<p>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.</p>

<p>The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.</p>

<p>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.</p>

<p>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.</p>

<p>“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.</p>

<p>“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.”</p>

<p><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" /></p>

<p>GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.</p>

<p>“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.”</p>

<p>Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.</p>

<p>“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.</p>

<p><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" /></p>

<p>&nbsp;</p>

<p>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.</p>

<p>Green praised local policy settings.</p>

<p>“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.”</p>

<p>One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.</p>

<p>“The way we will be able to achieve economies of scale is through size,” Green added.</p>


Joel Robinson

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

<p>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.</p>

<p>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.</p>

<p>Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be</p>

<p data-end="683" data-start="511">"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.</p>

<p data-end="882" data-start="690">"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."</p>

<p data-end="882" data-start="690">[smartcode_project:default project_id=134646 project_image_fid=6109]</p>

<p>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.</p>

<p>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.</p>

<p>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.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6110]</p>

<p>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.</p>

<p>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.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6116]</p>

<p data-end="247" data-is-last-node="" data-is-only-node="" data-start="0">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.</p>

<p>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.</p>

<p>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.</p>

<p>[smartcode_project_cta:default project_id=134646]</p>


WM Residences fills gap in Mordialloc townhouse market

<p>&nbsp;</p>

<p>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.</p>

<p>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.</p>

<p>The project has recorded more than $500 million in sales across the first three towers, equating to around 580 apartments sold.</p>

<p>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.</p>

<p>[smartcode_project:default project_id=144441 project_image_fid=370975]</p>

<p>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.</p>

<p>Construction has now commenced across four towers ranging between 18 and 30 storeys, with Hamilton Marino and Maxcon appointed as builders.</p>

<p>Once complete, the precinct is expected to comprise around 1,100 residences, alongside retail, hospitality and public realm uses integrated throughout the site.</p>

<p>[smartcode_project:default project_id=144441 project_image_fid=370981]</p>

<p>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.</p>

<p>“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.</p>

<p>“To deliver that requires an extraordinary level of detail, coordination and discipline across multiple verticals, from design and hospitality through to wellness and service.”</p>

<p>“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.”<br />
[smartcode_project:default project_id=144441 project_image_fid=370977]</p>

<p>The project’s design places a heavy focus on landscaping, wellness amenities and biophilic design principles.</p>

<p>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.</p>

<p>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.</p>

<p>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.</p>

<p>[smartcode_project:default project_id=144441 project_image_fid=370980]</p>

<p>Gurner said the company’s experience through its Saint Haven wellness clubs had directly informed the residential offering now being incorporated into Elysium Fields.</p>

<p>“We’re seeing a clear global shift toward longevity, performance and proactive health,” Gurner said.</p>

<p>“Our role is to deliver that in a way that feels seamless, highly private and beautifully resolved within the environments we create.”</p>

<p>A large component of the wellness offering is planned through the resident amenity and health facilities proposed within the precinct.</p>

<p>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.</p>

<p>The developer is also seeking approvals for what it describes as a “reverse ageing medical clinic” within the precinct.</p>

<p>[smartcode_project:default project_id=144441 project_image_fid=370978]</p>

<p>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.</p>

<p>Within the first tower, Helios, residents will also have access to a dedicated amenity offering known as the Sky Private Club.</p>

<p>The upper 15 levels of the building will include private lounges, dining spaces, rooftop amenities and optional private wellness studios integrated within residences.</p>

<p>The Helios tower itself comprises 260 apartments ranging between 60 sqm and 300 sqm, including a collection of penthouses.</p>

<p>That includes a planned two-storey penthouse spanning around 600 sqm with uninterrupted bay views.</p>

<p>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.</p>

<p>[smartcode_project:default project_id=144441 project_image_fid=370979]</p>

<p>The sales result comes as GURNER™ continues expanding its national development pipeline beyond Victoria.</p>

<p>“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.</p>

<p>“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.”</p>

<p>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.</p>

<p>[smartcode_project_cta:default project_id=144441]</p>


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

<p>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.</p>

<p>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.</p>

<p>Multiplex has been appointed the builder, and construction is now underway.</p>

<p>[smartcode_project:default project_id=108274 project_image_fid=365784]</p>

<p>Since its first project, Central Equity has delivered more than 85 residential developments with a combined end value exceeding $8 billion.</p>

<p>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.</p>

<p>“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.</p>

<p>He said NAB’s early support was instrumental in helping establish the company’s development model.</p>

<p>“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.</p>

<p>“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.”</p>

<p>[smartcode_project:default project_id=108274 project_image_fid=365771]</p>

<p>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.</p>

<p>Recognising changing demographics and lifestyle preferences, the company began developing high-rise residential projects designed to bring permanent residents into the city centre.</p>

<p>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.</p>

<p>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.</p>

<p>The developer said the Palmera apartment tower reflects its long-term view of the Gold Coast as a growing and increasingly diversified economy.</p>

<p>[smartcode_project:default project_id=108274 project_image_fid=365768]</p>

<p>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.</p>

<p>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.</p>

<p>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.</p>

<p>[smartcode_project_cta:default project_id=108274]</p>


NAB funds $1 billion Surfers Paradise apartment development, Palmera

<p>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.</p>

<p>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.</p>

<p>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.</p>

<p data-end="792" data-start="529"><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" /></p>

<p data-end="1040" data-start="794">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.”</p>

<p>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.</p>

<p>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.</p>

<p>Planning documents show the development would consist of a part-13, part-39 storey tower form positioned above a four-storey podium.</p>

<p>“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.</p>

<p>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.</p>

<p>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.”</p>

<p><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" /></p>

<p>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.</p>

<p>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.</p>

<p>“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.</p>

<p>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.</p>

<p>“The broader precinct is undergoing significant change, with a mix of existing mid-rise buildings and newer high-density developments,” the report stated.</p>

<p>“Recent and approved projects indicate a consistent shift toward taller built form, typically organised as tower-and-podium typologies with more active ground levels.”</p>

