits and long-term debt and reduced their use of short-term debt.
Graph 2
<img src="https://www.rba.gov.au/speeches/2016/images/sp-gov-2016-11-15-graph2.gif" alt="Graph 2: Australian Banks' Capital and Assets">
Graph 3
<img src="https://www.rba.gov.au/speeches/2016/images/sp-gov-2016-11-15-graph3.gif" alt="Graph 3: Liquid Assets and Deposits">
These are positive developments and they provide us with an extra degree of insurance against future shocks.
Of course, this insurance does not come for free. Higher capital, more liquidity and more expensive, stable funding all have a price. We need to keep an eye out to make sure that this price is not too high and that we don't constrain the ability of the financial system to do its job. My view is that this has not been the case in Australia and that the changes have increased the resilience of our system.
There is, though, a legitimate discussion to be held as to who pays the price. We see this issue frequently debated in our media. One possibility is that the cost falls on the bank shareholders in the form of lower returns on equity. Another is that it falls on borrowers in the form of higher interest rates on bank loans relative to the cash rate.
Ultimately, the balance is for the market to sort out, but it would seem unlikely that the cost will fall entirely on one side or the other. Over time, shareholders and borrowers will both benefit from these larger buffers to the extent that they contribute to economic stability. The shareholders should experience less volatile returns and borrowers should be more likely to be supported during difficult times. The larger buffers provide a form of insurance to all.
Article continues on the next page
<hr class="system-pagebreak">
<h2 id="fiscal-arena">Fiscal Arena</h2>
A second area where buffers are important is on the fiscal front.
Again, the events of the past decade provide a useful illustration.
In Europe, we saw examples of what can happen when public finances are not in order when difficult times strike. In some countries, when troubles arrived, governments felt that they had little choice other than to impose austerity measures to restore the fiscal accounts, despite the fact that these measures added to the immediate downturn in the economy.
Australia, again, provides a counter example. When the shockwaves of the global financial crisis hit us, the Australian government did have the capacity to support the economy through a fiscal expansion. This support was one of a number of factors that helped us get through this period. The ability to provide the stimulus was enhanced by the sound fiscal position that had been built up over previous years (Graph 4). While the exact nature of the stimulus remains a matter of debate, regardless of where you stand on that debate, the fiscal buffers that we had did provide us with options that not all other countries had.
<div>
<div>Graph 4</div>
<img src="https://www.rba.gov.au/speeches/2016/images/sp-gov-2016-11-15-graph4.gif" alt="Graph 4: Australian Government - Per Cent of GDP">
</div>
Since the financial crisis in 2008, the budget has been in deficit and debt levels have moved higher. Under current projections, net debt is expected to peak in 2017/18 at 19.2% of GDP and a balanced budget is not expected until 2020/21. This would still leave the fiscal accounts in better order than those in many other countries. Importantly, this means that fiscal policy still retains capacity to support the economy in difficult times. But this capacity is less than it once was. We have a smaller buffer than we once did and a smaller buffer means fewer options.
So from a risk-management perspective, there is merit in rebuilding our buffers on the fiscal front. This is a task that can be undertaken over time and it requires difficult choices to be made. As Secretary to the Treasury John Fraser reminded us in a recent speech, the task is made more difficult by slow growth in nominal income. But it is important that we ensure our public finances are on a sustainable track. This requires a better balance to be established, over time, between recurrent spending and revenue. It is worth pointing out that this does not preclude government spending on infrastructure, where this is backed by a strong business case. Such spending can provide support for the economy and can help generate the productive assets that a prosperous economy needs. Done well, infrastructure spending is not inconsistent with establishing a better balance between recurrent spending and revenue.
Article continues on the next page.
<hr class="system-pagebreak">
<h2 id="household-finances">Household Finances</h2>
The third set of buffers are those in household balance sheets. These buffers too are important as they influence how households respond to difficult economic times.
Ideally, in such times, people are able to draw on their savings a bit, and perhaps even access credit, so that they don't have to cut their consumption sharply. Of course they can do this only if their balance sheets are in reasonable shape.
Again, overseas experience is relevant here. In the United States when the recession hit in 2008 some households found that they had simply borrowed too much. What followed was a period of defaults by some, less new borrowing and faster repayment of some debt. The result was a more severe downturn and a more protracted recovery than otherwise would have occurred.
