<a href="https://www.apartments.com.au/developers/jwland-development">JWLand</a>’s De Burgh, the final residential release within the Northbourne Village precinct in Lyneham, is nearing completion just as the Federal Government’s Home Guarantee Scheme prepares for its most significant expansion to date.&nbsp;

From October 2025, the scheme will allow first home buyers to enter the market with just a five per cent deposit and no lenders mortgage insurance (LMI), removing some of the most common barriers to ownership.

With <a href="https://www.apartments.com.au/new-apartments/de-burgh-at-northbourne-village-40-de-burgh-street-lyneham-act-2602">De Burgh</a> on track for residents to move in by late spring 2025, the timing creates a strong opportunity for first home buyers seeking brand-new apartments in Canberra’s sought-after Inner North.&nbsp;

[smartcode_project:default project_id=139989 project_image_fid=212888]

The project delivers 350 residences across two buildings, with layouts ranging from compact studios through to one, two, and three-bedroom apartments.

JWLand has tailored the development for long-term liveability, integrating natural light, privacy and outdoor space into each home. Ground-floor residences feature private courtyards, while upper levels benefit from generous balconies.

Kitchens are fitted with Fisher &amp; Paykel appliances, and all apartments include ducted reverse-cycle air conditioning with smartphone app control for lighting and climate.&nbsp;

Shared resident facilities include a rooftop garden, gym, lounge and parcel lockers, alongside landscaped green space within the precinct.

[smartcode_project:default project_id=139989 project_image_fid=267376]

For buyers, the expanded Home Guarantee Scheme removes income caps and introduces unlimited places, making it more accessible than ever. With most De Burgh apartments priced under $1 million, they fall well within the updated eligibility thresholds.

The policy changes provide first home buyers with greater certainty and a smoother path to finance. Combined with the quality and location of De Burgh, the expanded scheme is expected to draw a new wave of buyers to Canberra’s Inner North.

Residents will benefit from the project’s central setting, just 600 metres from the light rail and three kilometres from Canberra’s CBD. The precinct is bordered by the <a href="https://www.apartments.com.au/developments/lyneham-act-2602">Lyneham</a> wetlands and sits within easy reach of cafes, restaurants, schools and the ANU.

With completion scheduled for late 2025, De Burgh is set to be among the first major apartment projects to meet the expanded scheme head-on, offering first-time buyers a realistic pathway to ownership in one of Canberra’s most connected neighbourhoods.

[smartcode_project_cta:default project_id=139989]

Joel Robinson

JWLand’s De Burgh aligns with expanded Homebuyer Scheme, opening doors for first home buyers in Canberra’s Inner North

A subtropical pair of residential towers are in planning for a key South Brisbane site neighbouring the iconic Expo ’88 Skyneedle, with new documents revealing a vertically layered vision designed to respond to the precinct’s evolving high-density character.

The proposal has been lodged by&nbsp;Darveniza Group, which is also is behind the 400-apartment Station Quarter precinct in Alderley.

Darveniza Group, led by Jane Darveniza, the Brisbane-based investor and Queensland rich-lister and widow of the late property magnate Bojan Darveniza, is seeking approval for a mixed-use project encompassing 204 apartments, ground-level retail, food and drink tenancies, and office space across two architecturally integrated towers at 37–39 Manning Street.

Occupying an 1,822 sqm site, the proposed towers would rise above a sculptural podium base, with a recessed landscaped centre, rooftop communal areas, and a total of 220 car parks and 256 bicycle bays. The apartment mix spans one- to five-bedroom dwellings, with a design emphasis on generous balconies, cross-ventilation, and climate-responsive materials.

<img alt="First look: Twin towers proposed for Manning Street site beside Skyneedle" data-entity-type="file" data-entity-uuid="42c1f501-2afd-440b-af49-67c257123ea7" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Manning%20podium.png?VersionId=KFlksfWzmDRD.VIYxd_1q3VAel.nN3TH" />

“The development is conceived as two slender twin buildings that meet at a lushly landscaped central recess,” the Finegrain design report states. “The façade is highly articulated with the plan form stepping back and forth to reduce visual bulk and maximise internal occupants’ access to natural light and air”.

A hallmark of the proposal is its integration of greenery, both visually and functionally. Around 77 per cent of the site’s green plot ratio is delivered through vertical planting spines, a green podium wall, and rooftop amenity. Ground-level deep planting and landscaped communal zones aim to create a shaded, walkable interface along Manning Street.

“The stepped plan form introduces variation in balcony setbacks and enclosed apartment areas, enriching both the façade expression and the resident experience,” the design team notes. “At ground and podium levels, this stepping also enhances permeability, maximising pedestrian view lines to the neighbouring Skyneedle and reinforcing a strong sense of local identity”.

<img alt="First look: Twin towers proposed for Manning Street site beside Skyneedle" data-entity-type="file" data-entity-uuid="b3f26dfc-6b93-465c-9ffb-0a2530372a23" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Manning%20site.png?VersionId=JflvKdqDxcaHTFbb9HL5TwoiRgeQ2LqA" />

The site directly adjoins the heritage-listed Skyneedle at 35 Manning Street, an enduring legacy of World Expo ’88. The accompanying heritage impact report by Pendergast Architects contends that the proposal has been carefully conceived to protect the cultural significance and landmark visibility of the structure.

“The design provides setbacks, tower separation and podium articulation to maintain the visibility and landmark role of the adjoining Skyneedle,” the report states. “The significance of the Skyneedle lies principally in its landmark visibility and cultural symbolism, rather than in detailed fabric or architectural setting”.

The proposal sits within the Kurilpa Sustainable Growth Precinct, under Brisbane’s TLPI 02/2023, where revised planning controls support high-density, mixed-use development integrated with subtropical design and increased public realm contributions.

Finegrain’s design reflects this intent, drawing cues from the site's adjacency to Musgrave Park, the subtropical landscape of South Brisbane, and cultural landmarks such as QPAC and South Bank.

