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


Joel Robinson

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

<p>It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.</p>

<p>Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.</p>

<p>Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be</p>

<p data-end="683" data-start="511">"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.</p>

<p data-end="882" data-start="690">"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."</p>

<p data-end="882" data-start="690">[smartcode_project:default project_id=134646 project_image_fid=6109]</p>

<p>The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.</p>

<p>The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.</p>

<p>Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6110]</p>

<p>Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.</p>

<p>The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6116]</p>

<p data-end="247" data-is-last-node="" data-is-only-node="" data-start="0">While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.</p>

<p>WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.</p>

<p>With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.</p>

<p>[smartcode_project_cta:default project_id=134646]</p>


WM Residences fills gap in Mordialloc townhouse market

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


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

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

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


NAB funds $1 billion Surfers Paradise apartment development, Palmera

<p>Two years after completing one of the newest developments in North Sydney, developer <a href="https://www.apartments.com.au/developers/aqualand-australia">Aqualand</a> is turning its attention to the rapidly evolving St Leonards apartment market.</p>

<p>The developer, which completed AURA by Aqualand on North Sydney's Walker Street, has lodged plans for a 5,918 sqm site at <a href="https://www.apartments.com.au/new-apartments/33-37-herbert-street-st-leonards-nsw-2065">33-37 Herbert Street, St Leonards,</a> seeking approval for a pair of residential towers rising above a shared podium opposite Royal North Shore Hospital.</p>

<p>The proposal forms part of the broader transformation underway across the St Leonards-Crows Nest precinct, where former industrial and commercial sites are increasingly being redeveloped into high-density mixed-use projects tied to major transport infrastructure.</p>

<p data-end="792" data-start="529"><img alt="Aqualand" data-entity-type="file" data-entity-uuid="2cc428cf-fe70-4cac-9cd5-264ad53af62c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.56%E2%80%AFAM.png?VersionId=otKSnHtbjAvAddOnovyXQMgcAwE6DMe1" /></p>

<p data-end="1040" data-start="794">According to the planning documents, the site sits “within the St Leonards–Crows Nest Strategic Centre, identified by the NSW Government as a key area for accommodating future jobs and housing across Sydney.”</p>

<p>The proposal has been designed by fjcstudio, formerly FJMT Studio, and is being progressed through the State Significant Development pathway due to its scale and affordable housing provision.</p>

<p>The scheme would comprise 413 apartments, including 46 affordable housing units, alongside retail and commercial uses fronting Herbert Street. The project would also include communal open space, landscaping, a swimming pool, gymnasium, children’s play areas and podium-level resident amenities.</p>

<p>Planning documents show the development would consist of a part-13, part-39 storey tower form positioned above a four-storey podium.</p>

<p>“The development comprises a unified podium that activates the street interface, and two setback towers to accommodate new housing supply while maintaining an appropriate human scale at ground level,” fjcstudio noted in its Design Report.</p>

<p>The northern and southern towers have been shaped to respond to the surrounding skyline while also limiting overshadowing impacts to nearby public open space, particularly Talus Reserve.</p>

<p>The design report said the differing tower heights were intended to “contribute to a varied skyline while responding to the surrounding built form context and solar access considerations.”</p>

<p><img alt="Aqualand" data-entity-type="file" data-entity-uuid="36da62dc-ff9e-41f2-a7e3-7be38373751c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.45%E2%80%AFAM_0.png?VersionId=Mo6Rp2r.XRLTzIfg_PEEpw8NepDH8UBs" /></p>

<p>The site sits directly opposite Royal North Shore Hospital and within walking distance of both St Leonards Station and the new Crows Nest Metro station.</p>

<p>While the site itself sits just outside the formal Crows Nest Transport Oriented Development boundary, the planning documents repeatedly reference its alignment with the broader TOD objectives reshaping the Lower North Shore.</p>

<p>“The site is located adjacent to St Leonards Station and in close proximity to Crows Nest Metro which is within the Crows Nest Transit Orientated Development Accelerated Precinct which has been identified by the NSW Government to support housing delivery,” the Design Verification Statement noted.</p>

<p>According to fjcstudio, the project has been designed to respond to the broader transition occurring across St Leonards, where increasing residential density is being concentrated around transport infrastructure and employment hubs.</p>

<p>“The broader precinct is undergoing significant change, with a mix of existing mid-rise buildings and newer high-density developments,” the report stated.</p>

<p>“Recent and approved projects indicate a consistent shift toward taller built form, typically organised as tower-and-podium typologies with more active ground levels.”</p>

<p>The proposal includes close to 6,000 sqm of retail and commercial space across the ground floor and podium levels, designed to create a more activated street edge along Herbert Street.</p>

<p>Aqualand’s plans would also introduce a landscaped podium shared between the two towers, with communal open space in the form of a podium rooftop designed to support resident interaction and improve urban greening outcomes. The scheme would also introduce pocket parks at the northern and southern ends of the site, including a landscaped area at the corner of Herbert and Ella streets designed to improve pedestrian amenity and soften the streetscape.</p>

<p>&nbsp;</p>

<p>The proposal is being progressed through the NSW Government’s Housing Delivery Authority pathway, which was introduced to accelerate housing supply across the state. The application was declared State Significant Development in April 2025 following an expression of interest process.</p>