Given this and other experiences, we need to pay close attention to household balance sheets here in Australia too. Debt levels, relative to income, are high in Australia and are much higher than they once were (Graph 5). Currently, household debt is equivalent to 185% of annual household disposable income, a record high and up from around 70% in the early 1990s. If we net off the household sector's holdings of cash and deposits the pattern looks somewhat different. It is important, though, to recognise that the households with the debt typically are not the same ones with the large deposits.
Graph 5
<img src="https://www.rba.gov.au/speeches/2016/images/sp-gov-2016-11-15-graph5.gif" alt="Graph 5: Household Debt and Deposits">
The reasons for the large increase in household debt have been well documented. The lower nominal interest rates that followed lower inflation in the 1990s allowed people to borrow more, as did the liberalisation of the financial system. As a nation, we took advantage of these new opportunities to borrow. As a result, we ended up with both higher levels of debt and higher housing prices.
Given the low level of interest rates and ongoing employment growth, most households are managing the higher levels of debt, but many feel that they are closer to their borrowing capacity than they once were and have adjusted their behaviour accordingly. Since the financial crisis, there has been a noticeable increase in the household saving rate. We are not using our houses like ATMs in the way that we were in the decade to the mid 2000s. Gone are the days when higher housing prices were a sign that we should go to the bank and borrow more to spend.
One illustration of this change in behaviour is the large increase in balances held in mortgage offset accounts and redraw facilities. In aggregate, households now have balances in these accounts equivalent to 17% of total outstanding housing loans, which is a buffer worth 2½ years of scheduled repayments at current interest rates (Graph 6). From the survey data we look at, we can see that over recent years more households in all income brackets have got ahead on their mortgages (Graph 7).
Graph 6
<img src="https://www.rba.gov.au/speeches/2016/images/sp-gov-2016-11-15-graph6.gif" alt="Graph 6: Aggregate Mortgage Buffers">
Graph 7
<img src="https://www.rba.gov.au/speeches/2016/images/sp-gov-2016-11-15-graph7.gif" alt="Graph 7: Households Ahead on Home Loan Repayments">
 
Article continues on the next page.
<hr class="system-pagebreak">
<h2 id="conclusion">Conclusion</h2>
This more prudent behaviour is a positive development. Given the high and rising levels of debt, though, we need to watch things carefully.
It is important that we avoid a build-up of financial imbalances in household balance sheets. We can never know with certainty exactly what level of debt is sustainable. It depends on income growth, lending standards and asset prices. But it surely must be the case that the higher is the debt, the greater is the risk. Given this, as I said recently when explaining our monetary policy decisions, it is unlikely to be in the public interest, given current projections for the economy, to encourage a noticeable rise in household indebtedness, even if doing so might encourage slightly faster consumption growth in the short term.
In each of the three areas I have talked about this evening – the financial sector, the fiscal arena and household balance sheets – the story is broadly similar. Stronger buffers give us more options. And more options promote stability and prosperity. If we skimp on the buffers then we expose ourselves to more risk.
It is true that building these buffers does not come for free. In the financial sector, it might mean lower returns on equity or higher lending margins. In the fiscal arena, it means difficult trade-offs about recurrent spending and taxation. And in the household sector, it means consumption growth is slower for a time than it might otherwise be. But this is the nature of insurance. You pay a premium for protection against future uncertainties and to provide resilience. Of course, we need to make sure that this premium is not too high. But it is surely better to pay the insurance premium when the sun is shining than when the storm clouds are building or, worse still, to seek insurance when it is too late.
This is an edited extract of a <a href="https://www.rba.gov.au/speeches/2016/sp-gov-2016-11-15" target="_blank">speech by Philip Lowe</a>, Governor of the Reserve Bank of Australia, at the Committee for Economic Development of Australia (CEDA) Annual Dinner, Melbourne.
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po-LsXgBTHBmX

Financial buffers will help us weather fiscal storms: RBA Governor Philip Lowe

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New South Wales is poised to lead the country in growth in the next two years, topping Victoria, even as the overall economy remains weak and the pain continues for the resources-powered economies of Queensland, NT and Western Australia.
According to the latest Economic Outlook bulletin by leading industry analyst BIS Shrapnel, the Australian economy will remain weak for some years yet until the non-mining sectors start to drive growth. However, the boost due to investment in housing will decline as as state-by-state housing peaks, and then falls, it adds.
<a href="/images/BISShrapnel1.png" target="_blank">Click to enlarge</a>
 <img src="/images/BISShrapnel1.png" alt="">
"The structural shift has begun – albeit with years to come," says the report.
