<a href="https://www.apartments.com.au/developers/capital-corporation">Capital Corporation</a> has announced that its <a href="https://www.apartments.com.au/new-townhouses/lovedale-farm-1054-1184-wine-country-drive-lovedale-nsw-2325">Lovedale Farm</a> residential, resort and golf project has secured $24.6 million in sales in just three weeks since the opening of its display home, underscoring the appetite for premium lifestyle property in the Hunter Valley countryside.

The sales milestone has been driven by a diverse mix of buyers, including owner-occupiers and investors from Sydney, Newcastle and the local Hunter region, purchasing both land-only lots and house and land packages across the development.

<img alt="Lovedale" data-entity-type="file" data-entity-uuid="e173edc9-e60e-4f19-a060-9dc4421a3233" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/LovedaleFarm_20250215-1.jpg?VersionId=1LY6CvOaD.Dzrt8tWpWxXtPyfchixNIo" />

&nbsp;

The result builds on the momentum generated at the display home opening on 22 March, which attracted more than 460 attendees.

With house and land pricing from $1.14 million, Lovedale Farm continues to attract strong interest from buyers seeking a premium lifestyle offering at a compelling price point. The development’s vision, a championship golf course, future epicurean village and access to the Hunter Valley’s celebrated wine country, has resonated with a broad buyer profile, from first-time investors to those looking to make the move and call the Hunter Valley home.

<img alt="Lovedale Farm records $21.4 million in sales in three weeks" data-entity-type="file" data-entity-uuid="b358e789-e1eb-40ed-8105-ed5c8297136f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/20260321LovedaleFarmDisplayHomeOpening--6.jpg?VersionId=6GUO8TNnxuELONrsM6n9imDB6oc82Bor" />

Jim Hunter, Managing Director of Capital Corporation said the response since opening the display home has been encouraging.

"To reach $24.6 million in sales in just three weeks speaks to the genuine demand for a lifestyle community of this calibre in the Hunter Valley," Hunter says.

"We’re seeing buyers from across the region and beyond, including investors who recognise the long-term value, and owner-occupiers who simply want to live somewhere truly special.

“Lovedale Farm is two decades in the making, and the market’s response is everything we hoped for. We’re excited to see these first buyers become part of the Lovedale Farm story from the very beginning."

<img alt="Lovedale" data-entity-type="file" data-entity-uuid="54d985cf-2ac2-400b-ac02-4401f3421ac7" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/20260321LovedaleFarmDisplayHomeOpening--5.jpg?VersionId=3866bPoqpLZsm.3ACg9EafAr1W3miC_f" />

&nbsp;

Spanning 240 hectares on Wine Country Drive in <a href="https://www.apartments.com.au/developments/lovedale-nsw-2325">Lovedale</a>, the $1 billion development is expected to deliver around 1,250 jobs during construction and inject more than $300 million into the local economy. The first 200 homes and championship 18-hole golf course are anticipated for completion in late 2027.

Capital Corporation has also lodged development plans for the Lovedale Farm clubhouse, set to become a vibrant hub for residents and the wider Hunter Valley community. Further releases are planned for later this year.

[smartcode_project_cta:default project_id=14476]

Joel Robinson

Lovedale Farm display home opening triggers $24.6 million in sales in three weeks

Prominent Malaysian developer <a href="https://www.apartments.com.au/developers/osk-property">OSK Property</a> has unveiled <a href="https://www.apartments.com.au/new-apartments/aura-at-melbourne-square-7-hoff-boulevard-southbank-vic-3006">Aura</a>, the next stage of its $3.5 billion Melbourne Square precinct in Southbank, continuing its push into wellness-led, amenity-rich apartment living.

The $800 million tower, planned for 7 Hoff Boulevard, will rise 67 storeys and deliver 673 apartments, with COX Architecture drawing on both Japanese design principles and Australia’s natural landscape to shape the building’s identity. A rectangular grid aesthetic defines the building’s exterior, with COX drawing design cues from New York high-rises and Tokyo’s skyline.

Aura builds on a growing trend in high-density living, where wellness is no longer an add-on but central to the product. The development is structured around four key pillars, combining calm, minimalist residences with layered communal spaces, landscaped gardens, and a suite of wellness amenities designed to support both physical and mental wellbeing.

[smartcode_project:default project_id=151921 project_image_fid=367465]

At the core of the project is what OSK describes as a vertical wellness ecosystem, a multi-level approach to amenity that integrates health, lifestyle, and social spaces throughout the building rather than confining them to a single level.

