Queensland builder-developer MAYD has revealed the first look at its major North Kirra beachfront development, lodging amended plans that reduce the number of apartments and increase the proportion of larger residences.

The project is planned across a substantial 4,742 sqm amalgamated site spanning seven lots at <a href="https://www.apartments.com.au/new-apartments/2-6-pacific-parade-bilinga-qld-4225">2-6 Pacific Parade</a> and 27-33 Golden Four Drive in Bilin​ga, directly opposite Nor​th Kirra Beach.

<a href="https://www.apartments.com.au/developers/mayd-group">MAYD</a> secured the site for $32.5 million in 2025, in what was one of the Gold Coast's largest property transactions of the year.

The development will be delivered across two stages, with the first stage carrying an estimated gross realisation value of around $360 million.

The latest amendments seek to reduce the overall apartment count and shift the project further toward the owner-occupier market, with larger residences designed for buyers wanting considerably more space than traditionally offered in a beachfront apartment.

The residential mix will include townhomes, oversized two-bedroom apartments, substantial three-bedroom residences and four-bedroom homes.

MAYD has appointed Cera Stribley to lead the architecture and interiors, with the Melbourne-based design practice drawing on the beachfront setting through a series of ocean-facing terraces and heavily landscaped balconies.

Strong horizontal forms and curved balconies will define the exterior, with subtropical landscaping integrated throughout the building to soften the built form and increase the connection between the residences and the beachfront.

The project will also include an extensive collection of resident wellness and lifestyle facilities, continuing the broader shift across the Gold Coast's luxury apartment market toward larger homes supported by resort-style amenity.

<img alt="MAYD" data-entity-type="file" data-entity-uuid="d1bcbb05-e659-4b47-8bd4-1e595315e2ad" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%202.05.03%E2%80%AFPM.png?VersionId=jj0XEud1X1DuLt7_KyElhjMdZGOXmLHP" />

MAYD Founder Todd Mould said North Kirra was increasingly appealing to buyers attracted to the more established, lower-density character of the southern Gold Coast.

"North Kirra presents one of the most compelling luxury residential opportunities currently emerging in Australia, combining absolute beachfront with the character and authenticity that buyers are increasingly seeking, and the same sense of tight-knit community that defined Burleigh and Currumbin perhaps 10 or 15 years ago," Mould said.

"With Gold Coast Airport on its doorstep, it also offers a level of accessibility that broadens its appeal across almost every market demographic."

The project comes as the southern Gold Coast continues to attract an increasing share of high-end apartment development and buyer activity.

Kirra in particular has emerged as one of the region's more tightly held beachfront markets, with its relatively low-density character, established surf and hospitality scene and proximity to Gold Coast Airport differentiating it from the higher-density markets further north.

Mould said those characteristics had informed the approach MAYD and Cera Stribley had taken to the project.

"We've worked closely with Cera Stribley to create a vision that is deeply connected to its surroundings," he said.

"Inspired by the coastline itself, the architecture has been shaped around space, privacy and resort-style living, creating a collection of homes that reflects the next generation of luxury on the southern Gold Coast."

MOTIV Managing Director Carly Cottam, who has been appointed to market the project, said buyer attention had continued to move south along the Gold Coast.

"Purchasers who may once have defaulted to Broadbeach, Main Beach or Surfers Paradise are increasingly recognising the value of a genuine beachfront location that offers lower density, strong amenity and a more established sense of community," Cottam said.

"Kirra has a powerful combination of growing demand and genuine scarcity. Beachfront supply is inherently constrained, the area remains relatively low density, and buyers are increasingly placing a premium on locations that feel established, uncrowded and authentic rather than heavily developed."

Cottam said the proximity to Gold Coast Airport was also proving increasingly important for interstate and second-home buyers.

"Being minutes from Gold Coast Airport makes it particularly compelling for interstate buyers, frequent travellers and second-home purchasers who can access an authentic coastal lifestyle almost immediately after stepping off a flight."

The acquisition takes MAYD's active development portfolio to more than $500 million, with the North Kirra project representing one of its largest undertakings to date.

MAYD is targeting an early 2027 launch.

Joel Robinson

First look at MAYD's North Kirra mixed-use precinct

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Castle Hill, the longtime hub of the Hills District, has been one of the major beneficiaries of Sydney's Metro expansion, with improved connectivity helping drive continued population growth, development and buyer demand across the Hills District.

But despite that growth, the suburb has seen relatively few major new apartment projects brought to market over the past 18 months.

Hills District developer Reve Group is looking to fill that gap with <a href="https://www.apartments.com.au/new-apartments/nova-r-ve-castle-hill-2-garthowen-crescent-castle-hill-nsw-2154">Nova Rêve</a>, a major new mixed-use precinct on the corner of Garthowen Crescent and Old Castle Hill Road, a short walk from Castle Hill Metro Station and Castle Towers.

[smartcode_project:default project_id=152737 project_image_fid=377679]

The project will comprise three residential towers alongside a hotel, restaurants, cafes and a skybar, more than 1,600 sqm of ground-floor retail and almost an acre of landscaped gardens.

It represents the largest project undertaken by Reve Group, the development arm of the Kassis family, which has been building across the Hills District for more than 30 years through Kassis Homes.

[smartcode_project:default project_id=152737 project_image_fid=377675]

Nova Rêve also represents a significant step up from the family's first apartment development, Grand Rêve, which was delivered nearby on Garthowen Crescent.

Grand Rêve introduced larger, house-like apartment layouts and premium inclusions including Wolf and Sub-Zero appliances to the Castle Hill market.

Nova Rêve takes that approach to a precinct scale, combining the residential component with hospitality, retail and substantial public and resident landscaping.

[smartcode_project:default project_id=152737 project_image_fid=377685]

Reve Group Managing Director Sam Kassis said the project reflected the family's three decades of building in the Hills, which has evolved from trophy homes on quarter-acre blocks to larger-scale apartment development.

"Grand Rêve was our first apartment project here and it showed us what this pocket of Castle Hill could be. Nova Rêve is the refinement of that idea: not just apartments, but a place the whole suburb can use," Kassis said.

A key part of that approach is the hotel, which has been designed to operate as an amenity for the wider Castle Hill community rather than solely hotel guests.

It will include restaurants, cafes, skybars and all-day dining, alongside conference and event facilities catering to business functions, community groups and private events.

At ground level, more than 1,600 sqm of shops and cafes will open onto the surrounding streets and landscaped areas.

Almost an acre of gardens designed by Land and Form Studios will run through the precinct, incorporating pathways, seating, barbecue areas and children's play spaces.

[smartcode_project:default project_id=152737 project_image_fid=377680]

Reve Group's Romio Georges said creating an active ground plane had been central to the planning of Nova Rêve.

"There are gardens with pathways, barbecues, seating and play areas, shops and cafes opening onto the street, and a hotel with restaurants and a skybar that anyone in Castle Hill can walk into," Georges said.

The project's elevated position on one of Sydney's highest ridgelines will also provide apartments with outlooks toward the Sydney skyline, surrounding parkland and the Blue Mountains.

More than 80 per cent of the apartments will occupy corner positions, with Turner responsible for both the architecture and interiors.

&nbsp;

[smartcode_project_cta:default project_id=152737]

<h3 data-end="3697" data-section-id="q3n5ak" data-start="3672">&nbsp;</h3>
</main>

Nova Rêve arrives as Reve Group bets on Castle Hill's next growth phase

A collection of just 25 large-format apartments and penthouses overlooking Goodwin Park is entering the Coolangatta market, with <a href="https://www.apartments.com.au/new-apartments/marea-residences-coolangatta-27-27a-dixon-street-coolangatta-qld-4225">Maréa Residences</a> combining a low-density, residential-only approach with uninterrupted park and Pacific Ocean outlooks.

Located at 27 Dixon Street, Maréa comprises three and four-bedroom residences alongside a limited number of dual-level penthouses, with the project positioned between Goodwin Park and <a href="https://www.apartments.com.au/developments/coolangatta-qld-4225">Coolangatta</a>’s coastal precinct.

Construction has commenced, with completion currently estimated for late 2027. Three-bedroom residences are priced from $1.8 million.

[smartcode_project:default project_id=150999 project_image_fid=374005]

The project has been designed around its northern outlook across the park, with the building’s architecture, landscaping and material palette intended to establish a connection with the neighbouring green space. The residences have been configured to maximise natural light and views across Goodwin Park towards the ocean.

Inside, the material palette incorporates timber, stone and brushed brass, complemented by curved detailing and ambient lighting. Kitchens and bathrooms carry the same natural material approach, while residences also include basement parking, storage and lift access.

Maréa’s penthouses are arranged over two levels and include private pools, adding another layer to the project’s focus on larger-format apartment living. Across the development, residences are configured with three or four bedrooms rather than the broader mix of smaller apartment types commonly found in larger projects.