A lower dollar has boosted the key tradeables sectors: tourism, education services, agriculture, manufacturing industries and some business services, which power the economies of NSW and Victoria, the report says. The trade-exposed states of NSW, Victoria, South Australia and Tasmania, which had suffered under the high dollar from 2007 to 2014 – are now strengthening because of the increased competitiveness from the lower dollar.
“This is a major reversal in interstate relativities from just four years ago,” said BIS Shrapnel senior economist and report author, Richard Robinson.
“For most of the decade to 2012, the mining investment boom saw Western Australia, Queensland and, more recently, the Northern Territory, record by far the strongest economic growth. Now, with the resources investment boom well into a substantial decline – and with more to come – they have been overtaken by NSW and Victoria. The pendulum is swinging away from the mining boom regions and states, and towards the states now being boosted by the lower dollar and their non-mining tradeables and services sectors.”
The peak in the mining boom and subsequent falls in both resources investment and commodity prices coincided with the 30 per cent decline in the Australian dollar (against the US dollar) to US72 cents in the March quarter 2016, although the dollar has since risen to US76 cents.
Among the states, there will continue to be marked differences in State Final Demand (SFD) according to the outlook for investment, which in turn will be a key influence on the prospects for employment and consumer spending in each state. Rising public investment in virtually all states will make a positive contribution to SFD growth.
This spending will also boost state output (Gross State Product) and employment, because public investment in infrastructure and buildings conveys significant multipliers through the economy via its high local content – except when governments don’t purchase local materials, such as steel.
<a href="/images/2016/11/14/BISShrapnel2.png" target="_blank"> Click to enlarge</a>
<img src="/images/2016/11/14/BISShrapnel2.png" alt="">
"Dwellings investment also has high local multipliers, but the boost from this upswing is now set to diminish and then decline, as state-by-state housing peaks, and then falls. But it is the wide differences in the cycles of business investment which will have the most impact in determining state outcomes – particularly with regard to mining investment versus non-mining business investment."
These differences in investment and growth outcomes are a reflection of the structural change process which started with the upswing of the mining investment boom. This structural adjustment still has a few years before it finishes and the Australian economy returns to the balanced economy enjoyed before the mining boom.
“The temptation is to use the last decade’s growth as a benchmark against which to measure current progress. But the last decade was abnormal. It involved significant structural change as non-mining industries and investment ‘made room’ for the mining boom,” said Robinson. “We won’t simply see a uniform recovery over the next decade across industries and the states, back to the peak levels of the last decade. There will again be significant structural changes affecting the performances of industries and regions, this time away from mining and back to the non-mining industries that made room.
“That process will continue for some years yet. The norm isn’t a return to the averages of last decade, but a return to the pre-mining boom growth of the decade before. The Australian economy will remain weak for some years yet until non-mining sectors take over as the engine of growth.
“And while we navigate this structural change and major cyclical shifts, we’ll also have to cope with any fall-out from President-elect Donald Trump’s more outlandish policies – should his campaign rhetoric be translated into actual policies. But we’re optimistic that little of the more dangerous policies will be enacted, and that the world economy will continue to limp along.”
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prateek24-ezbwHMbNAk

Years of structural shift to come for Australian economy: BIS Shrapnel 

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<img src="https://counter.theconversation.edu.au/content/68060/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
It came as no surprise that the Reserve Bank left the cash rate at its historic low 1.5 percent on Tuesday. Governor Philip Lowe’s statement contained most of the boilerplate phrases: “the economy is growing at a moderate rate”. “Labour market indicators continue to be somewhat mixed.” “Measures of household and business sentiment remain above average.”
But it was the following paragraph that piqued my interest:
“Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 has been helping the traded sector. Financial institutions are in a position to lend for worthwhile purposes. These factors are assisting the economy to make the necessary adjustments, though an appreciating exchange rate could complicate this.”
Not to go all deconstructionist, but it’s worth parsing those words carefully. “Low interest rates have been supporting domestic demand”: i.e. the usual effect of cheaper borrowing costs has worked. 
<a href="/images/2016/11/04/Screen%20Shot%202016-11-04%20at%209.14.33%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/11/04/Screen%20Shot%202016-11-04%20at%209.14.33%20AM.png" alt="">
The “lower exchange rate has helped the traded sector”: i.e. a lower dollar makes our exports cheaper for foreigners to buy. 
