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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The ABS released the <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/5206.0Main+Features1Dec%202014?OpenDocument" target="_blank">Australian National Accounts</a> for Q4 2014 which showed the economy growing by an underwhelming 0.5% in the quarter and 2.5% over the year.
In trend terms growth was just 2.3% over 2014, which is below the long run average.
Looking on the bright side this completes a remarkable 93 consecutive quarters since Australia experienced a recession.
<img src="https://4.bp.blogspot.com/-xEIAcp4LYc0/VPaSsFjrqjI/AAAAAAAATgw/pKuWUjzn7KU/s1600/GDP1.jpg">
In truth, though, this was another soft result and a slowing rate of annualised GDP growth which appears to be commensurate with further monetary policy easing.
<img src="https://4.bp.blogspot.com/-4cGxCCHnBag/VPaSsRwfC2I/AAAAAAAATg8/0-OVfUsFlXA/s1600/GDP2.jpg"> 
Domestic demand led by Sydney
The Domestic Final Demand picture showed that as expected the strength of the housing markets in Sydney and Melbourne have boosted demand locally.
Dwelling construction and <a href="https://petewargent.blogspot.com.au/2015/03/building-approvals-smash-record-high" target="_blank">record high building approvals</a> are firing in both capital cities and the "wealth effect" of rising dwelling prices has <a href="https://petewargent.blogspot.com.au/2015/02/retail-volumes-increase-in-q4" target="_blank">improved consumption in both New South Wales and Victoria</a>.
State Final Demand which is at best only an indicative measure remained weak in Canberra (ACT) and in the southern states of South Australia and Tasmania.
The negative year on year readings for Western Australia and Queensland are not unexpected, reflective of mining construction tailing away and a number of <a href="https://petewargent.blogspot.com.au/2015/03/death-of-thousand-cuts" target="_blank">diabolical regional economies</a> at the local level.
<img src="https://1.bp.blogspot.com/-fntRY-bk6b0/VPaSsVG5YXI/AAAAAAAATg0/RlVdkNmSgGo/s1600/GDP4.jpg">
Contributors to growth
GDP growth of 0.5% for the quarter was held aloft by net exports. While non-residential construction acted as a drag it was heartening to see new housing investment contributing 0.2ppts to growth. 
<img src="https://3.bp.blogspot.com/-5DRqvlhjVfQ/VPaSuxcDSwI/AAAAAAAAThc/4O1cOiPstc8/s1600/gdp3.jpg">
Dwelling investment
Indeed the "new dwellings" component of dwelling investment improved substantially by 12.4% over the past year, and the Reserve Bank will be keen to see this continue over the next couple of years as mining construction declines.
Note that major renovations contributed absolutely zip to GDP - a stunning 0.0ppts.
Although Sydney has been through a renovations mini-boom, across the rest of the country the trend is at best moribund.
<img src="https://3.bp.blogspot.com/-wLlfIgjgeuk/VPaStGcwTqI/AAAAAAAAThk/JcrrI8BAVyk/s1600/GDP5.jpg">
National and household income 
While real net national disposable income increased by 0.4% in Q4 to be 0.5% over the year, in per capita terms this reading did not increase in Q4 and was negative in 2014. 
Meanwhile the most recent <a href="https://petewargent.blogspot.com.au/2015/03/weak-commodity-prices-pave-way-for-more" target="_blank">commodities index release</a> showed that Australia's terms of trade are set to continue declining in Q1 2015.
At the household income level employee compensation growth has slowed markedly following on from a <a href="https://petewargent.blogspot.com.au/2015/02/wages-rise-25-percent" target="_blank">wage price index at a survey low reading</a> of +2.5%, although gross disposable income fared somewhat better across 2014.
<img src="https://4.bp.blogspot.com/-GYBsvfA-FOw/VPaStX6RBOI/AAAAAAAAThE/zA9HcTQqyn0/s1600/GDP6.jpg">
While interest paid on dwellings began to rise again through 2014 - and logically we should expect to see this chart rising over time due to Australia's high rates of immigration - mortgage serviceability for existing homeowners on variable rate mortgages has improved enormously since Q3 2008.
<img src="https://3.bp.blogspot.com/-G6fajQbUcCc/VPaSuWaqblI/AAAAAAAAThU/2iXR0cYE7P8/s1600/GDP8.jpg">
The shape of the above chart mirrors the findings of the Reserve Bank's own submission to the <a href="https://www.rba.gov.au/publications/submissions/inquiry-affordable-housing/" target="_blank">Inquiry into Affordable Housing</a> which found that repayments on new housing loans when charted against household disposable income had improved dramatically to be way below the average for the past decade.
Anyone with a variable rate mortgage over the past six years will attest to the same - not that this is much consolation for first home buyers in Sydney, granted. 
 The Wrap
Not entirely unexpectedly this was a soft result which marginally missed expectations and won't do a great deal to change the view that interest rates are likely be cut again before the end of H2 2015.
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>.
His book '<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>' is out now.
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pwargent-M4siyDbqQY