[smartcode_project:default project_id=150999 project_image_fid=374010]

Resident amenity is concentrated at rooftop level, where landscaped entertaining terraces and pools take advantage of elevated views across Coolangatta and the Pacific Ocean.

The project has so far been particularly well received by local owner-occupiers and downsizers, according to Urban Activation Property Sales and Marketing Director Matt George, with the residential-only format, construction quality and northern park outlook among the features resonating with purchasers.

“The uninterrupted northern aspect overlooking Goodwin Park has been a key point of difference, with buyers attracted to the sense of serenity and open space the park provides, while still enjoying easy access to the ocean and being within walking distance of the lifestyle and amenities Coolangatta has to offer,” George said.

[smartcode_project:default project_id=150999 project_image_fid=374002]

“The combination of high-quality construction, a residential-only building, park outlook and proximity to the beach has resonated strongly with the local downsizer market.”

The Dixon Street address is within walking distance of Coolangatta Beach and the broader southern Gold Coast coastline, including the surf breaks at Snapper Rocks and Kirra. Coolangatta’s cafés, restaurants and retail are nearby, while Gold Coast Airport is also within close proximity.

[smartcode_project_cta:default project_id=150999]

Maréa Residences brings parkside apartments to Coolangatta

Melbourne developer PDG has secured Victorian Government approval for its $1.5 billion Southbank development <a href="https://www.apartments.com.au/new-apartments/the-one-1-queens-bridge-street-southbank-vic-3006">The One</a>, clearing the way for the long-dormant riverfront site opposite Crown to finally be developed.

The Minister for Planning has approved the project at 1-29 Queens Bridge Street, with the Department of Transport and Planning issuing the planning permit following its assessment.

The approval will allow PDG to develop the prominent 5,059 sqm site with a major mixed-use tower comprising premium apartments, including branded residences, a luxury hotel and boutique office space.

PDG acquired the site in late 2024, with its position directly opposite Crown's main entrance and near Melbourne's Arts Precinct making it one of Southbank's most significant remaining development opportunities.

<img alt="PDG" data-entity-type="file" data-entity-uuid="3933013e-6332-4386-b9be-089df05caf17" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%209.29.22%E2%80%AFAM.png?VersionId=sITIgBqDL0N3VNSMwWEmF5UA.uvcsRyu" />

Designed by COX in collaboration with ODO and PDG, the tower's architecture draws on the movement of the Yarra River, with six vertical pleats running the height of the sculpted facade.

The project will also see the heritage-listed Queens Bridge Hotel restored and incorporated into the development&nbsp;with new hospitality and public uses, including a rooftop venue.

A significant component of The One will be its residential amenity.

More than 5,000 sqm of resident facilities will be delivered across a single level, making it one of the largest consolidated residential amenity offerings proposed in an Australian apartment development.

The planning approval also incorporates a major upgrade of Queensbridge Square, which PDG will deliver in partnership with the City of Melbourne.

<img alt="PDG" data-entity-type="file" data-entity-uuid="73167fcd-1031-4b6f-a408-a064cfe45ed1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%209.29.17%E2%80%AFAM.png?VersionId=Pf1AEWxw6SNmBqR0zQW5lyEze.MtxgFp" />

The existing square will be revitalised as a new civic and pedestrian space along the Yarra River, strengthening the connection between the project, Southbank and the riverfront.

PDG Founder and Managing Director Vince Giuliano said the approval represented a major milestone for a site which has remained largely underutilised for more than 15 years.

“This is the most significant Planning Permit approval Melbourne has seen in recent years,” Giuliano said.

“For more than 15 years, this site has remained underutilised. This approval enables us to deliver a project that will contribute meaningfully to the revitalisation of Southbank, restore and reactivate an important heritage building, and create a new civic and hospitality destination for Melbourne.”

The latest approval follows an earlier planning permit issued by the City of Melbourne covering demolition works across part of the site at 9-29 Queens Bridge Street. Those demolition and early works are already underway.

PDG has also started generating early interest in the residential component from owner-occupiers ahead of a planned public launch in early 2027.

PDG secures approval for $1.5bn Southbank apartment development, The One

Local developer Harridan is seeking to turn its Woolloongabba apartment project into the first stage of a broader transformation of Burke Street, using a new 16-storey mixed-use building to establish a greener pedestrian connection toward the rapidly evolving Boggo Road transport and knowledge precinct.

The South East Queensland developer has filed plans for 154 apartments on the <a href="https://www.apartments.com.au/new-apartments/4-burke-street-woolloongabba-qld-4102">southern side of Burke Street</a>, where its proposal has been designed alongside a wider vision by LatStudios for the street.

That vision positions the southern side of Burke Street for buildings of 15 storeys and above, while envisaging lower-rise development of up to five storeys on the northern side to transition into Woolloongabba's existing character housing. It also proposes wider pedestrian verges, deep planting, new street trees and upgrades to the pedestrian approach to Boggo Road Station.

The Harridan development itself has been designed by Brisbane-based Arqus Design and will comprise 154 apartments across 16 storeys. The mix is weighted heavily toward two-bedroom apartments, with 121 proposed alongside 10 one-bedroom and 23 three-bedroom residences. There will typically be around 14 units per floor.

A lower-ground car park and three podium levels will accommodate 156 resident parking spaces, along with visitor and commercial parking. There will also be 154 resident bicycle spaces and 40 visitor bicycle parks.

&nbsp;

Harridan is a family-owned developer and part of the Holmwood Highgate Group, with more than three decades of development activity across South East Queensland. Its portfolio spans residential, commercial and industrial property, with current residential projects including Riverbank on Byron in Bulimba, Esperance Residences in Carina and The Precinct at Kinross Road in Thornlands.

Wooloongabba has been popular for apartment developers, particularly since the announcement of the 2032 Summer Olympics games in Brisbane.

While there have been a lot of development applications, it has failed to materialize into real supply.&nbsp;

Sarazin has been the major player in the area. They are under construction at Murcia Residences, on the fringe of East Brisbane and Woolloongabba. They have just launched <a href="https://www.apartments.com.au/new-apartments/the-stanley-residences-woolloongabba-8-trafalgar-street-woolloongabba-qld-4102">The Stanley Residences</a>, in Woolloongabba on Trafalagar Street. They also have Nuage coming soon on the nearby <a href="https://www.apartments.com.au/new-apartments/nuage-woolloongabba-14-wellington-road-woolloongabba-qld-4102">Wellington Road</a>.

First look: Harridan plans Burke Street transformation beside Boggo Road transport hub

Economy

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The first Coalition budget was always to going to be a fiasco – should the Coalition significantly reduce the budget deficit this would put the ALP in the untenable position of being seen as incapable of managing the nation’s finances given their past track record.
So when it goes to the Senate it will be rejected given the Coalition simply don’t have the numbers to get it through. In the meantime let’s have a look at what I perceive as a major housing affordability issue – actually it’s horrendous.
In a nutshell, the budget forecasts economic growth to be 2.5% in 2014-15 and moving to 3.5% in 2017-18. Unemployment to sit at 6.25% in 2014-15 then falling to 5.75% in 2017-18 and inflation sitting around 2.25% in 2014-15 rising to 2.5% in 2017-18. The big mover is debt which will reduce from $667 billion to $389 billion over the next 10 years.
All very good, but what are the Reserve Bank of Australia’s (RBA) cash rate projections as this is the sleeping elephant in the china shop.
Cue the Australian Bureau of Statistics (ABS) who released this week what many are saying is the real debt crisis in Australia and we should be very afraid about these statistics. Australian household debt at the end of 2013 came in at approximately $1.84 trillion which then calculates out at approximately 180% of disposable household income. Little wonder we are now starting to see household debt slowing – this should come as a major concern. Government debt is currently sitting at around 30% of GDP – Australian household debt today is sitting at around 120% of GDP.
Household debt is today at the highest level for 25 years and when you deduct 25 from 2014 you come up with 1989. Whilst the vast majority may not remember what happened in 1989, I clearly do as I <a href="/expert-insights/why-property-bubbles-are-like-the-loch-ness-monster">recently wrote about it</a>.
Now to put these statistics into greater context it needs to be remembered that back in 1989 the cash rate was sitting between 17.5% and 19% as against 2.5% today. The cash rate is crucial to the Australian housing industry given once the RBA starts to raise it there will be collateral damage along the way as “some” households will not be able to meet their repayments given our high cost of living. The areas that have been over heated in recent times are a natural example where previously they witnessed dramatic property value corrections.
<a href="https://www.rwm.com.au/files/2014/05/14-05-2014-10-15-49-AM.jpg"><img class="aligncenter size-full wp-image-8543" src="https://www.rwm.com.au/files/2014/05/14-05-2014-10-15-49-AM.jpg" alt="14-05-2014 10-15-49 AM" width="614" height="401"></a>
Source: Digital Finance Analytics
<a href="https://www.rwm.com.au/files/2014/05/14-05-2014-10-18-14-AM.jpg"><img class="aligncenter size-full wp-image-8544" src="https://www.rwm.com.au/files/2014/05/14-05-2014-10-18-14-AM.jpg" alt="14-05-2014 10-18-14 AM" width="689" height="387"></a>
Source: Digital Finance Analytics
So the ABS has released in its March 2014 data that Australia’s total housing stock is estimated currently at $5.1 trillion which equated to a rise of $105,348.0 million over that quarter – with the total number of residences calculated at 9.33 million.
The June housing numbers will make for compelling viewing given so many Australians see their homes as an appreciating ATM that can easily be borrowed against – which is fine so long as homes are in capital appreciation mode. In recent times we have seen areas posting annual capital appreciation of around 30% plus which signals dangerous debt loading.
<blockquote>
Until household debt starts showing signs of improvement the RBA could well be forced to lower the cash rate further to say 2.00%.
</blockquote>
Historically what we see next is the banks tightening their loan ratios which many would agree is long overdue given their recent ‘lend at all costs’ mandate to increase their respective market shares. We would all remember that as we entered the global financial crisis the first thing expected of the government is to guarantee bank deposits – to stop a run on the banks.
What is assured is that until household debt starts showing signs of improvement the RBA could well be forced to lower the cash rate further to say 2.00%.
When one takes a moment to seriously consider the economic ramifications we are presently observing in the housing industry, it makes a mockery of all the political bickering of what is currently being argued in Canberra.
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robertsimeon-hRNTwJyXkQ