“An appreciating exchange rate could complicate this” underlines the long-held concern the RBA has in the Aussie dollar rising above about 75 US cents. This could happen, for instance, if the US Federal Reserve fails to raise rates as aggressively as markets expect, or if there is a continued flight out of Europe to Australia’s relative safety and positive interest rates.
The fact that the RBA is so concerned about this highlights how interconnected Australian monetary policy is with international events and policy. And in a world as uncertain as the one we are in, it’s dangerous to make strong predictions about the future course of monetary policy.
The most interesting sentence of all in Dr Lowe’s statement is:
“Financial institutions are in a position to lend for worthwhile purposes.” 
This is a comment about the ability of Australian banks (essentially the big four) to take risk. That is, a comment about the strength of their balance sheets. Assuming it’s accurate, this is both comforting and important. If business and consumer confidence do pick up further, and businesses want to invest, then they should be able to borrow to do so, according to Dr Lowe.
Meanwhile, building approvals fell sharply in September, down 8.7 percent on a seasonally adjusted basis – well beyond market expectations. Housing approvals were up slightly, 2.3 percent, but apartment approvals fell 16.3 percent. That sounds bad, but the apartment sector is volatile, and there have been concerns about oversupply – especially in Brisbane and Melbourne. Still, overall approvals are down 6.4 percent on last year.
That’s no good for housing affordability, but it also has a monetary policy implication. If it fuels a continued escalation in housing prices – especially in Sydney and Melbourne, then the RBA may well feel constrained to cut interest rates in the event that they otherwise might want to.
There was mixed news about the Australian services sector – the largest and most economically important in the economy – with the Australian Industry Group’s Performance of Services Indicator up 1.6 points to 50.5. This is well below levels of around 56 before the financial crisis, and below the 54s recorded in mid 2015.
The ABS reported Thursday that the trade deficit fell 35% in September to A$1.227 billion, in seasonally adjusted terms. This was largely due to the recent increase in commodity prices – something over which Australia has no control, and which are devilishly difficult to forecast going forward.
Overseas, there was positive news from China where both the official Purchasing Managers’ Index (PMI) and the unofficial Caixin index came in at 51.2, ahead of expectations and indicating expansion (as numbers above 50 do). The official PMI is more relevant for large, state-owned enterprises, while the Caixin index is useful for understand medium-sized business. Often they don’t align, so this may be an early signal of a general positive trend. Stay tuned in coming months.
In fact, that will depend in no small part on whether Dr Lowe’s comment about banks in Australia having the balance-sheet capacity to lend is true in China. There are serious concerns about household indebtedness and the quality of bank balance sheets in China. A sustained increase in the PMI might be a hint that things are not quite so bad. September, however, is one datum point.
The Australian economy continues to show some positive signs, but there are pockets of weakness and cause for concern every month. And these aren’t concentrated to one sector, like the mining sector. In recent months there have been (and continue to be) legitimate concerns about: the labour market, business confidence, consumer confidence, inflation, growth, and more.
It looks like it will be some time before we see a consistent run of data indicating that we should have confidence in a genuine recovery.
Richard Holden is professor of economics and PLuS Alliance Fellow, UNSW Australia and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">here</a>.
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Australia not immune from global market uncertainty

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Model simulations suggest that during private deleveraging, targeted fiscal interventions should be used to help unclog an economy’s credit system, as the cost of inaction is much higher including from a public debt sustainability perspective, according to IMF's latest report.
However, the optimal size of the intervention depends on the available fiscal space and the efficiency of intervention, under- scoring the importance of carefully designing these measures.
In the current global environment of low growth and private sector deleveraging—and with a strained financial system in some countries diminishing the effectiveness of monetary policy—there is a question of whether fiscal policy can play a role in facilitating the ongoing adjustment.
<a href="/images/2016/10/31/Impact%20of%20Targeted%20Interventions%20in%20a%20Deleveraging%20Phase.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/31/Impact%20of%20Targeted%20Interventions%20in%20a%20Deleveraging%20Phase.jpg" alt="">
The dynamic general equilibrium model developed by Batini, Melina, and Villa (2016) is used in this box to assess the benefits of alternative fiscal policy measures.
The simulations assume that there is a shock in house prices similar in size to that observed in the United States during the global financial crisis, pushing the private sector into deleveraging. Three types of stimuli are considered: (1) a targeted intervention in the form of a subsidized government loan to the private sector when the credit channel is not working, (2) government consumption, and (3) public investment. Figure 1.4.1 shows the relative benefits of these measures compared to a no-policy-action scenario.