Twin green towers proposed for Manning Street, South Brisbane site beside Skyneedle

A first-of-its-kind culinary precinct is coming to <a href="https://www.apartments.com.au/developments/melrose-park-nsw-2114">Melrose Park</a>, inspired by global street-food flavours and best-in-class restaurants and entertainment.

Deicorp’s emerging mid-city precinct, <a href="https://www.apartments.com.au/new-apartments/melrose-central-melrose-park-33-hope-street-melrose-park-nsw-2114">Melrose Central</a>, will become the go-to precinct within the wider Melrose Park community, and at its heart, a first-of-its-kind culinary precinct that brings the buzz of Asia’s most iconic food streets to life.

Spanning more than 4,700 sqm, Melrose Central street food precinct is inspired by the energy and vibrant flavours of street-food neighbourhoods from Hong Kong and Tokyo to Seoul and Singapore.

This new destination will be over three times the size of existing offerings like Burwood Chinatown or Westfield Chatswood’s Hawker Lane, positioning Melrose Central as a must-visit dining hub for all of Sydney.

[smartcode_project:default project_id=134220 project_image_fid=289878]

Designed by Anthony Ho of Basalt Studio, this street food concept blurs the lines between culinary theatre, art, and entertainment, offering an immersive experience. Neon-lit laneways thread between open kitchens and live grill stations, while murals, interactive displays, and light installations will bring the precinct to life, trading until late, a first for the area.

“We’ve imagined our street food concept as a graduated evolution of everything people love about Burwood Chinatown, East Village and Regent Place, elevated by the immersive artistry creating a city-style dining offer,” said Bilinda Turner, Head of Retail at Deicorp.

“By curating the very best tenants from across Australia, we’re creating a fit-for-purpose town centre for 2025 and beyond. It’s something that people truly haven’t seen before."

[smartcode_project:default project_id=134220 project_image_fid=352610]

Melrose Central is far more than a food precinct. Spanning 30,000 sqm across four levels, the shopping centre will be home to approximately 100 retailers, providing a total lifestyle offering from morning until late evening.

Fresh food offerings span a brand new Coles Supermarket, Local Grocer, Korean Supermarket, Bakery and boutique fresh food, as well as a Dan Murphy's, while health needs are covered from a pharmacy, medical centre and allied health. Fitness and wellbeing take centre stage from a dedicated wellbeing hub that includes pilates, recovery, Infrared saunas and a gym, to name a few.

Variety stores will feature throughout, as well as personal care offerings from nail salons to hairdressers, as well as a dedicated early-learning centre on level 1.

[smartcode_project:default project_id=134220 project_image_fid=289888]

Situated above the retail precinct will be 495 Turner Studio-designed apartments that open onto 6,000 sqm of lush podium gardens and rooftop terraces.

Located just six kilometres east of Parramatta’s CBD and 15km from Sydney CBD, Melrose Central forms the retail and lifestyle heart of Melrose Park, an urban-renewal precinct that is set to deliver more than 11,000 homes, 22,000 new residents, and 50,000 sqm of park and open space.

A dedicated stop on Parramatta Light Rail Stage 2 will arrive at the precinct’s Hope Street entrance, and the forthcoming Parramatta Gateway Bridge will link directly to Sydney Olympic Park and Wentworth Point.&nbsp;

Supported by a 10-minute drive, this growing catchment of 200,000 people, which is projected to grow to 279,000 by 2026, and an average household income above the Greater Sydney average, Melrose Central embodies Deicorp’s vision for transport-oriented, community-focused placemaking.&nbsp;

Melrose Central street food precinct and the wider Melrose Central retail town centre are both slated to open in mid-2026.

[smartcode_project_cta:default project_id=134220]

Melrose Central: First-of-its-kind culinary precinct coming to Sydney’s West

<a href="https://www.apartments.com.au/developers/sekisui-house-australia">Sekisui House Australia</a> has unveiled the fifth and final stage of its $1 billion Norwest community, The Orchards.

The final stage, <a href="https://www.apartments.com.au/new-apartments/zeste-at-the-orchards-norwest-104-fairway-drive-norwest-nsw-2153">Zeste</a>, will deliver 209 apartments across two distinctive buildings, Essence and Eden. The 135 apartments in Essence will be the first to be released to the market, which will bring to an end the decade-long vision to create a&nbsp;neighbourhood defined by design excellence, sustainability, and community engagement.

&nbsp;

&nbsp;

&nbsp;

[smartcode_project:default project_id=150510 project_image_fid=351878]

David Lee, Sales Manager at Sekisui House Australia said, Zeste's oversized living spaces and diverse apartment mix, which includes the introduction of&nbsp;Breezeway Sky Homes for the first time, deliver a unique lifestyle offering.

Early purchasers will benefit from exclusive VIP pricing as well as the choice of one premium upgrade, which Lee says is a "thank you" for their commitment to the project.

[smartcode_project:default project_id=150510 project_image_fid=351876]

Designed by <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a>, Zeste embodies Sekisui House’s global design philosophy of creating harmony between people, homes and nature. Principal Ben Pomroy explained that Zeste is about living within the landscape.

“With two large courtyards, the lagoon pool precinct for the wider community and a central courtyard with pavilion exclusively for Zeste residents, the architecture frames an experience of living in a park," Pomroy said.

“Over 50 per cent of the site is landscaped, ensuring a deep connection to nature at every stage of daily life. The buildings are designed as a collection of smaller, finer-grain forms, with over 85% of apartments enjoying dual aspects.

“The focus on natural ventilation, generous layouts and communal interaction creates a residential environment that is both sustainable and socially connected.”

&nbsp;

[smartcode_project:default project_id=150510 project_image_fid=351886]

Natalie Shalala, a member of Rothelowman’s interiors team said they reimagined the former site’s Orchard homestead with a contemporary twist. &nbsp;

“The design draws on the nostalgia of the past orchard – timber floors, the warmth of a fireplace, the rituals of the homestead and reinvents them for modern apartment living,"&nbsp;Shalala said.

“We have created two tonal palettes, one with pale honey undertones and another with a soft blush inspired by nectar. A highlight feature is the cathedral glass light box, a bespoke design element that re-interprets the classic lantern. It is both beautiful and functional, tying kitchen and bathroom spaces together in a way that feels entirely unique."