Household debt is the sleeping elephant in the china shop

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GUEST OBSERVATION
Treasurer Joe Hockey’s first budget creates a clear path almost to a surplus. Our children will pay much less for current spending. Real political courage was required to get this far.
But the budget also creates problems for the future that will drag on economic growth and hurt the less fortunate. Over the next few years the Abbott government will have to make even tougher choices that both keep the budget in balance and do more to promote economic growth and fairness.
Even in four years' time the budget does not quite balance – and <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2014-05-08/daley-our-bloated-budget-needs-to-hit-the-treadmill/5437904" target="_blank">it should already be balanced</a> given that the economy is not doing too badly. Some of the choices, particularly the timing of the deficit levy and increases in infrastructure spending, seem almost designed to avoid claiming a surplus. The budget ducks the possibility of under-delivering on a surplus, but only by under-promising.
Bracket creep does most of the work of budget repair. Fixed income-tax thresholds and wage inflation will take personal income tax from 11% to 12% of GDP. This is worth about $18 billion in today’s terms. Income tax has not been at these levels since the GST came in.
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/48422/width668/7xmtbdzr-1400030990.jpg" alt="">
Real spending reductions and a few tax increases also help to reduce the budget deficit. New decisions will improve the budget bottom line by about $10.5 billion in 2016-17.
It will be the sharpest sustained slowdown in spending since the “recession we had to have” of 1990. Commonwealth spending on health will shrink as a proportion of GDP for the first time in a long while.
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/48423/width668/9prfznpk-1400031054.jpg" alt="">
The Treasurer promised the burden would be shared across the community. The budget is clearly designed around this principle, which is likely to make the package <a href="https://grattan.edu.au/publications/news-and-opinion/post/fixing-our-budget-emergency-means-making-the-case-for-change/" target="_blank">easier to sell</a>. Patients, students, families, pensioners, the unemployed and high earners will each contribute $1 billion to $2 billion fairly directly to the bottom line. However, the <a href="https://theconversation.com/age-pension-reform-needed-for-a-fair-sustainable-welfare-system-22313" target="_blank">largest line item in the budget, the Age Pension</a>, will continue to consume more of the Commonwealth budget and national resources, despite some minor tinkering.
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/48425/width668/3h3mg82d-1400031107.jpg" alt="">
False economies in the budget
Unfortunately, many of the things helping the budget to surplus will drag on economic growth and well-being.
Co-payments for medical services and pharmaceuticals are likely to lead to more sickness that far outweighs any budget savings. Similar co-payments elsewhere have led to people seeing the doctor less. Some didn’t really need to see a GP, but far more <a href="https://theconversation.com/federal-budget-2014-health-experts-react-26577" target="_blank">missed out on valuable treatment</a>.
The budget also unilaterally tears up the Commonwealth’s promises to help states with the growth in hospital spending. In effect, the Commonwealth has told the states they will have to absorb most of the <a href="https://grattan.edu.au/publications/reports/post/budget-pressures-on-australian-governments-2014/" target="_blank">coming cost increases in health</a> as new and more expensive treatments keep proliferating and the population ages. This doesn’t solve the budget problem, just transfers it to another level of government.
The budget’s reliance on bracket creep is also likely to discourage workforce participation, particularly among women thinking about returning to work who often <a href="https://grattan.edu.au/publications/news-and-opinion/post/to-lift-economic-growth-we-must-cut-the-cost-of-childcare/" target="_blank">take home very little of what they earn</a>. By 2017-18 – after the deficit levy is due to expire – middle-income earners will pay an extra 1.8% of their incomes - $744 a year – in tax. Some will lose family payments on top of that.
Similarly, although bush economists might be attracted by “work for the dole” schemes, and these are likely to reduce claims for unemployment benefits, the evidence shows that these schemes <a href="https://theconversation.com/work-for-the-dole-doesnt-work-but-here-is-what-does-22492" target="_blank">hinder people finding proper long-term jobs</a>. Combined with uncapped university fees and charging real interest for student loans, which may start to deter people from going to university, this budget could reduce how much Australia’s workforce produces in the long term.
The government’s controversial Paid Parental Leave Scheme remains in the budget, although you would need a microscope to find it buried in the budget papers as an “other” variation from the November economic statement. The best one can hope is that it never eventuates – and if the company tax changes that were to part-fund the scheme don’t happen, then the budget will get a collective boost of $4 billion a year. That money could be put to better use making childcare more affordable.
The budget’s main claim to economic responsibility is its new infrastructure spending, about $3 billion in 2016-17. That is smaller than you might think if you listened to the announced package, which conflates spending over a number of years, as well as already announced spending. And the claimed economic benefits may be much smaller than assumed.
Not one of the material projects getting new money from the government is <a href="https://www.infrastructureaustralia.gov.au/coag/files/2013/2013_IA_COAG_Report_National_Infrastructure_Plan_LR.pdf" target="_blank">rated by Infrastructure Australia as “ready to proceed”</a> – indeed not one even falls into their “on the threshold” category. Many are not even rated as projects with “real potential”.
The rigorous independent cost-benefit analysis of projects simply hasn’t been done. Given past experience, we should be sceptical about accepting politicians’ claims that their instincts are a good substitute.
So this budget may reduce the deficit, but it reinforces the need for much better quality policy in future to encourage economic growth and well-being. Better unemployment, health and transport infrastructure policies will be needed. The big reforms, as identified in Grattan Institute’s <a href="https://grattan.edu.au/publications/reports/post/balancing-budgets-tough-choices-we-need/" target="_blank">Balancing Budgets</a> report, will involve tightening superannuation tax concessions and pension eligibility and abolishing negative gearing so that the tax burden is shared more fairly across the community and it becomes easier for our children to buy houses. These measures will all create space to reduce income tax and relieve the burden on low and middle-income earners.
The government has made one courageous decision in this budget: those born in 1965 will need to work until 70 to collect an Age Pension. This is the kind of measure that will both repair the budget in the long term and encourage economic growth. Future budgets will need more of this kind of courage if they are both to sustain the deficit reduction of this year’s budget and ensure long-run economic growth and well-being.
John Daley is chief executive officer at <a href="https://grattan.edu.au/" target="_blank" style="line-height: 1.3em;">Grattan Institute</a>.
Cassie McGannon is fellow, Australian Perspectives at <a href="https://grattan.edu.au/" style="line-height: 1.3em;">Grattan Institute</a>.
Grattan Institute began with a $15 million endowment from each of the federal and Victorian governments. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and Grattan uses the income to pursue its activities.
This article was originally published on <a href="https://theconversation.com" target="_blank">The Conversation</a>.
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jake-cSmGT7VXVf