<p>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.</p>

<p>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.</p>

<p>&nbsp;</p>

<p>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.</p>

<p><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" /></p>

<p>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.</p>

<p>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.</p>

<p>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.</p>

<p>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.</p>


First look: Aqualand joins St Leonards apartment party

Economy

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<p>GUEST OBSERVER</p>
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<p><span>Today’s super‑sized 58.6k rise in jobs was well above market expectations which were centred on a rise of 15k (CBA f/c +20k). To keep it in perspective, there is a pattern that the last few episodes of monthly falls in jobs have been followed by very large rises. It is likely that the next few monthly outcomes are lowish and will bring the three month average back to 17k.</span></p>
<p><span>Full‑time jobs growth of 40k in October means that annual growth is 159k or 2%. Part‑time jobs rose by 18.6k to be 104k, or 2.9%, higher over the past year.</span></p>
<p><span>The unemployment rate fell to 5.9%, the lowest since May, from 6.2%. We expect to see the unemployment rate oscillate around the 6% level over the next 6 months.</span></p>
<p><a href="/images/2015/11/12/Screen%20Shot%202015-11-12%20at%203.22.13%20PM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/11/12/Screen%20Shot%202015-11-12%20at%203.22.13%20PM.png" alt=""></span></p>
<p><span>Forward indicators of the jobs market, such as job ads and employer intentions, indicate that monthly average jobs growth should be in the 17 to 20k range, or 200k annually. It implies that the national unemployment rate will stay around the 6% level, depending on the wobbles in the participation rate.</span></p>
<p><span>Over the past 3 years around 277k extra jobs have been added to the workforce, with about two thirds of those in part‑time positions. The new jobs are a net outcome of significantly higher job gains netted off against large job losses. The chart on the next page shows the restructuring across sectors.</span></p>
<p><a href="/images/2015/11/12/Screen%20Shot%202015-11-12%20at%203.23.57%20PM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/11/12/Screen%20Shot%202015-11-12%20at%203.23.57%20PM.png" alt=""></span></p>
<p><span>The extra jobs over the past 3 years are in health, construction, retail, education and transport. They can be generally grouped as services sector positions, which also tend to have a greater part‑time component. The lower AUD will hasten the jobs growth in sectors like tourism, accommodation and education over the coming year. It will more than offset the losses in the mining and related sectors.</span></p>
<p><span>There is also a clear economic growth transition going on in the States.  VIC and NSW recorded the largest increase in jobs growth (+26.1K and +18.7K respectively). </span></p>
<p><span>The NSW unemployment rate, at 5.5% is now sitting at the lowest level across the States. It is followed closely by VIC at 5.6%. The residential construction boom, focussed in these two States, is one of the key drivers of employment growth.  The mining states also recorded good outcomes in October with QLD up 12.1K and WA up 14.8K.  SA jobs rose by 5.6K and jobs fell by 1.4K in TAS.</span></p>
<p><span>The next major economic release is the September quarter Capex which will be examined to see if there is any small improvement in the outlook for non‑mining investment. Next week’s RBA minutes are likely to show that the Board discussed a rate cut at the November meeting which could weaken the AUD.</span></p>
<p><a href="/images/2015/11/12/Screen%20Shot%202015-11-12%20at%203.25.45%20PM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/11/12/Screen%20Shot%202015-11-12%20at%203.25.45%20PM.png" alt="" width="379" height="70"></span></p>
<p> </p>
<p><em>Michael Workman is senior economist, <a href="https://www.commbank.com.au/corporate/research?ei=mv_research" target="_blank">Commonwealth Bank</a>.</em></p>
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jchancellor-FAypfDUnLy

Who needs a rate cut? CBA's Michael Workman

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<p><span>It has been interesting to track economic data over the past few years, watching the Sydney economy outperform across most metrics.</span></p>
<p><span>Small wonder that the Sydney housing market has also forged ahead so strongly since 2008.</span></p>
<p><span>The New South Wales economy is powering Australia's economic growth, with ANZ's stateometer now showing the Premier State both above trend and accelerating across a range of economic indicators, from labour market conditions to house prices.</span></p>
<p><a href="/images/2015/10/22/NSW.jpg" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/10/22/NSW.jpg" alt=""></span></p>
<p> </p>
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>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" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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pwargent-M4siyDbqQY

NSW above trend and accelerating: Pete Wargent

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<p>GUEST OBSERVER</p>
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<p><span>The latest data on economy-wide spending is best described as encouraging. Spending rose in September but slightly slower than the July and August results. Spending was mixed across sectors and states. But the good news is that the annual rate of economy-wide spending remains above longer-term averages.</span></p>
<p><span>While spending was up in the Business services category, it can prove volatile so it will be important to see a follow-up lift in sales. The large Retail Stores category (33% of economy-wide sales) rose by 0.5% in trend terms to be up 7.7% over the year – well above the long-term average growth pace of 5.7%.</span></p>
<p><span>There are few reasons to prompt the Reserve Bank to cut rates again. The economy is growing, sales are up, business and consumer sentiment are above average and our largest trading partner, China, is rebalancing from an industrial focus to a consumer spending focus and with some degree of success.</span></p>
<p><span>What does the data show?</span></p>
<p><span>The Commonwealth Bank Business Sales Indicator (BSI), a measure of economy-wide spending, recorded moderate sales growth in September, although down from previous months. The BSI lifted by 0.3% in September, the slowest growth in 35 months and down from 0.5% </span><span style="line-height: 1.3em;">gains in July and August. Annual growth of spending eased for the third month to 6.8%, but still above the decade- average of 5.1%.</span></p>
<p><span>The seasonally-adjusted measure of sales posted a solid 2.8% gain in September – the strongest growth since May 2013. And annual growth lifted from 5.7% to a 10-month high of 8.9%.</span><span style="line-height: 1.3em;"> </span></p>
<p><span>The Commonwealth Bank BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities. And in line with the practice of the Bureau of Statistics with its retail trade data, seasonally adjusted and trend estimates of the BSI are obtained by applying statistical software. The seasonally adjusted and trend BSI results are derived from the same SEASABS statistical software. This allows analysis of the broader underlying trends that may be hidden in the raw data. </span></p>
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<p><span>Across sectors, eight of the 19 industry sectors fell in trend terms in September. But encouragingly, spending in the volatile Business Services category rose by 5.3%. Also notably sales rose at Miscellaneous Stores (up 1.2%), Transportation (up 0.9%), Contracted Services (up 0.8%).</span></p>
<p><span>The large Retail Stores sector grew by 0.5% in September after rising between 0.6-0.7% per month over the previous seven months.</span></p>
<p><span>Among the weakest sectors in September were Airlines (down 3.6%); Government services (down 1.6%), and Utilities (down by 0.7%). Sales at Personal Service Providers, Service Providers and Mail Order/Telephone Order Providers all fell by 0.2%.</span><span style="line-height: 1.3em;"> </span></p>
<p><span>In annual terms in September, five of the 19 industry sectors contracted including: Utilities, Mail Order/Telephone Order Providers, Automobile and Vehicle Sales and Airlines.</span></p>
<p><span>At the other end of the scale, sectors with strongest annual growth in September included: Hotels &amp; Motels; Miscellaneous Stores; Amusement &amp; Entertainment, Service Providers and Wholesale Distributors &amp; Manufacturers.</span></p>
<p><span>Sales rose in only four of the states and territories in September: Tasmania (up 1.0%), South Australia (up 0.5%), Western Australia (up 0.4%) and Queensland (up by less than 0.1%). Sales fell the most in Victoria (down 0.8%), ACT (down 0.7%), Northern Territory (down 0.5%) and NSW (down 0.1%).</span></p>
<p><span>In annual terms, three states and territories had sales below a year ago in September: Northern Territory (down 8.3%), NSW (down 4.7%) and Victoria (down 1.7%). At the other end of the scale, growth was strongest in Tasmania (up 9.1%) from the ACT and South Australia (up 8.4%), Western Australia (up 7.9%), and Queensland (up 5.9%).</span></p>
<p><span>What is the importance of the report?</span></p>
<p><span>The Commonwealth Bank releases its Business Sales Index around the 20th each month. The data provides a broader perspective of consumer spending. The Business Sales Indicator includes transactions made at traditional retail establishments such as supermarkets, clothing stores and cafes &amp; restaurants and as such is more comparable to the ABS Household Final Consumption Expenditure released on a quarterly basis. The Business Sales Indicator also covers businesses such as airlines, car dealers and utilities such as water and electricity companies as well as motels, business, professional and government services and wholesalers.</span></p>
<p><span>What are the implications for interest rates and investors?</span></p>
<p><span>The latest data adds to our view that the Reserve Bank will leave official rates unchanged in coming months. </span></p>
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<p>Craig James is chief economist, CommSec and Savanth Sebastian is economist, CommSec. Both can be contacted <a href="https://www.commsec.com.au" target="_blank">here</a>.</p>
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Mixed results for economy-wide spending: CommSec's Craig James