Shalala said the&nbsp;day-to-day liveability has been carefully considered, with abundant storage solutions, butler’s pantries, bike storage and joinery designed to simplify routines and enhance comfort.

&nbsp;

[smartcode_project:default project_id=150510 project_image_fid=352090]

Apartments in Zeste start from $715,000 for one-bedrooms and extend through to expansive three-bedroom Sky Homes priced from $2.25 million. Floorplans range from 59 sqm to 144sqm.

The mix in Essence comprises 41 one-bedroom, seven one-bedroom + Max space, 39 two-bedroom, 40 two-bedroom Breezeway Sky Homes (24 of which include additional Max spaces), and eight three-bedroom residences.&nbsp;

Max spaces are integrated into select residences, offering a flexible room that can be tailored to individual needs, ideal as a home office, children’s play area, or additional storage.

[smartcode_project:default project_id=150510 project_image_fid=351881]

Zeste continues Sekisui House Australia’s partnership with Altogether Group, providing sustainable water, power and data services to residents. Passive design strategies include cross-ventilation, deep landscaping and water features that encourage evaporative cooling, aligning with The Orchards long-term environmental goals.&nbsp;

Construction is set to commence on the Zeste buildings in early 2026, with completion anticipated in late 2027 to early 2028.&nbsp;

More than 850 apartments have been sold across the masterplan, contributing to The Orchards community of 1,300 apartments when complete.

[smartcode_project_cta:default project_id=150510]

Sekisui House Australia launches Zeste, the final stage of its $1 billion Norwest masterplan

A significant addition to the Bella Vista Station Precinct is in the pipeline, with <a href="https://www.apartments.com.au/developers/landen-property">Landen</a> formally lodging a State Significant Development Application for a <a href="https://www.apartments.com.au/new-apartments/40-memorial-avenue-bella-vista-40-memorial-avenue-nsw-2153">new apartment community on Memorial Avenue</a>.

Positioned beside the Elizabeth Macarthur Creek corridor, the project is among the first major transit-oriented residential proposals within the Metro precinct.

The masterplan, designed by&nbsp;<a href="https://www.apartments.com.au/architects/turner-studio">Turner Architects</a>,&nbsp;outlines a four-stage delivery, comprising four buildings between four and fifteen storeys, and includes a mix of one-, two-, and three-bedroom apartments, alongside a limited selection of four-bedroom penthouses and terraces.

The project places a strong emphasis on housing diversity and liveability, with apartment sizes ranging from 50 to 180 sqm. The first stage will deliver 213 dwellings, followed by 231 in the second stage. Construction is expected to commence in 2026, pending approvals.

<img alt="Bella Vista Apartments" data-entity-type="file" data-entity-uuid="bb3d84b1-d2df-4e26-915a-31b27faf9b1a" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/View02_01-scaled.jpg?VersionId=Gb0AUtZ3VXsLxrqUaw_AwT_vcBwQ_FJu" />

As the first transit-oriented development (TOD) in the precinct, Landen’s Bella Vista community has been designed to align closely with the surrounding Metro infrastructure. The proposal integrates new pedestrian and cycling paths, a new bridge over Elizabeth Macarthur Creek, and direct access to Bella Vista Metro Station.

Lush communal amenities are also central to the design. 'The Grove' and the 'Garden Link' will create landscaped community areas that reflect the area's agricultural heritage and provide direct access to the creekside.&nbsp;

The ‘Garden Patio’ is conceived as a multi-use indoor-outdoor facility offering a gym, study nooks, and communal lounge spaces.&nbsp;Rooftop terraces across the buildings will offer views to the Blue Mountains and Parramatta skyline.

<img alt="Bella Vista Apartments" data-entity-type="file" data-entity-uuid="778da409-d5cf-4e7d-9ba9-0c36990bf0b4" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/landen-bella-property-image.jpg?VersionId=ukPpmVcHF71xRc7U3MUT5rtGwOsntMMz" />

Landen’s Head of Property, Shane Harding, said the proposal highlights the developer’s precinct-scale ambition.

“As the first TOD proposal in Bella Vista, it highlights Landen’s ability to pioneer precinct-scale projects, integrate housing with infrastructure, and deliver outcomes that align with government priorities,” Harding told the Daily Telegraph.

The project arrives at a time of rapid growth in Western Sydney, with Bella Vista alone forecast to more than double in population by 2046. The development’s location, between the Bella Vista and Kellyville Metro stations, positions it as a connected lifestyle hub for families, professionals and downsizers seeking access to transport, schools, and employment centres.

Pending approval, the development is slated for completion in 2028.

