Repeat buyers are one of the strongest measures of confidence in any apartment development.

At <a href="https://www.apartments.com.au/new-apartments/era-newcastle-west-124-126-bull-street-newcastle-west-nsw-2302">ERA</a> in Newcastle West, some purchasers are returning to <a href="https://www.apartments.com.au/developers/gwh">GWH</a> after living at the developer's One Apartments. Their decision to purchase again was driven by the quality of life they found after moving into their first GWH home.

Keith Wilton had spent years living in a house in East Maitland before deciding it was time for a change. Apartment living had always been on his radar, but he was selective about what he wanted.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/FH_1EzB-1vs?si=XScVlP1ERsTDJoME" title="YouTube video player" width="560"></iframe>

"I had some boxes I wanted to tick," he says.

Keith points to the open-plan design, generous outdoor areas and considered inclusions as key reasons One Apartments worked for him.

“One of those things was a nice indoor open plan area, but also I wanted a nice outdoor open area that I could entertain on in summer or Christmases or birthdays,” he says.

He also found value in the smaller details, from integrated appliances to shared resident spaces including the pool, cinema and rooftop areas.

[smartcode_project:default project_id=135096 project_image_fid=356818]

After comparing several developments, he chose One Apartments because of GWH's longstanding local reputation and his own experience working with the developer on a commercial project more than a decade earlier.

"I knew that they were local, that the quality of the build was going to be up there. I'd looked at other apartment complexes around and close by, and I just knew that here was a better decision location wise."

Today, Keith says the move has completely changed how he experiences Newcastle.

"I enjoy living in this location because it's more of a lifestyle change. That Newcastle city living where you can walk to restaurants and bars and even beaches and parks and even shopping across the road."

[smartcode_project:default project_id=135096 project_image_fid=356828]

Beyond the location, he says it's the sense of community that has surprised him most.

"Everyone loves living here because they chose to live here, but everyone looks out for each other. It's a real great community feel here."

For Aimee and Lyle Goodman, the journey started almost by chance.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/tsioMLcnjas?si=zq-ys3JuWpfa5hFv" title="YouTube video player" width="560"></iframe>

The couple happened to be having coffee in Newcastle when they noticed the site where One Apartments was about to begin construction.

"We were aware GWH was planning a development," Aimee says. "We made one phone call and things moved pretty quickly after that."

As busy business owners, they initially thought apartment living would simply reduce the maintenance that came with larger homes. Instead, it fundamentally changed how they spent time together.

"We actually catch up more as a family now," Aimee says.

"We've had homes with big yards and lots of space, but everyone ended up in different rooms. Here we'll have dinner together, the kids can play, and we spend far more quality time together."

[smartcode_project:default project_id=135096 project_image_fid=356829]

Lyle says their confidence came from GWH's reputation within Newcastle's building industry.

"I know people who've worked across different apartment projects, and whenever GWH came up the feedback was always the same. They're rock solid. They're quality."

That confidence only grew throughout the buying process.

"One of the things that really impressed us with GWH was the whole process, was the communication," Lyle says. "It was consistent, it was regular, there was no problem if we had some weird questions, there was no problems in getting answers."

[smartcode_project:default project_id=135096 project_image_fid=351104]

Aimee says one moment stood out.

"The project actually finished on time. We realised we needed to hurry up and sell our house because everything was happening exactly when they said it would."

The positive experience at One Apartments ultimately gave all three buyers the confidence to purchase again with GWH, this time at ERA.

Their confidence reflects what many buyers are seeking in today's apartment market. Location remains important, but so too does certainty around delivery, quality and long-term liveability.

[smartcode_project:default project_id=135096 project_image_fid=356822]

ERA builds on those foundations with 280 one, two and three-bedroom apartments across two landmark towers in <a href="https://www.apartments.com.au/developments/newcastle-west-nsw-2302">Newcastle West</a>.&nbsp;

Designed by <a href="https://www.apartments.com.au/architects/fk-australia">Fender Katsalidis</a>, the project will include more than 2,000 square metres of resident amenities, including a resort-style pool, gym, sauna, private cinema and rooftop entertaining spaces overlooking the harbour and coastline.&nbsp;

The development is also within walking distance of the Newcastle Interchange, Honeysuckle, Darby Street, the harbour foreshore, restaurants, retail and the city’s beaches, continuing the walkable lifestyle that existing GWH buyers say has transformed how they live.

[smartcode_project:default project_id=135096 project_image_fid=356826]

For Keith, the appeal remains straightforward.

"You feel at home even before you've moved into your home."

For Aimee, the change is measured in time.

“I just felt like I had more time,” she says.

[smartcode_project:default project_id=135096 project_image_fid=351102]

Construction at ERA is now underway, with more than half of the residences already sold and limited two and three-bedroom apartments remaining in the East Tower release. Priced from $980,000 for two-bedroom residences and $1.46 million for three-bedroom residences, buyers can secure an apartment with a 10 per cent deposit, with premium homes offering ocean views from Level 8 and harbour views from Level 10.

ERA is also backed by Resilience Insurance's 10-year Latent Defects Insurance policy, providing protection against structural or waterproofing defects for 10 years after completion. The project is anticipated to be completed in early 2028.

[smartcode_project_cta:default project_id=135096]

Joel Robinson

From ONE to ERA: Why buyers are choosing GWH again in Newcastle West

Virgate Property Group is preparing to commence construction of Verdé, its new apartment development in Melbourne's Arts Precinct at Southbank, following a strong run of sales that has seen more than half of the project's 173 apartments secured.

Verdé has attracted a broad mix of first home buyers, owner-occupiers upgrading from nearby inner-city suburbs and investors, with younger owner-occupier couples aged between 28 and 45 accounting for the strongest enquiry. Many are already living in Southbank, South Melbourne, Albert Park, Port Melbourne, South Yarra and the CBD.

"Verdé is located in one of the most desirable pockets of southern Melbourne," Blair Property Group Director Darren Blair, who is managing sales at Verdé, said.

"It's within walking distance of the Arts Centre, Royal Botanic Gardens, Albert Park Lake, and Southbank's restaurants and retail. It's a great lifestyle location with strong amenity and liveability, which made it a very attractive choice for the project."

[smartcode_project:default project_id=4661 project_image_fid=372549]

Virgate was already familiar with the precinct, having previously delivered the successful Domain House development in neighbouring South Melbourne. That experience gave the developer confidence to acquire the Coventry Street site and continue expanding its presence in Melbourne's inner south.

"We had been keeping an eye on the site and the broader precinct for a few months before deciding to move forward with the acquisition," Virgate said.

The project was ultimately secured in 2020 following feasibility studies, planning assessments and due diligence, with the brief centred on delivering "a high-quality, considered design that feels both refined and fit for purpose."

[smartcode_project:default project_id=4661 project_image_fid=314259]

Designed by <a href="https://www.apartments.com.au/architects/bruce-henderson-architects">Bruce Henderson Architects</a>, Verdé comprises 173 one, two and three-bedroom apartments priced from $599,000. The architecture is distinguished by a faceted glass façade that responds to both the site's outlook and Melbourne's changing light conditions.

According to Bruce Henderson Architects, the coloured glazing gives the building a distinctive identity while also providing privacy and solar shading, with residences oriented to capture views across the bay, city skyline and surrounding parklands.

Inside, <a href="https://www.apartments.com.au/interior-designers/designoffice">DesignOffice</a> has created interiors focused on natural light, efficient planning and enduring materials. Apartments feature engineered oak flooring, natural stone benchtops, floor-to-ceiling glazing and SMEG appliances, while a restrained material palette aims to complement the expansive outlooks rather than compete with them.

[smartcode_project:default project_id=4661 project_image_fid=372550]

Resident amenity has also been designed around everyday functionality rather than occasional use. Facilities include a concierge-serviced lobby, residents' lounge with fireplace, library and co-working space, gym, terrace garden with barbecue facilities, ground-floor café, and package delivery management.

The project's location continues to be one of its strongest drawcards. Positioned on Coventry Street, Verdé sits within walking distance of the National Gallery of Victoria, Arts Centre Melbourne, Royal Botanic Gardens and Albert Park Lake, while Southbank's dining precinct, Sturt Street trams and the new ANZAC Station are all nearby. The surrounding education catchment also includes Melbourne Grammar, Melbourne Girls Grammar, Mac.Robertson Girls' High School and several major university campuses.