Changes help the budget but not the economy

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I am not an economist and after the release of the federal government’s Commission of Audit report this is a fact for which I am somewhat grateful.
Having stated my position on the economics involved, some of the Commission of Audit’s 86 recommendations could, it appears, from all of the commentary potentially re-shape Australia. It could re-shape many aspects of society and many aspects of Federalism, which seems a shame really given that only last year, Canberra, the seat of Federalism, celebrated its 100th birthday – just as well it’s not this year.
Part of the intention of the report was to spark a conversation about what sort of society we want to be, in particular over the next 50 years or so. And it appears that conversation has got off to a flying start. When you search ‘Commission of Audit Australia’ on Google there are already some 280,000,000 references.
I have found myself asking the very specific question of how will the report impact the residential housing market? How will the report influence buyers and developers now and over the next few years?
It might be foolhardy to venture into this territory while the report is still so new, but I want to join the conversation, and because the report will reach into so many areas of our social structure I think the conversation is urgent.
A Shift in Demographics
Over the years the market has had to live and adjust to some big issues, like the introduction of universal superannuation guarantee levy (1992), the GST (July 2000), the 9/11 attack on New York and Washington (2001) and the GFC (2007/2008).
However even these big events did not have some of the potential impacts on the very structure of government and beyond that the wider demographic of the Australian population, and it is in the potential demographic changes that a much wider topic opens up for discussion relative to housing and the development market.
And while some changes are not due until mid century, I stop today and think how in just over two decades the arrival of the superannuation guarantee levy is now, thanks in part to the growth of SMSFs, central to many aspects of the residential housing market.
And some seven years later we are still in part dealing with the GFC and so it does not take a crystal ball to appreciate that change can be both long-term and to a degree painful.
Shifts in Demand Shifts in Confidence
Post the audit report in Sydney this weekend auction clearance rates were reported at some 77%, that’s down a little on some recent weekend results, but still slightly higher than the last few months. However after the delivery of the federal budget on 13 May the combined impact on consumer confidence will come into sharp focus over the next few months.
Consumer confidence in Australia increased to 99.73 in April of 2014 from 99.46 in March of 2014 but has been on a falling trend over the last six months.
While the level of consumer confidence is a closely watched measure of the economy, shifts in demographics are far more subtle and until now have been less in focus.
It’s somewhat remarkable how the impact of the baby boomer generation has now started to consume the government’s attention, despite the fact that this age bracket was always going to cause pressure points as it moves out of work and into retirement, and the property market has been feeling the presence of the ‘boomers’ for some years now.
Demographic Touch Points to Watch
The proposed change to the retirement age, has grabbed a lot of attention because it has the potential to impact the entire population. This change could have varied and possibly unexpected effects on the housing market; delayed retirement could impact the demand for downsize opportunities, it could also force more people to consider selling sooner to fund the gap between their retirement and ability to collect the pension and linking the family home to any sort of pension means this would be a big change.
The family home would move into a different light and how a future inheritance is impacted could change the housing ambitions of many younger people. While changes to the cost of education could re-shape the sometimes already fragile prospects of first time buyers, as they have to fund a degree well into their careers. This could also lead to a lowering of employment prospects and impact the earning power and relevance of the middle class in the housing market.
While the audit did not directly comment on tax issues, there is an ongoing debate about the GST – an increase could impact the market, but if there is also a change in the relationship between the Commonwealth and the States, then we could see greater mobility and demographic changes across state boundaries.
Infrastructure and Privatisation
One clear result of the audit will be greater pressure for all governments to venture into a wholesale period of privatisation. This may well deliver some greater opportunities for the property development industry, and the potential sale of the Defence Housing Authority would be a very competitive process.
However the real test will be an assurance that a real improvement in infrastructure must result, if it does not, or if projects are badly delivered this could impact the continued recovery in the housing market.
This is a conversation set to take a lot of time and effort, and so I wanted to remind myself of what an audit of this kind sets out to achieve; "A systematic check or assessement, especially of the efficiency or the effectiveness of an organization." 
While demographics: "The characterises of a human population, especially the size, growth, density, distribution and statistics regarding birth, marriage, disease and death." 
With the audit touching upon so many key social issues, the flow onto demographics is certain and the housing market may well be impacted, at first indirectly by a possible drop in confidence, but in the long term more directly as demographics, incomes and taxes change.
The audit looks like the first step in an extended agenda of economic reform, and while there may be some unpopular fiscal measures taken in next week’s budget, it does appear that interest rates are set to remain low. Because any increase would boost the dollar and possibly shake consumer sentiment so for the immediate future property will remain attractive due to the long run of low rates.
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pchittenden-eLqUUC8TWW

How will the Commission of Audit affect the residential housing market?

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The Reserve Bank of Australia has noted that the strong established housing market has stimulated consumption in its latest Statement of Monetary Policy.
In its outlook for 2014-15, the Reserve Bank predicts that low interest rates will continue to support the housing market. Low rates are also expected to boost the construction of new dwellings and household consumption.
According to the Reserve Bank, a “pronounced increase in dwelling investment is underway”, with growth higher than was forecast three months ago. Increasing housing turnover is expected to stimulate renovation activity, which the Bank notes has “to date been quite subdued.”
The market for new housing remains strong, with building approvals also surpassing previous expectations. Forward looking indicators such as loan approvals and first home owner grants for new dwellings are also showing strong growth.
The Reserve Bank cites low interest rates, rising housing prices, average rental yields and first home owner grants for new dwellings as key drivers for housing investment.
Nationally, house price inflation has moderated somewhat in recent months. The Reserve Bank also notes that auction clearance rates have declined from their recent highs, while loan approvals remain stable. According to the Reserve Bank, "it remains to be seen whether these signs of tempering conditions represent a shift to a more sustainable growth rate for housing prices."
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jrichardson-uRX5hFdKfN