Landen plans 444-apartment community in Bella Vista Metro zone

Justin Smirk

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EXPERT OBSERVER
The June quarter has brought a very modest lift in wage inflation.
In the quarter the Wage Price Index (WPI) lifted 0.6% vs market expectation for a 0.5% rise and up slightly from the 0.5% rise in the March quarter. This held the annual rate flat at 2.3%yr which is a modest lift from the low of 1.9% in 2017 but can hardly be described as a breakneck pace.
We still expect wage inflation to drift higher from here - our forecasts have it peaking around 2¾%yr in 2020 - but given how well contained wage inflation is across the nation, and between sectors, even this modest increase looks optimistic and the risks to this forecast remain more to the downside than upside.
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%201.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/wage%201.jpg" alt="">
In the March quarter, total hourly wages ex bonuses rose 0.6% compared to a market median (and Westpac) expectation for 0.5%.
The print was 0.61% at two decimal places with a 0.54% rise in private sector wage rates and a very solid 0.82% rise in public sector wages, the largest quarterly rise in public sector wages since Q1 2014.
But it should be noted that this followed the smallest quarterly rise in public sector wages since March 2000 of 0.45% rise in the last quarter highlighting a bit more volatility in this series than what is normally the case. It appears that state governments have released the purse strings, a little, for wages.
In the quarter, the largest increase in public sector wages was in Victoria (1.5%) with a more average rise in Queensland (0.5%) and a below average rise in NSW (0.2%).
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%202.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/wage%202.jpg" alt="">
Private sector wages printed 0.54% in the last two quarters. The annual pace eased back to 2.3% from 2.4% as the March 2018 quarter print of 0.55%, the fastest pace since December 2014, dropped out of the equation.
Public sector wage inflation lifted a little to 2.6% from 2.4% over the year to be back on par with the recent peak of 2.6% in September 2018.
So while an annual pace of wages growth of 2.3% is a modest lift from the 2.1% held from December 2017 to September 2018 which, in itself, was an improvement from the record low of 1.9% in the four quarters before 2017 Q3, it does not suggest any reason to suspect a “wages breakout” is hiding in the wings as wage inflation is well contained and remains under the historical average.
Since 2018, Westpac watched the rapid fall in the Victorian unemployment rate, and because of this, we have been looking an acceleration in Victorian wage inflation.
In the June quarter, Victorian wages lifted 0.7%, stronger than the 0.5% gain in March but a moderation from the 0.8% gain in both Q3 and Q4 of 2018.
The annual pace of Victorian wage inflation has lifted to 2.9% - the fastest pace by any state and the fastest pace in that state since September 2013.
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%203.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/wage%203.jpg" alt="">
Contrast that with NSW, where wage inflation was flat at 2.3%yr. Here there has been a longer history of a tighter labour market and yet it has failed to generate wage inflation as it has in Victoria.
We are closely watching how far the lift in Victorian wages extends. If it continues into 2020, it should lead to modest wages pressures in other states (particularly in NSW) as employers start competing for labour.
But we would not overstate this as we expect the overall impact to be modest given that the improvement in the national labour market, as measured by the fall in underutilisation, has not been as significant as it is has been in Victoria.
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%204.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/wage%204.jpg" alt="">
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%205.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/wage%205.jpg" alt="">
Private sector wages including bonuses continues to run at a faster pace than the measure excluding bonuses (2.4%yr vs 2.3%yr respectively) but the pace has slowed from a recent peak of 2.7% in Q4 2018.
The faster pace growth of growth in variable compensation, which tends to be positively correlated with the economic cycle, was pointing to some upside risk for wages.
However, as the pace of economic activity slows, this modest pressure is easing, suggesting the pressure on variable compensation is unlikely to be transferred to fixed compensation.
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%206.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/wage%206.jpg" alt="">
By industry, the fastest gains in wages are still in what we consider to be non-cyclical sectors such as heath care (3.3%yr), arts &amp; recreation (2.8%yr), public administration (2.5%yr), education &amp; training, other services and professional &amp; scientific (last three all on 2.4%yr).
The slowest wage growth remains in the cyclical industries such as wholesale trade (1.7%yr), retail trade and construction (both 1.9%yr) with manufacturing at just 2.0%yr.
Even in mining, where there is talk of a modest recovery in investment and talk of emerging shortages of skilled labour, wages are growing just 2.2%yr.
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%207.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/wage%207.jpg" alt="">
Overall, today’s WPI print is a disappointing update and one that will make us take a closer look at our forecast for wage inflation to get back to around 2¾%yr in 2020.
Click here to see the <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/August/Q2Wages-FI.pdf" target="_blank">full chart pack</a>.
JUSTIN SMIRK is ‎a senior economist for Westpac,
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j.ballantyne1990-6AQqhLzZaK

Wage inflation modest, but upside surprise does not change weak fundamentals: Justin Smirk 