The sales team says buyers have responded particularly well to the combination of location, design quality and long-term liveability.

"They're responding really positively to the quality of the design, premium resident amenities and the uninterrupted views. Many also appreciate the location and how connected it is to everything they need."

The ability to secure stamp duty savings before completion has also been a key factor for purchasers, alongside the opportunity to personalise finishes ahead of settlement.

With construction set to commence soon and more than half the apartments already sold, Verdé enters its next phase as one of the Arts Precinct's more established apartment developments, offering remaining buyers an opportunity to secure a residence before construction advances further. Expected completion is scheduled for late 2027.

[smartcode_project_cta:default project_id=4661]

Virgate's Verdé Southbank moves toward construction as sales fly past halfway stage

Downsizer-focused apartment development Kooyongkoot in Hawthorn has been recognised at the 2026 Better Future Melbourne Design Awards, taking home Gold and Silver awards in two categories.

<a href="https://www.apartments.com.au/new-apartments/kooyongkoot-hawthorn-1-kooyongkoot-road-hawthorn-vic-3122">Kooyongkoot</a>, currently being delivered by developer PQD and designed by Cera Stribley, received Gold in the Interior Design – Proposed category and Silver in the Architecture – Proposed category.

The dual recognition reflects the design approach behind the boutique development on prestigious Kooyongkoot Road, where the focus has been on creating homes for downsizers seeking the space, quality and functionality of a detached house within a low-rise apartment building.

Rather than maximising apartment numbers, <a href="https://www.apartments.com.au/developers/pqd">PQD</a> and <a href="https://www.apartments.com.au/architects/cera-stribley-architects">Cera Stribley</a> limited the development to just 18 residences, allowing for larger floorplans, greater privacy, generous landscaping and expansive communal spaces.&nbsp;The majority of the apartments also benefit from corner aspects, allowing for dual sources of natural light.

Now around 70 per cent complete and on track for completion in November 2026, Kooyongkoot will comprise a mix of garden residences, ter​race apartments, sub-penthouses, and is crowned by two half-floor penthouses with direct lift access and private rooftop terraces.

[smartcode_project:default project_id=102717 project_image_fid=355297]

The Silver Award for Architecture recognised the way the building responds to its prominent corner position at the ent​rance to Hawthorn's Scotch Hill precinct, one of Melbourne's most established residential neighbourhoods.

Rather than competing with the grand homes that line Kooyongkoot Road, the architectural approach focused on restraint and longevity, using curved brickwork, generous landscaping and carefully considered proportions to integrate with the existing streetscape.

"The form feels fluid and timeless, as though shaped by the landscape itself – architecture that belongs, rather than competes," said Chris Stribley, Co-Founder and Managing Principal of Cera Stribley.

The judging submission also highlighted practical innovations throughout the building, including lift cores servicing only nine homes each, a central landscaped lightcourt designed to bring daylight and ventilation into the building, and fully enclosed private storage rooms with lighting, power and shelving to better accommodate residents transitioning from larger family homes.

[smartcode_project:default project_id=102717 project_image_fid=355293]

The Gold Award for Interior Design recognised the project's focus on long-term liveability rather than display-home aesthetics.

According to the awards submission, the interiors were designed from the inside out, prioritising how homes would function over decades of daily use through generous proportions, practical storage, durable natural materials and flexible layouts.

The specification includes natural stone throughout, upgraded acoustic glazing, V-ZUG appliances and fully enclosed storage rooms, alongside an amenity offering focused on wellness, entertainment and everyday convenience.&nbsp;

Residents will have access to a gym and yoga studio, a wellness centre featuring traditional and infrared saunas, a cold therapy shower and treatment room, as well as a residents' lounge and golf simulator/cinema room for entertainment.&nbsp;Kooyongkoot has also considered the everyday convenience of its residents by offering a private carwash and pet wash facilities on site as well as dedicated parcel lockers and oversized fully enclosed storage rooms.&nbsp;

[smartcode_project:default project_id=102717 project_image_fid=355303]

The project's attention to detail has already resonated with buyers. Earlier this year, Kooyongkoot recorded one of Boroondara's highest apartment sales when an $8 million penthouse was purchased by a Melbourne CEO downsizing from a nearby family home.

"Every detail feels deliberate, from the overall design down to the smallest touches," the purchaser said.

"The level of quality and refinement is exceptional, but what really sold it was how liveable it felt... It felt like a place where everything had been considered, not just a luxury building."

[smartcode_project:default project_id=102717 project_image_fid=355304]

Sustainability also formed a key part of both award submissions. Kooyongkoot is targeting a minimum 7.5-star NatHERS rating across all residences, supported by passive design principles, high-performance glazing, EV charging infrastructure, water reuse systems and a wellness model focused on lower-energy dry facilities rather than pools and large wet areas.

Located within walking distance of Scotch College, Methodist Ladies' College, Koo​yong Lawn Tennis Club, Aubur​n Village and Camberwell Junction, Kooyongkoot continues to target owner-occupiers looking to remain in Melbourne's inner east without compromising on space or quality. A limited selection of two, three and four-bedroom residences remains available, with prices starting from $1.9 million.

[smartcode_project_cta:default project_id=102717]

Kooyongkoot wins Gold and Silver at Better Future Melbourne Design Awards

New apartment supply has become increasingly constrained across <a href="https://www.apartments.com.au/developments/parramatta-nsw-2150">Parramatta</a> in recent years, with fewer projects progressing through to completion as development conditions have become more challenging.

It makes <a href="https://www.apartments.com.au/developers/novm">NOVM</a>'s 2021-completed <a href="https://www.apartments.com.au/buildings/the-lennox-parramatta-12-phillip-street-parramatta-nsw-2150">The Lennox</a> one of the most recently completed residential towers on the Parramatta River, and among the newest apartment developments in Sydney's second CBD.

With the project largely completed before the sharp escalation in construction costs and inflation following the pandemic, The Lennox is now offering pricing that would be difficult to replicate in a comparable new development in Parramatta today, or across much of Western Sydney.

The majority of the 413 apartments at The Lennox sold before and shortly after completion. A limited release of the remaining apartments has recently been brought to market by capital partner <a href="https://www.apartments.com.au/project-marketer/equitifund-group">Equitifund</a>, with entry-level pricing from $700,000 and two-bedroom apartments available from under $1 million.

Rising above the Parramatta River at 12 Phillip Street, The Lennox comprises one, two, three and four-bedroom apartments, appealing to first home buyers, young professionals, families, downsizers and interstate investors seeking a completed apartment in one of Australia's fastest-growing economic centres.

[smartcode_project:default project_id=5743 project_image_fid=372394]

Rather than positioning Parramatta as an alternative to Sydney's CBD, Equitifund believes the city has reached a point where it stands on its own merits.

"Parramatta is no longer simply an alternative to Sydney CBD, it's becoming a destination in its own right," Equitifund Executive Chairman Greg Huxley said.

"The Lennox captures that evolution with a level of quality and amenity that's difficult to match at its price point."

[smartcode_project:default project_id=5743 project_image_fid=953]

Designed by <a href="https://www.apartments.com.au/architects/marchese-partners">Marchese Partners</a>, the tower responds directly to its riverfront setting through expansive glazing and open-plan layouts that maximise views across the Parramatta River and city skyline. Interiors feature engineered timber flooring, stone benchtops, stainless steel appliances and floor-to-ceiling glazing, while generous balconies extend the living spaces outdoors.

Marchese Partners says the project was conceived to balance high-quality apartment living with practical, long-term functionality, pairing larger, efficient floorplans with amenities more commonly associated with five-star hotels.

That emphasis continues through the resident facilities, which include a 20-metre rooftop swimming pool, fully equipped gym and wellness spaces, full-time concierge, a residents' lounge, function room, private lifts, secure basement parking and rooftop communal areas overlooking the Parramatta River. Ground-floor boardwalk retail and dining further activate the riverfront and integrate the building into the surrounding public realm.

[smartcode_project:default project_id=5743 project_image_fid=925]

Australian housing and finance group Equitifund has secured the remaining apartments, believing there are few completed apartment opportunities in Parramatta that offer the same combination of location, amenity and pricing.

Equitifund National Sales Director Ben Hamblett says buyers are increasingly recognising that premium apartment living no longer needs to come with Sydney CBD pricing.