RBA’s May 2014 statement: Dwelling investment increasing

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As we approach the federal budget, once again we have to endure another round of economic nonsense as the Treasurer tries to convince ordinary Australians that the country is running out of money – facing a ‘budget crisis’.
So ingrained is this message, that few question it.
Instead, <a href="https://www.3aw.com.au/blogs/3aw-drive-blog-with-tom-elliott/my-fivepoint-plan-to-fix-australias-budget/20131211-2z5mw" target="_blank">talk radio</a> is flooded with callers outraged at the ‘debt burden’ they imagine will be passed onto their children. A lifetime of work and servitude lay ahead – not only charged with the responsibility of paying down their own debt – but the government’s debt as well!
For an administration that wants to retain leadership through blaming the last government for the ‘mess’ they’ve reputedly left us in, it’s a convenient message to sell.
‘Fiscal responsibility’ is the catch term of the day, cuts to health services, education, welfare, job seekers allowance, wages, and proposed back to work assistance for those laid off  from the car industry - you name it, it’s on the table. 
Everything that is, except the golden egg of speculative windfall gains that can be gleaned from the increasing value of land.
In countries such as <a href="https://catherinecashmore.com.au/wp/?p=400" target="_blank">Germany</a>, they have historically managed to divert speculation away from residential real estate, with the focus being on productivity instead. Here we’re all subject to an economy built on the retirement ‘wealth egg’ of land – our personal economic leverage for all lifestyle and business needs.
It used to be called Monopoly. Today its termed - 'Getting onto the property ladder'. 
The rules of the game are simple.  The player uses as much debt as they can borrow - to buy and hold as much as they can – and those who got in at the beginning of the lending boom, securing the best plots available, win the game.
In relative terms, the ordinary home owner doesn't advantage much, but what else can they do? Retire still renting? Or become a contestant and hope their house yields enough appreciation to support them when they retire.  (But not so much that their children can't get a foot onto the first rung of course, and leave home before the age of 40.)  Our lives are therefore spent working to pay off a mortgage - or two. (That is, unless you're an unlucky tenant who doesn’t have the funds to buy, in which case you play a game called The Rental Trap.) 
The question we ask however is: at what expense? – Or perhaps at whose expense?
As demonstrated by a recent <a href="https://hia.com.au/~/media/HIA%20Website/Files/Media%20Centre/Media%20Releases/2014/national/Residential%20Land%20Market%20Pressures%20Continue%20to%20Mount.ashx" target="_blank">HIA report</a> – land values continue to skyrocket – with the weighted median across all capitals during the final quarter of December 2013, rising to the:
“Highest level on record… a 22.3% increase on the final quarter of 2012.”
 <img src="/images/2014/05/12/cashmore%20may%2012%20one.png" alt="">
Or perhaps it can be better illustrated on a graph <a href="https://www.newgeography.com/content/004261-urban-containment-land-price-up-5-times-income-smaller" target="_blank">Wendell Cox</a> (author of the <a href="https://www.demographia.com/dhi.pdf" target="_blank">Annual Demographica Housing Affordability Survey</a>) constructed which cuts through the usual measures used to convince readers that “housing has never been more affordable”, with overwhelming focus on mortgage serviceability rates alone.
Instead, it demonstrates the speculative nature shaping the property cycle, which affects not only established house prices, but building activity as lot sizes reduce, whilst land price per square meter, outpaces income growth considerably.
  <img src="/images/2014/05/12/cashmore-may-12-two.jpg" alt="">
<a href="/expert-insights/investing/who-is-really-benefiting-from-the-property-cycle-and-at-what-cost">The smoke screen debates on affordability and scrapping negative gearing</a>, are just that, smoke screens.  Something that was subsequently confirmed upon release of the government's Commission of Audit, which ruled out any consideration of a change to housing policy – better to tax income instead – easier for the top 10% to avoid it, whilst low to middle income earners suffer the shortfall.
Importantly, the Commission of Audit’s terms of reference was to concentrate on direct government expenditure - such as grants and transfer payments rather than tax expenditure - rebates, exemptions and so forth (such as negative gearing, capital gains).
We all have to shoulder the burden, tighten belts, work harder – pensioners included!
‘All’ that is, except those imposing the rules – whose entitlements are immune from any fiscal responsibility.  
Yes – the members of our federal government - the issuers of our monetary supply, offset through taxing those who do have to earn dollars before they can spend it – whilst our government earns nothing – but is rather elected, and charged, to manage the budget in the best interests of its working population to promote economic growth – for which education, health, back to work initiatives and so forth, are vital pillars.
There is no evidence and no economic wisdom that indicates running a surplus under current conditions is good for the economy, especially if that surplus is to be achieved through the measures suggested. 
Article continues on next page. Please click below.
<hr class="system-pagebreak">
The Henry Tax review set out a framework that would move us to good model of economic management - a well managed deficit in order to achieve this is better than a running for a surplus at any cost - harming productivity in the process - as well as exacerbating private debt - which is high by any measure.
Something, <a href="https://www.youtube.com/watch?v=D0iFiUfDqSw" target="_blank">Steve Keen</a> does an excellent job of demonstrating in a recent lecture given in Sydney, in which he shows the inevitable consequence to GDP should our government attempt to presently do so.
Economic orthodoxy, which stubbornly insists austerity measures to pay down government debt, should take precedence whilst imposing onerous taxes on its working population, are lessons that should have been learnt following the Great Depression in the 1930s.
There is nothing new about this – indeed, Australia’s oldest PhD at 93  - Dr Elisabeth Kirkby - has just written a 100,000 word thesis on it. And whilst valuable lessons reaped from the grains of history are ignored, the patterns that led to our greatest economic disasters are repeated.
What all demonstrate is, when the government tightens its belt, for no other reason than a vain attempt to spruik a surplus, it has the unwonted effect of withdrawing money from the economy – leaving the private sector (the working class population) to pick up the slack.
Therefore “repairing the [government] budget” with the claim it’s putting Australia “on the right track” – is not putting the fate of Australians on the right track.
It is the government’s responsibility to manage the monetary system for the needs of its population (whether surplus or deficit) - spending enough money into the economy to keep employment and productivity boosted, which by design, reduces pressure on the welfare state.  
Yet it chooses instead to penalise productivity and ignore tax expenditures such as the capital gains exemption on owner occupied housing or scaling back negative gearing.
In this respect, it is economically irresponsible to have a growing deficit offset by tax receipts that reward speculation and by consequence, widen the wealth gap between rich and poor.  Ironically, the very gap the tax and transfer system is supposed to narrow.
In other words, we are not burdening our children with debt – we are burdening them poor economic management.
As austerity measures bite and the retirement age increases, the majority of Australian’s will be working longer and harder – and whilst the government pays down its reputed debt burden – private debt levels will continue to increase as families borrow to afford the basic necessities they need, most likely leveraged against their own homes.
Notwithstanding, most of our debt, is bank created debt – arguably, a far greater concern than government debt.
For those that need a reminder – as demonstrated in the latest <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/4102.0main+features202014" target="_blank">ABS social trends report</a> – total household debt was $1.8 trillion as at the end of 2013 - higher than it has been at any other time over the past 25 years.
<img src="/images/2014/05/12/cashmore-may-12-three.jpg" alt=""> 
Real Household Debt Per Person, Source: ABS
Low interest rates aside - $1.8 trillion is a hefty figure.
To put it in some kind of context – a trillion, is a thousand billion. 
The sun is set to burn out in approximately 5 billion years. A trillion is so large; it’s almost meaningless in real terms.
Total government debt is around $542 billion (as at March 2014 - <a href="https://www.rba.gov.au/" target="_blank">RBA</a>) – that’s about 35% of GDP.
In contrast, our household debt to GDP ratio is estimated to be around 97% (as at December 2013 - <a href="https://www.rba.gov.au/" style="line-height: 1.3em;">RBA</a>) - assisted by low interest rates and an array of financial products to ‘woo’ new borrowers into the property market (such as shared equity schemes, interest only loans, redraw facilities, offset accounts and so forth). 
Notwithstanding – the increase in bank created debt is a far greater issue than \government debt.
Therefore instead of our current leaders asking Australian’s what they can do to assist government debt. We should be asking the government what it will do to assist private debt. Particularly as we move forward over the next 12 months or so, and the lending cycle turns.
Capitalism?
Of course, this problem is not unique to Australia.  Thomas Piketty’s book <a href="https://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/067443000X">Capital in the 21st Century</a> has just come out to great acclaim, choc full of statistics to demonstrate how income earners – the vast body of productive workers, who prop up the local economy through the taxes they pay and products they produce - are the losers, compared to those who hold stores of unproductive wealth. 
The book focuses on the ‘1%-ers’– advanced through gifts of inheritance – those who hold the vast majority of assets; controllers of the stock and bond markets - collecting their economic rent by way of hording property, and effectively, buying protection through lobbying seats of power.
It’s an age old game and in a world where gaining political leadership is only possible with vast sums of advertising dollars, lobbying is crystallised into the system.
We’re currently seeing this with the <a href="https://www.3cr.org.au/economists/podcast/renegade-economists-07052014" target="_blank">ICAC investigation</a> as it uncovers a web of alleged political corruption, with illegal donations from property developers and other sources, funnelled into a Liberal Party <a href="https://www.smh.com.au/nsw/icac-to-be-suspended-as-mike-gallacher-investigated-for-serious-electoral-funding-irregularities-20140506-zr59n#ixzz30xGqICRV">slush fund</a>.
Meanwhile, Clive Palmer has been accused of “<a href="https://www.theaustralian.com.au/national-affairs/palmer-spending-like-a-drunken-sailor-on-poll/story-fn59niix-1226871364428" target="_blank">spending money like a drunken sailor</a>” to secure a third seat in Senate for his PUP party.
Palmer reportedly entered the leadership battle due to “poor policy decisions” by the Gillard government – the carbon tax in particular being highlighted, which promised to negatively impact his core business.
However, his other policy evaluations leave much to be desired.
For example, Palmer’s <a href="https://palmerunited.com/national-policy/" target="_blank">housing affordability</a> plan, is to make home loans tax deductable for the first $10,000 – a move which will unquestionably push land prices higher, as future buyers factor the savings into their budget and adjust price expectations accordingly.
But then, considering Mr Palmer’s significant land holdings, which are said to <a href="https://en.wikipedia.org/wiki/Clive_Palmer" target="_blank">include</a>;
<ul>
<li>“A six bedroom, 11 bathroom, 22 car garage property in Queensland - along with;</li>
<li>An array of golf courses. As well as;</li>
<li>“Family and associates” owning a total of “11 homes in the Sovereign Islands” on the banks of the Southport Broadwater - as well as;</li>
<li>“Other known properties at Broadbeach Waters on the Gold Coast, Fig Tree Pocket in Brisbane, Jandowae on the Darling Downs, Queensland, and Port Douglas” and notwithstanding;</li>
<li>“An undisclosed number of properties held in trust for their daughter.”</li>
</ul>
I suspect lowering land values, may not be top of mind.
The wealth tax solutions Piketty proposes to stop the gap widening fail not only by the confused definition of what one would consider wealth (a Rembrandt painting, or luxury yacht for example?), but also that of capital.
In modern terminology, capital is used for anything that yields a profit – which under our current system includes land. However, in classical terms, capital is a factor of production - a depreciating asset and one, which can be reproduced.
In a society built on the foundation of free markets, factors of production flourish under competition. If one widget costs too much, an entrepreneur will find an innovative way to produce the same widget at a cheaper price. 
It’s called capitalism.
Land however is not a factor of production. It can’t be moved or reproduced and it’s limited in supply. Therefore the revenue stream generated from the unimproved portion alone is due to its locational advantage, and little else.
The free market activities in a capitalist society, cause land values to increase – and considering this is through no act of individual exertion on the vendor’s side, but rather the collective efforts of the community, it makes sense that most consider owning a well located plot of land, better than both money in the bank and the wages they have to earn.
This is why increasing charges on the revenue stream ensuing from the locational value of land, and recycling it back into the community - (which is where it came from, and where it belongs) – by way of a tax shift offproductivity (wages) and onto our valuable and limited natural resources - was termed the ‘least bad tax’ by the capitalists <a href="https://www.macrobusiness.com.au/2013/11/land-tax-must-kill-negative-gearing-stamp-duty/" target="_blank">Milton Friedman and Winston Churchill</a> – to name but a few. 
Rising land values harm capitalism, they increase the rent for small business owners, always benefitting the landlord but never benefitting the wage earner. Furthermore, rising land values force young people out of the market, whilst making those in the market wealthy – and widening the gap between rich and poor.
When land prices inflate, jobs are lost as more revenue is taken away from productivity and soaked into the ground.  
It’s not called capitalism; it’s called capitalising - taking advantage of community created revenue - the total of which is pocketed by the land owner.
This is why land prices are so high and vested interests of policy makers <a href="https://catherinecashmore.com.au/wp/?p=503" target="_blank">always act</a> to push them higher.
The great man Buckminster Fuller – architect, systems theorist, author, designer, inventor, and futurist – once said:
“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” (H/T author of soon to be published book Land by <a href="https://medium.com/p/18066c10ac50" target="_blank">Martin Adams</a>)
We live in a democracy, therefore any change to the status quo needs to come from the ground up – we will never get it from the top down.
The Henry tax review set out recommendations for transitioning our economy based on the ideas penned above. 
 How we get there is worthy of debate – however thankfully, due to the internet and a new age of enlightened priced out folk, we can start that debate in 2016/17 by using our own preference and economic wisdom to vote a government which acts to widen the rich/poor divide out.  By which time there may be better options to vote in.   
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catherinecashmore-6LXia3pPQj