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EXPERT OBSERVATION
A robust update but participation hit a new record high at the same time. So while the employment growth continues to outperform expectations the unemployment rate is very sticky around 5.2%.  As such, it is hard to see unemployment getting below 5% any time soon, let alone getting down the RBA’s natural rate of 4.5%.
Westpac is forecasting the unemployment rate to rise from here on the back of a soft patch in employment.
In the past year the largest share of employment gains have been for full-time females, male full-time employment has grown slower than total employment, suggesting employment gains remain focused in the services industries that are rich in female employment.
This update gives us comfort that the RBA will opt to wait-and-see at the September Board meeting and leave the cash rate unchanged.
The July Labour Force Survey reported a 41.1k gain in employment. As we head into the second half of the year, employment remains quite robust with a three month average gain of 28k in July, unchanged from June and slightly down from 35k in May.
<a href="https://www.propertyobserver.com.au/images/2019/8/15/westpac%201.jpg" target="_blank">Click here</a> to enlarge: 
 <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/15/westpac%201.jpg" alt="">
The May survey reported a strong +45.2k gain in employment with participation surging to a new record high of 66.1%, boosting the labour force and therefore holding unemployment flat at 5.2% despite the strong gain in employment. 
Since then, while the month to month employment gains have been volatile, the trend remains robust and unemployment has been flat at 5.2%.
<a href="https://www.propertyobserver.com.au/images/2019/8/15/westpac%202.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/15/westpac%202.jpg" alt=""> 
In the year to July, employment has grown 333k or 2.6%. The pace of employment growth has eased back from 2.9%yr in May but it is still stronger than the 2.2%yr at the end of 2018, while the six month annualised pace has was flat at 2.4%yr. 
Our Jobs Index suggests employment should be growing around 2.4%yr currently before slowing to 2.1%yr through Q4.
<a href="https://www.propertyobserver.com.au/images/2019/8/15/westpac%203.jpg" target="_blank">Click here </a>to enlarge: 
 <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/15/westpac%203.jpg" alt="">
We think it is worth noting that June employment was revised to –2.3k from +0.5k with June now recording the first negative print on employment in three years. 
In July, unemployment was flat at 5.2% (5.23% at two decimal places - it was 5.24% in June) with participation rising to a new record high of 66.1% (66.06% at two decimal places from 65.96% in June) the labour force grew a very solid 41.9k.
We had expected that a soft employment print would have been associated with a moderation in participation so we are not surprised that a robust employment gain is matched by a lift in participation.
Today’s update is further confirmation of a robust upward trend in participation, but there was a shift on which state is in the driving seat.
NSW hit a record high of participation of 66.2% in May and has since eased back a bit as has Victoria, which leaves Qld supporting the more recent gains in participation.
<a href="https://www.propertyobserver.com.au/images/2019/8/15/westpac%204.jpg" target="_blank">Click here </a>to enlarge:
 <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/15/westpac%204.jpg" alt="">
In June we were surprised by the drop in underemployment (those employed who are willing and able to work more hours) which fell 0.4ppts to 8.2%. 
Underemployment did not improve as much as unemployment through 2018 and had recently been trending higher compared to the unemployment rate. But in July, underemployment bumped back up to 8.4%, still down on the 8.6% in May but it did help to lock in a stronger trend.
<a href="https://www.propertyobserver.com.au/images/2019/8/15/westpac%205.jpg" target="_blank">Click here</a> to enlarge: 
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Underemployment lifted in both NSW and Victoria (from 7.5% to 7.9% and 7.9% to 8.5% respectively) while it fell in Queensland and WA (from 8.6% to 8.5% and 9.6% to 9.4% respectively).
We note how high underemployment is in Victoria compared to unemployment — unemployment is well below the national average (4.8% vs. 5.2% nationally) whereas the underemployment rate of 8.5% is higher than the national average of 8.2%.
In the last year to July, the gains in employment have mostly been full-time (255.6k/3.0%yr) and with females gaining slightly more than males (153.8k/4.9%yr for females, 101.8k/1.9%yr for males).
The mix is interesting as female full-time employment has lifted 153.8k (4.9%yr) in the year while male fulltime rose 101.8k (1.9%yr).
In contrast male part-time employment has lifted 59.2k in the year (4.8%) while female part-time grew just 17.8k (0.6%yr).
It does appear that employment gains continued to be focused in the services sectors that are rich in female full-time employment positions.  
<a href="https://www.propertyobserver.com.au/images/2019/8/15/westpac%206.jpg" target="_blank">Click here </a>to enlarge: 
 <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/15/westpac%206.jpg" alt="">
Employment growth has held together and has been quite robust so far in 2019 with the July update suggesting the pace of growth may be picking up — somewhat unexpectedly given the softening leading indicators.
Unemployment is flat around 5.2% but underemployment is drifting higher as the employment to population ratio has held around 62.5% to 62.6% since April highlighting that the gains in employment have only been pacing the gains in working age population.
In the year to July, employment has grown 161.4/4.0%yr in NSW compared to 97.8k/3.0%yr gain in Victoria. Employment grew more modestly in Queensland (57.8k/2.3%yr) and just 6.9k/0.8%yr in SA and slight better in WA with 19.5k/1.5%yr in WA.
<a href="https://www.propertyobserver.com.au/images/2019/8/15/westpac%207.jpg" target="_blank">Click here </a>to enlarge: 
 <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/15/westpac%207.jpg" alt="">
Since December the unemployment rate has risen 0.1ppt in NSW to 4.4% (the national low), +0.6ppt in Victoria to 4.8% with a smaller 0.3ppt in Queensland at 6.4% but a solid 0.9ppt lift in SA to 6.9%, the highest unemployment rate in Australia.
The only state to record a decline in unemployment from December is WA where it fell –0.4ppt to 5.9% which is still above the national average.
For complete chart pack <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/August/JulyLabour-FI_chart_pack.pdf" target="_blank">July Labour Force Chart Pack (pdf 334kb)</a>
JUSTIN SMIRK is ‎a senior economist for Westpac
 
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Labour force data will leave the RBA on the sidelines next month: Justin Smirk

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<div class="column">The CPI was 0.6% in the June quarter compared to the market median (and Westpac’s) forecast for 0.5%. The annual rate lifted to 1.6% from 1.3%.</div>
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<div class="column">The average of the core measures, which are seasonally adjusted and exclude extreme moves, rose 0.4% in the June quarter/1.4% over the year. In the quarter, the trimmed mean gained 0.42% while the weighted median lifted 0.37%.</div>
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 Incorporating revisions, the six month annualised growth in core inflation was flat at 1.3% over the year well below the bottom of the RBA target band and the slowest pace since March 1999.</div>
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 Standouts in the quarter were: on the positive or high side of expectations, clothing &amp; footwear which suggests we are starting see some impact from the AUD depreciation, stronger transports cost which was not just due to a jump in fuel prices but also a surprising 1.4% bump in automotive prices while the seasonal fall in pharmaceuticals was smaller than the historical norm.</div>
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<a href="https://www.propertyobserver.com.au/images/2019/8/1/CPI.jpg" target="_blank">Click here</a> to enlarge: </div>
<div class="column"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/1/CPI.jpg" alt=""></div>
<div class="column">Source: Westpac</div>
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 Prices that fell or where on the low side of expectations – tobacco prices surprised with a fall, housing was flat on falling house purchases and utilities, household contents fell more than expected while health rose less than expected and recreation fell more than expected.</div>
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 Food prices fell as expected, with falling fruit &amp; vegetable prices more than offsetting rising prices elsewhere. For now, the impact of the drought has been limited but we are watching this space closely as it extends in length and depth.</div>
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 It is worth noting the lack of inflationary pulse in housing. Overall housing costs fell a little more than expected as falling dwelling prices combined with falling electricity prices and flat rents. This moderation in housing costs is central to our outlook for low non- tradable and core inflation.</div>
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 In nine of the ten quarters to the 2019 Q1, inflation forecasters overestimated the quarterly rise in the CPI by 0.12ppts. Including Q2 analysts’ have now underestimated the quarterly print for the CPI in two quarters of the last three quarters. This suggests that the disinflationary pulse may be fading, if not coming to an end.</div>
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<a href="https://www.propertyobserver.com.au/images/2019/8/1/CPI%202.jpg" target="_blank">Click here</a> to enlarge:</div>
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<div class="column">Source: Westpac</div>
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 There are still some embryonic indicators that retail, in particularly clothing &amp; footwear, furniture &amp; appliances as well as motor vehicles, are turning modestly inflationary due to the AUD depreciation.</div>
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 However, housing has a significant weight in the CPI (22%) so it has a meaningful impact on both headline and core inflation. As such, it is hard to find any near- term risk of a meaningful acceleration in inflation.</div>
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 Our preliminary estimate for Q3 CPI is 0.4% in the quarter/1.6% over the year for headline and 0.3% in the quarter/1.5% over the year for the trimmed mean.</div>
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Waiting for Godot has ended its long run
In the December quarter 2018, for the first time in two year the quarterly rise in the CPI exceeded market expectations. However, the first quarter of 2019 saw a return of a disinflationary pulse with the CPI print coming in under expectations with a flat print. 
Then it was reversed again in the June quarter with the CPI rising 0.6% vs. a median expectation for 0.5%.
 Including Q2 analysts’ have now underestimated the quarterly print for the CPI in two quarters of the last three quarters. This suggests that the disinflationary pulse may be fading, if not coming to an end.
<a href="https://www.propertyobserver.com.au/images/2019/8/1/contributions.jpg" target="_blank">Click here</a> to enlarge:
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/1/contributions.jpg" alt="">
 