"The Lennox is where aspirational living becomes attainable," Hamblett said.

"Wake to river and mountain views, step into Sydney's Second CBD, and arrive home to resort-calibre amenities, all without the harbour price tag."

Hamblett says owner-occupiers are also attracted by the convenience of having Westfield Parramatta, Church Street's dining precinct, Parramatta Park, Riverside Theatres, Western Sydney University and major transport connections all within walking distance.

"At The Lennox, lifestyle is not an afterthought, it is the foundation."

[smartcode_project:default project_id=5743 project_image_fid=5374]

The Lennox places residents within walking distance of Parramatta Square, Westfield Parramatta, Church Street Eat Street, Parramatta Station, the ferry wharf, Light Rail, the future Sydney Metro West, Parramatta Park and CommBank Stadium, reinforcing Parramatta's position as one of Australia's most connected metropolitan centres outside Sydney's CBD.

Equitifund says buyers visiting the display suite consistently comment on the quality of the finishes, generous floorplans, river and skyline views, and the walkability of the location. The project has attracted a broad mix of local professionals, upsizers, downsizers, buyers relocating from Sydney's inner suburbs and interstate investors seeking long-term growth opportunities.

That demand aligns with Parramatta's continued evolution as an economic powerhouse. Equitifund Research and Market Insights specialist John Bekiaris says sustained population growth, infrastructure investment and expanding employment opportunities continue to support long-term housing demand across the city.

"Parramatta has evolved from a satellite city into one of Australia's most important economic centres. Population growth, infrastructure investment and employment are all supporting sustained long-term housing demand."

[smartcode_project_cta:default project_id=5743]

The apartment price gap drawing Sydney buyers west

A luxury beachfront apartment at Rainbow Bay has more than doubled in value since it sold off the plan six years ago, setting a new local apartment record in the process.

The three-bedroom apartment in the Flow development on Petrie Street, the first of four new projects locally by Paul Gedoun's S&amp;S Projects, has sold for $7.4 million, after originally selling for $3.27 million when the project launched in 2020.

The seventh-floor apartment, comprising 187 sqm of internal living space and a 54 sqm balcony overlooking Froggies Beach and Snapper Rocks, was purchased by a local family.

The transaction was negotiated by Pezet Matheson director Kerry Pezet and equates to more than $30,000 per sqm.

Pezet said the sale reflected the limited opportunities to buy into the boutique beachfront development.

"The sale highlights the rarity of opportunities within the boutique beachfront development, where residences seldom become available," Pezet said.

"Flow is one of the Gold Coast's most tightly held buildings. Buyers from our database move quickly when residences become available, and achieving an off-market sale at $7.4 million demonstrates the depth of demand for property of this calibre."

<img alt="Flow" data-entity-type="file" data-entity-uuid="c585b206-2130-4eee-a50c-3f27c51a7c70" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-06%20at%208.33.25%E2%80%AFPM.png?VersionId=m3pHRDV62Y3fvN.XQuQHq.52ilTWpRLf" />

Flow was the first of four luxury apartment developments delivered by Paul Gedoun's S&amp;S Projects at Rainbow Bay and was completed in 2023.

Positioned on the beachfront overlooking Snapper Rocks, the residence includes three bedrooms, three bathrooms, a powder room and views stretching north along the coastline towards Surfers Paradise.

Pezet Matheson Residential principal Mitchell Lambert said buyers continued to prioritise quality beachfront apartments in tightly held locations.

"Flow Residences offers a rare combination of elevated beachfront positioning, architectural excellence, comprehensive resident amenity and premium finishes, which is exactly what discerning purchasers are seeking," Lambert said.

"The transaction further reinforces Rainbow Bay's reputation as one of Australia's premier coastal lifestyle destinations, where limited supply and growing demand continue to support strong market performance."

Pezet Matheson originally marketed and sold out Flow off the plan, making the latest transaction a return to one of the project's original buyers.

Paul Gedoun is selling his third project, <a href="https://www.apartments.com.au/new-apartments/radia-rainbow-bay-271-boundary-street-coolangatta-qld-4225">Radia Rainbow Bay</a>, after recently completing, and selling out, <a href="https://www.apartments.com.au/buildings/esprit-217-227-boundary-street-coolangatta-qld-4225">Esprit</a>. He has plans for a <a href="https://www.apartments.com.au/news/qld/first-look-s-s-projects-proposes-88-apartment-wellness-tower-at-coolangattas-boundary-street">fourth building</a>, 88 apartments on <a href="https://www.apartments.com.au/new-apartments/209-213-boundary-street-coolangatta-qld-4225">Boundary Street</a>.

Rainbow Bay apartment doubles in price since off the plan sale during pandemic

Economy

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"This week is going to be a big week for markets and for the economy," says Westpac's economist Bill Evans.
He says they "obviously we expect the Reserve Bank to keep interest rates on hold."
But he says there will be some interesting things they will be looking for in the Governor's statement.
The video was uploaded on Monday prior to Tuesday's meeting.
<div style="padding: 56.25% 0 0 0; position: relative;"><iframe style="position: absolute; left: 0; top: 0; width: 100%; height: 100%;" src="https://player.vimeo.com/video/267181321" frameborder="0" width="320" height="240"></iframe></div>
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jrobinson-rf4aSBido9

All eyes on the RBA: Westpac's economic update

<html><body>
As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 1.5%.
While we expected that result, we were not expecting any significant surprises in the Governor’s Statement.
We were wrong.
Readers will be aware that Westpac has been consistently critical of the RBA’s GDP growth forecasts for 2018 and 2019 of 3 ¼ per cent in both years.
We have consistently argued that the number will be more in line with 2.5%. In all recent statements, the Governor has noted “the Bank’s central forecast for the Australian economy is for GDP growth to pick up to average a bit over 3% over the next couple of years”. This is confirmed in the official forecasts from the February Statement on Monetary Policy of 3 ¼ per cent in 2018 and 2019.
In today’s statement, he notes “the Bank’s central forecast is for the Australian economy to grow faster in 2018 than it did in 2017”. Tomorrow, with the release of the December quarter national accounts,  the measure of GDP growth in 2017 will print. Consensus  expects  growth of 2.5%. Westpac expects 2.4%. On the reasonable assumption that the RBA has a similar estimate (forecast in February SoMP was 2.5%), the above statement can be interpreted as the Bank now feeling comfortable with growth being above 2.5%, which is a major qualification of the Bank’s previous growth outlook.
This change does not seem to be indicated by a change in rhetoric around the economy. Indeed, the Governor points out that growth in exports “is expected to recover from the temporary weakness at the end of 2017”. Arguably, we could interpret this observation as attributing the lift in growth in 2018 mainly to a pick-up in exports. While the Reserve Bank does not supply independent estimates of its forecasts for household consumption, we have always presumed that it is more optimistic for household spending in 2018 than in 2017.
Certainly, Treasury’s forecasts indicate an expected boost to consumer spending in 2018. The RBA continues to highlight the outlook for household consumption as a “continuing source of uncertainty”.
While this change in the attitude to growth appears to be somewhat more dovish, the Bank does show some more confidence about wages. The Governor points out that “the rate of wage growth appears to have troughed”. This is an upgrade from the wages commentary in previous statements. The facts are of course that annual wages growth lifted in the December quarter from 2.0% in the September quarter to 2.1%, also consistent with the Governor’s comment, “wage growth remains low”.
The commentary around housing has also changed somewhat. The two major markets, Sydney and Melbourne, are now singled out and described as “have slowed”.
There is no change in the commentary around inflation (“likely to remain low for some time”); the Australian dollar (“remains within the range it has been in over the past two years”); employment (“forward looking indicators continue to point to solid growth”); Terms of Trade (“expected to decline over the next few years”); and the global economy (“has strengthened over the past year”).
The recent volatility in the share market is recognised, although no implications for markets or the global economy are drawn.
Conclusion
The Reserve Bank appears to be less confident about the growth outlook. Nevertheless, we still believe that it expects to be raising interest rates beginning sometime in late 2018 and into 2019. That would be in line with current market pricing.
In contrast, Westpac is not surprised to see the Bank more cautious on the growth outlook and we continue to expect that the cash rate will remain on hold in 2018 and 2019.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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bevans-rYk9SxEa4r

Reserve Bank stays on hold: Implies a more cautious assessment of the growth outlook