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<p>The Stockland chief Mark Steinert expects house prices to continue to rise next year.</p>
<p>His forecast is by about 3 to 5%, rejecting this week's forecast by Macquarie Research of a 7.5% slump in prices between 2016 and mid-2017.</p>
<p>"There has been quite a lot of talk going on for quite a long time now about the imminent downturn in housing, but no one has mentioned that it hasn't actually eventuated," Mark Steinert told a Property Council lunch in Melbourne yesterday.</p>
<p>"The reality is the economy in Australia is growing at a moderate level of around 2.5%.</p>
<p>"We have a low Australian dollar, continued population growth (albeit at a slower rate) and metro housing markets that are generally under supplied.</p>
<p>"These are not the pre-conditions for some sort of general correction in housing," he suggested.</p>
<p>Macquarie Research forecast for a 7.5 per cent drop in property prices nationwide from next March attracted widespread attack.</p>
<p>Superannuation columnist Peter Switzer said the forecast "bordered on being stupid."</p>
<p>"Even though these economists’ predictions are guesses based on some economic analysis, one journalist writes: House prices are set for a 7.5% decline from March next year, with the resulting slowdown hitting the broader economy and risking recession, economists have warned.</p>
<p>"Apparently, Macquarie says the decline in house prices, nationally, could be 7.5% peak to trough, which is eco-speak from the high point to the low point, which seems pretty small, given the recent rises.</p>
<p>"Our house prices have risen in the past three years but most of it has come out of Sydney and Melbourne. "</p>
<p>"Roughly, it has gone from an index reading of 320 to 390, so a 7.5% decline peak to trough is hardly a huge drama that could lead to recession!</p>
<p>"In fact, given the double-digit rises in the past three years in Sydney, it would be a healthy correction," Switzer suggested. </p>
<p>Dr Andrew Wilson, the senior economist at Domain's Australian Property Monitors, noted in the past decade, there had not been any national annual drops of more than 5%.</p>
<p>“Even in periods where we had prices falling, such as during 2008 when it was the global financial crisis, the national house price fell by just under 4 per cent after a significant period of higher interest rates,” Dr Wilson said.</p>
<p>“It would be an historical first and is unbelievably unlikely.”</p>
<p>The property market in southeast Queensland was steadily improving and all the latest data supported ongoing, consistent capital growth, the REIQ CEO Antonia Mercorella said.</p>
<p>"Sudden slumps were unlikely and any predictions of dramatic house price drops were nothing more than “crystal ball gazing”.</p>
<p>“The Brisbane median house price reached a new high of $610,000 in the June quarter following a trend of positive growth of around two percent since the June quarter of 2013,” Ms Mercorella said.</p>
<p>“Our data suggests that this trend will continue for the September quarter,” she said.</p>
<p>In Queensland, the average home loan is $319,328 compared with New South Wales’ average of $422,179 and Victoria’s average of $365,265, according to ABS data.</p>
<p>“In Queensland, the average proportion of family income used to repay a mortgage is 27.3 percent, compared with 35.5 percent in New South Wales and 32.1 percent in Victoria, according to REIA data.</p>
<p>“Household debt levels are just not comparable between Queensland and the southern states,” Ms Mercorella said. </p>
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Stockland, APM, REIQ and Switzer debunk headlines that Macquarie's 7.5% price dip prediction

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<p><span>The Westpac-Melbourne Institute Index of Consumer Sentiment increased by 4.2% in October from 93.9 in September to 97.8 in October.</span></p>
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<p><span>This result is a little short of the increase we would had expected given the strong boost the government received in the polls following recent leadership and ministerial changes. </span></p>
<p><span>The rise in the Index has failed to offset the loss we saw last month with the Index 1.6% below its August level and still below the key 100 level indicating pessimists still outnumber optimists. The Index has now been below 100 for 18 of the last 20 readings. </span></p>
<p><span>Given that politics is probably the most significant factor in the result it is noteworthy that the Index is 11.6% below the level (110.6) it reached following the election of the Abbott Government in September 2013. </span></p>
<p><span>Other factors that may have contributed to the boost in sentiment this month include recent recoveries in the Australian dollar and the sharemarket, complemented by a steady improvement in the labour market. </span></p>
<p><span>The AUD rose just over 2¢ against the USD between the September and October surveys, and the ASX 200 was up 3.4%. </span></p>
<p><span>The unemployment rate was recently reported to have fallen to 6.2% and jobs growth has been much stronger than anticipated over the past year. </span></p>
<p><span>In that regard, there has been a very significant and unexpected boost to respondents’ assessment of the state of the labour market which looks to be an even more significant result than the increase in the overall Index. </span></p>
<p><span>The Westpac Melbourne Institute Index of Unemployment Expectations fell by 16.3% from 156.3 to 134.9. Because the Index measures respondents’ outlook for the unemployment rate, a fall indicates an improvement in expectations around the labour market. This Index is now at its lowest level since November 2011 indicating a very significant improvement in how respondents assess the labour market including job prospects for those out<br> of work and job security for those in work. This comes after a recent business survey which also showed a significant boost in businesses’ hiring intentions. </span></p>
<p><span>Four of the five components of the Index increased in October. Both components measuring views on family finances increased: the sub-index on ‘family finances vs a year ago’ increased by 1.3% and the sub-index on ‘family finances over the next 12 months’ rose by 3.5%. </span></p>
<p><a href="/images/2015/10/14/Screen%20Shot%202015-10-14%20at%2010.45.39%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/10/14/Screen%20Shot%202015-10-14%20at%2010.45.39%20AM.png" alt="" width="707" height="466"></span></p>
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<p><span>Expectations around the economy were more mixed: the sub- index on ‘economic conditions over the next 12 months’ rose by 20% whereas the sub-index on ‘economic conditions over the five years’ fell by 7.9%. </span></p>
<p><span>That caution about the longer term outlook contrasts with the 7.1% increase in the five year economic outlook which occurred following the September 2013 election. </span></p>
<p><span>The sub index tracking assessments of ‘time to buy a major household item’ increased by an encouraging 6.3%. </span></p>
<p><span>Confidence around housing remains weak. The ‘time to buy a dwelling’ index slipped from 101.7 to 101.3 (down by 0.4%) to be down by 11% over the year. This Index peaked in September 2013 at 145.3 and is down over 30% from that peak. </span></p>
<p><span>There was a sharp fall in confidence around the outlook for house prices. The Westpac Melbourne Institute Index of House Price Expectations fell by 3.9% to 124.2. It is now down by 14.9% over the last three months and 25% from its peak in December 2013. </span></p>
<p><span>The Reserve Bank Board next meets on November 3. It will be encouraged by the signals from this survey and the official data that employment conditions and confidence around employment prospects appear to be finally improving. However it will probably be a little disappointed that confidence remains below the 100 level where pessimists outnumber optimists. </span></p>
<p><span>Westpac has been firmly of the view that rates will remain on hold for the remainder of 2015 and 2016. Improving conditions in the labour market are very important from this perspective. However, changes in financial conditions will also warrant scrutiny in the period ahead </span></p>
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<p><span><em>Bill Evans </em></span><em>is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.</em></p>
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Consumer sentiment increased by 4.2%, but a little short in October: Westpac's Bill Evans