Major renovations contributed absolutely zip to GDP: Pete Wargent

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Interest rate cuts are losing their potential at stimulating the economy, Reserve Bank deputy governor Philip Lowe says.
Lowe said rate cuts were having little effect on household consumption because retirees and other savers were instead cutting back spending as their incomes fell in line with deposit rates.
"At the end of the day, the solution to the problems caused by the disconnect between the desire to save and the desire to invest cannot lie with monetary policy," he said in a speech in Sydney yesterday.
"Instead, it lies in measures to improve the investment environment so that once again there is strong productive demand for the use of our societies’ savings."
Lowe noted borrowers with debts have been using the lower rates to accelerate repayments rather than raising their spending.
<a href="https://www.rba.gov.au/speeches/2015/images/sp-dg-2015-03-05-graph11.gif" target="_blank" title="Graph 11: Mortgage Repayments"><img src="https://www.rba.gov.au/speeches/2015/images/sp-dg-2015-03-05-graph11-small.gif" alt="Graph 11: Mortgage Repayments"></a>
Lowe said monetary policy was becoming less effective worldwide, in a speech titled, 'Low Inflation in a World of Monetary Stimulus' to the Goldman Sachs Annual Global Macro Economic Conference.
<a href="https://www.rba.gov.au/speeches/2015/images/sp-dg-2015-03-05-graph10.gif" target="_blank" title="Graph 10: Housing Equity Withdrawal"><img src="https://www.rba.gov.au/speeches/2015/images/sp-dg-2015-03-05-graph10-small.gif" alt="Graph 10: Housing Equity Withdrawal"></a>
“In the years leading up to the (global financial) crisis, a reduction in interest rates could be reliably predicted to encourage such a response,” Lowe said.
“Credit was easily accessible, economic volatility in many economies was low and people were prepared to borrow.
"In today’s world, things look quite different.”
“Many borrowers have responded to the lower interest rates of recent years by paying off their loan a little faster, rather than increasing their spending.
“Conversely, it seems likely that those relying on interest income have reduced their spending by more than would previously have been the case.
 “Certainly, the many letters we have been receiving at the bank recent­ly would suggest this.
“In (this) earlier period, the level of interest rates that we have today would have caused a large boom in borrowing, but this has not occurred.”
<a href="https://www.rba.gov.au/speeches/2015/images/sp-dg-2015-03-05-graph9.gif" target="_blank" title="Graph 9: Household Saving and Debt"><img src="https://www.rba.gov.au/speeches/2015/images/sp-dg-2015-03-05-graph9-small.gif" alt="Graph 9: Household Saving and Debt"></a>
Dr Lowe said the same reaction to low interest rates could be seen in governments.
“Few governments have seen the very low intere­st rates as an opportunity to support long-term infrastructure investment at low cost.
“Rather, much as households have done, governments have taken advantage of the lower debt-servicing costs to help shore up their finances.”
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jchancellor-FAypfDUnLy

There is no boom in borrowing says RBA

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GUEST OBSERVATION
Australia is in the midst of a structural economic change with the mining boom coming to an end as <a href="https://www.macrobusiness.com.au/2015/02/australian-investment-pipeline-falls/" target="_blank">investment in the sector falls</a>. Tourism has been <a href="https://www.budget.gov.au/2011-12/content/bp1/html/bp1_bst4-03.htm" target="_blank">promoted by government</a> as a key source of future economic growth, with some <a href="https://www.professionalplanner.com.au/featured-posts/2015/02/08/winners-and-losers-as-economy-changes-gears-34162/" target="_blank">media reports</a> already stating that tourism has started to recover. But will it really be that easy to shift back from a resource-dependent to a tourism-led economy?
Tourism and the resources sector have cyclically been key exports and drivers of economic growth in Australia. However, the last decade’s mining boom has <a href="https://www.tra.gov.au/documents/Economic-Industry/Economic_Impact_of_the_Current_Mining_Boom_on_the_Australian_Tourism_Industry_FINAL.pdf">negatively impacted</a> on the sector by inflating the exchange rate, increasing competition for labour and delivering a <a href="https://www.sciencedirect.com/science/article/pii/S016073831300159X" target="_blank">‘two-speed’ economy</a>.
During this boom, Australia’s resources sector has encroached on protected areas with iconic tourism attractions and protected areas, such as the <a href="/news">Great Barrier Reef</a>, increasing the risk of the region losing key assets that attract visitation. Importantly, the mining boom has heralded significant structural change in Australia’s economy, with little to no long-term planning for growth once it comes to an end.
A report by the <a href="/news">Griffith Institute for Tourism</a> has found that the transition back to tourism - particularly in regions that have become resource dependent - may be very difficult. Investigating two resource dependent regions in Queensland (Gladstone and Roma), the research found that the regions have become dependent on the resources sector and this has impacted tourism in many ways.
The key impacts of the boom in these regions include: reducing the tourism industry’s ability to attract and retain staff; increasing costs of accommodation, food and fuel for visitors and tourism employees; influencing tourism businesses to adapt to cater for the more lucrative resources sector workers (that is, installing dongas (portable buildings), building up-market motels, offering fine dining); reducing traditional tourism businesses profitability leading to their closure; and straining local infrastructure and support services upon which tourism depends.
The regions have reportedly suffered a decline in their aesthetics, reducing their appeal as tourism destinations. Combined with the busyness and limited amount of affordable accommodation, the traditional leisure markets now avoid or pass through the towns. In Gladstone the resources sector activity has also restricted visitor access to certain areas of the region and impacted on key natural assets that attract tourists, including the harbour and the Great Barrier Reef.
But probably the most concerning impact occurred in Roma, where there was a change in the strategic direction of the local council following the regional council amalgamations in 2008. Prior to the amalgamation, Roma was an example of regional tourism best practice, with a local tourism development officer working with the industry to develop products and market the region. Following the amalgamation, the council decided to grow the resources sector, which strengthened the sector’s capacity to do business in the region.
At the same time, the council struggled to understand and quantify the benefits of tourism, resulting in the revenue generated by tourism being viewed as inferior to the resources sector. The council’s shift in focus away from tourism led to a loss of tourism skills, advocacy and policy from the region. Since then, been very few new tourism developments and the existing tourism products have declined, deteriorated or adapted to service the resources sector.
Fortunately, the Council in Roma is now anticipating the end of the mining boom and have commenced efforts to rejuvenate tourism. However, this rejuvenation process might not be so simple or easy. <a href="https://www.propertyobserver.com.au/https://www.sciencedirect.com/science/article/pii/0261517794900892" target="_blank">Prior research </a> considering the rejuvenation of tourism following an oil and gas boom indicates that it can take a decade of significant product development and extensive marketing to attract the leisure tourist back to a region.
Another issue is that previously resource-dependent regions commonly attempt to attract high-yield tourists and <a href="https://www.propertyobserver.com.au/https://www.sciencedirect.com/science/article/pii/0160738395000615" target="_blank">re-image the region</a> by marketing the destination as dynamic and multi-cultural. This can reduce differentiation between destinations and undermine competitiveness.
This regional picture gives a glimpse to the challenges facing tourism nationally. Shifting the economy back towards tourism may be more difficult than expected. It’s not enough to just market Australia – significant reimaging will need to occur to change the perceptions tourists now have of Australia and its resource-dependent regions.
In addition, without good products and services, which have declined during the mining boom, the tourism industry will not be able to adequately service growing demand and there will be low levels of satisfaction.
Perhaps the most effective policy for ensuring tourism rejuvenation would have been to take a long-term perspective to development that recognised the value of tourism and developed strategies at the start of the mining boom to avoid the loss of valuable products, policy, expertise and skills. As it is, Australian tourism now faces an uphill battle.
Char-lee McLennan is research fellow, sustainable tourism at Griffith University.
This article was originally published on <a href="https://theconversation.com">The Conversation</a>.
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Char-leeMcLennan-qzrkbjqmWu