ABS confirms June quarter negative seasonality
As noted in our preview the June quarter 2019 was expected to be a seasonally soft quarter. 
However, on the estimates from the March quarter the estimated seasonal adjustment was +0.2ppt. 
In the June quarter release the seasonally adjusted CPI rose 0.7% so the seasonal adjustment factor was a smaller 0.1ppt. 
Revisions to the seasonal factors are a regular occurrence with the ABS conducting concurrent seasonal reanalysis.
<a href="https://www.propertyobserver.com.au/images/2019/8/1/seasonality.jpg" target="_blank">Click here</a> to enlarge:
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/1/seasonality.jpg" alt="">
For core inflation, the trimmed mean lifted 0.4% in the quarter
The average of the core measures, which are seasonally adjusted and exclude extreme moves, rose 0.4% in the June quarter. 
In the quarter, the trimmed mean gained 0.28%/1.6%yr while the weighted median lifted 0.37%/1.2%yr. 
The annual pace of the average of the core measures printed 1.4%, a very modest deceleration from the 1.5% pace in the March quarter.
Incorporating revisions, the six month annualised growth in core inflation was flat at 1.2% over the year, holding well below the bottom of the RBA target band and the slowest pace of core inflation since March 1999.
For a broader core inflation measure, more in line with some international measures, market sector goods and services excluding volatile items rose 0.5% in the quarter with the annual pace lifting to 1.8% from 1.6%.
<a href="https://www.propertyobserver.com.au/images/2019/8/1/core%20inflation.jpg" target="_blank">Click here</a> to enlarge:
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/1/core%20inflation.jpg" alt="">
We are yet to see the full inflationary impact of the drought
Food prices came as expected at 0.4% decline. Fruit &amp; vegetables fell slightly more than expected (2.8% vs 2.1%). 
Alcohol &amp; tobacco was slightly stronger (1.1% vs. 1.0%) with tobacco having a robust 2.4% rise following a surprising 0.7% in Q1.
<a href="https://www.propertyobserver.com.au/images/2019/8/1/durables.jpg" target="_blank">Click here</a> to enlarge:
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/1/durables.jpg" alt="">
 
A surprising bump up in car prices
Transportation rose 3.4% vs. 2.9% expected as car prices lifted 1.4% vs. our expectation for a 1.0% fall. 
Car prices are now up 3.4%yr, the fastest pace of growth since June 2020 and another sector we would expect to see the impact of the weaker AUD. 
However, the rise in car prices is more than what you would expect given the weakness of the AUD in either TWI terms or against the Japanese Yen.
Clothing has a larger than expected bump highlighting AUD pass-through...
Clothing &amp; footwear was stronger than expected rising 1.6% vs. our 0.5% expected. We are now seeing some pass through of the weaker AUD but the impact has not been uniform across this sector. 
Male garments are up 4.8% over the year while garments for women are down 0.2%. Footwear is down 1.1% over the year while accessories are down 1.0%.
...as does the rise in household contents &amp; services.
An area where the downside pressure on prices has been significant was household contents &amp; services. 
In the June quarter they rose 0.7% vs. our expectation for a 0.5%. There has been a turnaround in the trade exposed components with furniture prices up 2.8% over the year and household appliances up 5.1%.
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However, it is not all one way with textiles down 0.5% over the year and glassware down 4.1%. All up household furnishings are down just 0.4%, the softest deflationary pace since March 2018.
<a href="https://www.propertyobserver.com.au/images/2019/8/1/inflaction%20pressure.jpg" target="_blank">Click here</a> to enlarge:
 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/1/inflaction%20pressure.jpg" alt="">
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Housing reveals signs of the housing correction in Vic and Qld, not so strong in NSW
The slightly softer than expected housing print reflected the fall in dwelling prices (0.2% vs. our forecast for a flat print – this reflected a further fall in Victorian dwelling prices of 0.4% in the quarter,  a larger 0.6% fall in Brisbane and a more modest 0.1% fall in NSW).
Rents were flat as expected while utilities fell more than expected (1.0% vs. 0.4% forecast) due to a 1.7% fall in electricity prices.
<a href="https://www.propertyobserver.com.au/images/2019/8/1/dwelling.jpg" target="_blank">Click here</a> to enlarge:
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/1/dwelling.jpg" alt="">
There remains a significant near term negative risk around dwelling purchases prices in NSW.
 Prices are already falling in Victoria while rents have flattened in NSW. Given that rents and dwelling purchases together are worth around 15% of the CPI, this is a significant risk for headline inflation, and even more so for the core measures where the weight is somewhat higher.
<a href="https://www.propertyobserver.com.au/images/2019/8/1/narrow%20turnaround.png" target="_blank">Click here</a> to enlarge:
<img src="https://www.urban.com.au/images/2019/8/1/narrow%20turnaround.png" alt="">
Tradables stronger while non-tradables had a modest rise
Tradables rose 1.2% in the June quarter. Tradable goods rose 1.2% due to automotive fuel (10.2%). Tradable services rose 2.5% due to international holiday, travel and accommodation (2.7%).
Non-tradables rose 0.2% in the June quarter. Non-tradable goods rose 0.2% due to tobacco (2.4%). Non-tradable services rose 0.3% due to medical and hospital services (2.6%).
Looking forward inflation holds below the band
There are signs that we are getting some AUD deprecation pass-through to inflation in clothing &amp; footwear (for some selected groups) and in automotive vehicles. But it is harder to find any broader impact or wider inflationary pulse.
As housing has a significant group weighting in the CPI (22%) it has a meaningful impact on estimates of both headline and core inflation. As such, with core inflation below the bottom of the RBA’s target band we can find little to suggest any risk of a meaningful acceleration.
With crude oil prices easing there has been a turnaround in fuel prices which are expected to be a drag in Q3. Our preliminary estimate for the June quarter 2019 CPI is 0.4% which would see the annual pace steady at 1.6%.
Our preliminary estimate for the trimmed mean in the September quarter CPI is 0.3% seeing the annual pace ease a touch to 1.5%.
<a href="https://www.propertyobserver.com.au/images/2019/8/1/inflaction%202.jpg" target="_blank">Click here</a> to enlarge: 
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Justin Smirk is ‎senior economist, Westpac Group and can be contacted <a href="https://www.westpac.com.au/about-westpac/westpac-group/" target="_blank">here</a>.
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Q2 CPI: Some AUD pass-through but housing is the anchor on inflation - Justin Smirk