The main resident hub, the Aura Club on level seven, will include a pool, cold plunge, spa, gym, Pilates and yoga studios, alongside more lifestyle-driven inclusions like a golf simulator, music rooms, library, and work-from-home spaces. Above, a series of higher-level amenity zones, including the Meridian Club and Cumulus Club, introduce more refined, social and retreat-style environments, with private dining, lounges, and premium wellness spaces positioned to take advantage of city views.

[smartcode_project:default project_id=151921 project_image_fid=367467]

The residences themselves will largely include balconies, a key design move in a market increasingly focused on natural light, airflow, and connection to the outdoors. Views will extend across the CBD, the Arts Precinct, Royal Botanic Gardens, and beyond.

Aura also introduces approximately 1,600 sqm of retail across the lower levels, further activating the Melbourne Square precinct, which already includes Kennedy Park, a Woolworths, childcare, and a growing mix of hospitality operators.

[smartcode_project:default project_id=151921 project_image_fid=367474]

“Aura stands tall as an exemplar of holistic wellness – its focus on social, physical and mental health culminate in a building that is calming, restorative and relaxing, where residents will have their own sanctuary within the well-connected and sought-after <a href="https://www.apartments.com.au/developments/southbank-vic-3006">Southbank</a>," says&nbsp;OSK Property CEO Chong Boon Woon.

“We have been very encouraged by the market’s response to the BLVD offering, and we know there is a strong demand for the level of amenity, service and design that the Melbourne Square precinct is known for.

“Complemented by work-from-home lounges for professionals, family friendly outdoor garden spaces, and state-of-the-art fitness and wellness facilities, Aura will continue our focus on maximising physical, emotional, and mental wellbeing,” he said.&nbsp;

[smartcode_project:default project_id=151921 project_image_fid=367475]

The project follows the strong performance of BLVD, which is now around 80 per cent sold, and reinforces OSK Property’s long-term commitment to Melbourne Square as a fully integrated, mixed-use precinct.

Construction is expected to commence in late 2026.

[smartcode_project_cta:default project_id=151921]

OSK unveils AURA, the latest stage in Southbank's $3.5 billion Melbourne Square precinct

National developer Time &amp; Place appears to have settled on a design for its long-anticipated Potts Point project.

After several years of back and forth with local council and the NSW Government, the developer, which has spent close to a decade targeting the former The Chimes site on Macleay Street, has now progressed its plans.

Following a concept design submission last year by SJB, Time &amp; Place has lodged a full State Significant Development Application with the NSW Government, this time for a scheme designed by Kerry Hill Architects.

<img alt="Time &amp; Place" data-entity-type="file" data-entity-uuid="504d2a27-d65f-4227-8189-1e35e3376e62" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-04-20%20at%209.38.24%E2%80%AFAM.png?VersionId=_XqFKATYHF30KnVByPxhaI9UBzmkmfn7" />

The 16-storey proposal includes 44 apartments, 21 of which will be build-to-sell. These will comprise 19 three-bedroom apartments and two four-bedroom penthouses.

More than 50 per cent of the development will be dedicated to affordable housing, with 23 studio apartments to be delivered in line with the NSW Government’s Housing SEPP.

Kerry Hill Architects said the proposal is driven by a strong response to place.

“Our proposal for a new residential building for Potts Point in Sydney is driven by a deep consideration of place,” the practice said in its submission.

“This operates on multiple levels, including a landscape approach that reinstates endemic flora of the Sydney peninsula and provides a ground-floor garden for residents, reconnecting the site to its pre-European history. A brick podium further strengthens this relationship to context, integrating planting and fine bronze detailing that references the predominant material language of Macleay Street.”

The three-level podium will be topped by a communal resident space, featuring a covered pool designed to receive direct afternoon sun in winter, a neighbouring reflection pool, dining and event areas oriented to maximise sunset views, and an outdoor exercise zone.

<img alt="Time &amp; Place" data-entity-type="file" data-entity-uuid="8d3eedc1-babb-44a3-bd96-d8a42f3adf1f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-04-20%20at%209.37.48%E2%80%AFAM.png?VersionId=Ii7.4dvqNatu5GQi6bhqNjAswrMB998." />

The design also incorporates highly crafted shopfronts and a clearly defined residential entry to activate the street. Juliette balconies to the podium residences will provide passive surveillance and a strong sense of habitation.

Above, the larger apartments are housed within a light-coloured masonry and bronze tower.