Overall, targeted fiscal intervention can alleviate the recessionary impact of private sector deleveraging, with the output gap up to 41⁄2 percentage points higher relative to no action (panel 1). By relaxing the private sector’s borrowing constraints, this type of measure allows households and firms to spend while deleveraging, supporting aggregate demand.
In addition, public debt is slightly lower than under no intervention, despite the up-front fiscal cost as a result of the boost to growth (panel 2).  The benefits of intervention (in terms of minimizing output losses) for a given size of stimulus decrease with the inefficiency costs associated with poor targeting (red versus blue lines in panels 1 and 2).
The output benefits of targeted intervention are four times larger than those of more standard stimulus measures (panel 3). The main reason for this powerful result is that, by lending to credit-constrained house-holds and firms, the government can leverage a much larger amount of spending than through other policy stimuli of equal cost.
That is because the fiscal cost of targeted intervention is only a fraction of the total government loan.
The higher the initial public debt (a proxy of the available fiscal buffers), the lower the optimal level of intervention that minimizes output losses (panel 4). With higher public debt, the sovereign risk premium goes up, increasing the fiscal cost of intervention and thereby limiting the optimal amount of credit that the government can intermediate.
Still, intervening pays off as long as there are some buffers, suggesting that multipliers are very high.
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j.ballantyne1990-6AQqhLzZaK

Property 101: The benefits of targeted fiscal intervention

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The sovereign net worth implied by market prices tends to be on average about 20 percent of GDP higher than its accounting value for a sample of 31 advanced economies and emerging market economies, according to IMF's latest report.
Differences between market and accounting values are more positive for countries with weaker fiscal fundamentals and have increased disproportionately for euro area countries over the past two years.
Sovereign credit indicators (such as credit default swap spreads and bond yields) offer valuable information about the size and riskiness of government balance sheets, as perceived by the market. Higher credit spreads, which measure the default risk borne by public bond holders, indicate that a government’s financial solvency has deteriorated.
This occurs when the government net worth declines and eventually becomes negative—at which point government assets become insufficient to fully cover outstanding liabilities.
This box relies on a finance model that builds on the contingent claim analysis framework of Jobst and Gray (2013). The model’s purpose is to infer a market-implied estimate of government assets, which are mostly unobservable, from the (observed) amount and maturity structure of outstanding debt securities and their prevailing market valuation, under the assumption that available credit indicators imply an accurate assessment of sovereign risk.
The market-implied sovereign net worth is then computed and compared with the accounting data reported by statistical agencies. The framework is applied to monthly observations between April 2012 and the end of 2015 from 31 advanced and emerging market economies for which comprehensive accounting balance sheets are available.
Overall, the analysis shows a significant gap between market- and accounting-based assessments. Results for 2014 suggest that market-implied sovereign net worth exceeds its accounting equivalent by about 20 percent of GDP on average, with considerable cross-country variation (Figure 1.5.1).
The market assessment is forward looking and thus may reflect various factors, including valuation effects and the acknowledgment of unobserved or unmeasured effects that have an impact on debt sustainability but are not recorded by statistical offices (such as future primary balances and implicit guarantees received or granted by the government).
<a href="/images/2016/10/12/Median%20Evolution%20of%20Market-%20Implied%20Net%20Worth%20201215.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/12/Median%20Evolution%20of%20Market-%20Implied%20Net%20Worth%20201215.jpg" width="350">
Moreover, the gap between the market and accounting measures of sovereign net worth is positive and widens for countries with weaker fiscal positions (in Figure 1.5.1, fiscal stress is defined as debt ratios exceeding debt sustainability analysis thresholds, but the result is consistent with broader measures of fiscal soundness).
Because the model controls for changes in sovereign risk, this means that for these countries, market prices would justify a significantly higher net worth than measured by accounting data. Conversely, accounting balance sheets would be consistent with sovereign credit spreads above those currently observed.
Interestingly, euro area countries have experienced a much higher increase in market-implied net worth than other countries in the sample since mid-2012.
In these countries, net worth rose by more than 30 percent of GDP on average between mid-2012 and the end of 2015, with half of the surge occurring in the months following European Central Bank President Mario Draghi’s July 2012 pledge to do “whatever it takes to preserve the euro” (Figure 1.5.2).
Over the same time period, expected losses on public debt, which underpin the estimation of market-implied net worth, declined sharply (Figure 1.5.3). Fiscal consolidation efforts and overall financial conditions are certainly part of the story, but they are not sufficient to explain such a sharp increase in a short period of time.