Moving from resources to tourism is a bigger leap than we think: Char-lee McLennan

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GUEST OBSERVATION
Dear Premier Palaszczuk,
As you meet with <a href="https://www.couriermail.com.au/business/business-looks-for-economic-diversity-infrastructure-stability/story-fnihsps3-1227220692715" target="_blank">Queensland business leaders</a> on Tuesday and get down to the business of governing, you’re sure to face many immediate preoccupations and challenges. But considering <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2015-01-23/regional-queenslanders-worried-about-downturn-of-state-economy/6035220" target="_blank">the economy was the dominant issue</a> of this election, I would like to provide three pieces of advice for your new Labor minority government.
The economy is ultimately about people
First of all, I would encourage you to remember that the ultimate objective of economic policy is to promote inclusive economic growth and welfare. I use the word inclusive here to mean that all individuals, especially those at the bottom end of income distribution, should be guaranteed access to the benefits and opportunities arising from the increasing pace of economic activity. It is only by being inclusive that growth can effectively generate “development”.
Budget, taxes, debt and expenditure are only tools that the government can use to achieve the fundamental goals of inclusive growth and welfare. Unfortunately, in the recent past both the federal and Queensland governments have mistaken tools for objectives.
This has led to a policy of “minimisation”: to minimise debt, minimise deficit, and minimise expenditure. This is hardly a good way to run fiscal policy. On the contrary, inclusive growth and welfare become more difficult to achieve when the only purpose of policy is to shrink the size and scope of government, thus compromising its ability to supply public goods and to stabilise the economy against cyclical shocks.
There are two important features that should instead characterise good fiscal policy.
One is the synchronisation of expenditure with the business cycle. Cutting expenditure just to balance the budget in a time of economic contraction will only make the contraction worse. Conversely, when the economy slows down, the government should increase expenditure and possibly run a deficit. This will help the economy recover.
That is not just theory: my own research on Australia indicates that one extra dollar of government expenditure generates <a href="https://www120.secure.griffith.edu.au/research/file/dd80d33e-ccac-46f9-ac58-d9ff7d41b5b7/1/2014-08-does-government-expenditure-multiply-output-and-employment-in-Australia.pdf" target="_blank">more than one dollar</a> of gross domestic product (GDP). I have done similar research for Queensland, which is yet to be published but which found a similar result.
Of course, the increase in expenditure and deficit in time of contraction must be offset by expenditure cuts and surpluses in time of economic expansion. This counter-cyclical pattern of government expenditure and deficit will ensure that the economy is stabilised in response to shocks, and there is no accumulation of debt in the long-term.
The second feature of good fiscal policy is attention to quality considerations in public investment. It is rather common to think that economic growth is just a matter of investment, and hence that the best (and possibly only) way in which governments can support growth is by throwing money into some infrastructure projects.
But the quality of investment and spending is as important as its quantity. Quality, for instance, means that upgrading the curriculum or promoting work-integrated learning is as important as building a new school.
Similarly, the growth payoff from building a tunnel that does not really address any transport bottlenecks or does not facilitate connectivity between market nodes is going to be small. I guess that the general message here is: public investment in infrastructure is not a panacea, and there is more that the government should/can do to promote inclusive growth.
Obsession with debt
My second bit of advice Premier is to get some perspective on the “debt problem” of Queensland.
There is no question that <a href="https://theconversation.com/the-true-state-of-queensland-debt-36345" target="_blank">Queensland debt has grown considerably</a> since 2006-07, and that today the debt to GDP ratio in Queensland is higher than in the rest of Australia, as I showed <a href="https://theconversation.com/the-true-state-of-queensland-debt-36345">in a recent article</a>.
But from a policy perspective, what matters is not much the comparison with other states, but instead the extent to which debt is sustainable. Sustainability refers to the dynamics of the debt to GDP ratio in the long-term. It is a simple matter of algebra to show that debt is sustainable as long as the economy grows sufficiently fast.
So, the issue of sustainability is essentially a question of economic growth. If in the attempt to reduce debt you were to undertake cuts or actions that undermine the growth potential of the economy, then the debt problem would simply get worse.
Now, this does not mean that Queensland should take a course of fiscal profligacy. It means, however, that there is no need at this stage to make drastic measures to repay debt. The type of counter-cyclical fiscal policy previously described, coupled with sound interventions in support of growth, will be enough to prevent further debt accumulation and hence to ensure its sustainability.
I welcome your government’s decision to re-consider the proposed plan of asset privatisations. It is the wrong response to a problem that does not require any such strong choice.
From an economic perspective, there is simply no evidence to support the notion that the private sector always does it better. Certainly, there are several examples of successful privatisations of public assets. But there are also many instances where privatisation has not resulted in a decrease in price and/or an increase in consumer’s satisfaction.
What does the economic data tells us?
And this brings me to the last bit of advice: make sure that your team takes a comprehensive look at the economic data before making any big decisions.
If good fiscal policy means that government expenditure must be synchronised to the business cycle, then the government must be able to identify and even predict the phases of the cycle. This in turn requires making the most efficient use of the large volume of statistical information that is available today. That is, good economic policy must be guided by a good understanding of the economic data.
A good look at the data is also important in terms of communication. I do not think that it helps the cause of any government to advertise a strong economy when – as is the case in Queensland today – gross domestic income per capita <a href="https://theconversation.com/the-true-state-of-queenslands-economy-without-the-spin-35959">is declining</a>, the only jobs that are being created <a href="https://theconversation.com/what-unemployment-figures-really-say-about-queensland-36305" target="_blank">are part-time</a>, and the unemployment rate <a href="https://theconversation.com/what-unemployment-figures-really-say-about-queensland-36305" target="_blank">is higher</a> than what it was three years ago (with or without seasonal adjustment).
Fabrizio Carmignani is a professor at the Griffith Business School at Griffith University.
This article was originally published on <a href="https://theconversation.com">The Conversation</a>.
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FabrizioCarmignani-GxUevkhNYc

Queensland’s biggest economic challenge isn’t debt – it’s growth

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The extent to which the Abbott government’s woes have effects in the real world of Australian lives was on display in last week’s January unemployment numbers from the <a href="https://www.propertyobserver.com.au/https://abs.gov.au/ausstats/abs@.nsf/mf/6202.0?OpenDocument" target="_blank">Australian Bureau of Statistics</a> (ABS).
First, the good news: the number of aggregate hours worked in January was up a lot — 0.5% seasonally adjusted. And part-time employment rose nearly 16,000 jobs, seasonally adjusted.
But nationally, unemployment rose 0.3 points to 6.4%, the highest in over 12 years. That more than reversed the surprise fall in December to 6.1% from 6.2% in November. In trend terms, unemployment remained steady at 6.3%. Participation was steady at 64.8%, seasonally adjusted, so the big rise in unemployment was not due to participation. It was driven by a fall of 28,000 in full-time jobs.
There was a 0.3 point rise in unemployment in NSW to 6.3%, where participation dropped 0.1 of a point. It dropped the same in Victoria, where unemployment rose to 6.6% from 6.5%. In Queensland, the final legacy of the Newman government was a 0.3 point rise in unemployment to 6.5%, off the same small fall in participation as in NSW and Queensland. South Australia saw a big rise in unemployment, from 6.6% to 7.3%, but the numbers in smaller states are always more volatile, and it was accompanied by a 0.7 point jump in participation. Western Australia recorded a fall of 0.3 points to 5.9% unemployment, off another 0.1% fall in participation, while unemployment was flat in Tasmania at 6.6%.
Overall, the numbers show that, as forecast, the jobs market slowed at the start of 2015 after a strong finish to 2014. That strong quarter coincided with problems around the accuracy of the ABS jobs data. But in a note with the release, the ABS made it clear those recent problems had no impact on the January figures:
“The increase in unemployment in January 2015 in original and seasonally adjusted terms has not been caused by the recent changes to the ABS supplementary survey program.
“Historically, the ABS had not conducted supplementary surveys in the December and January months, and no supplementary surveys were conducted in December 2014 and January 2015.”
It continued:
“The increase in unemployment in original terms is due to:
<ul>
<li>a net increase in unemployment in persons who responded to the labour force survey in both December and January (the ‘matched sample’),</li>
<li>a contribution from the incoming rotation group compared to the group it replaced, and</li>
<li>a contribution from persons who responded in December but not in January and vice versa.”</li>
</ul>
“Overall response rates for both December and January were in the ABS’s target range of 93% to 95%,” the ABS added. Adding to the need for caution about the jobs data was the number of jobs added to the economy in December being revised upwards from 37,400 to 42,300. A downward revision would add to any feeling the jobs data for January was showing a weakening demand for labour.
The overall result bears out the RBA’s obvious concerns about the fragile state of growth in the economy. And the concerns of the rest of us that the Abbott government doesn’t have the wherewithal to address it.
This story originally appeared on <a href="https://www.crikey.com.au/2015/02/12/unemployment-lurches-up-while-government-navel-gazes/">Crikey</a>.
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po-LsXgBTHBmX