<p><img alt="Aqualand" data-entity-type="file" data-entity-uuid="faf6d97d-2671-454f-b85a-fe1c6a7be608" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.49%E2%80%AFAM.png?VersionId=diVd28OBVr5.YV.7prrOz.uAanwwwm7a" /></p>

<p>St Leonards has been particularly active with new developments in recent weeks. Developer SP Setia’s <a href="https://www.apartments.com.au/news/nsw/first-look-sp-setia-targets-st-leonards-skyline-with-40-storey-tod-tower">plans for a new 42-storey tower</a> recently went on exhibition through the same pathway, while <a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">Stockland’s 52-storey tower proposal</a> was also recently unveiled.</p>

<p>Aside from the St Leonards project, which is expected to take around nine months to move through the approvals process ahead of a potential 2027 launch, Aqualand is also preparing to launch Boronia, a new apartment project in Roseville comprising around 111 apartments on Larkin Street.</p>

<p>The developer also has approvals in place for the next stage of the Barangaroo precinct, which will feature new residential, retail, hospitality and community uses, alongside a new metro entry across the five-hectare site.</p>

<p>More than 50 new retail destinations are planned for Central Barangaroo, alongside a 270-metre-long boulevard connecting Hickson Park to Nawi Cove. Together with Harbour Park, more than 50 per cent of the precinct will comprise public open space and parkland.</p>


First look: Aqualand joins St Leonards apartment party

Economy

j.ballantyne1990-6AQqhLzZaK

Prospects of another soft economic quarter: Alan Oster

How the global picture affects the economic outlook and monetary policy: RBA Governor Philip Lowe

<html><body>
<p>EXPERT OBSERVATION</p>
<p>It is true that wage inflation has lifted off its record low of 1.9%yr in June 2017 but running at a 2.3%yr at March 2019 it can hardly be described as running at a breakneck pace. We expect wage inflation to drift higher from here - our forecasts have it peaking around 2.75%yr in 2020 - but given how well contained the wage inflation is across the nation, and between sectors, even this modest increase looks optimistic with the risks to this forecast more to the downside than upside.</p>
<p>In the March quarter, total hourly wages ex bonuses rose 0.5% compared to a market median (and Westpac) expectation for 0.6%. The print was 0.54% at two decimal places with a 0.54% rise in private sectors wage rates and a smaller 0.45% rise in public wages - the smallest quarterly rise in public sector wages since March 2000. It appears that state governments, where revenues are under pressure from declining stamp duty collection, are pushing back against rising wage costs.</p>
<p>Private sector wages printed 0.54% in the last two quarters, but with base effects, the annual pace did drift a little higher to 2.4%yr - the fastest pace since December 2014 but still not exciting. Public sector wage inflation eased to 2.4%yr from a recent peak of 2.6%yr in September 2018, and on current trends, is likely to continue to moderate from here.</p>
<p>An annual pace of wages growth of 2.3%yr is a modest lift from the 2.1%yr pace it held from December 2017 to September 2018 which, in itself, was a very modest improvement from the record low of 1.9%yr in the four quarters before 2017 Q3. So while it is clear that wages have picked up a little and are off the record lows wage inflation is well contained and holding under the historical average.</p>
<p>Since 2018, Westpac watched the rapid fall in the Victorian unemployment rate, and because of this, we are now looking for signs of an acceleration in wage inflation there. In the March quarter, Victorian wages lifted 0.5%qtr, a moderation from the 0.8% gain in Q4, but with base effects, the annual pace was flat at 2.7%yr - the fastest pace by any state and the fastest pace in that state since December 2014.</p>
<p><em><strong>JUSTIN SMIRK</strong> is ‎a senior economist for Westpac.</em></p>
<p><em>You can read the  full report here: <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/May/Wages-FIQ12019.pdf" target="_blank">WPI First Impressions pdf 390kb</a>.</em></p>
</body></html>