“The tower steps back in a series of gently curved volumes that reference the rich Art Deco context of Macleay Street,” the architects said. “Carefully calibrated vertical fins frame the views while providing privacy and a sense of refuge.”

<img alt="Time &amp; Place" data-entity-type="file" data-entity-uuid="6fab60f4-3140-4469-b47a-48c781e0a30b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-04-20%20at%209.28.44%E2%80%AFAM.png?VersionId=e5XxrM3kzdASdKlcIACHAHbOSZhSKC9O" />

Time &amp; Place has been one of the most active developers nationally in the last 12 to 24 months. Late last year they completed&nbsp;The Queensbridge in&nbsp;<a href="https://www.apartments.com.au/developments/southbank-vic-3006">Southbank</a>, a mixed-use tower with 353 apartments and a hotel. They are currently selling Park Modern, 246 apartments near the famous Botanic Gardens in South Melbourne.

The developer has approval for The Burke, a mixed-use project in&nbsp;<a href="https://www.apartments.com.au/new-apartments/glen-iris-vic-3146">Glen Iris</a>&nbsp;being delivered in partnership with Woolworths. The 60 apartments, positioned above a new Woolworths supermarket, are expected to launch in the coming months. Time &amp; Place is also progressing plans for the redevelopment of&nbsp;<a href="https://www.apartments.com.au/developments/northcote-vic-3070">Northcote</a>&nbsp;Plaza, and have recently submitted plans for a <a href="https://www.apartments.com.au/news/vic/time-place-unveils-plans-22-storey-south-melbourne-tower">22-storey tower</a>, another in South Melbourne.

In&nbsp;<a href="https://www.apartments.com.au/developments/sydney-nsw">Sydney</a>, the developer has two projects in Manly: Two Tides, which is currently under construction, and an ultra high-end building on&nbsp;<a href="https://www.apartments.com.au/buildings/shoreline-manly-beach-89-90-north-steyne-manly">North Steyne</a>, fronting the beach. It is also continuing to work through the redevelopment of The Chimes building on Macleay Street in&nbsp;<a href="https://www.apartments.com.au/developments/potts-point-nsw-2011">Potts Point</a>, as well as Marlborough House, the redevelopment of the original David Jones warehouse building in&nbsp;<a href="https://www.apartments.com.au/developments/surry-hills-nsw-2010">Surry Hills</a>.

First look: Time & Place settles on design for The Chimes, Potts Point redevelopment

<a href="https://www.apartments.com.au/developers/develotek">Develotek</a> is joining the likes of TOGA, Deicorp, and One Global Capital, betting on a boom in Five Dock ahead of the 2032 mooted opening of the Five Dock Metro Station.

Develotek, which is currently developing Bianca on the Drummoyne waterfront and has plans approved for a tower in Chatswood, has filed a State Significant Development Application for a <a href="https://www.apartments.com.au/new-apartments/79-81-queens-road-five-dock-nsw-2046">two-building project in the evolving Kings Bay precinct</a>.

The buildings, one more boutique just five storeys and the other 26 storeys, will rise from an 3,158 sqm site across&nbsp;79–81 Queens Road and 2–8 Spencer Street, will home 134 one-, two-, and three-bedroom apartments, above ground-floor retail and five basement levels of parking.

A key component of the proposal is the inclusion of 15 per cent of residential floor space as in-fill affordable housing, unlocking additional height and density under the Housing SEPP.

<img alt="First Look: Develotek lodges State Significant shop top housing project in Five Dock precinct" data-entity-type="file" data-entity-uuid="3ee31bf7-75ba-4bc5-b190-49885193219f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/podium_2.png?VersionId=730UbrduuwK3C1sO28RHjiLPUPqXqjkh" />

Designed by <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a>, the scheme adopts a podium-and-tower configuration, with a five-storey street wall along Queens Road transitioning to a 26-storey tower set deeper into the site. The ground plane prioritises activation and permeability, with retail frontages and a new through-site link connecting Queens Road to Spencer Street.

At the upper levels, the tower façade has been conceived using a modular system to support prefabrication and reduce construction waste, while improving build efficiency. The splayed form draws on the geometry of surrounding industrial rooftops, reinterpreting the area’s heritage in a contemporary expression while also helping to reduce solar heat gain to east and west-facing apartments.

“This project aspires to transform a former industrial site into a connected, resilient and people-focused urban community, grounded in Country, shaped by history, and designed to enrich everyday life within the evolving Kings Bay Precinct,” said John Walsh, Principal at Plus Studio.