Unemployment lurches up while government navel-gazes

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The Australian economy will drop out of the G20 by 2050, according to research published by PwC.
And the slide will continue unless the nation’s leaders fundamentally change the way they think about investing in science, technology, engineering and mathematics (STEM) skills, says one of the country’s leading technology entrepreneurs, <a href="https://www.smartcompany.com.au/legal/politics/45612-why-australia-keeps-getting-it-wrong-on-employee-share-schemes" target="_blank">Matt Barrie</a>.
The <a href="https://www.pwc.com.au/consulting/assets/publications/World-in-2050-Feb15.pdf">PwC The World in 2050 report</a> predicts the Australian economy will drop 10 places in world rankings by the middle of the century, dropping from its current rank of 19 to 29.
This would put the Australian economy behind the likes of growing economies such as Bangladesh, Pakistan and the Philippines and far behind economic powerhouses China, India and the US, which are predicted to stay at the top of the rankings over the next 35 years.
According to PwC, the end of the Australian mining boom, and a lack of investment in other parts of the economy, will cause the Australian economy to fall behind.
The PwC rankings are determined by comparing the purchasing power parity of each economy and this year’s result shows a broad shift from developed economies to emerging economies.
While China is predicted to remain the largest economy by 2050, India is expected to overtake the US for second place, and Indonesia, Mexico and Nigeria could push the UK and France out of the top 10.
The Philippines, Vietnam and Malaysia are expected to shoot up the rankings, while Colombia and Poland will grow at a faster rate than the large economies of Brazil and Russia.
PwC Australia economics partner Jeremy Thorpesaid the research indicates the Australian economy will “revert to trend” and we “won’t see the mining boom in the same way”.
While Thorpe says PwC is not trying to predict exactly what the Australian economy will look like, the takeaway from the research is that “we know the economy is going to be different and STEM will be important wherever it goes”.
“The Australian economy is not going to be as large in relative terms and so our companies are not going to be competing on scale,” Thorpe says.
“They will be competing at the smarter end.”
Thorpe says this represents an opportunity for “smaller, nimble companies”, especially those built on digital disruptive technology, and that is why it is essential to make long-term investments in STEM capabilities.
“Many of these things don’t pay off immediately,” says Thorpe.
“You can’t cut the ribbon in the same way you can for a new bridge, you have to look beyond the political cycle. But as the events of the past week have shown, it can be heard to divert attention from the here and now.”
Freelancer founder Matt Barrie agrees with Thorpe’s analysis, said he fears the Australian economy will follow the same path as the resource-rich Argentina, which saw a dramatic decline in its wealth because of government policies that did not alter the composition of the economy.
Barrie has spoken out regularly about the need for investment in STEM skills in Australia, including to <a href="https://www.linkedin.com/pulse/20140627074014-921366-australia-technology-policy-points-in-letter-to-malcolm-turnbull" target="_blank">Communications Minister Malcolm Turnbull last year</a>.
“We have actually gone backwards in our thinking about the tech industry or science,” says Barrie, who lays the blame with “successive Australian governments”. 
“There have been rampant cuts. I don’t think it would be possible to do more damage.”
Barrie points to cuts to funding for science research, declining university enrolments in STEM subjects and courses, the “dumbing down” of curriculum in primary and secondary schools, as well as the “screwing up” of remuneration schemes for technology companies, as just some of what he believes are damaging policies.
“It just goes on and on and on,” he says. “We’re at risk of becoming a shipwreck … It’s death by a thousand cuts.”
If given the chance, Barrie says the first thing he would change is the K-12 curriculum taught in Australian schools.
“Every little kid wants to design the next Facebook … the next mobile phone app but they don’t know how,” he says.
“We need to help them connect the dots.”
He would also encourage more people to work in STEM fields and appoint a national chief technology officer who would be responsible for setting longer-term goals.
But as long as the topic remains off the table in Canberra, Barrie says he “is at a loss”.
“There is fundamentally something wrong in the way our country is governed,” he says.
This artiocle first appeared on <a href="https://www.smartcompany.com.au/" target="_blank">SmartCompany</a>.
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ekeating-PWvazjYE25