jonathanchancellor-7SQnKwU6yx

The economic data around wages continues to disappoint: Westpac's Justin Smirk  

<html><body>
<p><span>EXPERT OBSERVER</span></p>
<p><span>February Labour Force Survey: Total employment: 4.6k from 38.3k (revised from 39.1k), unemployment rate: 4.9% from 5.0% (unrevised 5.0%), participation rate: 65.6% from 65.7% (unrevised 65.7%).</span></p>
<p><span>Employment growth slowed in February lifting 4.6k less than what the market was looking for (median +15k) but a touch better than Westpac’s forecast of –5k. So far 2019 has had a sound start for the labour market with a three month average gain of 21.1k/per month. </span></p>
<p><span>Through 2018 total employment grew 274.5k, or 2.2%yr, with a solid momentum into year end with a six month annualised pace of 2.3%yr. </span></p>
<p><span>While it is just second month into the year, employment grew 284k in the year to February (2.3%yr) but the six month annualised pace has moderated from 2.9%yr in January to 2.3%yr in February.</span></p>
<p><a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%201.jpg" target="_blank">Click here</a> to enlarge:</p>
<p><span><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/3/21/employment%201.jpg" alt=""></span></span></p>
<p> </p>
<p>Source: Westpac</p>
<p><span><span>As highlighted in our preview we are very cautious about making too much of the January/February releases given the large underlying seasonality in these months. However, what we can say is that it does appear that the momentum in employment has slowed. </span></span></p>
<p><span><span>As such, there is nothing in this release to make us change our view that employment growth will take a breather through the first half of 2019 leading to a lift in unemployment. But, to be fair, the fall in the unemployment rate to 4.9% also means that at this point in time, the RBA will also feel little pressure to change their forecast for the unemployment rate to fall to 4¾%.</span></span></p>
<p><span><span> It will all come down to who is the better forecaster.</span></span></p>
<p><span><a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%202.jpg" target="_blank">Click here</a> to enlarge:</span></p>
<p><span><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/3/21/employment%202.jpg" alt=""></span></span></p>
<p> </p>
<p>Source: Westpac</p>
<p><span>In February, in reverse to the January result, the mix of employment gains painted a soft picture with a 7.3k loss in full-time employment offset by an 11.9k gain in part-time employment. However, hours worked was a bit more upbeat in the month with total hours worked up 0.2% (total employment was flat in the month) as hours worked per person gained 0.1% due to average hours worked rising for both full-time and part-time employees. </span></p>
<p><span>In the year to February total hours worked has lifted 2.2%yr which is on par with the 2.3%yr pace for employment.</span></p>
<p><a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%203.jpg" target="_blank">Click here</a> to enlarge:</p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/3/21/employment%203.jpg" alt=""></span></p>
<p> </p>
<p>Source: Westpac</p>
<p>Despite the soft print on employment, the unemployment rate fell to 4.9% (market median was 5.0%) as a 0.1ppt decline in the participation rate to 65.6% (65.57% at two decimal places) resulted in a –7.1k decline in the labour force. At this stage it appears that both male and female participation is levelling out in a trend sense and we are closely watching where they go next. We do expect both to edge lower though 2019 H1 as employment growth stalls.</p>
<p><a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%204.jpg" target="_blank">Click here </a>to enlarge:</p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/3/21/employment%204.jpg" alt=""></span></p>
<p> </p>
<p>Source: Westpac</p>
<p><span>February was a soft month for employment growth across the states. Employment fell 5.8k in NSW (+128.9k in the year) and the unemployment rate lifted to 4.3% from 3.9% which was a 30 year low in unemployment for that state. In Victoria, employment lifted 5.7k (+136.7k in the year) but with a lift in participation, the unemployment rate lifted to 4.8% from 4.6%. </span></p>
<p><span>Queensland employment lifted in February 6.4k (+20.4k in the year) but a decline in participation saw the unemployment rate dip to 5.4% from 6.1%. In WA employment rose 2.8k (+7.7k in the year) with the 1ppt fall in unemployment to 5.9% being supported by a 0.6ppt fall in participation. Meanwhile in SA a lift in employment 3.8k (–0.1k in the year) in February saw the unemployment rate ease back 0.6ppt to 5.7%.</span></p>
<p><a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%205.jpg" target="_blank">Click here </a>to enlarge:</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/3/21/employment%205.jpg" alt=""></p>
<p>Source: Westpac</p>
<p>Overall, while the annual pace of employment growth has picked up in Victoria, and eased back in NSW, NSW can still claim the mantle of having the lowest unemployment rate.</p>
<p> <span>Victoria was the state showing the greatest improvement through 2018 with the unemployment rate down 2ppts to 4.2% in December while in NSW unemployment fell just 0.5ppts to 4.3%.</span></p>
<p><a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%206.jpg" target="_blank">Click here</a> to enlarge:</p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/3/21/employment%206.jpg" alt=""></span></p>
<p>Source: Westpac</p>
<p>We are closely watching how these trends continue through 2019 – NSW did surprise in January by dipping below 4%, but it has since bounced back to 4.3%, while Victoria’s improvement does look to be cooling with the unemployment rate holding above 4.5%.</p>
<p>It is these two states, and how their labour markets will respond to falling house prices, a contraction in construction activity and weak retail sales, that is behind our expectation for the unemployment rate to rise through the first half of this year. While we are cautious about interpreting too much from the January/February releases, we see nothing in them that makes us nervous about our forecasts.</p>
<p><span>It is also worth noting that in 2018, for all the strength in the labour market, the underemployment rate only declined 0.2ppt. So far there has been a further improvement with the rate falling from 8.3% in December to 8.1% in February. Again, we would caution that so far we have only see the January and February prints, so would not project that this improvement can be sustained, but nevertheless, it is another indicator of just how robust the labour market was at the end of 2018.</span></p>
<p><a href="https://www.propertyobserver.com.au/images/2019/3/21/employment%207.jpg" target="_blank">Click here</a> to enlarge:</p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/3/21/employment%207.jpg" alt=""></span></p>
<p>Source: Westpac</p>
<p>For 2019, we are looking for a pause in the pace in employment growth due to the economic uncertainties surrounding the Federal Election at the same time as we expect to see a moderation in momentum in NSW and Victoria on the back of a moderation in housing activity. With reasonable estimates for the participation rate, our weaker jobs growth profile has the unemployment rate lifting to 5.5% in the second half of 2019 and further by end 2020.</p>
<p><em>JUSTIN SMIRK is ‎a senior economist for Westpac</em><span><br></span></p>
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Australian employment saw a February pause: Justin Smirk