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EXPERT OBSERVATION
Economic and Financial market perspectives
<ul>
<li>Cash payouts: Since mid-February, ASX 200 companies have paid out around $3.3 billion in dividends to shareholders. But dividend payouts really start to ramp up from today. Overall, around $22 billion will be paid to shareholders over coming weeks.</li>
<li>Dividends still in vogue: The majority of companies reporting half-year earnings results (87%) chose to pay a dividend and 91.5% of these companies lifted or maintained dividends.</li>
<li>Injection into the economy: Dividends totalling $18 billion will be paid out by listed companies to their shareholders in the next four weeks.</li>
</ul>
What does it all mean?
Dividends remain in vogue. But as has been apparent for the last few reporting periods, companies are seeking better balance between paying out dividends and investing in their businesses. The world has seemingly become a smaller place with companies across the globe competing with one another for the affection of consumers. Businesses need to invest in the brands, their businesses and their futures. That was certainly the response by Coca Cola Amatil which plans to spend $40 million in promoting brands Coke, Mount Franklin and Pump. The aim is to lift sales, profits (earnings per share) and ultimately support the share price and dividends.
Of the ASX 200 companies reporting for the six months to December, around 87% of firms elected to pay a dividend, up from the long-term average of 86%, but down from the record level of 92% in the 2015/16 full-year results.
There is certainly plenty of cash available to firms. Of the 135 companies reporting half-year results, a record 94% reported a profit. Aggregate cash holdings rose by 6% over the year to $87 billion. Adding in the 32 companies reporting full-year earnings, cash stood at a record $115 billion.
Over the period from February to May, over $22 billion will be paid to shareholders as dividends. A year ago dividend payouts were also around $22 billion, while in the full-year earnings season in August 2017, dividend payouts totalled around $26 billion. So shareholders continue to be well rewarded.
Some shareholders will receive the dividends as cash and others will employ the proceeds through dividend reinvestment schemes. While the majority of the funds will be paid to domestic investors, other funds will go offshore to foreign investors. And while some of the dividends are paid to ordinary investors, other payments are paid to superannuation funds, thus with more limited short-term consequences for the economy.
While dividends flow at this time every year, the dollars potentially could lift spending. However, April tends to be a good month for the Australian sharemarket and part of the reason is that investors are keen to put their dollars to work in listed companies.
The Profit Reporting Season
Regular readers would be aware that each six months CommSec undertakes a detailed review of the profit reporting season – the time when companies report half-year or annual results for the period to June or December. (A far smaller proportion of companies have a different reporting period, such as March or September). 
To recap, the recent earnings season – for companies largely reporting half-year results to December 2017 – can be described as solid, not spectacular. Effectively, companies seem to be laying the groundwork for the future.
A record share of companies reported a profit. But aggregate statutory earnings were down 1.5% on a year ago. A smaller percentage of companies issued a dividend, expenses outpaced sales and cash earnings were up only modestly on a year ago.
Some of the themes of the season:
<ul>
<li>Department stores remain under pressure but less so Specialty Retailers.</li>
<li>TV and Radio Broadcasters have benefitted as advertisers drift away from social media.</li>
<li>There were more reports of companies being able to lift margins.</li>
<li>Agricultural and export-focussed consumer good companies benefitted from strong demand in Asia.</li>
<li>Companies dependent on home construction and development have benefitted from strong activity levels in south-east Australia.</li>
<li>Technology and Telecom companies have struggled.</li>
<li>Transport and Infrastructure companies have out-performed.</li>
</ul>
Of all companies reporting half-year earnings, 57% reported a lift in profit and 43% a decline (long-term average 61.4%). Of those 94% of companies reporting a profit, 56% lifted profits and 44% reported a decline.
Of all the half-year reporting companies, 87% issued a dividend and 13% didn’t. Of those reporting a dividend, 74.5% lifted the dividend, 8.5% cut and 17% left dividends unchanged.
Of all companies reporting half-year earnings, 58% lifted cash holdings over the year and 42% cut cash levels. Cash holdings of both full-year and half-year reporting companies stood at $115 billion at December 31.
The Dividend Timeline
IRESS provides data on the dividends declared by companies, the number of shares on issue and the pay date of the dividends. So it is possible to derive a dividend timeline. The ASX 200 companies were assessed.
As always there are complications to the analysis such as where the shareholders are based, whether dividend reinvestment plans operate, special dividend payments and currency translation effects for foreign investors. But the aim is to get a broad idea of the timing and magnitude of dividend payouts.
CommSec estimates that around $22 billion will be paid to shareholders from mid-February to early May 2018. The key period for dividend payments is the three-week period beginning March 26 and ending April 13. Over that three-week period, $16.6 billion will be paid out as dividends by listed companies: in the week ending March 30, dividends totalling $10 billion will be paid; in the week ending April 6, $4.1 billion will be paid out as dividends; in the week ending April 13 dividend payments totalling $2.5 billion will be made.
The importance of dividends
If you indexed the All Ordinaries index and the All Ordinaries Accumulation index at January 2004 it would show share prices (All Ords) up 84% while total returns have risen by around 339%. The differential (dividend growth) has especially widened from the low point for shares after the GFC in February 2009.
So dividends have taken on greater importance.
There are a few reasons for this. Investors have been more cautious about buying shares, despite the fact that Australian companies have been making money and strengthening balance sheets. So share prices have not fully captured the stronger fundamentals.
The economy has also continued to mature and the “potential” growth rate has eased from around 3.5% to 2.75%. Many of Australia’s biggest companies operate in mature industries. So while companies continue to generate good returns, growth options are more limited. Add in the fact that inflation has also slowed from around 2.5% to just below 2%.
In recent years Australian companies have also had to compete with heady property markets to secure the affection of investors. With share prices seemingly constrained by a range of influences, that puts more onus on companies to offer attractive dividends or to support share prices with buybacks.
Until recently there has been some reluctance by companies to plough back cash into the business. And expansion, renewal, replacement or efficiency measures have boosted the funds that can be made available as dividends.
What are the implications for investors?
Investors have the usual choice over the next few weeks. Those investors who still elect to receive dividend payments direct to their accounts can choose to spend the extra proceeds, save the proceeds (leave it in the bank) or use the funds in combination with other savings and reinvest into shares or other investments.
For companies, retailers and financial firms, the dividends flowing through to shareholders clearly represent opportunities. The Reserve Bank will also monitor the trends in the next few weeks: stronger confidence and an inflow of funds represent a potential spending boost.
Of the major bourses across the globe, Australia is the largest payer of dividends. In part this reflects the maturity of Australia’s industry sectors. It also reflects the stability of the companies that dominate the ASX20 and ASX50 indexes. And it also reflects the on-going growth of the Australian economy and corporate profitability.
Over the past couple of years many companies took the “safe option” of paying out dividends and buying back shares – in other words, keeping shareholders happy. But many companies are now opting for greater balance.
Adequate cash must be maintained to pay out dividends. But cash levels as well as modest borrowings are important for reinvestment in the business and applied to new opportunities – entering new markets or engaging in mergers and acquisitions.
Aussie companies have been successful in recent years in trimming costs and improving efficiencies. But the path to higher profits and retained earnings is also growth of revenues. And that objective is more difficult in a globalized world, affected by disruption and technology-driven innovation.
Shareholders increasingly realize that it is important to select companies with good potential for solid, sustainable growth in total returns – share price plus dividends. And that means paying attention to all aspects of the business.
Craig James is chief economist at CommSec.
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cjames-5S2v74qSNK