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<p><span>RBA Deputy Governor Philip Lowe struck an optimistic tone today, and noted that the Bank retains flexibility on interest rates. </span></p>
<p><span>He emphasised that Australia’s economic fundamentals were good and the economy has high degree of flexibility at the CFA Institute Australia Investment Conference in Sydney. </span></p>
<p><span>Most of Dr Lowe’s remarks focused on the microeconomic reform agenda that would lift Australia’s living standard over the medium term, and so he did not directly address the near term path for interest rates in his speech. In the Q&amp;A though, he answered several questions related to the immediate outlook and monetary policy and repeated the bank’s expectation that growth will gradually pick up. </span></p>
<p><span>Some key points Dr Lowe made were: </span></p>
<span style="line-height: 1.3em;">There continued to be some flexibility in monetary policy given the cash rate had not been reduced to zero as policy rates have in many other advanced countries.</span><br><span style="line-height: 1.3em;">Monetary policy still works, as seen through its impact on housing construction and the exchange rate. But lower interest rates are not as effective as they used to be, as low interest rates seem to be helping households to pay back their debt sooner, rather than encouraging household spending.</span>
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<br><span style="line-height: 1.3em;">There is still some flexibility in fiscal policy due to our history of fiscal prudence.</span><br><p style="line-height: 1.3em;">The probability of recession is low but we cannot rule out the possibility of a <span style="line-height: 1.3em;">downturn. There will be a cycle, and we have had a remarkable 25 years.</span></p>
<span style="line-height: 1.3em;">He said that comments about consumer and business confidence being weak were not correct. On cue, this morning’s ANZ-Roy Morgan Australian Consumer Confidence index showed a 5.1% rise in the week ending 11 October, bringing confidence 2.6% above its long run average</span>
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<br><span style="line-height: 1.3em;">Dr Lowe said business conditions were above average overall and that business was reporting that current conditions are ok. He said firms were willing to hire and as they have stated many times before, it is not clear at what point this will translate into higher capex.</span>
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<br><span style="line-height: 1.3em;">When asked if state stamp duties should be used to soften demand for housing, he said it is a mistake to think house prices can be managed through levers that affect demand. He repeated that regulatory action on lending is working its way through the system. Dr Lowe said that ideally there would be a period of quite modest house price growth.</span><br><p style="line-height: 1.3em;">On the US he said there has been some movements in capital flows from emerging markets back to the US, even ahead of the Federal Reserve increase in rates. He said there might be some stresses in capital markets.</p>
<p style="line-height: 1.3em;"><span style="line-height: 1.3em;">Dr Lowe did not address our concerns about growth in 2016 and 2017, which recently led us to lower our interest forecast to 1.5% by mid next year. We think further rate cuts will be necessary as concerns simmer about the unpredictability of international economic conditions, while the boost from housing starts to fade as the impact of the lower AUD on services trade lessens. Dr Lowe noted that monetary policy maintains a key role in dealing with cyclical swings in the economy. </span></p>
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<p><em>Cherelle Murphy is co-head of Australian economics, ANZ, and can be contacted <a href="https://bluenotes.anz.com/authors/our-economists/" target="_blank">here</a>.</em></p>
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RBA's Lowe strikes optimistic tone: ANZ's Cherelle Murphy