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EXPERT OBSERVER
An expected soft update but a robust trend in participation is making it very hard to see unemployment getting below 5% any time soon, let alone getting down the RBA’s natural rate of 4.5%. Westpac is forecasting the unemployment rate to rise from here.
The June Labour Force Survey reported a 500 gain in employment. So far this year employment has been quite robust with a three month average gain of 29.2k in June from 35.8k in May and 24.45k in April.
The trend in employment remains on par with the three month average gain of 31.2k in January.
The May survey reported a strong 45.3k gain in employment (revised from 42.3k) with participation surging to a new record high of 66.0% boosting the labour force and lifting unemployment to 5.2%.
As such, we had thought there was a high risk of a statistical correction this month which is why we forecast a modest 10k rise in employment. The market median was 9k.
<a href="https://www.propertyobserver.com.au/images/2019/7/18/unemployment%201.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/18/unemployment%201.jpg" alt="">
 
In the year to June, employment has grown 296.3k or 2.4%.
The pace of employment growth has eased back from 2.9% in May but it is still stronger than the 2.2% at the end of 2018.
Our Jobs Index suggests employment should be growing around 2.4%yr currently before slowing to 2.1% through Q4.
In June, unemployment was flat at 5.2% (5.24% at two decimal places so just a whisker from 5.3% - it was 5.19% in May) and with the participation holding a record high of 66.0% (65.98% at two decimal places from 66.03% in May) the labour force grew just 700.
We had expected that a statistical decline in participation would have seen the unemployment rate fall to 5.1%.
Today’s update is further confirmation of a robust upwards trend in participation particularly in NSW which hit a record high of 66.2% in May.
<a href="https://www.propertyobserver.com.au/images/2019/7/18/unemployment%202.jpg" target="_blank">Click here </a>to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/18/unemployment%202.jpg" alt="">
The big surprise in June was the drop in underemployment (those employed who are willing and able to work more hours) which fell 0.4ppts to 8.2%.
Underemployment did not improve as much as unemployment through 2018 and had recently been trending higher compared to the unemployment rate.
The correction in June has mostly reversed the surprising 0.3ppt jump in April.
In Victoria, the underemployment rate fell 1.5ppt taking that state’s underemployment rate back to 7.9%, more in line with 7.5% in NSW.
We had been surprised by just how high underemployment has been in Vic over the last few months.
<a href="https://www.propertyobserver.com.au/images/2019/7/18/unemployment%203.jpg" target="_blank">Click here</a> to enlarge:
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/18/unemployment%203.jpg" alt="">
In the last year to June, most of the gains in employment have been full-time (246.5k/2.9%) and the share has been split evenly between males (121k/2.2%) and females (125.5k/4.0%).
As females are growing from a lower base they have a much faster growth rate but it is somewhat surprising that in the year to June, part-time female employment has been broadly flat while male part-time employment has grown at a 4.2% pace over the year. 
<a href="https://www.propertyobserver.com.au/images/2019/7/18/unemployment%204.jpg" target="_blank">Click here</a> to enlarge: 
 <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/18/unemployment%204.jpg" alt="">
Employment growth has held together so far in 2019 even if it is on a softening trend.
Unemployment and underemployment are drifting higher but the employment to population ratio has held around 62.4% since the end of 2019 highlighting that the rise in unemployment is more about rising participation than weak employment.
<a href="https://www.propertyobserver.com.au/images/2019/7/18/unemployment%205.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/18/unemployment%205.jpg" alt="">
In the year to June, employment has grown 121.9k/3.5% in NSW compared to 126.5k/3.8% gain in Victoria.
Employment grew more modestly in Queensland (27.9k/1.8%) and just 11k/1.7% in South Australia and 20.5k/0.9%yr in Western Australian.
In the year to April unemployment has fallen 0.1ppt in NSW to 4.6% (the national low), –0.8ppt in Victoria to 4.8% and rose 0.6ppt in Queensland at 6.5%.
In which case, Queensland rose to 6.5% from 6.2% in May or 5.8% in June 2018. But this trend is shifting with unemployment up 0.3ppt in the last six months in NSW, 0.6ppt in Victoria with a 0.4ppt rise in Queensland.
Justin Smirk is ‎senior economist, Westpac Group and can be contacted <a href="https://www.westpac.com.au/about-westpac/westpac-group/" target="_blank">here</a>.
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Unemployment rate set to rise: Westpac's Justin Smirk