Economic nonsense and the consequences for future generations

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GUEST OBSERVATION
The Victorian government has decided to reduce payroll tax by 0.05%, from 4.9% to 4.85%. The decision comes as the Commonwealth government contemplates an increase in income tax via a deficit levy.
But if the objective is to increase national productivity to meet growing expectations for government services, as well as private consumption, logic would shift the tax burden away from income tax and increase payroll tax. This approach might even provide the basis for more effective and transparent commonwealth-state financial arrangements.
Stand-alone taxes are not the answer
A comprehensive income tax system would include tax on wages, but also on capital income, where capital income is the return on accumulated savings, such as superannuation earnings.
Commonwealth taxation is reasonably comprehensive for wages, with fringe benefits concessions and tax breaks for superannuation for those on middle and high incomes.
In the case of capital income, there are many concessions, including the exemption of income earned on savings invested in owner-occupied homes, the half rate on capital gains and the low flat rate on superannuation fund earnings; interest and dividends face no concessions. A progressive rate schedule is applied to taxable income.
By contrast, a comprehensive payroll tax would fall on all labour remuneration, but not on capital income.
In Australia, the states impose payroll tax on a base that covers about half of all salaries. The largest concession is the exemption of small businesses, with the definition of small business varying across the states (and territories). There are exemptions also for other governments and charities. Above the threshold, a flat marginal tax rate is applied, again with different rates in different states.
Measuring the real impacts of tax
The ultimate outcome of income tax, and especially of payroll tax, is often misunderstood. It is generally accepted that most of the effect, if not all, of the income tax is borne by households as lower disposable income to buy things; with the tax revenue used to fund government goods and services. But in reality, most of the income tax on labour income is first paid by employers as a PAYG deduction from salaries.
And the economic impact of payroll tax should also be on households as lower take-home pay. Initially, businesses pay the payroll tax bill to government, and with a jump in labour costs some are forced to reduce the number of people they employ, boosting unemployment.
The increase in unemployment induces a slower rate of increase in market wages in order for the labour market to return to a new near full employment equilibrium. That is, in the longer run, households bear payroll tax as a lower market wage and take-home pay.
Further, consider the current payroll tax with its exemption on the half of employees working in small businesses. While large businesses write the payroll tax cheque, ultimately the tax is passed on as lower market wages and take-home pay for employees of both small businesses and large businesses.
At the same time, the selective payroll tax on large businesses distorts the employment mix away from large to small businesses with a loss of national productivity.
Replacing the current payroll tax, with its small business exemption, with a comprehensive base and lower flat rate payroll tax would also result in lower market wages for all employees. But, the distortions of the current system to the mix of big and small businesses would be removed, resulting in a net increase in national productivity.
The case for a shift from income tax to payroll tax
Shifting the tax burden away from income tax and onto a comprehensive payroll or consumption tax would reduce the effective tax burden on capital income, leading to an increase in aggregate investment and a more productive mix of different investment and saving options with a final economic impact on higher real wages and household income.
Since the arrival of Governor Phillip, Australia has been a net importer of foreign capital to meet its investment needs. Foreign investors, with options to place their savings in many other countries, require at least an alternative world return on the Australian investment after Australian tax.
A lower Australian tax on capital income, for example a lower income or corporate tax rate, means some marginal Australian investments with a lower pre-tax return become worthwhile. In time, the increased investment means a larger stock of capital and technology per Australian worker, feeding into higher labour productivity and market wages.
Finally, a broader base payroll tax, and possibly also a higher payroll tax rate, along with a reformed land tax, offers a desirable tax reform package to increase the tax revenue of the states.
John Freebairn is a professor at the Department of Economics at University of Melbourne.
This article was originally published on <a href="https://theconversation.com">The Conversation</a>.
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Australia’s tax system is half-baked and a deficit levy won’t help

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With the federal budget looming, retail sales have slowed down, up just 0.1% for March, driven mainly by household goods and food.
Figures published yesterday by the Australian Bureau of Statistics show <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/8501.0Main%20Features1Mar%202014?opendocument&amp;tabname=Summary&amp;prodno=8501.0&amp;issue=Mar%202014&amp;num=&amp;view=">overall sales</a> are down by 0.2% from February, despite a 1% growth for household goods, a 0.5% growth for food, and a 1% growth for cafes, restaurants, and takeaways.
Department stores are down by 0.6% and clothing, footwear and personal accessory spending is down by 0.2%.
However, ANZ senior economist Felicity Emmett told SmartCompany while shrinking consumer confidence is a response to General Motors quitting Australia by 2017 and the uncertain future of Qantas, she expects to see spending rise further.
“I think the outlook is quite good for consumer spending. House prices are rising at a solid rate and that will help to support consumer spending going forward,” says Emmett.
National Retail Association chief executive Trevor Evans says while the <a href="https://www.smartcompany.com.au/legal/politics/41743-budget-2014-national-commission-of-audit-sharpens-axe-as-government-moves-to-ditch-tax-returns-for-1-4-million-australians">federal budget may help consumer confidence if the government is seen as reining in debt</a>, an overly harsh response risks destroying growth.
“We think it’ll be good for consumer confidence, economic growth and retail status if the government can be seen to be getting the budget problem under control,” Evans says.
“We’re worried if the budget response is too harsh, it might have the impact of shocking households and destroying the momentum,” he says.
But Evans sees the Australian expansion of Swedish furniture and home wares chain IKEA and US home wares giant Williams-Sonoma as an international vote of confidence in the retail sector.
IKEA plans to open four more stores by 2016 and launch an online store across 44 countries over the next two years. IKEA Australia currently has no online store.
Pottery Barn partner company Williams-Somona plans to launch eight more Australian stores over the next year.
“The Australian economy is clearly doing better and preforming better and there are many countries in the developed world with a waiting brief on Australia and [who] would be willing to take charge to enter the market here is conditions are right,” says Evans.
This article first appeared on <a href="https://www.smartcompany.com.au/" target="_blank">SmartCompany</a>.
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ABS figures show slowdown in retail growth ahead of the budget