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<p><span>EXPERT OBSERVER</span></p>
<p><span>The six month annualised growth rate in the Westpac– Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, fell from –0.37% in January to –0.56% in February.</span></p>
<p>The Index has now registered three consecutive months in which the growth rate has been negative. This is a strengthening signal that growth through the first two to three quarters of 2019 is likely to be below trend.</p>
<p>The signal from the Index is certainly consistent with the weak momentum in the second half of 2018 revealed in the print of the December quarter national accounts. In the second half of 2018 growth momentum slowed to an annualised pace of 1% from a 4% pace in the first half of the year.</p>
<p>Westpac expects growth in the Australian economy in 2019 to be around 2.2% – significantly below trend which is generally assessed as 2.75%.</p>
<p>Key to the ongoing slow growth will be a challenged consumer as households adjust to much slower wages growth than anticipated and falling house prices. That will be supplemented by a continuation of the contraction in residential house building activity that appears to have begun in the September quarter of 2018.</p>
<p>We have consistently highlighted these risks which are likely to coincide with a slowdown in jobs growth and investment spending as both political uncertainty and global volatility weigh on firms’ employment and investment decisions.</p>
<p>The Index growth rate has shown a significant deterioration over the last six months, declining from +0.47% in September to –0.56% in February. Five components have driven the deterioration: US industrial production (–0.31ppts); the S&amp;P/ASX200 (–0.30ppts); the Westpac-MI Unemployment Expectations index (–0.22ppts); the yield spread (–0.19ppts); and dwelling approvals (–0.10ppts).</p>
<p>The only component providing a partially offset is the commodity prices in Australian dollar terms (+0.12ppts). The contribution from the remaining components – monthly hours worked and the Westpac MI CSI expectations index – has been largely unchanged.</p>
<p><a href="https://www.propertyobserver.com.au/images/2019/3/21/westpac%20.jpg" target="_blank">Click here </a>to enlarge:</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/3/21/westpac%20.jpg" alt=""></p>
<p>The Reserve Bank Board next meets on April 2. The minutes of the March Board meeting highlight the importance of data releases going forward with the key issue being the “tension” between soft activity indicators and strong labour market data. It will take time for the Bank to resolve those tensions but we expect that by the August meeting the case for lower rates will be clear.</p>
<p>At present the Bank is forecasting growth of 3% in 2019 and 2.75% in 2020. The signals, some of which are discussed in this release, are pointing to much slower growth. We expect the Bank’s growth forecasts to be lowered in both May and August with the forecasts in August being consistent with the need for easier policy.</p>
<p>Westpac expects rate cuts of 25 basis points in both August and November.</p>
<p><em>BILL EVANS</em><em> is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.</em></p>
<p><span> </span></p>
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Leading Index growth rate firmly in negative territory: Bill Evans