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<p><span style="line-height: 1.3em;">The headline growth figures certainly look a bit on the soft side. But the breakdown of the growth components provides a much more interesting picture. </span></p>
<p><span style="line-height: 1.3em;">Government </span><span style="line-height: 1.3em;">consumption provided the biggest contribution to growth while </span><span style="line-height: 1.3em;">household consumption held up relatively well. The biggest </span><span style="line-height: 1.3em;">drag was net exports which detracted 0.6 percentage points from growth. In addition the drawdown in inventories also crimped growth by 0.2 percentage points. Overall, not an “ideal” mix of growth drivers, but close enough for this point in the cycle. </span></p>
<p><span style="line-height: 1.3em;">The good news is that productivity is still rising while wage costs are falling and price pressures are restrained.</span></p>
<p><span style="line-height: 1.3em;">The economic growth figures are largely important as an historical record. But the data can’t tell us much about the here and now. And certainly the figures have limited use in telling us where the economy is going. But for the Reserve Bank the data serves as a base for its forecasts. It’s a case of ticking the figures off to ensure that there are no surprises. </span></p>
<p><a href="/images/2015/09/02/Screen-Shot-2015-09-02-at-2.27.22-PM.jpg" target="_blank">Click to enlarge</a></p>
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<div class="column"><span style="line-height: 1.3em;">Overall the data confirms that growth over the past year has been below trend but “ok” for an economy that is going through a generational transition. Despite all the doom and gloom about the winding back of mining investment, fiscal contraction and horror stories about the collapse of the manufacturing sector it is pretty clear that the economy is in reasonable shape – certainly in better shape than most other so-called “advanced” economies.</span></div>
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<br><span style="line-height: 1.3em;">While media commentary is likely to focus on the fact that growth is a touch on the soft side the key point is that Australia has completed 24 consecutive years of growth. It is an achievement to be celebrated. And interestingly the drawdown in inventories in the quarter may be as a result of the lift in domestic demand, and it does mean that businesses will be re-stocking shelves in coming quarters – supporting the overall growth figures.</span>
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<br><span style="line-height: 1.3em;">Looking forward growth will continue to remain mixed over the next few months. The transition from mining to housing-led investment continues to be the dominant driver of activity. Although somewhat encouragingly the ongoing lift in consumer and business confidence is now translating through to a lift in risk appetite and investment plans.</span>
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<br><span style="line-height: 1.3em;">CommSec tips the economy to grow by 2.75-3.00% over the coming year. CommSec believes that given the ongoing below trend growth outcomes, the Reserve Bank is unlikely to lift interest rates over the next year. </span>
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<div class="column"><span style="line-height: 1.3em;">What do the figures show?</span></div>
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<br><span style="line-height: 1.3em;">National Accounts:</span>
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<br><span style="line-height: 1.3em;">Economic Growth: </span><span style="line-height: 1.3em;">The economy grew by 0.2 per cent in the June quarter after a 0.9 per cent increase in the March quarter.</span>
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<span style="line-height: 1.3em;">The economy </span><span style="line-height: 1.3em;">has grown 2.0 per cent over the past year, below the decade-average growth rate of 2.8 per cent and below the 15-year average of 2.9 per cent. In 2014/15, the economy grew by 2.4 per cent.</span>
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<br><span style="line-height: 1.3em;">The non-farm economy </span><span style="line-height: 1.3em;">grew by 0.2 per cent in the June quarter after a 0.9 per cent lift in the March quarter. Annual growth stands at 1.9 per cent.</span>
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<span style="line-height: 1.3em;">Farm GDP </span><span style="line-height: 1.3em;">fell by 2.6 per cent in the June quarter after rising by 0.3 per cent in the March quarter. Farm GDP rose 4.1 per cent over the year.</span>
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<span style="line-height: 1.3em;">At current prices, </span><span style="line-height: 1.3em;">GDP rose by 0.3 per cent in the quarter to be up by 1.6 per cent over the year. The annual growth rate is well below the decade average of 6.2 per cent. Over the year to June 2015, </span><span style="line-height: 1.3em;">the Australian economy was valued at $1,612 billion.</span>
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<span style="line-height: 1.3em;">Growth drivers: </span><span style="line-height: 1.3em;">The biggest contributions to growth came from government consumption (+0.4 percentage points), followed by household consumption expenditure (+0.3pp), and public investment (+0.2pp). The biggest drag on growth was net exports (exports less imports) (-0.6 percentage points), inventories (-0.2pp) and dwelling investment (-0.1pp).</span>
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<br><span style="line-height: 1.3em;"><span style="line-height: 1.3em;">Inflation: In terms of domestic price pressures, the household consumption implicit price deflator rose 0.7 per cent in the June quarter after a 0.3 per cent lift in the March quarter. Annual growth stands at just 1.4 per cent. Real non-farm unit labour costs rose by 1.1 per cent in the June quarter after falling by 0.6 per cent in the March </span></span><span style="line-height: 1.3em;">quarter. Real non-farm unit labour costs rose by just 0.9 per cent over the year. </span>
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<span style="line-height: 1.3em;">Productivity: </span><span style="line-height: 1.3em;">Gross value added per hours worked in the market sector rose 0.4 per cent in the June quarter after 0.3 per cent growth in the March quarter. Annual growth stands at 0.8 per cent. Hours worked in the market sector were up 0.3 per cent in the quarter to be up 1.7 per cent for the year.</span>
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<span style="line-height: 1.3em;">States &amp; Territories: </span><span style="line-height: 1.3em;">The best description of the performance of States and Territory economies is state final demand plus net exports. The ACT had the fastest annual growth rate in the June quarter (up 5.4 per cent), followed by Victoria (up 2.9 per cent), NSW (up 2.4 per cent), South Australia (up 0.7 per cent) and Tasmania </span>
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<div class="column"><span style="line-height: 1.3em;">(up 0.5 per cent). The Northern Territory contracted by 11.4 per cent followed by Western Australia (down 2.4 per cent) and Queensland (down 0.8 per cent).</span></div>
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<span style="line-height: 1.3em;">Consumer spending lifts. </span><span style="line-height: 1.3em;">Household spending rose by 0.5 per cent in the June quarter to be up 2.5 per cent for the year. Only five of the 17 sectors recorded weaker spending in the quarter. Spending on Health rose by 2.5 per cent followed by Communications (up 1.9 per cent). But spending fell in Cigarettes &amp; tobacco and Alcoholic beverages (both down 2.2 per cent) and Electricity, gas and fuel (down by 2.0 per cent).</span>
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<br><span style="line-height: 1.3em;">Industry sectors: </span><span style="line-height: 1.3em;">Thirteen of the 19 industry sectors expanded in the June quarter. Rental, hiring and real estate services grew by 2.7 per cent, contributing 0.1 percentage points (pp) to growth in the quarter. Five other sectors contributed 0.1 percentage points to growth. The weakest sectors were Mining (down 3.0 per cent and removing 0.3pp from growth) and Agriculture, forestry and fishing (down 2.3 per cent).</span>
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<br><span style="line-height: 1.3em;">Other points:</span>
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<span style="line-height: 1.3em;">Profit share falls. In seasonally adjusted terms, the ratio of profits to total factor income fell from 26.3 to 25.4 </span><span style="line-height: 1.3em;">per cent in the June quarter. The wages share rose from 53.0 per cent to 53.4 per cent.</span>
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<br><span style="line-height: 1.3em;">Household savings ratio rose. The household saving ratio lifted from 8.3 per cent to 8.8 per cent in seasonally adjusted terms in the June quarter. In trend terms household saving held steady at 8.6 per cent in </span><span style="line-height: 1.3em;">the quarter.</span>
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<br><span style="line-height: 1.3em;">Imports ease as a share of spending. The imports to sales ratio fell from 0.394 in the March quarter to </span><span style="line-height: 1.3em;">0.392 in the June quarter.</span>
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<div class="column"><span style="line-height: 1.3em;">The inventory to sales ratio rose from 0.627 in the March quarter to 0.643 in the June quarter. </span></div>
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<div class="column"><span style="line-height: 1.3em;">What is the importance of the economic data?</span></div>
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<span style="line-height: 1.3em;">The quarterly </span><span style="line-height: 1.3em;">National Income, Expenditure and Product release (national accounts) </span><span style="line-height: 1.3em;">from the Bureau of Statistics is the most complete assessment of Australia’s economic performance. Detailed estimates are provided on incomes (wages, profits), spending (such as household, dwelling investment and trade (exports and imports) and production (comparing industry performance). Other data includes household saving and the economic performance of States and Territories.</span>
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<div class="column"><span style="line-height: 1.3em;">The main use of the national accounts figures is as a historical record of economic performance. The information has little forward-looking value for currency, interest rate or share markets.</span></div>
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<br><span style="line-height: 1.3em;">What are the implications for interest rates and investors?</span>
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<br><span style="line-height: 1.3em;">The national accounts data is backward looking. But the data is taken into account by the Reserve Bank, serving as a base for forecasts. The Reserve Bank uses six-month </span><span style="line-height: 1.3em;">annualised growth figures to ascertain how the economy is </span><span style="line-height: 1.3em;">travelling. And in that context growth looks more robust </span><span style="line-height: 1.3em;">annualising at around 2.2 per cent.</span>
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<span style="line-height: 1.3em;"><br></span><span style="line-height: 1.3em;">Importantly business confidence and conditions remain healthy and should support a lift in activity over the latter part of 2015.</span>
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<br><span style="line-height: 1.3em;">At present there is no rush to lift or cut interest rates although the risks lie with another rate cut given the patchiness in the economy. CommSec believes interest rates will remain unchanged over the rest of 2015. </span>
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<div class="column"><em><span>Savanth Sebastian is an economist for CommSec. You can follow him on Twitter <a href="https://twitter.com/commsec" target="_blank">here</a>.</span></em></div>
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Australia's 24th consecutive year of growth: CommSec's Savanth Sebastian