The proposal reflects the broader transformation of the Kings Bay Precinct under the Parramatta Road Corridor Urban Transformation Strategy, marking a shift from its industrial past to a higher-density, mixed-use urban neighbourhood.

<img alt="First Look: Develotek lodges State Significant shop top housing project in Five Dock precinct" data-entity-type="file" data-entity-uuid="abde734c-1e31-4a97-a1d2-fa9bcf31c380" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/building%20podium.png?VersionId=fNUupP6u146yEytQT31kKVRxwtACgPpP" />

Develotek is emerging as an active participant in the state’s affordable housing-led uplift pathway. The developer recently secured approval for a 34-storey mixed-use tower in Chatswood, where it similarly leveraged the in-fill affordable housing provisions to increase scale and deliver a 101-unit scheme with dedicated affordable apartments.

Their entry into Five Dock places them alongside a growing list of developers targeting the suburb ahead of its anticipated transport uplift, with Sydney Metro set to extend into the area. Major players including TOGA, Deicorp, and One Global Capital are all progressing large-scale precinct-style developments nearby, collectively reshaping the low-rise industrial fabric into a higher-density mixed-use corridor.

The Five Dock site sits within the Kings Bay Precinct, a key renewal area under the Parramatta Road Corridor Urban Transformation Strategy, where planning controls support significant uplift tied to affordable housing delivery. The consolidated 3,158 sqm site is currently occupied by low-rise industrial uses, including warehouses and vehicle workshops, earmarked for transition.

First Look: Develotek joins in Five Dock apartment boom

Ascot’s Racecourse Road continues to be a hive of activity for Brisbane developers.

Following Fortis and GRAYA, which are both preparing new projects along the key strip connecting Kingsford Smith Drive and Eagle Farm Racecourse, local developer <a href="https://www.apartments.com.au/developers/skyhold">Skyhold</a> is the latest to lodge plans for its own development.

The group is proposing One One Two Residences, a boutique project comprising just seven apartments, named after its address at 112 Racecourse Road.

The proposal outlines a five-storey building on an 810 sqm site. The built form slightly exceeds the four-storey expectation under the neighbourhood plan, aligning instead with the emerging character of the strip. As the planning report notes, “the locality is characterised by a transition toward medium-rise residential development, with a number of recent developments… above the stipulated height limits.”

<img alt="First Look: Skyhold lodges plans for boutique Ascot apartments as Racecourse Road revival gathers pace" data-entity-type="file" data-entity-uuid="ec577631-8c51-4163-960e-e7b3a77d655b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Ascot.png?VersionId=iAzQ46D4Uu1UqiS0mVnlcy9jeFKBpJIj" />

Designed by 111 with landscape architecture by <a href="https://www.apartments.com.au/landscape-architect/paul-bangay-garden-design">Paul Bangay Studio</a>, the scheme adopts a layered architectural approach with strong articulation and a subtropical response. Deep balconies, integrated planters, and a mix of masonry and textured finishes define the façade, while upper-level setbacks reduce perceived bulk. The architectural statement describes “a series of horizontally expressed layers, defined by deep balconies and a consistent robust material palette,” aimed at delivering a refined streetscape presence.

Apartments are configured as large-format residences, including multiple three-bedroom layouts and a full-floor penthouse, supported by ground-level parking. A rooftop terrace will provide communal amenities including a pool and landscaped recreation areas. The design prioritises privacy, natural ventilation, and greenery, with planting integrated across all levels to soften the building form and contribute to the public realm.

<img alt="First Look: Skyhold lodges plans for boutique Ascot apartments as Racecourse Road revival gathers pace" data-entity-type="file" data-entity-uuid="1e1219bd-b45a-4d7f-bbc7-7207d7b2fc94" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Ascot%20entry.png?VersionId=JIoUOLMgQ5xWpEF0etEI3ffIoIVjD7gO" />

The proposal sits within the Racecourse Road precinct, a key mixed-use spine in Ascot that continues to attract renewed development interest.

Later this year national developer Fortis will launch its own boutique development, which, pending council approvals, will be 16 apartments designed by Koichi Takada Architects, just down the street.

“Racecourse Road is going through a massive revitalisation and we’re proud to be a part of that transformation,” said Fortis's QLD General Manager, Dan Boman.

Nearby, GRAYA is advancing its larger-scale The Gallery, a mixed-use shop-top housing project designed to act as a “catalytic project for Racecourse Road.”