PwC forecasts what Australia’s economy will look like in 2050

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Unemployment remains a concern, but perhaps not when it comes to house price growth, according to recent Macquarie Wealth Management research.
They note counter-intuitively that a rise in unemployment typically sees house prices move higher.
"Whilst unemployment is a key factor to be cognisant of for housing demand, the below table indicates that prior cycles exhibiting a strong rise in unemployment typically illicit a policy response from the RBA (i.e. rate cuts) which sees house prices actually increase as unemployment rises," the January report to clients noted.
<img src="/images/2015/02/13/housing-cycle-feb-13-one.jpg" alt="">
It looked at five recent cyclical employment downturns going back to the 1980s.
"In the 1990 recession the unemployment rate increased ~180bps to 10.7%, but house prices increased ~8% in the following 12 months factoring a ~200bps decline in the cash rate. 
A similar scenario was seen post the GFC," the report noted.
Rising unemployment is likely heighten risks of mortgage delinquencies, according to Genworth Mortgage Insurance Australia.
Ellie Comerford, chief executive of Genworth in Australia, expects expects its loss ratios to climb from its current 19 per cent to 25 to 30 per cent for the full 2015 financial year.
Ms Comerford's comments to the Australian Financial Review came after Genworth posted a $172.7 million statutory net profit for the six months to December, due primarily to lower than expected claims and a strong housing market. The result was a 52 per cent improvement to the prior corresponding period
Genworth's share price sits around $4.20, up 60 per cent since its public debut in May, compared with the 6 per cent gains of the benchmark S&amp;P/ASX200 Index.
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Unemployment won't stop house price rises: Macquarie Wealth