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<p>GUEST OBSERVER</p>
<p>The Australian economy is going through a period of transition. The mining investment boom is coming to an end, the terms of trade has fallen sharply and the AUD has been trending lower.</p>
<p>The weaker local unit is largely the result of the decline in Australia’s terms of trade. Since mid-2014, the AUD has fallen some 25% against the USD and 16% on a TWI basis. Over the year to June-2015, the terms of trade is estimated to have declined by 15%.</p>
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<p>The decline in the AUD is a welcome development for sectors of the economy with a high export propensity or high import intensity. Tourism is one such sector. A lower AUD provides assistance to the Australian tourism industry in essentially two ways: (i) it encourages international holidaymakers to visit Australian because it reduces the relative cost of a trip; and (ii) it makes a domestic holiday more attractive to Australian residents because the relative cost of an overseas holiday rises.</p>
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<p><img src="/images/2015/08/17/Screen%20Shot%202015-08-17%20at%202.08.23%20PM.png" alt=""></p>
<p>How important is tourism to the Australian economy?</p>
<p>Tourism has long been an integral part of the Australian economy. The industry accounted for 2.7% of GDP in 2013/14 ($43.4bn), down a touch from 2.8% of GDP in 2012/13. By way of comparison, the tourism sector is a little bit larger than the agriculture sector, as a share of GDP. It is Australia’s third largest export and the largest services export.</p>
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<p>More importantly for the Australian economic story, the tourism sector employs around half a million workers, which represents a significant 4.6% of total employment. Tourism’s share of total employment is greater than its share of GDP because it’s more labour intensive than other industries (as distinct from capital intensive industries like mining production). Tourism industry workers largely comprise those employed in the sectors of accommodation, cafes, hotels, transport, travel agencies, retail trade and education and training.</p>
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<p>In recent years, however, it hasn’t all been smooth sailing for Australia’s tourism sector. Since the GFC, the sector’s share of the Australian economy has declined a little (down from 3% of GDP in 2007/08). The small fall is largely the result of the slowdown in the global economy, which has a negative impact on the number of inbound visitors and also the elevated level of the AUD. There is little that policymakers can do on either of those fronts. But as key export commodity prices have fallen, which has been the key factor in the decline in the AUD, the tourism sector has benefited.</p>
<p>How does the level of the AUD impact on tourism in Australia?</p>
<p>In a nutshell, a lower AUD is positive for the tourism sector. It benefits both the domestic tourism sector and also the international tourism sector. The recent trends in the AUD and tourism flows confirm that the lower AUD is having a positive impact on the Australian tourism sector. Since mid-2014, the ratio of arrivals to departures has gradually lifted. Or put another way, growth in the number of arrivals has outpaced growth in the number of departures. Over the same period, the AUD has fallen some 25% against the USD and 16% on a TWI basis.</p>
<p>The monthly trade balance data paints a similar picture. Since early-2014, tourism related service credits have been larger than tourism related service debits. In other words, the monthly tourism trade balance has moved into surplus. In our view, this will be the new norm.</p>
<p>Our forecasts have the AUD drifting a little lower over the next 12 months (both compared to the USD and on also on a TWI basis). On that assumption, the tourism sector will receive further support from the level of the exchange rate, particularly given there is a lagged effect between changes in the level of the currency and holiday-related decisions. The lag represents the timing differential between booking a holiday and taking it. We put this differential at 3-6 months. So the tourism sector’s share of the Australian economy and its contribution to growth is set to lift over the next couple of years.</p>
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<p> </p>
<p>Where will the tourists come from?</p>
<p><span> </span>The lower level of the AUD means that domestic tourism will receive a boost as more Australian residents holiday locally rather than overseas. Equally, the lower AUD will boost the number of international holidaymakers visiting Australia.</p>
<p>Tourists from Asia, and in particular tourists from China, are the major growth area for Australian tourism exports. In 2014/15, the number of short-term arrivals from China to Australia rose to 935k (compared with 770k in 2013/14). If current trends are maintained, 1 million Chinese residents will holiday in Australia in 2016. In our view, this is likely to happen. The number of holidaymakers from China was already rising steadily when the AUD was elevated. This was partly the result of rising Chinese household income which has generated a resultant lift in tourism- related consumption. Some softening around travel controls over Chinese residents also helped. The lower level of the AUD will simply serve to act as a tailwind on the growth in tourists from China.</p>
<p>The impact of the lower AUD will be most noticeable on the number of tourists arriving from the UK and USA. The UK and USA economies have recovered and their currencies have appreciated commensurately. The lower AUD (and stronger GBP and USD) will see tourists to Australia from both the UK and USA lift. This has already started to happen with the number of tourists from the UK and USA rising on the back of stronger currencies against the AUD.</p>
<p>The tourism investment pipeline</p>
<p>A pickup in the tourism sector has benefits for non-residential construction and other capital expenditure. The tourism investment pipeline was estimated to have grown by 8.7% in 2014 to $53.7bn<span>1</span>. The pipeline constitutes aviation investment, accommodation investment and arts, recreational and business services.</p>
<p>Which regions will benefit the most?</p>
<p>All States benefit from a lift in tourism, but the States which have the highest specialisation to tourism will benefit the most. These States are NSW and QLD. Both States have a tourism specialisation ratio greater than 1<span>2</span>. The Barrier Reef has been a major drawcard for international tourists while Sydney Harbour is one of Australia’s iconic places. The tourism sectors in ACT (specialisation ratio close to 2), being the national capital, and NT (with Kakadu National Park and Ayres Rock) are also important to local economies.</p>
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<p>The national accounts spending data is telling. It shows that since the AUD started heading lower, real spending on hotels, restaurants and cafes has lifted considerably. The lift in QLD, in particular, is significant and illustrates the positive impact that a lower AUD has had on the tourism industry. We expect this trend to continue. Robust growth in the tourism industry will help to offset the downturn in mining investment and associated job losses in QLD.</p>
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<p><em>Gareth Aird is an economist with the Commonwealth Bank of Australia and can be contacted <a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/gareth-aird/14/790/905" target="_blank">here.</a></em></p>
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Tourism dollar key to riding out mining slump: Gareth Aird