Other factors are also at play, most likely monetary policy actions and perceptions about future monetary stance, suggesting benefits from coordinated policy measures (IMF 2016c).
<a href="/images/2016/10/12/Change%20in%20Market-Implied%20Expected%20Losses%20on%20Sovereign%20Debt%20201215.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/12/Change%20in%20Market-Implied%20Expected%20Losses%20on%20Sovereign%20Debt%20201215.jpg" width="350">
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Property 101: How much do financial markets value government balance sheets?

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GUEST OBSERVER
The federal government’s proposal to amend paid parental leave may result in short term fiscal gains, but overlooks the fact that well-functioning families provide long-term economic and social benefits to the community.
The paid parental leave scheme was designed to enhance the well-being of families by providing a strong foundation in the months following the birth of a child. The 2016 Bill limits the entitlements of women who receive some level of support from their employer by restricting the Commonwealth support to a top-up payment that would be a maximum of 18 weeks at the minimum wage. 
The current scheme entitles the primary carer to claim up to 18 weeks at minimum wage, of which two weeks can be claimed by the carer’s partner (Dad or Partner Pay). Women earning more than A$150,000 per annum are not eligible for the government scheme. The minimum provisions of the National Employment Standards further allow a parent to take up to 12 months of unpaid parental leave.
This original scheme was not designed as a top-up scheme, but to complement payments available under existing employment arrangements. It recognised that some new parents had rights under their existing employment agreements, so the policy was explicit that the parental leave pay can be received in addition to other entitlements including employer-provided parental leave. 
Before fiddling with the design of paid parental Leave, we need to be clear about the purpose of the policy. Family policies, including child care, early education, paid parental leave and family benefits are not just about economics and productivity: they are also about ensuring children get a good start in life. The broad reach of this policy is set out by the diverse range of women’s groups who have signed the call to protect paid parental leave. 
<h2>What the experts say</h2>
Health experts are unanimous about the benefits of parental bonding in the first weeks of life. The International Labour Organisation recommends mothers be entitled to at least 18 weeks of leave, on the equivalent of their normal rate of pay.
The World Health Organisation further recommends that infants should be breastfed for the first six months of life, with supplementary breastfeeding until at least the age of two. These recommendations were critical in the design of the 2010 paid parental leave policy, with the Productivity Commission noting that:
"a leave period of 18 weeks of postnatal leave (as proposed in the draft report), combined with adequate payment levels appropriately balances the above considerations. Such a duration would provide the overwhelming majority of parents, more than 90 percent according to preliminary estimates, the option of taking at least 26 weeks of leave without undue financial stress."
The current proposals will meet the 18 week benchmark, but payments are limited to the basic wage. This is about half of average weekly earnings for women. If paid parental leave cannot be combined with other leave entitlements, the amount the parent receives will be inadequate to give many parents the option of taking the recommended 26 weeks of leave to bond with and care for the newborn baby.
WGEA data shows that in 2015, less than half of employers (48.2 percent) provided paid parental leave. Of those, 80.9 percent offered full pay and 8.6 percent topped up the government scheme to full pay. The average period of paid leave was 10.2 weeks. 
The most highly feminised industries of health, childcare and primary education are more likely to provide leave on full pay, but the duration of the leave remains around the average. This is a long way from the 26 weeks that the WHO and the Productivity Commission recommended as being in the best interests of the child. 
Under the current arrangements, a new parent who is entitled to claim 10 weeks on full pay from their employer would be entitled to dad and partner pay of two weeks and 16 weeks of Parental Leave Pay. This would enable the family to get to 26 weeks, although they would need to budget carefully to get through this period.
Under the proposed changes, the family would be restricted to eight weeks of parental leave pay following the employer-funded leave. This leaves the family with the choice of either returning to work or remaining on unpaid parental leave for the balance of the recommended 26 weeks. 
When deciding whether to return to work, other practical issues must be considered. 
If adequate breastfeeding facilities are available in the workplace, 18 weeks would meet the ILO standards, but the WGEA data also shows that less than half of employers (45.7 percent) provide private breastfeeding facilities. If this can be addressed, the family will then need to find a place in a childcare centre for a child under six months old. The cost of childcare takes a further chunk out of the family earnings.
Paid parental leave policies need to consider a range of objectives. The economic objectives include encouraging women to remain active participants in the workforce. But the overriding objective is to improve the well-being of families, including the health, social and cognitive development of the child.