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GUEST OBSERVATION
Prime Minister Tony Abbott has suggested that <a href="https://www.couriermail.com.au/news/opinion/opinion-any-budget-pain-will-be-australias-gain-in-the-longterm/story-fnihsr9v-1226898755245">“You can’t fix the economy unless you fix the budget</a>“.
If we are to believe the over-the-top Commission of Audit report it will take far more than this to bring the budget to surplus by 2023. But few seriously think many of the recommendations will be implemented.
While it is correct to say that lower debt would allow more government revenue to fund worthwhile projects to improve economic outcomes, it is not clear why lower (or zero) deficits or debt necessarily implies the economy will perform better.
A balanced budget may be a very valuable, but not essential, condition for good economic management. There are even fellow economists who argue (in my view wrongly) that increasing deficits and debt are necessary at the moment to increase current economic growth and reduce unemployment.
How Australia’s economy is faring
A good way to judge how Australia’s economy is faring is to compare key indicators such as inflation, unemployment rate and GDP growth compared to other industrialised countries, especially those who make up the <a href="https://www.oecd.org/about/membersandpartners/list-oecd-member-countries.htm">OECD</a>. I’ve chosen OECD countries comparable to Australia: the United States, United Kingdom, Germany and Japan, as well as the OECD average.
Inflation: By almost all the standard economic indicators the Australian economy is doing better than most other industrialised countries – even though our inflation rate is somewhat higher, we have an enviably high rate of growth and low rate of unemployment compared to other OECD countries.
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/47507/width668/ynjv5tcr-1398912827.jpg" alt="">
Inflation: Australia compared to OECD
Australia is a very rich country by world standards and the economy does a pretty good job of developing wealth and opportunities for most people. These comparatively glowing figures, however, mask the fact that there are those who do not fare so well in the market economy.
Welfare and unemployment: Despite being one of the richest countries in the world, 20% of Australian households rely almost entirely on welfare payments. Those of working age receiving benefits, rather than being in work, make up over 16% of the labour force.
<a href="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/47508/area14mp/6dj3x44s-1398912828.jpg"><img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/47508/width668/6dj3x44s-1398912828.jpg" alt=""></a>
 Unemployment: Australia compared to OECD countries
In addition many are underemployed, working fewer hours than they want to. By changing the way we measure joblessness we could easily double the official estimates of unemployment.
As Ken Henry <a href="https://theconversation.com/why-rising-youth-unemployment-demands-our-urgent-attention-25990">pointed out recently in The Conversation</a>, youth unemployment is a particular concern. The rate among 15-19 year olds is currently over 16%, and is 9% among 20-24 year olds.
<a href="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/47506/area14mp/sdwncqpb-1398912827.jpg"><img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/47506/width668/sdwncqpb-1398912827.jpg" alt=""></a>
Youth Unemployment: Australia compared to OECD countries
Productivity: Also, recent concerns have been expressed about Australia’s <a href="https://theconversation.com/why-we-should-approach-claims-of-a-productivity-crisis-with-caution-26000">levels of productivity</a>. In other words, we need to make better use of the resources already employed as well as do better by putting unemployed resources to work. This becomes particularly important given the ageing of the population.
<a href="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/47512/area14mp/kqwqbg56-1398912836.jpg"><img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/47512/width668/kqwqbg56-1398912836.jpg" alt=""></a>
OECD Labour Productivity
Debt: While there has been a lot of public concern expressed about reducing Australia’s debt levels, Australia’s debt-to-GDP ratio - a key indicator of how well a country can pay back its debt without incurring more debt - is significantly lower than the OECD average and also much lower than countries such as Japan. In fact, Australia’s position <a href="https://media.smh.com.au/news/federal-politics/joe-hockey-grilled-by-british-presenter-5373145">is the envy of other countries</a> in the OECD.
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/47510/width668/kyz8gwkp-1398912830.jpg" alt="">
OECD Govt Debt
<h2>How the budget is faring</h2>
The structural deficit: So, it can be demonstrated that Australia’s economy is strong. However, there is concern that Australia, on its current trajectory, is heading for (or well on the way) to an unsustainable structural deficit. This is where the budget may most influence economic growth, as it impedes the ability of a government to plan future spending.
It is generally accepted that the actual government budget will (and should) fluctuate between deficit and surplus during, respectively, downswings and upswings in the economy. While there is a lot of public attention on whether the year-on-year budget balance is in deficit or surplus, and by how much, the structural balance is the more important concept. The structural balance is basically the budget deficit or surplus after accounting for cyclical movements in the economy - the balance when conditions are normal or average.
We have heard much in recent budgets about Australia’s structural deficit, backed by <a href="https://www.aph.gov.au/~/media/05%20About%20Parliament/54%20Parliamentary%20Depts/548%20Parliamentary%20Budget%20Office/Parliamentary%20Budget%20Office%20Stuctural%20Budget%20Balance.pdf">several reports</a> indicating the structural budget balance is in pretty poor shape.
As I have <a href="https://theconversation.com/pbo-and-treasury-reports-confirm-it-the-deficit-is-unsustainable-14559">pointed out previously</a> in The Conversation this structural imbalance is a result of irresponsible spending policies of successive governments, both Coalition and ALP but particularly by the Rudd/Gillard governments. New spending initiatives, such as the Gonsky funding changes and the NDIS, have been brought in without plans to raise the revenue to pay for them, and often, without due analysis.
And bad luck for Tony Abbott that he is left with unfunded big budget items in the future to deal with, as a legacy of the former government. The only way to reduce the deficit is through reduced expenditure and/or increased revenue. As each idea of how this can be done is <a href="https://theconversation.com/abbott-on-back-foot-over-tax-levy-parental-leave-26043">shot down</a> on a daily basis, the Coalition government is realising what a difficult thing this is to sell. The hostile reaction to the Commission of Audit report at least might mean some of the unpopular decisions in the May budget are, by comparison, greeted with relief
How to “fix” the budget
There is, however, more to government policy than balancing the budget. Policy should be made in the context of a long-term vision for the economy. This includes getting everyone who wants to into work, providing the public infrastructure needed to increase productivity, the right mix of private and government provision of health and education, and reform of the regulatory environment.
The continuous economic growth that the Australian economy has achieved, even during times when other countries’ economies experienced recessions, are largely due to the economic reform process carried out during the Hawke/Keating and Howard terms in government. Economists credit the increased productivity levels of the second half of the 1990s and early 2000s as resulting from microeconomic reform and the adoption of new technology.
For policy to facilitate reform in the economy it needs to address impediments to growth in the current tax system and in government programs – it is not only the quantity (size of the deficit) but the quality (of taxation and spending) which is important.
Among the obvious things that need to be addressed are – education participation, infrastructure spending, industrial relations, a greater role for markets, and reducing work and investment disincentives inherent in our benefits and taxes.
While short term measures such as expenditure cuts and debt levies may have an impact on the size of the deficit, they cannot “fix” the economy. The economy is not in disarray, and long-term budget deficit and debt issues require well thought-out policy on the structure of taxation and expenditure.
Phil Lewis is professor of economics at University of Canberra.
This article was originally published on <a href="https://theconversation.com">The Conversation</a>.
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Australia’s economy is healthy, so how can there be a budget crisis?

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The release of the Commission of Audit yesterday has recommended the federal government abolish support for funding through the <a href="https://www.propertyobserver.com.au/https://www.startupsmart.com.au/financing-a-business/commission-says-startups-should-not-receive-government-help/2014050112201" target="_blank">Commercialisation Australia and Innovation Investment Fund</a>.
The commission believes the government should stop providing assistance to startups as there was no greater public benefit, with benefits only for the companies.
“The intellectual property, and any profits arising from these new ideas remains with the business, and there are no clear public benefits arising,” the report says.
“The process of commercialising new products can often be a difficult one.
“However, skills and finance can be acquired from the private sector, and there is no clear reason for the Commonwealth to provide this assistance in competition with private sector providers.”
We spoke to a number of investors about their reaction to the recommendation and what impact, if any, it would have on the community.
Rui Rodrigues, investment manager, <a href="https://www.tankstream.vc/" target="_blank">Tank Stream Ventures</a>:
Rodrigues says that while the tech sector is not reliant on these grants, and nor should they be, there will be an impact in the industry should the recommendations be approved by the government.
“There grants are important in early stage startups and there will be consequences for the sector if they are abolished,” Rodrigues says.
He points out that Commercialisation Australia was responsible for commercialising Wi-Fi (a method was developed and patented by Australian CSIRO researchers to "unsmear" radio waves that echo off indoor surfaces making Wi-Fi possible) something the government was still reaping rewards from through licensing.
He says the audit was not well executed and there were no ideas on how to support innovation and no recommendations on how things could be done better.
“Companies will continue with these grants or not, it’s not critical, but they will be impacted,” Rodrigues says.  
Governments should not be responsible for investment in startups, but they do need to put incentives in place to facilitate it from the private sector.”
Adrian Stone, chairman, <a href="https://www.investorsorg.com/" target="_blank">Investor’s Org</a> and early stage investor:
Stone says his concern is for early stage startups, which were never well-supported by their Commercialisation Australia or the Innovation Investment Fund.
“They were relics of the old days developed along a manufacturing model that did not support startups well,” he says.
The crucial factor here, according to Stone, is that early stage investment represents better “bang for your buck.” Using government money to get in early would represent a greater reward to the economy in the long-run with smaller amounts of money needed.
“The Commercialisation Grant should stay, but it needs to be simplified,” Stone says. “Governments should be co-investing with investors and accelerators that know and understand the market.”
He says IIR was never relevant and in setting up accelerator Inspire 9, of which he is a partner, there was no government support available.
He says a new process that was quicker and simpler was needed by the industry and the current commercialisation grant, which insisted on startups being “pre-revenue”, went against lean startup best principles, forcing startups to apply at a stage where they hadn’t proven their viability as a business.
Clearly the government had a mandate to save money without giving much thought to the longer term impact beyond two years, he adds.
This article first appeared on <a href="https://www.startupsmart.com.au/" target="_blank">StartUpSmart</a>.
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Investors react to Commission of Audit recommendations