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<p><span>GUEST OBSERVER</span></p>
<p><span>The Australian economy continues to show sub-trend growth, facing headwinds caused by falling commodity prices and a hangover from one of the largest mining booms. Whilst the New South Wales and Victorian economies pace ahead, the Western Australian and Queensland economies continue to experience challenges as their resource driven growth continues to decline.</span></p>
<p><span>At its meeting on Tuesday, the RBA Board decided to keep the cash rate unchanged at 2.00%. </span></p>
<p><span>Key points raised regarding the decision by the Bank include the following:</span></p>
<ul>
<li><span>Australia's two paced economy continues in disparate directions as the eastern states pull ahead with solid economic performances.</span></li>
<li><span>Australian dollar reaches the lowest level since May 2009 on the back of US economic data and declining commodity prices.</span></li>
<li><span>Greek debt crisis fallout averted, however, concerns remain over Chinese share market volatility. An estimated $US450 billion of capital has flowed out of China in last four quarters according to JPMorgan. Australian real estate likely recipient as this trend is expected to continue.</span></li>
<li><span>Unemployment continues to show positive signs with a benign increase from a revised 5.9 percent in May to 6.0 percent in June. The eastern seaboard office demand to increase as unemployment remains on steady decline while economy adjusts away from commodity driven growth.</span></li>
<li><span>The eastern seaboard industrial and logistics sector to show strong growth as merchandise trade volumes increase.</span></li>
<li><span>Retail turnover growth remains slow, but healthy, as South Australia and New South Wales demonstrate strong growth. Turnover growth forecast as Australian dollar forecast for record lows.</span></li>
<li><span>Strong economic fundamentals encouraging the re-rating of market yields</span></li>
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<p><span>The economic recovery is back on track having averted a fallout Greek debt crisis, however, potential for further corrections in the Chinese share market are likely. According to JPMorgan, a capital outflow of $US450 billion from China has occurred in the last four quarters. Australian assets have been a major destination of these outflows due to their high risk adjusted return. This is expected to continue as volatility in the Chinese share market continues. Economic data from the U.S revealed a lower than expected second quarter growth. Although the annualised rate of 2.3% was higher than the 0.6% in the first quarter, it fell short of expected forecasts. However, the Fed has signalled that it remains poised for an interest rate hike this year, potentially as early as September. In light of this announcement, the Australian dollar reached a fresh six year low of $US72 cents on Monday.</span></p>
<p><span>Given the continuing decline in commodity prices and the probable near-term U.S interest rate hike, the Australian dollar will likely fall below the $US 70 cent mark by the end of the year. This will increase the demand for Australian property assets as they become relatively cheaper for both domestic and offshore investors. Domestic retailers will also benefit from this as the declining dollar will increase the demand from online shoppers, brick-mortar stores and an influx of inbound tourism. The industrial and logistics sector must also respond to increased retail activity and the increased demand from the manufacturing and agricultural sector as conditions ease with the dollar.</span></p>
<p><span>In consideration of the recent historically low growth period, the RBA Governor last week indicated the RBA would revaluate its assumption on trend growth. However, in the interim, the forecasted growth of 2.5% remains below the currently assumed trend growth of 3-3.25%. However, the Victorian and New South Wales economies continue to demonstrate strong economic fundamentals with steady growth rates, reducing unemployment, retail turnover growth and increased international trade volumes. These strong fundamentals have encouraged a re-rating of the market as sharper yields from major transactions begin to crystallise. Aside from the CIC acquisition of Investa portfolio transacting at an initial yield of 5%, Blackstone's patrial acquisition of 161 Castlereagh Street and the Qatar Investment Authority's share of Barangaroo Tower 1 were at a yields below 6%. These sharp yields are continuing to emerge in the industrial and logistics sector.</span></p>
<p><span>The Coles Chilled Distribution in Eastern Creek was purchased by Mapletree Investments for $253 million with an initial yield of 5.6%. Additionally, KWAP Pension Fund purchased an asset in Lenore Drive, Erskine Park for $79.5 million at initial yield of 5.97%.</span></p>
<p><span>In the year to March, New South Wales and Victoria continued to show solid economic growth. The South Australian economy was the only mining-heavy economy to show strong growth. This growth was underpinned by solid population growth, housing construction and retail spending. However, the South Australian economy faces grim times ahead as its unemployment rate in June reached a 15-year high resulting from the long expected stripping out of manufacturing jobs.</span></p>
<p><span>Employment figures have stabilised since the latter part of 2014. Previous concerns of the national unemployment rate surpassing 6.5% in the coming year have now subsided. Unemployment rates on the eastern seaboard continue to decline and momentum in demand for office space continues. Unemployment in New South Wales, Melbourne and Queensland has declined steadily since January, whereas the Western Australian and South Australian markets continue to struggle. A depreciating Australian dollar is poised to assist the services sector as blue collar employment regains momentum with increased demand from Australia and the greater region alike.</span></p>
<p><span>The industrial and logistics sector is currently experiencing a shift as the growth shifts towards the eastern states. The downward trend in the Australian dollar and the economic growth has had a positive impact of international trade volumes on the eastern seaboard trade hubs. Conversely, the declining commodity prices have had a pronounced negative impact on trade volumes on the western seaboard.</span></p>
<p><span>These disparate rates were also present in retail turnover growth. New South Wales and South Australia showed strong retail growth underpinned by strong population growth and housing construction. As discussed earlier, retail trade is expected to benefit from the depreciating Australian dollar and increased tourism. Additionally, New South Wales, Victoria and Queensland are expected to show strong retail turnover growth in line with higher gross state product forecasts.</span></p>
<p><span><em>Nerida Conisbee is national director of research for Colliers International.</em></span></p>
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Two paced economy continues in disparate directions: Colliers' Nerida Conisbee