First Look: Racecourse Road, Hamilton revitalization to continue as Skyhold joins the party

Global Financial Crisis

<html><body>
<img src="/images/2016/03/Holdencapital_banner.jpg" alt="" width="655" height="138">
SPONSORED POST
Currently we are seeing a constant barrage of articles from all sectors of the press and social media regarding the onset of an impending financial readjustment or even a collapse, with some arguing it will be worse than the last GFC.
There are many areas being pointed to as the likely root causes or triggers for this financial Armageddon and most are driven by international triggers well beyond our control, however the potential ramifications on our markets are being touted as devastating and even their potential occurrences are impacting our day to day business confidence.
One key area of influence that we have touched on previously is the impact of the post GFC capital requirements on our banks and how that impacts their appetite for construction lending. It is important to understand why this is happening but of more importance is what you need to do to ensure your business is not adversely impacted.
While the changes in bank policies towards construction lending will fluctuate within certain low risk parameters, these overriding regulatory requirements are not temporary responses to a specific event; they represent an ongoing constraint that will impact the pricing and structure of all future loan transactions and represent a new world order in construction finance.
Fundamentally this is because Australians have an expectation that their savings accounts will always be there when things get tough and they expect their politicians to ensure that this is so. No political leader wants to be explaining why they allowed unscrupulous lenders to lose the hard earned savings of their Mum and Dad depositors.
Accordingly, Governments of both persuasions continue to apply pressure on the major banks via the available regulatory levers to ensure that their contingent exposure to underwriting a portion of the banks deposit funds is appropriately controlled and that the banks risks are “well managed”.
History tells us that during booms, lenders can get over-excited and sometimes leads to being careless in the race to secure a share of the profits being generated as markets run hot, and then as it peaks and the signs are there that risks are increasing, the temptation to do “one more deal” often leads to losses.
The regulatory requirements being imposed on the banks are designed to minimise this risk and this is demonstrated by the recent changes seen their attitude towards construction lending that has been substantially pared back to ensure that they maintain appropriate capital reserve exposures.
Putting aside the question of the profitability of these types of loans to the major banks which we have also addressed in a previous paper, all bank loans of this type are now assessed on deal-by-deal basis with all the relevant factors input into a complex risk model in order to monitor the banks risk profile as prescribed by ASIC. As a consequence, there are far fewer “discretionary” decisions available to your bank manager when he deals with your application, which also reflects the lower risk appetite now prevailing amongst the major banks.
As a result of all this, developers can no longer expect their regular bank will provide the necessary funding just because “they have always done it in the past”. 
As many are learning, the fact that you may have had a 30+ year sound relationship with your bank is of no consequence and does not guarantee they will lend you money when you ask them for it, or on the terms they previously have.
With the banks limiting their exposure to the sector and pricing risk far more keenly than in the past, there is now a wide range of alternative providers of debt, equity and all the permutations between entering the market.
The challenge for tody’s developer is identifying which ones best fit both their business and specific project needs. This in turn requires a readjustment of expectations as to what constitutes an appropriate finance cost when assessing project viability.
While all this sounds like the industry has become a lot more complicated, and in some ways it has, it also means there are far more options available to Developers, enabling them to fulfil their project ambitions and maximise their available capital.
As a consequence, knowledge of all these competing options is a critical prerequisite to getting the best outcome. Even more importantly, engaging the right finance consultant who can navigate your transaction through to a successful conclusion, just as you would with any specialised requirement such as town planning or engineering solutions, is the key to securing funding and ensuring a profitable outcome for your next development.
As always, your success is directly related to how well you adapt and deal with change and as the saying goes, there is nothing surer than change. So make sure that you are setting your expectations at the appropriate levels and getting sound advice.
This article was written by Dan Holden of HoldenCAPITAL, who are a bespoke construction finance firm, they arrange construction finance and invest in projects through their equity fund, Queen Street INVEST. To discuss your project finance requirement please call (07) 3171 4200 or visit HoldenCAPITAL <a href="https://www.holdencapital.com.au/" target="_blank">here</a>.
</body></html>