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GUEST OBSERVATION
You know Australia’s in trouble when the Reserve Bank cuts interest rates.
Last week, the central bank did precisely that, in belated recognition of the <a href="https://www.afr.com/p/national/national_income_recession_already_2sLhoU9EtfoC0g0M5xvujI" target="_blank">income recession</a> that has struck. Gross domestic income (GDI) fell by 0.3% in the June quarter of 2014, followed by a further 0.4% slump in the September quarter.
The RBA has cut its 2015 GDP growth estimate as well, by 0.25%, predicting a 1.75%–2.75% range.
In 2012, I <a href="https://theconversation.com/buckle-up-australia-recession-is-coming-7950" target="_blank">predicted</a> an Australian recession, albeit as a “delayed tsunami” effect of the global financial crisis of 2008–12. However, some <a href="https://au.finance.yahoo.com/news/economist-expects-recession-2015-034208840" target="_blank">bank economists</a> since late last year have <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2014-12-17/australia-out-of-luck-odds-of-recession-rise/5972732" target="_blank">declared</a> there is a recession in the making in 2015.
Welcome to the post-industrial economy. Fortress Australia is long gone; the automotive industry is evanescing before our eyes; while textiles, footwear and clothing barely exist on these shores.
Steel, once the linchpin of Australia’s heavy industries, is a shadow of its former self. Battered by fierce competition from China and India, Australian steel tonnage output didn’t even crack the <a href="https://www.statista.com/statistics/271979/the-largest-steel-producers-worldwide-ranked-by-production-volume/" target="_blank">top 20 world rankings</a> in 2013.
As everyone knows, the main game in Western Australia and Queensland is mining, mining and mining. Meanwhile, the sucker-fish, located predominantly in Sydney and Melbourne, comprising the <a href="https://www.rooseveltinstitute.org/new-roosevelt/fire-sector" target="_blank">finance, insurance and real estate (FIRE) industries</a>, gorge themselves on the vast swathes of export dollars produced by coal and iron ore.
But for how long?
From hero to zero?
Throughout the last 12 years, Australia has produced world-beating results. Australia’s <a href="https://www.tradingeconomics.com/australia/gdp" target="_blank">GDP doubled between 2007 and 2013</a>. It is the world’s 12th-ranked economy, a remarkable feat for a population comprising a mere 24 million people (and <a href="https://en.wikipedia.org/wiki/Cats_in_Australia" target="_blank">20.7 million cats</a>, apparently). Nationally, unemployment is low. In 2013 and 2014, <a href="https://www.smh.com.au/business/the-economy/property-makes-australians-the-world8217s-richest-says-credit-suisse-20141014-1163ip" target="_blank">Australians were the world’s richest</a>, thanks to the property boom, with every man, woman and child worth an average of $A258,000.
And oil prices are so low that they’re better than any tax cut any miserly government could ever give you in its wildest dreams.
Everything’s going swimmingly, isn’t it? Where’s the party?
But Australia is also facing an <a href="https://www.theage.com.au/business/the-economy/doing-more-with-less-as-incomes-shrink-20141205-120so4" target="_blank">income recession</a>. Real <a href="https://www.smh.com.au/federal-politics/political-news/real-wages-growth-worst-in-17-years-20140521-38p5j" target="_blank">household disposable income</a> is <a href="https://www.adelaidereview.com.au/commentary/article/falling-real-wages" target="_blank">falling</a>, exacerbated by the tumbling Australian dollar. Ominously, the world may be about to experience a Great Deflation.
Agriculture and manufacturing – the mainstays of Australian employment from federation until the 1990s – have been displaced by service sector industries. These largely feed off the revenues of a resources sector whose exports dwarf all others. But even iron ore export prices have halved in the past year, and there could be <a href="https://www.miningaustralia.com.au/news/could-iron-ore-drop-to-%24us30-a-tonne" target="_blank">worse to come</a>. There is not much point in Australia boosting its iron ore output if no one wants to buy it. Just ask the Soviets what they did with their surplus steel. Komrade (they dumped it in the west, to save you looking it up).
Unfortunately for us, we like to party hard and we didn’t invest all the enormous benefits of the boom in the terms of trade during the 2000s. We spent it on tax breaks. Which we then spent. On property. And Chinese consumer goods.
And speaking of being dwarfed, Australia’s Future Fund – designed to fund public service pensions and the odd politician – is paltry by comparison with <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2014-01-09/all-norwegians-become-millionaire-shareholders-in-world27s-big/5191480" target="_blank">Norway’s</a>, which ranks third in the world with almost US$1 trillion in assets.
By contrast, Australia ranks 13th globally (as it does in most things, except cricket), with a mere <a href="https://www.futurefund.gov.au/" target="_blank">A$109 billion</a> at its disposal. Or about 2.1 years of Commonwealth deficits, roughly.
Article continues on the next page. Please click below.
<hr class="system-pagebreak">
The Great Deflation
This week, China reported its <a href="https://www.wsj.com/articles/china-inflation-drops-to-five-year-low-in-january-1423533186" target="_blank">inflation figures</a> and the numbers are troubling. Year-on-year domestic demand has weakened considerably. Moreover, in January, the US economy saw its consumer-price index (CPI) fall to its lowest level since bottoming out during the Great Recession of 2009.