Dividends top $22 billion, but have they peaked? CommSec's Craig James

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GUEST OBSERVATION
Business leaders in health and consumer discretionary sectors are feeling less positive about the year ahead because consumers are feeling the pain in the hip pocket, according to our analysis of the outlook of leaders of Australia’s ASX 200 companies. The threat of changes in regulation also features in business leaders’ fears.
Roughly four out of five Australian workers earn their living from private businesses. So we should care about how Australian business leaders are feeling about the future of their businesses, because it’s our future.
The consumer discretionary sector encompasses industries that tend to be the most sensitive to economic cycles. They include businesses that produce goods like cars, clothes and leisure equipment but also services like hotels, restaurants and media.
Business sentiment in the consumer discretionary sector fell in March 2018 relative to the 2017 September business reporting season - from 0.19 to 0.13; and also compared with March 2017 but by a smaller magnitude.
Companies with lower than average sentiment for the year ahead included retailer Myer (0.05) – no surprise given the ongoing weak performance and takeover speculation; and Nine Entertainment (-0.03), facing ongoing cost pressures from digital media competition. Also less positive were Skycity Entertainment Group (0.01) and Webjet (-0.02).
<a href="https://images.theconversation.com/files/208860/original/file-20180305-65541-t4bhgu.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/208860/original/file-20180305-65541-t4bhgu.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
The Conversation, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/" target="_blank">CC BY-ND</a>
Tighter household budgets bad for business
The glum business sentiment is in sectors related to consumer spending. A decline in consumer spending could be because household finances are under pressure from slow income growth and wealth.
Slow household income growth is driven by slow wage growth. The wage price index grew by 2% over the past year, and less on a per hour basis, which means it is barely keeping up with consumer prices. The second factor is the slowing growth in household net wealth due to a slow down in house prices and financial assets.
Similarly, another consumer sentiment index in Australia declined 2.3% from January to February – the first decline in three months. Part of this may be due to the volatility in global share markets that occurred in the survey week in early February.
This volatility is widely expected to continue and weakening sentiment in the consumer discretionary sector may reflect ongoing uncertainty in household financial wealth.
Health and consumer spending sectors wary of regulation
Our analysis shows business sentiment in the health care sector dropped from 0.18 to 0.07 September 2017 to March 2018 and by a smaller magnitude since March 2017. This could reflect business leaders’ ongoing concern about the sustainability of the current health system.
Health business with lower than average sentiment for the year ahead include generic drugs supplier Mayne Pharma (0.01), infection control company Nanosonics (-0.03) and private hospital group Healthscope (0.04).
Private health insurance premiums have increased at nearly twice the growth rate of wages over the past. According to a recent survey, 44% of Australians believe the current mix of public and private health systems will not be around in 15 years, and 52% lack confidence that the current public hospital system will still be around in 15 years.
Government regulation is a recurrent theme in business leaders’ statements. For example, diagnostic imaging company Primary Health Care notes in its report: “…funding pressures will remain for the industry…Australia is at an important juncture in the delivery of health-care services.”
The private health care funding system is regulated to within an inch of its life in the desperate attempt to shore up its viability. For example, the Private Health Insurance Rebate, Lifetime Health Cover and the Medicare Levy Surcharge are all measures designed to force healthy young people and high income earners to subsidise the health care of others.
But this regulation is not working, judging by declining proportion of young people with private health insurance and the need to increase premiums so dramatically.
We also see regulation mentioned in the reports for the consumer discretionary sector. For example David Attenborough, the managing director and CEO of gambling entertainment giant Tabcorp said:
“Tabcorp is well placed to compete in the evolving regulatory landscape. This includes the introduction of point of consumption taxes, and restrictions on credit betting, advertising, inducements and live betting.”
The placement Attenborough refers to may have something to do with the proposed merger with lottery retailer Tatts Group, after shareholders and the Australian Competition Tribunal approved the move.
However gambling regulation continues to be politically charged as we saw in the fight over pokies in pubs and clubs during the Tasmanian state election and are seeing in South Australian state election race.
Overall business sentiment not looking bad
Overall business sentiment is roughly the same as at March 2017 and 2016. Some sectors are higher, such as telecommunication services (up from 0.05 to 0.08), materials (up from 0.07 to 0.11) and information technology (up from 0.13 to 0.23). This is offsetting the weaker sentiment about the year ahead in consumer discretionary, health care and energy.
The overall sentiment level continues to be positive at 0.08.
Ongoing strong employment growth over the past two years is a likely indicator of this positive sentiment. Overall employment growth of 3.3% in the past 12 months is about double the growth in the working age population, and the Reserve Bank expects it to continue to grow faster than the working age population to the end of 2019.
Our analysis also looks at the subjectivity in the statements these businesses make. There’s no significant change in the subjectivity scores compared with last year. This means no increase or decrease in confidence or uncertainty around the sentiment levels.
<img src="https://counter.theconversation.com/content/92737/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">It will be interesting to see whether sentiment changes over the next six months to the September business results, given the destabilising effects of a range of factors just starting to play out. These factors include stock market volatility, the announcement of US tariff increases, company tax cuts and the probably interest rate rises.
Ross Guest, Professor of Economics and National Senior Teaching Fellow, Griffith University
Ben Hachey, Honorary Associate, School of Information Technologies, University of Sydney
Leonardo dos Santos Pinheiro, PhD candidate, Artificial Intelligence, Macquarie University
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/face-value-business-leaders-nervous-about-consumers-spending-less-and-regulation-92737" target="_blank">original article</a>.
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j.ballantyne1990-6AQqhLzZaK

Business leaders nervous about consumers spending less and regulation

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GUEST OBSERVER
The tale of new technologies causing the death of work is the prophecy that keeps on giving. Despite evidence to the contrary, we still view technological change today as being more rapid and dramatic in its consequences than ever before.
The mistaken view that robots will take our jobs may come from a human bias to believe that “we live in special times”. An absence of knowledge of history, the greater intensity of feeling about events which we experience first-hand, and perhaps a desire to attribute significance to the times in which we live, all contribute to this bias.
History repeating
In the 1930s, John Maynard Keynes envisaged that innovations such as electricity would produce a world where people spent most of their time on leisure activities. In the United States in the 1960s, Lyndon Johnson established a Presidential Commission to investigate fears that automation was permanently reducing the amount of work available.
Australia has not escaped the prophecy, with similar concerns about the future of work expressed in the 1970s.
In their history of Monash University, Graeme Davison and Kate Murphy report that:
"In 1978, the historian Ian Turner, organised a symposium on the implications of the new technologies. The world, he predicted, was about to enter a period as significant as the Neolithic or Industrial revolutions. By 1988, at least a quarter of the Australian workforce would be made redundant by technological change…"
Some years later, Barry Jones continued the gloomy forecasts in his best-seller Sleepers Wake!:
"In the 1980s, new technologies can decimate the labour force in the goods producing sectors of the economy…"
Of course, none of this came to pass in Australia; just as work did not disappear in the 1930s in the United Kingdom, or the 1960s in the United States.
Yet today, we are seeing the resurrection of the prophecy. Commentary on the Australian labour market abounds with claims that the world of work is undergoing radical and unprecedented change.
The increased application of computer-based technologies in the workplace is suggested to be causing a reduction in the total amount of work available; or to be bringing a more rapid pace of substitution of machines for humans than has been seen previously.
No evidence for the death of work
In recent research with Michael Coelli, we argue that the prophecy is no more likely to be realised in the 2010s in Australia than in the 1970s.
Certainly, there is no evidence that the death of work is at present underway. Since the mid-1960s the aggregate hours worked by the Australian population (on a per capita basis) has remained stable.
In particular, there has been no long-run decline in the aggregate amount of work that matches the timing of the progressive introduction of computers to the workplace since the early 1980s
<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/2017/11/19/5baa26ddacfe444abff8a277ccfd75f3.jpg" alt="">
Source: Borland, J. and M. Coelli (2017), ‘Are robots taking our jobs?’, Australian Economic Review, forthcoming, Figure 3
Moreover, the pace at which workers are churning between jobs in the Australian labour market is not getting quicker. Not only is there no evidence that more workers are being forced to work in short duration jobs, but what is apparent is that the opposite has happened. The proportion of workers in very long duration jobs has increased over the past three decades.
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Source: Borland, J. and M. Coelli (2017), ‘Are robots taking our jobs?’, Australian Economic Review, forthcoming, Figure 9
Why work is not disappearing
There are good reasons why we should not expect new technologies to cause the death of work. New technologies always cause job losses, but that is only part of the story. What also needs to be understood is how they increase the amount of work available.
One way this happens is through the increases in incomes that accompany the application of new technologies. With the introduction of these technologies, it may take less labour time to produce what used to be consumed, but higher real incomes, together with an apparently unlimited human desire to spend, bring extra demand (for existing products as well as for new types of goods and services), and hence for workers to provide those extra goods and services.
As well, new technologies are likely to substitute for some types of workers, but to be complementary to, and hence increase demand for, other types of workers. Computer-based technologies appear to be complementary to workers who perform non-routine cognitive jobs.
In a report on the digitally enabled workforce, Stefan Hajkowicz and co-authors suggest a range of examples for Australia – such as an increase in demand for photographers at the same time as demand for photographic developers and printers has decreased; an increase in demand for graphic designers versus a decrease in demand for printers and graphic press workers; and a decrease in demand for bank tellers simultaneously with an increase in demand for finance professionals.
<img src="https://counter.theconversation.com/content/87188/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">The end of work is no closer in Australia today than at any time in the past. So, perhaps there is a need to keep disproving the prophecy, to change our mindset.
Jeff Borland, Professor of Economics, University of Melbourne.
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/why-we-are-still-convinced-robots-will-take-our-jobs-despite-the-evidence-87188" target="_blank">original article</a>.
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Why we are still convinced robots will take our jobs despite the evidence: Jeff Borland