firstname-zEygzUaHDN

Development finance new world order: Resetting your expectations for success

<html><body>
EXPERT OBSERVER
There is always someone telling us that there is some sort of economic/financial disaster coming our way.
However, there does seem to be a higher level of hand wringing now about the global economic outlook than normal.
 These concerns basically go something like this: 
Global debt – both public and private – is at record levels relative to GDP and with public debt ratios so high there is no scope for fiscal stimulus should things go really bad. 
Years of quantitative easing and other unconventional monetary policies like negative interest rates by central banks in major advanced countries haven’t worked and seem to have no end.
More and more debt globally is trading on negative interest rates – it’s now around $US14 trillion including around 25% of all government bonds – which is unnatural and causing distortions in valuing assets with risks of asset bubbles.
Inequality (as measured by Gini coefficients) is rising – particularly in the US – which is driving a populist backlash against rationalist market-friendly economic policies of globalisation/free trade (as evident in Trump’s trade wars), deregulation and privatisation. 
This along with the relative decline of US economic and military power is contributing to geopolitical tensions as we move from a “unipolar world” (dominated by the US after the end of the Cold War) to a “multipolar world” as other countries (China, Russia, Iran/Saudi Arabia, etc) move in to fill the gap left by the US or even “challenge” the US.This is all seen as being bad for global growth and hence growth assets, all of which is being heightened by the downturn in global growth seen over the last year or so.
 Five reasons not to be too fussed
There is no denying these concerns. Debt is at record levels globally. QE has been running in various iterations for more than a decade now in some countries.
Inequality is up – albeit its mainly a US and emerging country issue. Support for market-friendly economic rationalist policies such as globalisation, deregulation and privatisation seems to have waned (except in France). And geopolitical risks are up.
All these developments point to the risk of slower global growth and investment returns ahead and may figure in the next major bear market. But there is always something to worry about (otherwise shares would offer no return advantage over cash) and trying to time the next downturn is hard. Moreover, there are five reasons not to get too fussed about the global outlook.
1. Debt is more complicated than being at a record
History tells us that the next major crisis will involve debt problems of some sort. But what’s new – they all do! Just because global debt is at record levels does not mean that a crisis is imminent.
There are several points to note here:
<ul>
<li>debt has been trending up ever since it was invented; </li>
<li>comparing debt to income (or GDP) is like comparing apples to oranges as debt is a stock and income is a flow – the key is to compare debt against assets and here the numbers are not so scary because debt and assets tend to rise together;</li>
<li>debt interest burdens are low thanks to low interest rates;</li>
<li>all of the rise in debt in developed countries since the GFC has come from public debt and the risk of default here is very low because governments can tax and print money.</li>
</ul>
While Modern Monetary Theory has its issues, it does remind us that as long as a government borrows in its own currency and inflation is not a problem, it has more flexibility to provide stimulus than high public debt to GDP ratios suggest.
2. QE’s end point is not necessarily negative
Quantitative easing and other unconventional monetary policies actually do appear to have helped. Since its high in 2013 unemployment in the Eurozone has fallen from 12% to 7.5% and in the US it fell from 9% in 2011 to 4% in 2017 enabling the Fed to start unwinding unconventional monetary policy.
Inflation has not been returned to 2% targets, but wages growth has lifted and at the start of last year it looked like the global economy was getting back to normal. What kicked the global economy off the rails again was a combination of Trump’s trade wars, a debt squeeze in China and tougher auto emission controls. But this it wasn’t due to a failure of quantitative easing. As to how quantitative easing is eventually unwound there is no easy answer, but there is no reason to believe that it will end with a calamity.