Deflation means prices are down. One type of deflation can be positive, as it emerges from gains in technology, efficiency and scale, coupled with cheaper labour and energy.
But too much of the wrong kind of deflation – where inflation is negative – leads to long-term unemployment, reduced demand and low, zero or negative growth. Exhibit A: Japan. <a href="https://af.reuters.com/article/commoditiesNews/idAFL1N0VJ0BN20150210?pageNumber=2&amp;amp;virtualBrandChannel=0" target="_blank">Two decades of deflation</a>.
The main reason price deflation is occurring is due to weak demand. This is due partly to a reduction in the gross money supply, and partly as a by-product of lower wages.
Money supply evaporated – temporarily – as credit markets froze in 2008. As governments poured liquidity back into financial markets in 2008–09, credit cautiously returned, but growth was non-existent or hesitant throughout most of the developed world. Millions of jobs vanished during the Great Recession, and the jobs that eventually returned <a href="https://www.theguardian.com/business/2015/jan/30/british-wage-slump-post-financial-crisis-uk" target="_blank">paid much less</a> than they had just a few years earlier.
In fact, the US has reportedly regained all the jobs it lost during the recession. With one hitch: these jobs pay <a href="https://www.latimes.com/business/la-fi-income-inequality-20140812-story">23% less</a>.
Now, this scenario has some resonance in Australia. The 2007–13 period saw Australian wages rise much faster than their OECD counterparts. But in 2014, <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2014-02-19/abs-figures-show-annual-wages-growth-slowest-on-record/5269480" target="_blank">wages hit a brick wall</a>, barely matching inflation. Yes, even miners saw lower wage growth. And, judging by their trade magazines, neither white-collar nor blue-collar resources industry workers are too optimistic about the future.
Oh Eurozone crisis: we’ve missed you most of all
If you thought the IMF and European Central Bank (ECB) had muddled successfully through the 2011–12 eurozone crisis, think again. Exhibit B: The ECB’s January 2015 quantitative easing program, injecting €60 billion per month into the eurozone economy.
Sounds impressive. But it isn’t. What it will do is simply refinance the banking sector, which is now beginning to pay back the three-year Longer-Term Refinancing Operation (LTRO) funds it borrowed during the crisis. Over 500 eurozone banks accepted more than €1 trillion during the crisis.
Now the ECB’s LTROs are maturing. As of January 2015, banks were <a href="https://www.reuters.com/article/2015/01/16/ecb-policy-idUSL6N0UU3V720150116" target="_blank">due to repay up to €196 billion</a> on LTROs by the end of February. But they still owe nearly €900 billion.
Consequently, the ECB’s QE program will only keep liquidity flowing back to the banking sector, as it replaces old LTROs with new QE.
The elephant in the room is not Greece. It’s inflation – or lack of it, to be precise. Eurozone inflation is running at -0.2%, a far cry from its 2% target. Not to put too fine a point on it, but -0.2% is not inflation. I’ve met inflation. And that’s not inflation.
The clear objective of the ECB’s €1.2 trillion QE program is to reflate the eurozone economies and ensure sufficient bank liquidity. But it also has a secondary objective: currency manipulation. 18 months of the Federal Reserve’s QE 3, which concluded in late 2014, injected $US85 billion per month into the American economy, pumping up its GDP growth figures, manipulating its currency and, coincidentally, depreciating China’s massive stash of US bonds.
How has the ECB responded to this? By engaging in its own currency manipulation scheme. This has sent the euro <a href="https://au.finance.yahoo.com/echarts?s=EURUSD%3DX#symbol=EURUSD=X;range=1y" target="_blank">below US$1.15</a>, a far cry from its US$1.45 rate of mid-2011. With the euro closer to parity with the US dollar, eurozone global exports can at least remain competitive.
Why does any of this matter to Australia? First, the EU is Australia’s largest source of foreign direct investment. Second, the currency power-play between New York, Tokyo and Frankfurt has hurt Australian productivity and exports, even as the Reserve Bank <a href="https://www.smh.com.au/business/mining-and-resources/australia-accused-of-manipulating-australian-dollar-to-save-iron-ore-miners-20150204-135jzu" target="_blank">tries to play</a> this poker game as well. Although the dizzy heights of an above-parity Australian dollar are a long-forgotten dream, currency depreciation in Europe, North America and Asia has contributed to the loss of Australian industries, such as the automotive sector. Equally, the Australian dollar, even at US$0.70, is not competitive enough to substitute for a lack of productivity.
The ducks are all lined up. A perfect storm approaches.
Welcome to capitalism. We hope you enjoy your stay.
<img src="https://counter.theconversation.edu.au/content/37355/count.gif" alt="The Conversation" width="1" height="1">Remy Davison is Jean Monnet Chair in Politics and Economics at Monash University.
This article was originally published on <a href="https://theconversation.com">The Conversation</a>.
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You know Australia’s in trouble when the Reserve Bank cuts interest rates: Remy Davison