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Key Points
- The Chinese economy is not about to collapse and isn’t likely to be at “peak commodity demand”.
- The failure of the Australian economy to crash after the end of the commodity price boom and mining investment boom early this decade highlights that it’s a lot more diversified than many give it credit.
- The housing boom in Sydney and Melbourne has not been built on the China boom – in fact it has had more to do with strong population growth and the end of the mining boom.
- And we don’t just make good “flat whites” – why does Chai tea brewed with soy never get a mention?
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Introduction 
I don’t normally comment directly on articles by others but an article by Matt Barrie with Craig Tindale called “Australia’s economy is built on shaky foundations, and it’s about to collapse,” has been sent to me several times for comment so I thought I would make an exception this time.
The gist of the article seems to be that growth in the Australian economy has been built on “a property bubble inflating on top of a mining bubble, built on top of a commodities bubble, driven by a Chinese bubble” and that “Australia has relied on China for too long – our whole economy is built on China buying our stuff. And it’s about to collapse.” 
This note takes a look at this risk. 
Crash calls for the Australian economy are like a broken record 
The first thing to note is that there is nothing really new in the latest call for a collapse in the Australian economy. In fact, for as long as I have been an economist there have been calls for the Australian economy to collapse. Back in 1985, I recall going to presentations on fears the economy might soon “default” and require a rescue by the IMF. The crash calls have accentuated post the Global Financial Crisis (GFC). The Australian economy was supposed to have crashed when the mining investment boom ended in 2012-13 and every year since then there has been an ad on the internet titled “Australian recession 2014: why it’s coming, what to do and how you can profit” but the year just keeps getting updated to the current year. I guess it will be right one day.
Is China about to collapse? 
China is Australia’s number one trading partner so Australia is more vulnerable to the Chinese economy than in the past. But warnings of a Chinese collapse have been around for years 
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now and I continue to regard it as unlikely. The most common concerns about high and rising debt in China miss the reality that China’s high debt growth reflects its high saving rate (of around 46% of GDP compared to around 22% in Australia), which in turn gets largely channelled through the banking system as its capital markets remain underdeveloped. China does not rely on foreign capital (in fact it supplies savings to the rest of the world) and to slow its debt growth, it actually needs to save less and spend more (so very different to countries that normally have debt problems!) and broaden its capital market beyond the banks. But this will take time and the Chinese authorities will not act precipitously. And in the meantime, yes, there is a risk that some corporate loans will go bad but don’t forget much of the growth in debt has gone from state-owned banks to state-owned businesses and will be supported by the Government if there is too much trouble (just like the Chinese Government solved its local government debt problem of a few years ago). 
But isn’t China at peak commodity demand? 
Similarly, concerns about China’s property market and commodity demand are misplaced. The Chinese property cycle has regular ups and down as the property market is generally undersupplied but the Government periodically tries to keep a lid on prices. But every time there is a downturn in the property cycle (usually after Government moves to cool it down), out comes new crash stories. The “ghost cities” stories of a few years ago were evident of this but were literally just scary stories – they are part of an effort to decentralise away from crowded cities and the biggest “ghost city” (Ordos Kangbashi) is now almost full. The reality is that much of China continues to have a housing shortage as the population urbanises and many of the apartments built 20 years ago are now substandard and need to be replaced. So demand for steel and concrete from the property market is likely to remain strong for many years to come. Similarly, much of China remains under developed in terms of infrastructure. So yes, China is trying to wind back excess capacity in some sectors that have got ahead of themselves but peak raw material demand from China is a long way off. Yes, Chinese growth could slow towards 6% over the next few years but I doubt a hard landing any time soon. Certainly there was no sign of any hard landing in China when I visited it again in the last week – things were just as frantic as ever!
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Australia has always had some export dependence 
It’s worth noting that over the years Australia has always seemed to have some dependence on some foreign country in terms of export demand – the UK, Japan, it’s now China but as China’s industrialisation phase slows I suspect other countries will just jump into the commodity demand space (Vietnam, India, Pakistan) and in any case our relationship with China is also shifting across to services. 
But the mining boom has long ended so why hasn’t the Australian economy collapsed already? 
If Australia is so dependent on the commodity price boom and mining investment boom, why didn’t it crash when they crashed after 2011 and 2012-13 respectively? The simple answer is that the Australian economy is actually less dependent on mining and hence China than many commentators claim. In reality, mining activity is only 7% of Australian economic activity (or GDP) and agriculture is 3%, which taken together hardly suggests an excessive reliance on exports and China. 
The mining boom basically meant that south east Australia – and sectors like manufacturing, tourism and higher education along with housing – was suppressed by high interest rates and the high Australian dollar. Once the commodity and mining investment booms went away and interest rates and the $A fell, south east Australia was able to bounce back offsetting the slump in Western Australia and the Northern Territory and parts of Queensland. So Victoria, NSW and even Tasmania were able to go from near recessionary conditions and at the bottom of state rankings a decade ago to now being at the top. 
More than housing 
This has not just been driven by housing-related activity, smashed avocados and flat whites (how come Chai tea brewed with soy never gets a look in?) but also in services like tourism and higher education (our third biggest export earner), which are booming. Even manufacturing is looking better. In fact, for many Australians the China driven mining boom was more a curse than a blessing – the saying in Sydney was that the people of western Sydney were paying the price for the mining boom in Western Australia. 
Housing construction is starting to slow causing many to wheel out the disaster scenarios again. But the contribution to economic growth from growth in housing construction is regularly exaggerated. Last year it contributed around 0.3% directly to growth and indirect effects are likely to have taken that contribution to around 0.6%. In other words its relatively modest and a housing construction slowdown should be easily offset as the drag on growth (of around 1-1.5% per annum) from slumping mining investment is nearly over, infrastructure spending is booming (partly on the back of the asset swap program), non-mining investment looks to be bottoming at last and export volume growth is strong. 
What about a house price crash? 
Yes, there is a risk of a house price collapse but it’s a lot more complicated than most people think as pointed out in my last house price note http://bit.ly/2y97kCE . Basically: we have not built enough housing to keep up with strong population growth since mid-last decade (see the next chart); the boom lately has been confined to Sydney and Melbourne (which were more harmed than helped by the mining/China-related boom); and the deterioration in lending standards has been modest with, for example, little in the way of the NINJA (no income, no jobs, no assets) loans that caused so much trouble in the US. 
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Sydney and Melbourne home prices are likely to fall by 5-10% (like in 2008 and 2011-12) but a crash is unlikely unless unemployment goes up a lot (unlikely), the RBA raises rates aggressively (again unlikely) or the current unit supply surge continues for several more years (again unlikely with approvals off their peak).
More than “dumb luck” in Australia’s 26-year expansion 
While luck has played a role in Australia’s 26 years of economic expansion, it’s worth noting that the China-related boom only really ran for eight or nine years of it (from 2004-2012), and a significant contribution came from the economic reforms of the 1980s and 1990s that made the Australian economy more flexible in responding to shocks. Also, sensible economic policy meant that we managed the China boom well (by avoiding an overheating economy and running budget surpluses), which meant we were better placed to ride out the global shock from the GFC and the subsequent end to the commodity and mining investment booms. 
26 years of economic expansion has left the Australian economy with lots to show for it: the economy is 129% bigger in real terms than it was when the 1990-91 recession ended, per capita GDP is up 61%, unemployment is less than half its early 1990s high and our dependence on foreign capital as measured by the current account deficit relative to GDP is about one third smaller than it was 26 years ago. Sure we can do better – underemployment, weak wages growth and poor housing affordability are serious problems and we seem to have given up on serious economic reform – but the economy is in better shape than some give it credit for. 
Australia versus the world 
Finally, I should note that while we are not in the crash camp for Australia, we remain of the view that it will be a while before interest rates can rise and that Australian economic and profit growth will be subpar compared to other countries for a while yet. As a result, we remain of the view that while Australian shares have more upside they are likely to remain relative underperformers versus global shares for some time yet and that the Australian dollar still has more downside. This is really just a continuation of the “mean reversion” of the huge outperformance in Australian shares versus global shares and in the Australian dollar seen last decade. 
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<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
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Is Australia’s economy “built on shaky foundations” that are “about to collapse”? Shane Oliver