First, in the absence of a surge in inflation necessitating a withdrawal of the money that has been pumped into the global economy there is no reason to withdraw it. And when inflation does start to rise it can be reversed gradually by central banks not replacing their bond holdings as they mature.
Second, the assets central banks purchased as part of QE have boosted the size of their balance sheets but the varied size of central bank balance sheets from one country to another as a share of their economy shows that there is no natural optimal level for them.
In fact, the Fed is now resuming natural growth in its balance sheet as occurred prior to the GFC so its balance sheet may just stay high (as along as inflation is not a problem).
Finally, if push came to shove just consider what would happen if say the Bank of Japan told the Japanese government that it no longer expects payment at maturity for the 50% of Government bonds it holds?
The BoJ would write down its bond holding and the Japanese Government would suffer a loss on its investment in the BoJ but that would be matched by a write down in its liabilities.
Basically, nothing would happen except that Japanese government debt would fall dramatically!
 3. Inflation and interest rates are low
The key thing that has caused many sceptics to miss out on good returns this decade is that they focussed on low inflation as reflecting low demand growth but missed out on the positive valuation boost to assets like shares and property that low inflation and low interest rates provides.
 4. Rapid technological innovation and growth in middle income Asia is continuing
This is well known and has been done to death, so I won’t go over it suffice to say that there are still a lot of positives helping underpin the global outlook and these two remain big ones.
5. Global growth looks like it may pick up
While the slowdown in global growth over the last 18 months has been scary and associated with share market volatility, the conditions are not in place for a deeper slide into global recession like we saw at the time of the GFC – excesses like overspending, surging inflation, excessive monetary tightening are not present.
 In fact, various signs are pointing to a cyclical global pick up ahead: 
<ul>
<li>Bond yields are up from their lows &amp; look to be trending up;</li>
<li>The US yield curve is now mostly positive – suggesting the inversion seen this year may have been another false recession signal like seen in 1996 and 1998; </li>
<li>European, Japanese &amp; emerging shares are looking better; </li>
<li>Cyclical sectors like consumer discretionary, industrials and banks are looking better;</li>
<li>The US dollar looks like it might have peaked; and </li>
<li>Business conditions PMIs for the US, Europe &amp; China were flattish in October &amp; may be stabilising.</li>
</ul>
This saw the global manufacturing PMI go sideways and a rise in the services PMI and both still look like the 2012 and 2016 slowdowns.
These could be pointers to global monetary easing getting traction. Of course, much depends on what happens to geopolitical risks.
The US election next year will be a big one to keep an eye on and beyond that US/China tensions look likely to be with us for years. But there is reason to expect some respite in the short term on the geopolitical front:
First, the economic slowdown in both China and the US is pressuring both to defuse the trade dispute in the short term. This pressure is greater now as Trump wants to get re-elected next year and knows that he won’t if he lets the US slide into recession or unemployment rise.
China may prefer to wait till after the election but is more likely to opt for the devil it knows.
Second, Trump’s avoidance of retaliation after the attack on Saudi’s oil production facilities in September shows a desire to avoid getting into military conflict in the Middle East.
Third, Brexit risks are on the back burner for now (although they could still come up again next year).
Concluding comment
There is good reason to expect the global economic cycle to turn up in the year ahead just as it did after the growth in 2012 and 2016. This should be positive for growth assets like shares.
Finally, for those worried that more and more debt will trade at negative interest rates our view is that this is unlikely: many countries have already sworn off using rates including the US and RBA Governor Lowe says it’s extremely unlikely in Australia. And if growth picks up as we expect the proportion of global debt on negative rates will decline as it did after 2016.
DR SHANE OLIVER Head of Investment Strategy and Chief Economist AMP Capital
</body></html>