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GUEST OBSERVATION
Following the recent cut in interest rates, we can see that there will be a pickup in residential construction particularly in Melbourne, Sydney and to a lesser extent in Brisbane, that will feed the appetite of the property investor who makes up more than 50% of the purchase of these apartments.
We think that self-managed super funds, as well as mum and dad investors, will be heightened with the fall in interest rates. Affordable housing, lower interest rates and higher job confidence will tempt first home buyers.
The concern is that outside of Sydney the economic indicators are not as strong, which permeates into confidence.
We are of the opinion that although interest rates have been lowered, it will not push another increase in property prices above circa 4% on the back of home purchasers being mindful of the price.
From the rental point of view we expect to see vacancy rates in the major capital cities to tick up as more of the investor stock comes on the market, which means a good opportunity for tenants.
As far as the government looking to regulate property investment, we don’t think this will take place as the major economic driver is the construction boom, which the government will not wish to disrupt.
We will see a multi-tiered market with Sydney continuing to grow with strong economic conditions coupled with job security to a lesser extent in Brisbane and in Melbourne.
Concern lies with Perth where there is a declining state economy due to job losses in the mining industry and the housing marketing beginning wane.
Malcolm Gunning is the president of the <a href="https://www.reinsw.com.au/imis15_Prod/web" target="_blank">REINSW </a>and the principal of <a href="https://gunningcommercial.com.au/" target="_blank">Gunning Commercial</a>.
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Outside of Sydney the economic indicators are not as strong: Malcolm Gunning

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GUEST OBSERVATION
The Reserve Bank’s recent decision to introduce an interest rate reduction is a strong indication that there are changes brewing for Australia’s property market.
To fully understand how this rate cut will affect our housing markets, I think it’s essential to firstly understand how they have performed over the last 12 months. My research shows that there has definitely been some ‘winners and losers’ in the state comparisons.
The clear winner of the housing market battle is Sydney, which has documented a 16.78% annual growth rate from the period of December 2013 to December 2014. Performing equally as well in the unit market with an annual growth of 12.90%. By all accounts, what we have just witnessed is one of the largest boom periods in Sydney’s housing market history.
Taking this into consideration - along with its strong annual economic growth throughout 2014 that saw its state final demand increase by 3.5% - it is clear to see why people who are looking to enter the housing market would choose New South Wales. This compares to Western Australia, for example, whose economy is arguable in recession with its state final demand falling in the last three reported quarters.
This aside, when we take a deeper look at the Sydney market we uncover some unfavourable facts, including:
<ol start="1">
<li>The ABS’ latest reported commencements in new housing currently sits at 4,082 dwellings above the median commencement rate of the last five years. 
</li>
<li>New housing approvals, as last reported by the ABS, are running at 2,591 dwellings above the five year median. 
</li>
<li>Population growth, as last reported by the ABS, is slowing and currently running at 1,728 people below the five year median. 
</li>
<li>Residex estimates that there are currently some 7,000 dwellings surplus to need. 
</li>
<li>Unemployment is increasing, and is likely to increase a little more than was anticipated, given the lower crude oil prices and a consequential likely reduction in employment in the LNG development and exploration area.</li>
</ol>
These observations suggest that the Sydney market is heading into considerably oversupplied territory, which could lead to some significant corrections. In fact, analysis right across Australia indicates that there is a national stock overhang, and in many states it is significant.
So what does this all mean in a situation where interest rates have decreased?
We can anticipate that the interest rate decrease is likely to stimulate the markets, so house prices will probably move forward from here, with the lending control of the major banks hopefully keeping the markets from overheating.
But is this a good outcome for the property market? My simple answer is… no!
While it may be good in the short-term for existing house owners, throughout my three decades of monitoring house price growth, I can confirm that each period of growth always ends with a number of people who bought close to the top of the market getting burned due to their excessive leverage. 
I issue a warning to all, and that is that we have passed the top of a normal growth period, and we are now about to have the market further stimulated. This will take the growth into unchartered waters where affordability will be worse than we have previously seen.
If you are an investor wanting to get into the market, take care and make sure you don’t pay a premium for any purchase you make, especially if you are buying new units.
John Edwards is a consulting analyst for <a href="https://www.onthehouse.com.au/" target="_blank">Onthehouse.com.au</a>.
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