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<p>GUEST OBSERVATION</p>
<p>Australia’s big little economic lie was laid bare on Wednesday.</p>
<p>National accounts figures show that the Australian economy grew <a href="http://www.ausstats.abs.gov.au/ausstats/meisubs.nsf/0/7F1A83D8EEABAF73CA2583B40018551F/%24File/52060_dec%202018.pdf" target="_blank">by just 0.2%</a> in the last quarter of 2018. This disappointing result was below market expectations and official forecasts of 0.6%. It put annual growth for the year at just 2.3%.</p>
<p>But the shocking revelation was that Gross Domestic Product per person (a more relevant measure of living standards) actually slipped in the December quarter by 0.2%, on the back of a fall of 0.1% in the September quarter.</p>
<p>These are the first back-to-back quarters of negative GDP per capita growth in 13 years - since 2006.</p>
<p><strong>We’re going backwards, for the first time in 13 years</strong></p>
<p>The reason this is significant is that the Australian convention around what constitutes a recession is two back-to-back quarters of negative GDP growth.</p>
<p>Since more people in the economy mechanically increases overall GDP, you might think that measuring things on a per-person basis gives a better sense of whether we are better off or worse off.</p>
<p>And you would be right. Why then, do we talk so much about overall GDP?</p>
<p>One answer is that in a lot of advanced economies there isn’t very much population growth, so overall GDP is a good enough measure.</p>
<p><strong>Population growth hides it</strong></p>
<p>The more insidious answer in Australia is that, for a long time, our high population growth, fed by a high immigration rate, has masked a much less rosy picture of how we are doing. And neither side of politics has wanted to admit it.</p>
<p>At 1.6% a year, Australia’s population growth is roughly double the OECD average, which is perhaps why we hear politicians say things like “Australia continues to grow faster than all of the G7 nations except the United States,” as Treasurer Josh Frydenberg did this week.</p>
<p>The good news is that standard economic theory tells us that in the long run, immigration has very little impact on GDP per capita in either direction, unless it drives a shift in the population’s mix of skills.</p>
<p>But in the short term, it depresses GDP per capita because fixed capital such as buildings and machines has to be shared between more workers.</p>
<p>The business lobby doesn’t want us to focus on that because population provides more customers as well as more workers, allowing them to grow without growing domestic market share or exports.</p>
<p>Governments don’t want us to focus on it because adjusting for population growth makes GDP growth look small or, as at present, negative. Also, the tax revenue from the population growth is factored into the official budget forecasts – but the extra social spending needed isn’t always factored in.</p>
<p>Pro tip: watch for population growth as a fudge factor generating a return to surplus in next month’s budget.</p>
<p><strong>There’s a better way of getting at the truth</strong></p>
<p>That said, GDP itself – per capita or not – is not a great measure of the standard of living. That’s why in 2001, the Bureau of Statistics began also reporting <a href="http://www.abs.gov.au/ausstats/abs@.nsf/3d68c56307742d8fca257090002029cd/3fa94a5da5f20eddca256b7400730b78!OpenDocument" target="_blank">real net national disposable income</a>.</p>
<p>It is a measure with advantages over GDP. As the bureau points out, it takes account of changes in the prices of our exports relative to the prices of our imports - our terms of trade. If the prices of our exports were increasing much faster than the prices of our imports (as happened during the mining booms), our standard of living would climb and real net national disposable income would reflect it, where as gross domestic product would not, although it would reflect increased income from increased export volumes.</p>
<p>To get at living standards per person, which is what we are really interested in, the bureau also publishes real net national disposable income per capita.</p>
<p><img src="https://images.theconversation.com/files/262582/original/file-20190307-100799-crlh9b.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></p>
<p>The graph shows that so far the growth rate of real net national disposable income per capita hasn’t changed much, and that it has been negative for far fewer quarters than in the Coalition’s first term in office.</p>
<p>It bounces around with changes in the prices of imports and exports, and is generally climbing less than when export prices were really high.</p>
<p><strong>A year of two halves?</strong></p>
<p>The treasurer painted 2018 as a “year of two halves”.</p>
<p>The first half was great - the annualised GDP growth rate (what it would have been had it continued all year) was a very impressive 3.8%.</p>
<p>The second half was just 1%.</p>
<p>I’m not sure the change was that clear cut. As I wrote <a href="https://theconversation.com/vital-signs-national-accounts-show-past-performance-no-guarantee-of-future-results-102717" target="_blank">last September</a>, there have been troubling signs for some time, despite the solid headline growth.</p>
<p>Household savings have been plummeting, real wage growth has been stagnant, housing prices have been falling in Sydney and Melbourne. Together they put significant pressure on household spending, which accounts for about 60% of GDP.</p>
<p>Those concerns are now mainstream. Good news on export prices has rescued tax receipts for the time being, and will probably also rescue real net national disposable income per capita.</p>
<p>But the fundamentals of the Australian economy are looking somewhat weak. Like the US and other advanced economies, we are living in an era of secular stagnation – a protracted period of much lower growth than we had come to expect.</p>
<p>And until we do something to tackle it, such as a major government investment in physical and social infrastructure, we will continue to face anaemic wage growth, shaky consumer confidence, and mediocre economic growth per person.<img src="https://counter.theconversation.com/content/113026/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;"></p>
<p><em><a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a>, Professor of Economics, <a href="http://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a></em></p>
<p><em>This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/vital-signs-australias-sudden-ultra-low-economic-growth-ought-not-to-have-come-as-surprise-113026" target="_blank">original article</a>.</em></p>
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rh-YsoTT2xMuQ

Australia’s sudden ultra-low economic growth ought not to have come as surprise: Richard Holden

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<p>Dwelling investment increased 1.0% in the quarter, and has risen in each of the last four quarters, according to the Q3 Report released by NAB.</p>
<p>However this quarter, NAB found that the increase was entirely driven by alterations &amp; additions (up 4.5% q/q), as investment in new dwellings fell 0.8% q/q.</p>
<p>Alongside the cooling in the housing market, NAB expect dwelling investment to decline over the next couple of years.</p>
<p>Alan Olster, NAB Group Chief Economist said that a pull-back in new building approvals is already evident, though the large pipeline of work yet to be done will provide some support, suggesting the real weakness will likely occur in 2020.</p>
<p><img src="https://www.urban.com.au/images/2018/12/5/NAB%20Q3.JPG" alt=""></p>
<p>The report also found that underlying business investment declined for the second consecutive quarter (-1.9% q/q).</p>
<p>Reflected largely by a fall in non-dwelling construction (-5.6% q/q) as both new building and new engineering construction declined.</p>
<p>Mr Olster noted, "the weakness in non-dwelling construction appears to be at least partly related to the mining sector as despite overall non-mining investment being up (1.0% q/q),  mining sector investment declined 7.5% q/q."</p>
<p>"There was a large fall in Northern Territory non-dwelling construction, he added"</p>
<p>As the tail-end of the construction phase of the LNG mega-projects wraps up, NAB expect mining investment to stabilise, with some potential upside given the improvement in business conditions in the sector.</p>
<p>Following the latest releases of growth, labour market and prices data, NAB have stated they are reassessing their view on monetary policy.</p>
<p>They currently have the next cash rate movement forecast as an increase in mid 2019, but are in the process of reviewing this statement.</p>
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Increase in dwelling investment driven by renovations: NAB