soliver-smf6LQXgW9

Five reasons I'm not fussed about the global economic outlook: Shane Oliver

<html><body>
EXPERT OBSERVER
Ever since the Global Financial Crisis (GFC) there has been an obsession with looking for the next recession.
In this regard, over the last year or so there has been increasing concern that a flattening yield curve in the US - ie the gap between long-term bond yields and short-term borrowing rates has been declining - is signalling a downturn and, if it goes negative, a recession in the US.
This concern naturally takes on added currency given that the current US bull market and economic expansion are approaching record territory in terms of duration and given the trade war threat.
The increased volatility in shares seen this year, including a 10% or so pull back in global shares earlier this year, adds to these fears.
Whether the US is about to enter recession is critical to whether the US (and hence global) bull market in shares is about to end. Looking at all 10% or greater falls in US shares since the 1970s (see the table in Correction time for shares?), US share market falls associated with a US recession are longer lasting and deeper with an average duration of 16 months and an average fall of 36% compared to a duration of 5 months and an average fall of 14% when there is no recession.
Similarly, Australian share market falls are more severe when there is a US recession.
So, whether a recession is imminent or not in the US is critically important in terms of whether a major bear market is imminent.
The long US economic expansion and bull market The cyclical bull market in US shares is now over nine years old.
This makes it the second longest since WW2 and the second strongest in terms of percentage gain.
And according to the US National Bureau of Economic Research the current US economic expansion is now 109 months old and compares to an average expansion of 58 months since 1945.
See the next two tables. So, with the bull market and the economic expansion getting long in the tooth it’s natural to ask whether it will all soon come to an end with a major bear market.
<img src="https://www.urban.com.au/images/2018/7/20/Oliver%20Graph%201.JPG" alt="">
The yield curve flattens – but it’s complicated 
The yield curve is watched for two reasons. First, it’s a good guide to the stance of monetary policy. When short-term interest rates are low relative to long-term rates it indicates businesses can borrow short and lend (or invest) long &amp; this grows the economy.
But it’s not so good when short rates are above long rates – or the curve is inverted. And secondly an inverted US yield curve has preceded US recessions. So, when it’s heading in this direction some start to worry.
However, there are several complications. First, which yield curve?
Much focus has been on the gap between 10-year bond yields and 2-year bond yields which has flattened to just 0.3%, but the Fed has concluded that the traditional yield curve based on the gap between 10-year bond yields and the Fed Funds rate is a better predictor of the economy and it has flattened but only to 1%
. based on the gap between 2-year bond yields and the Fed Funds rate predicted past recessions like the longer yield curves but has actually been steepening in recent years which is positive.
<img src="https://www.urban.com.au/images/2018/7/20/Oliver%20Graph%202.JPG" alt="">
Second, the yield curve can give false signals – the traditional version flattened or went negative in 1986, 1995 and 1998 before rebounding – and the lags from an inverted curve to a recession can be long at around 15 months.So even if it went negative now recession may not occur until late 2020.
Third, various factors may be flattening the yield curve unrelated to cyclical economic growth expectations including still falling longterm inflation and real rate expectations, low German and Japanese bond yields holding down US yields and higher levels of investor demand for bonds post the GFC as they have proven to be a good diversifier to shares in times of crisis.
Fourth, a flattening yield curve caused by rising short term rates and falling long term rates is arguably more negative than a flattening when both short and long term rates go up like recently.
Finally, a range of other indicators which we will now look at are not pointing to an imminent US recession.
Watch for exhaustion, not old age
A key lesson of past economic expansions is that “they do not die of old age, but of exhaustion”.
The length of economic expansions depends on how quickly recovery proceeds, excess builds up, inflation rises and the central bank tightens.
The US economic recovery may be long, but it has been very slow such that average economic and employment growth has been around half that seen in post WW2 expansions.
So as a result it has taken longer than normal for excesses to build up.
Apart from flattening yield curves one area where the US is flashing warning signs is in relation to the labour market where unemployment and underemployment have fallen about as low as they ever go warning of a wages breakout and inflation pressure.'
<img src="https://www.urban.com.au/images/2018/7/20/Oliver%20Graph%203.JPG" alt="">
However, there is still arguably spare capacity in the US labour market (the participation rate has yet to see a normal cyclical rise) and wages growth at 2.7% remains very low.
The last three recessions were preceded by wages growth above 4%.
Secondly, while US GDP is now back in line with estimates of “potential”, what is “potential” can get revised so it’s a bit dodgy and more fundamentally, industrial capacity utilisation at 78% is still below normal of 80% and well below levels that in the past have shown excess and preceded recessions.
Thirdly, cyclical spending in the US as a share of GDP remains low. For example, business and housing investment are around long term average levels as a share of GDP in contrast to the high levels in one or both seen prior to the tech wreck and GFC.
<img src="https://www.urban.com.au/images/2018/7/20/Oliver%20Graph%204.JPG" alt="">
Finally, while the rising Fed Funds rate and flattening traditional yield curve is consistent with tightening US monetary policy, it’s a long way from tight.
Past US recessions have been preceded by the Fed Funds rates being well above inflation and nominal economic growth whereas it’s still a long way from either now. See the next chart.
<img src="https://www.urban.com.au/images/2018/7/20/Oliver%20Graph%205.JPG" alt="">
US likely to see overheating before recession 
Apart from the amber lights flashing from the flattening yield curve and very low unemployment our assessment is that a US recession is still some time away as it will take time for excesses to become extreme and US monetary policy to become tight.
Looked at another way, the US is still more likely to overheat before it goes into recession.
We have been thinking recession is a 2020 risk.
The end of the current fiscal stimulus around then would also be consistent with this. However, given the current slow pace in terms of building excess, that 2020 is a presidential election year – do you really think Trump will allow the US to go off a fiscal cliff then? – and with 2020 being the consensus pick for a downturn, the risk is that it comes later.
Of course, an escalating trade war could mess things up earlier, although we still see a negotiated solution.
The rising US budget deficit is a concern but it’s more of an issue for when the economy turns down as this is when investors will start to worry about its sustainability. And of course a 1987 style share market crash cannot be ruled out but probably requires a share market blow off before hand.
In the meantime, the Fed has more tightening to do and while share market volatility is likely to remain high as US inflation and short rates rise, excesses gradually build and given risks around Trump and trade, with recession still a way off the US and global share bull market likely still has some way to go.
Dr Shane Oliver is the Head of Investment Strategy and Chief Economist for AMP Capital.
</body></html>

Global Financial Crisis

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Global Financial Crisis

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News