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The Abbott government’s National Commission of Audit has recommended the abandonment of Australia’s post-war fiscal structure in favour of a decentralised state-based model of taxation and service delivery that would significantly reduce the Commonwealth’s role in national life. It also recommends targeting pensions, disability insurance, carers, higher education students, foreign aid and the homeless in order to deliver a more sustainable long-term budget.
Across 66 recommendations aimed at reducing government spending by $60 billion to $70 billion per year by 2023, the commission, chaired by business figure Tony Shepherd, has called for a massive reduction in Commonwealth programs and substantial reform and restructuring of the public service. But the most radical call is for a return to pre-war taxation arrangements in which the states would partially control income tax.
Federalism:
The commission has called for the devolution of services to the level closest to those receiving the services — a common enough argument — but has backed it up by calling on the Commonwealth to reduce the current personal income tax rate and replace the reduced rate with an equivalent “state surcharge” revenue from which would be hypothecated to the states. State governments would then have the power to increase or decrease the surcharge “as a means of injecting further competition into the federation”.
GST revenue would also be split between the states on a per capita basis, with smaller states receiving top-up grants from the Commonwealth to ensure they are not worse off. In return, the Commonwealth would then slash tied grants to the states, in effect freeing up the states to use tax revenue as they see fit. Natural disaster payments to the states would also be reduced to one-quarter to one-third of the cost of recovery, and Commonwealth payments to local government would cease.
Transfer and social assistance payments:
The commission calls for a major overhaul of Commonwealth welfare programs:
<ul>
<li>Slowing indexation of the age pension so that it falls to 28% of average weekly earnings over a 15-year period and then remains at that level thereafter; 
</li>
<li>Automatically adjusting the eligibility age to 77% of life expectancy from 2033, such that the pension age would reach 70 in the 2050s; the superannuation preservation age would adjust automatically to be five years under the pension age; 
</li>
<li>The family home, above a high value threshold, would be included in the pension means test for new pensioners, and tapering rates increased, from 2027; 
</li>
<li>Making the Commonwealth Seniors Health Card harder to quality for; 
</li>
<li>Slowing down the roll-out of the National Disability Insurance Scheme; 
</li>
<li>Cutting off Family Tax Benefit A at a significantly lower threshold — just under $100,000 a year compared to $110,000 now, and reducing the level of benefits for families with more than one child; 
</li>
<li>Abolishing Family Tax Benefit B and replacing it with a sole parent family supplement; 
</li>
<li>Forcing young unemployed people to relocate to “higher employment areas” and increasing the taper rate for additional income; 
</li>
<li>More tightly targeting the Disability Support Pension and setting it at the same level as the age pension at the same time; 
</li>
<li>Consolidating indigenous-specific programs and altering arrangements for overseeing indigenous program spending; and 
</li>
<li>Dumping homelessness programs, as they are a state responsibility, and confining the Commonwealth’s social housing role to rent assistance payments.</li>
</ul>
Education:
The recommendations on education are straightforward — the commission wants the Commonwealth out of education as much as possible and wants higher education students to pay much more:
<ul>
<li>States to have full responsibility for schools, with the Commonwealth’s role limited to providing pools of funding for public, Catholic systemic and private schools, and funding capped at 2017 per-student levels indexed by a combination of CPI and the Wage Price Index applying education; 
</li>
<li>States to have full responsibility or vocational education and training; all Commonwealth programs to be abolished; 
</li>
<li>
“Significantly” reducing the size of the Commonwealth Department of Education; and 
</li>
<li>Students to pay a greater share of higher education costs — 55% from 41% now — and accelerating payments under the Higher Education Loan Program.</li>
</ul>
Defence:
The commission is sceptical of the government’s “aspiration” to lift defence spending to 2% of GDP (which would worsen the budget by $11 billion in 2023 if achieved, according to Shepherd) and suggests funding be driven by the capability required to counter the strategic risks Australia faces:
<ul>
<li>Moving the Defence Materiel Organisation back into the Department of Defence and privatising the Defence Housing Authority; 
</li>
<li>Cutting the level of staff in the Department of Defence to 1998 levels; 
</li>
<li>Greater transparency and budget accountability for the Department of Defence; 
</li>
<li>But on intelligence — bizarrely, no discussion of any kind by the commission of Australia’s massive intelligence budget.</li>
</ul>
Health:
While the commission wants the burden of healthcare shifted to the states, it recognises this is a more complex task than in education. Instead, its priority is imposing more user charges in health in order to deter overuse:
<ul>
<li>Punitive taxation for high income earners who don’t take out expanded, more flexible private health insurance, with no access to the private health insurance rebate; 
</li>
<li>All patients to make Medicare co-payments of $15 up to 15 visits a year and $7.50 thereafter, with lower rates for concession card holders; 
</li>
<li>State governments should impose emergency department co-payments for non-emergency treatment to deter avoidance of the GP co-payment; 
</li>
<li>Capping Commonwealth hospitals funding and reducing reporting requirements on hospitals; 
</li>
<li>Cap the Pharmaceutical Benefits Scheme, increase co-payments and deregulate the pharmacy sector; 
</li>
<li>Aged care reforms currently in train are supported, but implementing the full suite of Productivity Commission recommendations in this area; and 
</li>
<li>Means-testing carer payments and targeting them only at carers whose ability to work has been limited, and setting them (eventually) at the same level as the age pension.</li>
</ul>
Industry and employment:
Having proposed that the axe be taken to individual welfare, the commission couldn’t avoid proposing a similar approach to corporate welfare. But it also wants Australia’s lowest wage earners to have their remuneration held down until it reaches 44% of average weekly earnings.
<ul>
<li>Limiting industry assistance to “areas of genuine market failure” and transitional assistance for “genuine structural change”, including closing 22 existing programs (the remaining automotive industry assistance schemes included) costing around $5 billion, and curbing anti-dumping provisions; 
</li>
<li>Abolishing export assistance by closing the Export Finance and Industry Corporation, closing the Export Market Development program, ending tourism grants and cutting back Tourism Australian and Austrade funding; 
</li>
<li>Consolidating and reducing research and development funding; 
</li>
<li>Less independence for the CSIRO “to ensure that resources are being directed at areas of greatest priority”; 
</li>
<li>Curbing the growth in the minimum wage until it is 44% of AWE in 10 years; 
</li>
<li>Capping the paid parental leave scheme at average weekly earnings (but not means-testing it) and redirecting savings to childcare assistance, which the commission believes was more important to female participation than the PPL; and 
</li>
<li>Ending Farm Finance Concessional Loans.</li>
</ul>
Foreign affairs and immigration: 
<ul>
<li>Abandoning the current bipartisan policy of linking foreign aid with Gross National Income and only indexing current levels of foreign aid, and reducing it if fiscal needs require it; 
</li>
<li>Outsourcing visa processing; and 
</li>
<li>Reducing costs of detaining asylum seekers to 2011-13 levels, plus “renegotiating contracts and better targeting of services”.</li>
</ul>
Broadcasting:
<ul>
<li>Benchmarking the ABC and SBS against commercial broadcasters to inform decisions to cut funding.</li>
</ul>
Public service:
<ul>
<li>Abolishing 35 agencies, a list headed by the Australian Public Service Commission (to be folded into the Department of Employment); most casualties though are small advisory boards; 
</li>
<li>Merge or consolidate over 60 other bodies: the biggest is the merger of Customs and Immigration, and 22 health bodies should be considered for merger or consolidation; 
</li>
<li>Privatise Australian Hearing Services, Snowy Hydro Ltd, Defence Housing Australia, ASC, consider privatising Australia Post in the medium-term; 
</li>
<li>Outsource the Department of Human Services payments system; 
</li>
<li>Public service departments to shift away from middle-management heavy structures; 
</li>
<li>Public servants to be required to be “highly productive”; 
</li>
<li>Departments to provide corporate/HR services to small agencies in their portfolios; and 
</li>
<li>A more coherent and systematic alignment of key performance indicators, reporting requirements and program evaluation.</li>
</ul>
Infrastructure:
<ul>
<li>Commonwealth should only invest  in projects “that provide broad economic or social benefits beyond commercial returns but cannot be completely funded in the short-term by user charges and would not otherwise go ahead”; and 
</li>
<li>
“Over time”, move to road-user charging “for all vehicles to the maximum extent possible”.</li>
</ul>
This article first appeared on <a href="https://www.crikey.com.au/" target="_blank">Crikey</a>.
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