Helen Hodgson is associate professor, Curtin Law School and Curtin Business School, Curtin University and author for The Conversation. She can be contacted <a href="https://theconversation.com/profiles/helen-hodgson-94553" target="_blank">here</a>.
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Paid parental leave plan ignores economics of well-functioning families

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GUEST OBSERVER
Australian consumer price data for Q3 2016 indicates that while inflation remains below the Reserve Bank of Australia’s (RBA) target band, there are signs of stronger price growth, indicating we may be near the inflation low for this cycle. This provides mixed signals for Australian commercial property.  For the retail sector, the data indicate both tradeable and non-tradeable goods inflation appears to have stabilised, suggesting improved pricing may support retail sales growth. However, this is likely to be limited by soft wages growth and ongoing competition in the supermarket and apparel sectors. Stronger inflation may also put upward pressure on bond yields, limiting demand for Australian commercial real estate and A-REITs. However, thecommercial real estate bond yield spread remains very large andAustralian commercial real estate continues to look attractive compared to many overseas markets, suggesting investment demand should remain solid.
<a href="/images/2016/10/27/unnamed.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/27/unnamed.jpg" alt="">
 
What happened?
Consumer price data for Q3 2016 was released today by the Australian Bureau of Statistics (ABS). Theheadline inflation data show annual growth of 1.3%, up from 1.0% in June and price growth over the quarter rose to 0.7% from 0.4% in June. The growth was stronger than expected with the consensus estimates at 0.5% quarter on quarter (QoQ) and 1.1% year on year (YoY)
The headline figure includes some items with volatile pricing, so the RBA tends to keep a closer eye on measures of ‘core’ inflation such as the Trimmed Mean and Weighted Median. These rose by an average of 1.5% over the year. At 1.5%, the figure remains below the RBA’s target range of 2%-3%, the low price pressure being a factor in the RBA’s decision to cut the cash rate to 1.5% in August. The market, as indicated by ASX 30 Day Interbank Cash Rate Futures, was yesterday pricing in the chance of another rate cut at next Tuesday’s RBA meeting at just 16%. The low core inflation data may increase the odds of another rate cut, however, emerging signs of price growth in some areas may temper this.
Unlike previous quarters in 2016, price growth across the various categories was generally positive (Figure 1). 
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<img src="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.28.08%20AM.png" alt="">
While most price growth continues to appear in non-discretionary categories such as health andeducation there was also growth in a number of ‘retail’ categories including appliances, furnishings andapparel. The strongest price growth was in the alcohol and tobacco category and was largely due to tobacco tax increases. Food price growth picked up on a surge in fruit and vegetable prices, up 11.6% QoQ. Falling utility prices had been dampening overall CPI increases, however in Q3 utility costs had their strongest increase since the end of carbon pricing with electricity costs rising 5.4% QoQ (Figure 2).
<a href="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.29.17%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.29.17%20AM.png" alt="">
Tradeable and non-tradeable goods price growth appears to have stabilised after several quarters of slowing growth (Figure 3).
<a href="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.30.11%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.30.11%20AM.png" alt="">
Tradeable goods price growth was 0.7% over the year. Still low, though it had averaged zero growth over the previous six quarters. Tradeable goods inflation is usually correlated with changes in the Australian dollar (AUD), however, this relationship has broken down recently (Figure 4). 
<a href="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.31.08%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.31.08%20AM.png" alt="">
The break appears correlated to the relatively soft petrol prices, which now appear to be stabilising (Figure 5). 
<a href="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.32.49%20AM.png" target="_blank"> Click to enlarge</a>
<img src="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.32.49%20AM.png" alt="">
Weak apparel price growth also contributed to low tradeable goods inflation. While apparel price pressure is still soft, the 1.2% YoY growth recorded this quarter is the strongest since March 2012. The soft growth is likely due to increased price competition from new international retailers such as H&amp;M, UNIQLO and Zara as well as increased use of mobile technology for price comparison.
What does it mean?
Retail
Areas of increased competition such as apparel and supermarkets have contributed to weaker retail price growth though there are signs prices are stabilising. Sectors with stronger price growth, such as household goods, are continuing to benefit from the strong east coast housing market and small business tax deductions. This suggests the downward pressure on moving annual turnover growth will begin to dissipate and sales growth improve (Figure 6).  
<a href="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.33.45%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.33.45%20AM.png" alt="">
That said, the upside is likely to be limited by factors such as weak income growth. Employment data, released last week, show a spike in part-time employment.  This is part of a continuing trend associated with the end of the mining boom and is correlated with relatively weak wages growth (Figure 7).