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<p style="line-height: 1.3em;">GUEST OBSERVATION</p>
<p style="line-height: 1.3em;">Australia’s population growth has typically lagged the economy’s fortunes – people vote with their feet. Rising unemployment typically results in a slowing in net immigration and population growth (typically with a lag), and vice versa (Figure 1).</p>
<p style="line-height: 1.3em;"><span style="line-height: 1.3em;">We are seeing this currently as sluggish growth in activity has resulted in a slowing in population growth. We discuss a few reasons why net immigration and population growth may have already slowed by more than official figures suggest. </span></p>
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<p style="line-height: 1.3em;"><img src="/images/2015/08/10/Screen%20Shot%202015-08-10%20at%204.30.04%20PM.png" alt="" width="737" height="470"></p>
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<p><span>Australia’s population growth slowed to 1.4% y/y, on current estimates, at the end of 2014 from a peak of more than 2% y/y prior to the GFC. Lower net immigration has contributed most to the slowing but births have also fallen (see page 4) (Figure 3). </span></p>
<p><span>Monthly overseas arrivals and departures data suggest that net immigration slowed further in H1 2015 (Figure 4). In fact, on a sequential basis, </span><span>population growth already looks to have dipped towards 11⁄4% </span><span>at end 2014 in annualised terms. </span></p>
<p><span>The slowing in population growth has been </span><span>most pronounced in the mining states </span><span>of Western Australia, Queensland and the Northern Territory (Figure 5). These states have also seen sharp slowings in 457 visa (Temporary Work (Skilled)) applications which allow recipients to stay in Australia for up to four years. This indicates that slower economic activity and </span><span>reduced job opportunities in these states has been an important reason for the overall slowing in net immigration</span><span>. This has taken pressure off unemployment from rising faster than it has in these states. </span></p>
<p><span>Historically, swings in population growth have </span><span>tended to lag changes in economic momentum</span><span>. To illustrate, population growth has typically slowed as the unemployment rate has risen, and vice-versa (the one exception being the late 1980s where population growth slowed in advance of the economic cycle) (Figure 6). </span></p>
<p><span>The slowing in population growth underway therefore largely reflects weaker economic activity. </span><span>From a labour market perspective, slower population growth can be thought of as ‘shock absorber’. It limits upward pressure on the unemployment rate to the extent that it reflects a slower rise in the supply of available workers. </span><span>A large share of the slowing in net immigration has been among the prime working age </span><span>(25- 44 year olds). Fewer arrivals British and other European citizens in this age bracket have accounted for half of the decline in permanent and long-term arrivals to Australia since 2012. </span></p>
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<p><span>Measuring population growth accurately in real time is difficult and we suspect that it could be revised lower due to downward revisions to net overseas migration (NOM) over time. </span></p>
<p><span>The ABS count persons as being in the resident population if they are in Australia for at least 12 months in a 16 month period. The problem is that this cannot be known in real time and the ABS cannot produce ‘final’ NOM and population estimates until 21 months after the relevant quarter.</span><span>1 </span><span>In the interim its </span><span>preliminary estimates of NOM are subject to revision </span><span>which can sometimes be large (Figure 7). In fact, </span><span>NOM and population growth have already been revised lower </span><span>since its most recent peak. This could be due to the way the ABS calculates preliminary estimates of NOM. </span></p>
<p><span>To estimate NOM the ABS uses passenger card information combined with propensities from the year before for groups of individuals to ‘NOM in’ or ‘NOM out’. Revisions to NOM can therefore occur if these propensities are changing quickly which may occur if net migration flows are changing rapidly as is currently the case. </span></p>
<p><span>Net immigration has already been slowing faster than expected. </span><span>For instance, ABS estimates of NOM have already significantly undershot the latest estimates/forecasts by the Department of Immigration made in mid 2014, particularly on the departures side (Figure 8). Net immigration from New Zealand has slowed more sharply than expected as unemployment had been falling across the Tasman but rising in Australia (Figure 9). </span></p>
<p><span>More important, however, has been the much weaker-than-expected decline in net immigration of persons on Working Holiday and Work &amp; Holiday visas and the slowing in net immigration of workers on 457 visas, both reflecting the softness of Australia’s labour market (Figures 10 and 11). </span></p>
<p><span>Finally, net immigration may be weaker than official estimates because </span><span>published (final) NOM figures have historically overstated net immigration. </span><span>Given births and deaths can be measured relatively accurately, and total population estimates are provided by the Census every five years, a more accurate estimate of net immigration is calculated as population growth less natural increase. Figure 12 shows that this residual measure of NOM has been lower than published NOM. </span><span>If history is any guide, therefore, the availability of 2016 Census figures could lead to further downward revisions to NOM and population growth. </span></p>
<p><span>In summary, these factors suggest </span><span>net immigration and population growth have already slowed by more than official figures suggest. </span></p>
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<p><span>THE OUTLOOK FOR POPULATION GROWTH </span></p>
<p><span>Population growth is expected to slow a little further in the near term as lags from slower economic activity feed through. </span><span>Over the next five years, it seems likely that population growth will average 11⁄4-11⁄2% per annum (the RBA is now assuming 11⁄2% over the next few years). This would be much slower than growth experienced in recent years but still faster than the 1.1% per annum average growth rate from 1992 to 2006. As net immigration slows, nearly half of Australia’s population growth is again likely to come from natural increase, although this is also slowing. </span></p>
<p><span>NATURAL INCREASE </span></p>
<p><span>The number of births has moderated again in recent years after a brief spurt and is expected to slow further. </span></p>
<p><span>The contribution of natural increase – births less deaths – to population growth steadily declined over time until the mid 2000s (Figure 2). More births then supported population growth as the number of 25-34 year old females – those with the highest fertility rates – rose sharply after being little changed for more than a decade (Figure 13). </span></p>
<p><span>The number of births and natural increase in the population is already slowing. It will slow further as much weaker growth over the past five years in the number of 20-24 year old females will result in slower growth in the population of 25-34 year old females. </span></p>
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<p><span>NET IMMIGRATION </span></p>
<p><span>Unless there is a persistent improvement in labour market conditions, it is difficult to see net immigration increasing in the foreseeable future. </span><span>While some further slowing in net immigration is expected in the near term, we expect it to then stabilise due to: (i) fewer outflows to New Zealand; (ii) a still high official immigration programme; and (iii) strong international student inflows. </span></p>
<p><span>First, the relative strength of the New Zealand economy, which has resulted in a small outflow of people from Australia across the Tasman, is diminishing. The jobless rate in New Zealand has increased recently amid more moderate economic activity and the increase in labour supply (Figure 14). This could see at least a </span><span>stabilisation in net immigration between Australia and New Zealand </span><span>if not some turnaround. </span></p>
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<p><span>Secondly, the intake under </span><span>Australia’s official Migration Programme has been kept at 190,000 persons for 2015-16</span><span>. While this level of official migration in recent years has not prevented net immigration from moderating, it will limit its rate of decline by, to some extent, putting a floor under immigration levels (Figure 15). </span></p>
<p><a href="/images/2015/08/10/Screen%20Shot%202015-08-10%20at%204.39.42%20PM.png" target="_blank"><span>Click to enlarge</span></a></p>
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<p><span>Finally, </span><span>strong growth in international student arrivals is supporting net immigration</span><span>. As long as students satisfy the ‘12/16’ rule they are counted as residents for population purposes and many stay in Australia after graduation. </span></p>
<p><span>The number of </span><span>international student commencements has reached the previous peak in 2009 </span><span>when its contribution to net immigration peaked at around 120K persons per annum (Figure 16). Department of Immigration forecasts, which appear broadly on track, suggest a similarly large contribution to NOM over the next few years which would add 0.4ppts to annual population growth. (Students may add less to potential labour supply than other immigrants, however, as they are limited to working 20 hours per week while studying.) </span></p>
<p><span>This trend is being supported by the weaker Australian dollar, streamlined policies towards overseas students and rule changes that allow overseas students to extend their stay for two to four years upon graduation under a Temporary Graduate visa. </span></p>
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<p><span>IMPLICATIONS OF SLOWER POPULATION GROWTH </span></p>
<p><span>Potential growth and interest rates </span></p>
<p><span>In the medium-term, one implication of slower population growth is lower potential output growth through weaker growth in both demand and supply. Given the aging population, potential labour supply growth would be even slower absent a persistent increase in labour force participation. </span></p>
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<p><span>Assuming annual productivity growth around its long-run average of 11⁄2%, potential output growth could fall closer to 23⁄4% per annum over the medium term, well below the 3–31⁄4% widely assumed previously. While it’s per capita growth that ultimately determines standards of living, </span><span>lower potential GDP growth would imply lower interest rates than otherwise </span><span>(Figure 17). </span></p>
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<p><span>Housing demand </span></p>
<p><span>One source of slower potential output growth is that </span><span>slowing population growth would, over time, reduce underlying demand for housing. </span><span>While several years of underbuilding means that there remains excess demand for housing, particularly in Sydney, smaller increases in the population will eventually result in weaker housing demand. </span></p>
<p><span>In this regard, </span><span>relatively small changes in population growth matter for housing demand. </span><span>For example, annual population growth of 11⁄4% would add around 125k less people per annum to the population compared with growth of 13⁄4% (Figure 18). Assuming 2.5 persons per household, this would mean housing demand drops by roughly 50k dwellings per year. </span></p>
<p><span>A complicating factor is that international students are expected to account for a noticeable share of population growth in the near term. As mentioned recently by the RBA, demand for housing from students may be different to that from other immigrants, including because they have lower incomes and are typically younger. They are also likely to demand housing close to universities and apartment living rather than detached housing. The composition of student arrivals, however, may also have a bearing on the type of housing sought. </span></p>
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<p><span> </span></p>
<p><em>Justin Fabo is senior economist, ANZ. You can follow him on Twitter <a href="https://twitter.com/justinfabo" target="_blank">here</a>.</em></p>
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