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<p>GUEST OBSERVATION</p>
<p>The internet is transforming every aspect of our lives. It has become indispensable. But, so far, according to <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/joes.12211" target="_blank">a new meta-analysis we have published in the Journal of Economic Surveys</a>, the internet has done next to nothing for economic growth.</p>
<p>Vast resources have been thrown at information and communication technologies. Yet despite exponential growth in ICT and its integration into almost all aspects of our lives, economic growth is not demonstrably faster (and at the moment is demonstrably slower) than it was beforehand.</p>
<p>As Nobel Prize-winning economist Robert Solow famously put it, “you can see the computer age everywhere but in the productivity statistics.”</p>
<p>This productivity paradox has caused angst and raised questions about whether the trillions invested in ICT could have been better invested elsewhere.</p>
<p><strong>Our study of studies</strong></p>
<p>We reassessed ICT through a meta-analysis of 59 econometric studies incorporating 466 different observations in both developed and developing countries. We divided ICT into three categories: computing, mobile and landline telephone connections, and the internet. For developed countries, we found that computing had had a moderate impact on growth. Mobile and landline telephone technologies also had a small effect.</p>
<p>But the internet has had no effect, at least not as far as can be ascertained from the research to date.</p>
<p><strong>The promise not yet delivered</strong></p>
<p>Ever since the Industrial Revolution, innovation and technological change have driven rising productivity and economic growth.</p>
<p>Information and communications technologies ought to follow in those footsteps.</p>
<p>Instead, productivity growth in US manufacturing has <a href="https://www.bls.gov/opub/mlr/2018/article/multifactor-productivity-slowdown-in-us-manufacturing.htm" target="_blank">slid</a> from 2% per year between 1992 to 2004 to minus 0.3% per year between 2005 and 2016.</p>
<p>Where ICT innovations <a href="https://www.propertyobserver.com.au/https://www.jstor.org/stable/20777587?seq=1#page_scan_tab_contents" target="_blank">do lead to an increase in productivity</a>, it’s often a one-off boost rather than an <a href="https://www.propertyobserver.com.au/https://press.princeton.edu/titles/10544" target="_blank">ongoing increase year after year</a>.</p>
<p><strong>Where the internet sends us backwards</strong></p>
<p>More disquieting, there is some evidence suggesting that rather than contributing to economic performance, some parts of ICT can harm it.</p>
<p>The internet can be an enabler of <a href="https://www.propertyobserver.com.au/https://www.penguinrandomhouse.ca/books/202162/the-procrastination-equation-by-piers-steel/9780307357175" target="_blank">procrastination</a>. Cyberslacking can take up to <a href="https://www.sciencedirect.com/science/article/pii/S0747563211000604" target="_blank">three hours of work a day</a>.</p>
<p>It isn’t all bad. Many of us get a lot of joy from catching up on social media and watching dog and cat videos. But if everyone is distracted by it, little gets done.</p>
<p>The internet has also enabled greater flexibility in work, another plus. But if it contributes little to economic growth, it is worth asking whether our economic managers should continue to fund its expansion.</p>
<p><strong>No saviour for developing nations</strong></p>
<p>For developing countries, generating economic growth is pressing because resources are scarce. ICT has been <a href="https://www.propertyobserver.com.au/https://openknowledge.worldbank.org/handle/10986/2422" target="_blank">held out as a saviour</a>.</p>
<p>Yet, it has almost always been found that more obvious innovations, such as running water, <a href="https://www.propertyobserver.com.au/https://press.princeton.edu/titles/10544" target="_blank">electricity</a>, and primary education for girls, have bigger payoffs.</p>
<p>Our own findings show that developing countries benefit from landline and mobile phone technologies but not at all from computing, at least not yet. ICT might need to reach a <a href="http://www.oxfordhandbooks.com/view/10.1093/oxfordhb/9780199548798.001.0001/oxfordhb-9780199548798-e-005" target="_blank">critical size</a> before its effects matter.</p>
<p><strong>But maybe later, down the track</strong></p>
<p>The time it takes for ICT investment to generate economic growth might be longer than expected, and it might need to reach an even bigger critical mass before that happens.</p>
<p>But it’s hard to avoid the conclusion that, for the immediate future, growth will continue to depend upon more traditional sources: trade between nations, education, new ideas, the rule of law, sound political institutions, and <a href="https://theconversation.com/dont-listen-to-the-rich-inequality-is-bad-for-everyone-81952" target="_blank">curtailing inequality</a>.</p>
<p>Unfortunately, these are under threat from growing nationalism and protectionism in the United States and elsewhere. The evidence to date suggests that we would be better off fighting those threats than investing still more in an information technology revolution that has yet to deliver.<img src="https://counter.theconversation.com/content/105294/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;"></p>
<p><em><strong>Chris Doucouliagos</strong>, Professor of Economics, Department of Economics, Deakin Business School, Alfred Deakin Institute for Citizenship and Globalisation, Deakin University</em></p>
<p><em><strong>Tom Stanley</strong>, Professor of Meta-Analysis, Deakin University</em></p>
<p><em>This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/the-internet-has-done-a-lot-but-so-far-little-for-economic-growth-105294" target="_blank">original article</a>.</em></p>
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The internet has done a lot, but so far little for economic growth