<a href="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.34.42%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.34.42%20AM.png" alt="">
Investment demand
A low inflation, soft economic growth environment has resulted in very low interest rates across the globe. This led to a global hunt for yield and relatively strong demand for Australian commercial property. Therelatively wide property income – bond yield spread has supported the demand for Australian commercialproperty. Whilst today’s data suggest we may be near the low point for inflation in this cycle and put upward pressure on bond yields, they would need to increase significantly before Australian commercial real estate begins to look relatively expensive (Figure 8).
<a href="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.35.42%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.35.42%20AM.png" alt="">
In addition, Australian commercial real estate appears relatively attractive compared to many overseas markets, which should also support ongoing demand from international investors. 
A-REIT performance has been linked to changes in bond yields. Figure 9 indicates the increase in theS&amp;P/ASX 200 A-REIT index has been correlated with the fall in bond yields since 2011. If bond yields continue to increase from their recent lows, this is likely to limit A-REIT stock price growth.
<a href="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.36.43%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/27/Screen%20Shot%202016-10-27%20at%208.36.43%20AM.png" alt="">
John Sears is national director, research, Cushman and Wakefield and can be contacted <a href="https://www.cushmanwakefield.com.au/en-gb/" target="_blank">here</a>.
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CPI and the impact on commercial property: John Sears

Housing finance above decade averages in six states and territories: CommSec's Craig James

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With Australian retail yields near historic lows, compared with fixed interest investments and retail property around the globe, retail property in the country continues to attract investors, says Cushman and Wakefield.
The commercial real estate firms Q3 Retail Snapshot summarises its findings for the Australian economy and the retail sector.
ECONOMY
The Australian economy performed more strongly than expected in Q2 2016, expanding 2.9 percent in annual average terms. This result outperforms the Q1 outcome of 2.7 percent and is similar to the trend rate of 3 percent. 
Population growth, a slowly improving tourism sector and increased export volumes have helped to reduce the impact from declines in resource-based states. August saw a further 25 bps cut to the cash rate, to 1.50 percent, in an effort to boost lacklustre inflation. This coupled with a weaker exchange rate is providing a boost to housing and corporate activity. 
<a href="/images/2016/10/14/marketindicators-retail.png" target="_blank">Click to enlarge</a>
 <img src="/images/2016/10/14/marketindicators-retail.png" alt="">
RETAIL MARKET REVIEW 
In the year to June 2016, Moving Annual Turnover (MAT) grew 3.8 percent, a modest decline on 4.1 percent in Q1, with both quarters below the long term average of 5.2 percent. Below average economic and income growth since the GFC have contributed to sub-trend retail sales MAT growth. Sales for discretionary items remain solid but a little below average, supported by South-East Australia’s housing boom. Consumer sentiment continues to trend at neutral levels. 
<a href="/images/2016/10/14/retailsnapshot1.png" target="_blank">Click to enlarge</a>
 <img src="/images/2016/10/14/retailsnapshot1.png" alt="">
<a href="/images/2016/10/14/retailsnapshot2.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/14/retailsnapshot2.png" alt="">
INVESTMENT REVIEW
Robust investment volume continued in Q3 2016, with a total of $2.1 billion invested over 47 transactions. Investment volume declined quarter on quarter, but the number deals increased resulting in smaller average deal size. In line with this, activity in the quarter was focussed on smaller, neighbourhood centres whereas in the previous quarter volume was driven by larger CBD centres and portfolio deals. 
A major contribution to quarterly result was the joint venture purchase of David Jones at 65-77 Market Street, Sydney by Scentre Group and CBUS from Woolworths Holdings for $360 million at an approximate initial yield of 4.50%. This transaction was part of nearly $1 billion invested in New South Wales retail over the quarter – almost 50% of the national total. Retail yields across most centre categories compressed further as evidenced in average transaction yields. Although foreign investment activity was more muted in Q3 at $445 million, offshore capital continues to target retail assets. 
OUTLOOK 
While Australian retail yields are near historic lows, compared to fixed interest investments and retail property around the globe, Australian retail property remains relatively attractive. This has resulted in strong demand for retail assets from both local and international investors as well as limited availability of quality assets. With interest rates generally expected to remain lower for longer, we expect ongoing investor demand to remain solid leading to further, but modest yield compression. 
<a href="/images/2016/10/14/retailtransact.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/14/retailtransact.png" alt="">
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