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

Joel Robinson

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

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

WM Residences fills gap in Mordialloc townhouse market

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

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

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

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

NAB funds $1 billion Surfers Paradise apartment development, Palmera

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

First look: Aqualand joins St Leonards apartment party

Economy

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"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

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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>
<div class="separator"><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/2017/09/25/A2.jpg" alt=""></div>
 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>
<div> </div>
<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>
<div class="separator"><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/2017/09/25/A3.jpg" alt=""></div>
<div class="separator"> </div>
<div>Construction still raging</div>
<div> </div>
<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>
<div> </div>
<div>Between them these three industries have created net new employment of +263,000 since August 2016, which really is a huge number. </div>
<div> </div>
<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>
<div> </div>
<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>
<div class="separator"><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/2017/09/25/A6.jpg" alt=""></div>
<div> </div>
<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>
<div> </div>
<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>
<div class="separator"><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/2017/09/25/A5.jpg" alt=""></div>
 
<div>The wrap</div>
<div> </div>
<div>Sydney's economy is clearly relishing its stamp-duty-funded infrastructure boom.</div>
<div> </div>
<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>
<div> </div>
<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>
<div> </div>
<div>This is why, in my opinion, it may pay to be sceptical about all the casual chatter about rate hikes.</div>
<div> </div>
<div>Residential jobs account for about three quarters of total construction industry employment.</div>
<div> </div>
<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>
<div> </div>
<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>.
</div>
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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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