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<p>EXPERT OBSERVER</p>
<p><span>For years now, many have told us that Australia is heading for an imminent recession. By contrast official forecasts have long been looking for several years of above trend growth. In the event neither has happened and we don’t see them happening anytime soon. Against this backdrop there are five things you should know about the Australian economy.</span></p>
<p><strong>First – the economy grew solidly over the last year</strong></p>
<p><span>After several years of muddling along the Australian economy actually perked up over the last year with GDP growing a surprisingly strong 3.4% year on year, its fastest since 2012.</span></p>
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<p><span>That growth has been able to range between just below 2% and just above 3% over the last six years despite a large drag on growth from the fall back in mining investment is actually pretty good. But it’s below the norm for Australia, which has averaged around 3% GDP growth per annum over the very long term. It should also be remembered that strong population growth has been one of the reasons for the relative resilience of Australia’s economy, but over the last year per capita GDP growth at 1.8% has been running below that in the US and in line with that in Europe.</span></p>
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<p><strong>Second – growth is likely to slow a bit from here</strong></p>
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<p><span>While economic growth averaged a strong 1% quarterly pace in </span>the first half of the year it’s likely to slow going forward:</p>
<ul>
<li>The housing construction cycle is turning down as approvals trend down and the cranes come down. Falling alterations and additions won’t help.</li>
<li>Growth in consumer spending is likely to slow given weak wages growth, high levels of underemployment and slowing wealth gains as home prices fall. With falling home prices its unlikely that households will be prepared to keep running down the household saving rate – which is now at a 10 year low of just 1% - to make up for weak income growth.</li>
<li>Business investment plans for the current financial year are still subdued pointing to roughly flat investment (if plans for this year are compared with those made a year ago) and political uncertainty could start to weigh ahead of a potential change in government.</li>
</ul>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/9/6/amp%202.jpg" alt=""></p>
<ul>
<li>Drought could knock 0.5 percentage points off economic growth this year.</li>
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<p><span>While agricultural production as a share of GDP is now just </span>2.5%, a 20% slump in farm production as seen in past droughts would still knock 0.5% off economic growth. If it turns into an El Nino phenomenon it could be worse.</p>
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<p><strong>Third – but it’s not going into recession</strong></p>
<p>Despite these drags, recession will continue to be avoided justas it has been over the past 27 years:</p>
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<li>Over the past five years or so the slump in mining investment back to more normal levels has knocked around 1.5% per annum from GDP growth. However, mining investment is no longer 7% of the economy and it’s near the bottom so its drag on GDP growth is approaching zero.</li>
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<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/9/6/amp%204.jpg" alt=""></p>
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<li>Public infrastructure spending is rising and has further to go.</li>
<li>Net exports are likely to add to growth as the completion of resources projects boosts resources export volumes, although a US/China trade war is a threat here.</li>
<li>Profits for listed companies are rising in contrast to the 2014-16 period. This is a positive for investment.</li>
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<p><span>While profit growth has slowed from 17% in 2016-17 to </span>around 8% it’s positive and 77% of companies in the recent reporting season (the highest since the GFC) have seen rising profits with 86% of companies raising or maintaining their dividends indicating confidence in the outlook.</p>
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<p><span>So while housing construction will slow and consumer spending is constrained, a lessening drag from mining investment and slightly stronger non-mining investment along with solid export growth provide an offset and are expected to see growth between 2.5-3% going forward. Down from over the last year and slower than the RBA expects, but stronger than many doomsters see.</span></p>
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<p><strong>Fourth – spare capacity will remain for a while yet</strong></p>
<p>With the economy’s potential (or sustainable) growth rate <span>running around 2.75% and actual economic growth likely to run <span>around this spare capacity in the economy will be with us for a <span>while yet. To use it up we really need a long period of </span>above </span></span>trend economic growth, but this looks unlikely. Spare capacity remains most obvious in the labour market where the underutilisation rate remains historically high at near 14%. With it likely to remain high for some time to come it’s hard to see much acceleration in wage growth or inflation in the economy.</p>
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<strong>Fifth – which means RBA rate hikes are a long way off</strong><br><div class="layoutArea">
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<p><span>The RBA’s forecasts for continuing solid economic growth and a gradual rise in underlying inflation argue against a rate cut and support the case for an eventual hike. But our more constrained view on growth implying lower for longer wages growth and inflation along with the risks posed by likely further falls in Sydney and Melbourne home prices, tightening bank lending standards and the drought indicate a rate hike is unlikely to be justified any time soon. The next move in rates is probably still up but not until second half 2020 at the earliest and there is a risk that the next move will actually be down if falling home prices pose a significant threat to consumer spending and inflation starts falling again.</span></p>
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<p><strong>Implications for investors</strong></p>
<p><span><span>There are several implications for Australian investors.</span></span></p>
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<p><span>First, continuing growth should provide support for reasonable </span>returns from Australian growth assets.</p>
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<p><span>Second, bank deposits are likely to provide poor returns for </span>investors for a while yet.</p>
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<p><span>Third, while Australian shares are great for income, global </span>shares are likely to remain outperformers for capital growth.</p>
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<p>Finally, the outlook remains for a further fall in the $A. With the RBA comfortably on hold and the Fed raising rates every three months (with the next move coming this month), the interest rate gap between Australia and the US will go further into negative territory making it even more attractive to park money in the US and not Australia which will drag the $A down. Threats to global growth from a trade war and problems in emerging countries will also weigh on the $A.</p>
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<p><em>Dr Shane Oliver<br>Head of Investment Strategy and Chief Economist AMP Capital</em></p>
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soliver-smf6LQXgW9