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GUEST OBSERVER
Australia’s economy increased 0.8% in the June quarter, according to seasonally adjusted, chain volume measures released Wednesday. 
This brings annual GDP growth to 1.8% at the end of June. 
The results reinforce Australia as ‘the lucky country’, as we enter the 104th consecutive quarter without recession.
But aggregate growth figures mask one of the longest declines in private sector, gross capital formation in Australia’s history. Gross capital formation refers to spending on fixed assets and inventories such as land improvements, buildings, machines and equipment.  
In 2012, a demand shock from China drastically reduced the value of Australian commodity exports. The decline of the mining sector bled into secondary and tertiary sectors of the economy, and by 2014, annual growth in private sector capital formation was negative. It has remained negative since. 
Graph 1 shows the rolling annual growth rate of different economic components. This is not the first time private sector capital formation has fallen in value against household and government expenditure – 2001 saw one of the largest private sector contractions at -11%. However, we are currently in the longest period of private capital formation decline on record, with the rolling annual growth rate declining 13 quarters in a row.
<a href="https://www.propertyobserver.com.au/images/2017/09/27/Screen%20Shot%202017-09-27%20at%208.45.03%20AM.png" target="_blank">Click to enlarge</a>
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Some of the largest declines in the latest GDP figures were seen in non-residential construction. In the June quarter, privately funded investment in the construction of engineering projects, commercial buildings and other non-residential builds contracted -7.7% in the quarter, contributing -0.4% to total GDP growth. 
Graph 2 shows that nationally, even as private residential building has soared, this has not offset overall losses in private sector capital formation. As the dwelling construction boom eases, recovery in private capital formation may be even slower. 
<a href="https://www.propertyobserver.com.au/images/2017/09/27/Screen%20Shot%202017-09-27%20at%208.45.03%20AM.png" target="_blank"> Click to enlarge</a>
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The good news is that is that Graph 1 also shows that private investment appears to have reached a trough of -5% annual growth in December 2016. The upturn has been driven by competitive agricultural products, investment in intellectual property products and machinery and equipment investment. 
So how has Australia remained the lucky country in a climate of low private investment? The main growth driver is household expenditure, which rose 0.7% in the quarter. The trouble with aggregate indicators in household expenditure is that it does not always reveal the squeeze on household funds. The household savings ratio has sunk to its lowest level since 2008 at 4.6%. This suggests that households are using their savings to keep up with rising costs of living, which is one of the only explanations for increased consumption in a period of low wage growth. 
Government expenditure is also working to offset economic decline. In particular, the state governments of New South Wales and Victoria – enabled through high property tax revenue and asset sales - are rapidly increasing expenditure. The latest GDP figures suggest that state and local government expenditure increased 25.5% in the June quarter. 
The main projects being funded are large scale transport infrastructure and school and hospital upgrades. These have the benefit of offsetting job losses in the private sector, while improving commute times and learning facilities to increase economic capacity in the long term. According to Cordell construction data, government funded projects accounted for 44% of the value of construction work commencing across Australia last year. 
Much like the mining boom, the enormous east-coast housing boom and asset sales are likely once-in-a-life-time events. Another economic shock, such as accelerated house price declines, could see limited government funding for continued infrastructure investment. For Australia’s luck to continue, private sector investment needs to make a recovery before the public sector runs short on revenue.
Eliza Owen is Commerical Property Research Analyst with ‎CoreLogic and can be contacted <a href="https://www.corelogic.com.au/" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

Household and government spending mask the weakness in our private sector: Eliza Owen

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<div>Australia has created an extraordinary ~325,000 jobs over the past year, including a boom over the past six months the like of which arguably hasn't been seen in decades. </div>
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 The question is how? And where?
<div>Greater Sydney (+83k), Melbourne (+59k), and now Brisbane (+46k) have each seen a drive in employment growth over the past year. </div>
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<div>Greater Sydney now has a monthly unemployment rate of only 4.46 per cent, and the annual average unemployment rate across the harbour city continues to decline, as it has for 3½ years now. </div>
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<div>That's been partly driven by apartment construction and the associated multiplier effect, and a swathe of infrastructure projects. </div>
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<div>Increasingly Hobart is firing up, adding +6k jobs over the year to August 2017, with the median duration of job search continuing to decline. </div>
<a href="https://www.propertyobserver.com.au/images/2017/09/25/A2.jpg" target="_blank">Click to enlarge</a>
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 Where else?
<div>Gold Coast (+21k) and Sunshine Coast (+12k) have been other contributors to Queensland jobs growth over the past year, presumably driven by tourism, while Toowoomba added a cheeky +5k of new jobs on a net basis. </div>
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<div>Emerging from the resources doldrums, meanwhile, Mackay (+10k) and Townsville (+17k) have clearly turned a corner of sorts lately. </div>
<a href="https://www.propertyobserver.com.au/images/2017/09/25/A3.jpg" target="_blank">Click to enlarge</a>
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<div>Construction still raging</div>
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<div>Over the past quarter the greatest employment gains were to be found in construction (+64,600), healthcare &amp; social assistance (+48,000), and education &amp; training (+25,700).  </div>
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<div>Between them these three industries have created net new employment of +263,000 since August 2016, which really is a huge number. </div>
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<div>Alongside tourism, a boom in international students and education has been a shining light of the economy in recent times - at least in terms of quantity, if not quality.</div>
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<div>Offsetting this, some professional services and administrative employment has been scaled back. </div>
<a href="https://www.propertyobserver.com.au/images/2017/09/25/A6.jpg" target="_blank">Click to enlarge</a>
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<div>The construction employment surge needs to be viewed in the context of the preceding resources construction boom, which took construction employment to already unprecedented levels. </div>
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<div>And now total construction employment has elevated further - thanks to a combination of residential and infrastructure projects - to 1,168,000. </div>
<a href="https://www.propertyobserver.com.au/images/2017/09/25/A5.jpg" target="_blank">Click to enlarge</a>
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<div>The wrap</div>
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<div>Sydney's economy is clearly relishing its stamp-duty-funded infrastructure boom.</div>
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<div>At the industry level, healthcare &amp; social assistance may well continue its structural uptrend, perhaps eventually accounting for ~15 per cent or more of the entire workforce. </div>
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<div>Construction now directly accounts for ~9.5 per cent of Australian employment. This is much more surprising, and it's never been higher.</div>
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<div>This is why, in my opinion, it may pay to be sceptical about all the casual chatter about rate hikes.</div>
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<div>Residential jobs account for about three quarters of total construction industry employment.</div>
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<div>So once the residential building sector inevitably slows over the next year or two, total employment growth could be winching itself down to earth with a big, clumsy thump. </div>
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<div>
PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.
His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank">Four Green Houses and a Red Hotel</a>.
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pwargent-M4siyDbqQY