Five things you need to know about the Australian economy: Shane Oliver

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<p>GUEST OBSERVATION</p>
<p>The disturbing trend of persistently low inflation continues, as Wednesday’s data release shows.</p>
<p>Headline inflation was 2.1% for the last 12 months. But the more relevant “underlying” rate came in at 1.9%. This is even below the 2.0% the RBA forecast in May.</p>
<p>Given that the RBA’s target band for inflation is 2-3%, and that inflation has barely touched the bottom of that band over a protracted period, there are implications for monetary policy.</p>
<p>But, before we get to that, the obvious question to ask is: why is inflation so low?</p>
<p>One strand of thinking involves the “Philips Curve”. This basically says that low unemployment pushes up wages growth and hence inflation.</p>
<p>We could get into a long discussion of whether the current 5.4% unemployment rate is “low”. And whether the effective rate really is 5.4% given anecdotal evidence about “underemployment”, the impact of recent decisions on penalty rates and minimum wage rises, and the robot revolution as a backdrop to the whole labour market.</p>
<p>But we don’t need to go there. There is barely any evidence of the Philips Curve in the data over the past quarter century, so let’s just reject that theory and move on.</p>
<p><strong>Plausible factors keeping a lid on inflation</strong></p>
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<p><strong>Technology</strong>. The information technology and internet revolution has made lots of things much cheaper. Take music. Gone are the days of paying A$20-plus for a CD with maybe 16 songs on it. Streaming services like Apple Music and Spotify give access to literally millions of songs for a small monthly fee.</p>
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<p><strong>China</strong>. The rise of Chinese manufacturing has led to everything from kids’ toys to cell phones being produced vastly more cheaply than if those things were manufactured with higher-cost labour.</p>
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<p><strong>Globalisation and trade</strong>. The world has become radically more connected, and so have company supply chains. This not only allows access to lower-cost manufacturing but also leads to better specialisation through the principle of comparative advantage. This means that high-labour-cost countries like Australia can specialise in other components of goods and services, get better at producing those components, and reduce overall costs further.</p>
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<p><strong>Wages</strong>. Wage growth has been subdued for a long time now. Since labour costs are an important component of many goods and services, this has served to tame inflation. One potential reason for low wage growth is that automation sits as a background threat to human labour. If labour costs get too high then processes get automated, which serves to keep wages in check.</p>
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<p><strong>Leverage and consumer spending</strong>. A final factor is that given how heavily indebted Australian households are –largely through mortgage debt – they simply don’t have a lot of discretionary income. This limits consumer spending and makes price rises in the retail sector less likely.</p>
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<p>These factors don’t look likely to change any time soon – with the possible exception of trade due to the Trump trade war. But even if that escalates dramatically it will shrink economic activity, further depressing prices.</p>
<p>So we have long-run, persistently low inflation. Is that a problem?</p>
<p>The major concern is that it could turn into deflation, although that doesn’t look terribly likely right now.</p>
<p>If, however, there was another significant economic downturn then deflation is a very real prospect. That would raise the spectre of Japan’s experience of the 1990s where deflation caused people to hoard money, severely contracting economic activity.</p>
<p>But for now the real impact of low inflation is on the RBA.</p>
<p>Faced with inflation below its target band for an extended period, the standard response would be to cut interest rates. The RBA is clearly worried about doing this.</p>
<p>One reason is housing prices – the RBA is worried about further fuelling the bubble.</p>
<p>With housing prices easing, this may become less of a concern, although household debt levels remain extremely high. Not encouraging households to become further indebted seems like a reasonable concern.</p>
<p>A second reason the RBA may be nervous about cutting rates is that it doesn’t have very far to go with the cash rate at 1.50%. If there is another major economic downturn then the RBA wants to have some firepower left to respond.</p>
<p>If short-term rates were already near zero then the only tools available to the central bank would be non-standard measures such as quantitative easing. That would be uncharted territory for the RBA, which seems reticent to explore that territory.</p>
<p>So, as with economic growth and wage rises, the RBA response seems to involve crossing as many fingers and toes as possible and to publicly proclaim that things are looking good, but may take a while.</p>
<p><img src="https://counter.theconversation.com/content/100514/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">We will get a better look into how that strategy is going when wage price index figures are released mid-August.</p>
<p><em><strong>Richard Holden</strong>, Professor of Economics and PLuS Alliance Fellow, UNSW</em></p>
<p><em>This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/vital-signs-inflation-misses-again-so-where-does-the-rba-go-next-100514" target="_blank">original article</a>.</em></p>
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