Sydney relishing stamp-duty-funded infrastructure boom

RBA welcomes noticeable decline in interest only loans: August 2017 minutes

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Chair
Members of the Committee
It is a pleasure to be here in Melbourne to explain our thinking on the Australian economy.
My colleagues and I view this as an important part of the accountability process for the Reserve Bank.
As usual, we look forward to answering your questions.
Since we last met in February, the global economy has strengthened.
As a result, in most advanced economies, economic growth has been sufficient to push unemployment rates down further.
A number of countries now have unemployment rates that are close to, or below, conventional estimates of full employment.
Conditions have also improved in many emerging market economies, partly due to an increase in global trade.
Commodity prices have mostly risen over recent months.
In China, growth has surprised on the upside a little of late.
The main challenge there continues to be containing the risks from the build-up of debt, while at the same time keeping growth on a steady path.
This remains a work in progress.
Economic growth has also picked up in the euro area, with conditions the best they have been since the euro area crisis in 2012.
On the other side of the ledger, though, in the United States the earlier optimism that the new administration's fiscal policies would spur stronger growth has dissipated.
Since we last met, the Federal Reserve has increased interest rates twice and the policy rate in the United States now stands at 1¼ per cent.
Despite this, the US dollar has depreciated in global markets, which has surprised many observers.
The Bank of Canada has also increased its interest rate, reversing some of the policy insurance it took out earlier when the outlook was less positive.
Elsewhere, there is no longer an expectation that central banks will announce yet further monetary stimulus and some central banks have indicated that they may scale back some of the current stimulus if conditions continue to improve.
This is a positive development.
As well as this change in the outlook for global monetary policy, another prominent theme in discussions of the global economy of late has been the slow growth in wages.
Despite the success that a number of countries have had in generating jobs, wage growth remains low.
This is contributing to a continuation of inflation rates that are below target in most advanced economies, although in headline terms they are mostly higher than a year ago.
The reasons for the low growth in wages are complex.
The fact that it is a common experience across countries suggests some global factors are at work.
One possibility is that workers feel a heightened sense of potential competition; either from advances in technology or from international competition.
More competition means less opportunity to put your price up. In the case of workers, it means slower rates of increase in wages.
At the same time, many workers feel an increased sense of uncertainty and they feel less secure.
This too is contributing to slow aggregate wage growth.
The slow growth in wages is underpinning the low inflation outcomes in much of the world.
It is possible that these effects will pass and that the normal relationship between tighter labour markets and higher wages will reappear.
It is also possible that the current environment turns out to be quite persistent.
How things turn out on this front is likely to have a significant bearing on the next stage in the global economic cycle.
I would now like to turn to the Australian economy.
The most recent GDP data are quite dated now and are for the March quarter.
They showed growth weaker than we had earlier expected.
This, however, partly reflected temporary factors, including weather-related disruptions to production and quarter-to-quarter volatility in resource exports.
Since then, the recent run of data has been consistent with a pick-up in growth.
There has been an improvement in survey-based measures of business conditions and capacity utilisation has increased.
Employment growth has also picked up and retail spending has been a bit stronger of late.
Financial conditions remain favourable, with interest rates remaining low and banks willing to lend.
The Reserve Bank released its latest forecasts for the economy last Friday.
In summary, our central scenario is for GDP to grow at an average of around 3 per cent over the next couple of years.
This would be better than we have seen for some time.
The transition to lower levels of mining investment following the mining investment boom is now almost complete.
This means that falling levels of mining investment will not be a drag on the economy for much longer.
Instead, with some large LNG projects reaching completion soon, GDP growth is expected to be boosted by a lift in LNG exports.
For some time we have been looking for a strong pick-up in private business investment outside the resources sector.
This is taking longer to occur than expected.
While we do see positive signs in parts of the economy, many firms still show some reluctance to commit to significant investment, often citing a range of uncertainties.
It is possible that this reluctance will continue for a while yet.
But it is also possible that the improvement in business conditions that we have seen will give firms the confidence to invest more, after a period of under-investment.
We have incorporated a middle path into our own forecasts.
On the investment front a positive development has been an increase in spending on public infrastructure, particularly transport.
This is directly supporting aggregate demand and is having some positive spin-offs elsewhere in the economy.
It is also addressing earlier under-investment and should improve the supply side of the economy.
Another factor that has a bearing on the outlook is the behaviour of households.
There is an adjustment going on, with many people getting used to lower growth in their real wages.
Many now see this as more than just a temporary development, with wage increases of 2 point something per cent now the norm.
In my view, the underlying drivers of the slower wage growth in Australia are much the same as we are seeing overseas.
At the same time, the household sector is also dealing with higher levels of debt relative to income.
Higher electricity prices are also affecting household budgets.
This all means that consumer spending behaviour is something we continue to watch carefully.
One positive development in this area over recent times has been a pick-up in employment growth, which should boost incomes.
A little while ago, employment growth was on the weak side and the unemployment rate had ticked up.
In contrast, in recent months employment growth has been noticeably stronger and more people have entered the labour force.
Encouragingly, the gain in jobs is evident in all states, including in Western Australia and Queensland, which have been adjusting to lower levels of mining investment.
Our central scenario is for the national unemployment rate to move gradually lower, although it is likely to be some time before we reach what could be considered full employment in Australia.
Another area that we continue to watch closely is the housing market. Conditions continue to vary significantly across the country.
The Melbourne and Sydney markets have been much stronger than elsewhere.
There are some signs of slowing in these two markets, although these signs are not yet definitive.
In some markets, a large increase in the supply of new dwellings is expected over the next year as new buildings are completed.
This increase in supply is expected to have an effect on prices.
In terms of inflation, when we last met I suggested that inflation was at a trough and was expected to increase gradually.
Recent outcomes have been consistent with this.
Both headline and underlying inflation have risen and are currently running a little under 2 per cent.
Inflation is likely to continue to move higher gradually, with the headline measure boosted by higher prices for tobacco, electricity and gas.
A consideration working in the other direction is increased competition in the retail sector, particularly from new entrants.
This is likely to continue for a while yet.
The low wage increases are also contributing to the subdued inflation outcomes.
One factor that is influencing the outlook for both economic growth and inflation is the exchange rate.
The recent appreciation means lower prices for imported goods and it is weighing on the outlook for domestic output and employment.
Further appreciation, all else constant, would cause a slower pick-up in inflation and slower progress in reducing unemployment.
Since August last year, the Reserve Bank Board has held the cash rate steady at 1.5 per cent.
This setting of monetary policy is supporting employment growth and a return of inflation to around its average rate of the past couple of decades.
The Board is seeking to do this in a way that does not add to the medium-term balance-sheet risks facing the economy.
It has been conscious that a balance needs to be struck between the benefits of monetary stimulus and the medium-term risks associated with rising levels of debt relative to our incomes.
As a result, the Board has been prepared to be patient.
The fact that the unemployment rate has been broadly steady has allowed us this patience.
We have preferred a prudent approach, which is most likely to promote both macroeconomic and financial stability consistent with the medium-term inflation target.
The Reserve Bank has continued to work closely with APRA through the Council of Financial Regulators to address financial risks.
Our assessment is that the various supervisory measures – including a focus on lending standards and placing limits on investor and interest-only lending – will work to strengthen household balance sheets over time.
Financial institutions have adjusted to the new requirements and these requirements are contributing to the resilience of the system as a whole.
I would now like to briefly mention three matters related to the Bank's other functions that may be of interest to the Committee.
The first is that the banking industry is in the final stretch of developing the New Payments Platform (NPP).
As we have spoken about previously, this new payments infrastructure will provide Australians with the ability to make real-time, information-rich payments on a 24/7 basis.
It will also make addressing of payments much simpler, using email addresses and mobile phone numbers, rather than BSB and account numbers.
It has been a complex project and the Reserve Bank has played an important role, both in policy terms and as a provider of a key part of the infrastructure.
As the government's bank, the Reserve Bank will also make the new payment capabilities available to its government banking customers.
The new system is expected to commence processing payments later this year.
It is likely to start off small and gradually ramp up next year as financial institutions gain experience with a new way of operating 24/7.
The second matter is that when we met in February, I said that I had commissioned an external review of the efficiency of the Bank's operations.
That review has now been completed. It concluded that our support areas were functioning well and assisted the achievement of the Bank's important public policy objectives.
At the same time, it suggested some areas for us to focus on.
One was the development of a shared internal services centre to drive continuous improvement.
Another was further evolution in our approach to IT as some of our major IT-related projects come to an end.
These projects are in the banking and payments areas and have been undertaken in the national interest.
As these projects wind down we are looking to make sure that the size and structure of our IT function remains appropriate.
More broadly, as some of these projects finish this year, the Bank's overall staff numbers will decline.
Finally, I would like to take this opportunity to announce that we will be releasing the new $10 banknote next month, on 20 September.
Printing of the new notes has been completed at our printing works in outer Melbourne.
The new notes contain the same world-leading security features as the new $5 note that we issued last September, including the clear top-to-bottom window, and the tactile feature so that it can be recognised by vision-impaired members of the community.
Construction has also recently been completed on our new banknote storage and processing facility at Craigieburn, which will soon commence operations.
Thank you. My colleagues and I are here to answer your questions.
The speech was delivered to the House of Representatives Standing Committee on Economics.
For more information click <a href="https://www.rba.gov.au" target="_blank">here</a>.
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