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EXPERT OBSERVER
Westpac is forecasting a 0.5% rise in the June quarter consumer price index (CPI) lifting the annual pace to a 1.5% rise from a 1.3% rise.
The June quarter tends to be a seasonally soft quarter with the ABS projecting a seasonal factor of 0.2ppt increase. The seasonally adjusted CPI is forecast to rise 0.7%.
The trimmed mean is forecast to rise 0.33% in the June quarter or 1.5% over the year and the weighted median is forecast to rise 0.30% in the June quarter/1.1% over the year.
The average of the core inflation measures is forecast to print 0.31% in the June quarter with the annual pace easing back to a 1.3% rise from a 1.4% rise.
In June, we forecast that fresh fruit and vegetable prices drag food prices down 0.4% in the quarter.
<a href="https://www.propertyobserver.com.au/images/2019/7/16/CPI%201.jpg" target="_blank">Click here</a> to enlarge:
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/16/CPI%201.jpg" alt="">
Source: Westpac 
Housing costs are down slightly due to falling utilities and there is the usual seasonal fall in pharmaceuticals while car prices fall again.
Auto fuel is forecast to make the single largest contribution rising 11%.
Alcohol and tobacco rose modestly while clothing and footwear had a positive quarter.
Health costs continue to rise solidly (as rising medical and hospital services more than offset falling pharmaceuticals) and there was an unseasonal gain in domestic holiday travel.
Traded prices are forecast to rise 0.8% in the June quarter while non- traded prices are forecast to rise 0.4% in the June quarter.
Outside of fuel, there is very little inflationary pressure in the Australian economy.
<a href="https://www.propertyobserver.com.au/images/2019/7/16/CPI%202.jpg" target="_blank">Click here</a> to enlarge:
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/16/CPI%202.jpg" alt="">
 
Core inflation remains well below the bottom of the RBA target band as moderating housing costs hold back modest inflationary pressure elsewhere.
Competitive deflationary pressure in consumer goods is limiting the pass through of the weaker AUD though it is having an impact.
As such, we find it hard to see how core inflation could break higher any time soon.
<a href="https://www.propertyobserver.com.au/images/2019/7/16/2019%20Q2.jpg" target="_blank">Click here</a> to enlarge:
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/16/2019%20Q2.jpg" alt="">
Recap March quarter CPI - above expectations
The CPI was flat in the March quarter compared to a market median expectation of 0.2% and Westpac’s 0.1%.
The annual rate eased back to 1.3% from 1.8% in Q4.
Of note, housing costs were flat in the quarter as falling dwelling prices offset modest gains in rents and other housing costs which is key to low non-tradable and core inflation prints.
<a href="https://www.propertyobserver.com.au/images/2019/7/16/dwelling%20inflation.jpg" target="_blank">Click here </a>to enlarge:
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<a href="https://www.propertyobserver.com.au/images/2019/7/16/dwelling%20prices.jpg" target="_blank">Click here</a> to enlarge: 
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<a href="https://www.propertyobserver.com.au/images/2019/7/16/weaker%20AUD.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/16/weaker%20AUD.jpg" alt="">
Drought is a surprising negative for food prices in Q2
The continuing dry conditions on the east coast have, for now, suppressed wholesale prices for agricultural goods as growers sell stock they can no longer support increasing supply. 
This is particularly so for meat (beef and lamb) but we have to be careful not to take this too far due to significant variation in the quality of stressed stock plus, for now, anecdotally many growers are choosing to bear the costs of feeding stock rather than selling.
<a href="https://www.propertyobserver.com.au/images/2019/7/16/lamb%20price%201.jpg" target="_blank">Click here</a> to enlarge:
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Beef and veal prices are expected to rise modestly as are lamb and goat prices.
Pork should have a seasonal fall in price but we are closely watching the rise in global pork prices as a large proportion of the Chinese pork herd is slaughtered to control an outbreak of African swine flu. This should be boosting the price of imported pork and has been boosting the demand for alternative meats including chicken.
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<img src="https://www.urban.com.au/images/2019/7/16/veggie%20price.png" alt="">
Wholesale prices are pointing to meaningful fall in fresh fruit and vegetable prices. All up we are looking for a –0.4% fall in food prices (–0.07ppt contribution).
Alcohol and tobacco remains a source of inflation
Tobacco in particular remains a key source of inflationary pressure.
Even without excise indexing, tobacco prices are expected to rise 2% in Q2 contributing 0.06ppt to the CPI.
By comparison alcohol is expected to rise 0.4% contributing 0.02ppt to the CPI.
Clothing and footwear has a small seasonal rise
In recent years clothing and footwear prices have tended to rise in the June quarter due to the repricing post the New Year sales and before the start of the end of financial year sales.
We also expect to see some pass-through from the weaker AUD that has given a small boost to imported goods prices.
However, the trend has been for the Q2 rise to be softer than historically hence Westpac is forecasting a very modest 0.5% gain in the quarter contributing 0.02ppt.
Housing set to be flat in the quarter
We are looking for rents to be flat in Q2. Industry data suggests that with vacancy rates rising, particularly in Sydney, the pressure remains on rents.
But this series measures all rents being paid, including public sector rents, and not just the new contracts being signed (which is what is reported in most industry data).
As such, we caution against forecasting ongoing falls in rental prices, at least for now.
Dwelling purchase price changes in Sydney and Melbourne have been quite volatile on a quarterly basis but there has been a moderation in the annual pace consistent with industry data.
Price changes have eased in Brisbane and Adelaide while the correction in Perth was having a second wind through the second half of 2018 but stabilised in 2019 Q1.
For utilities we are also looking for the usual June quarter rebound in gas prices while the wholesale prices suggest some further correction in electricity prices is likely.
Our forecast a 0.1% fall in housing costs will contribute –0.01ppt to the CPI.
Household contents and services to have a seasonal bump
Furniture and carpets, household textiles and appliances are set to have a seasonal bump but we have muted it a bit for appliances as the price competition here has been limiting this rise.
Our estimate is 0.5% (contributing 0.04ppts) does include an allowance for some modest pass through from the impact of the weaker AUD on import goods prices.
Health has a seasonal bump despite falling pharmaceuticals
The June quarter is the first quarter for many households where the PBS (Pharmaceutical Benefits Scheme) kicks in as they have spent over the threshold limit on healthcare and thus can access government assistance.
But the rise in other health costs more than offsets this price fall and Westpac is forecasting 2.1% rise in health costs contributing 0.12ppt.
Automotive fuels will be the main boost to prices
For transport, pump prices of automotive fuels lifted 11% in the June quarter.
However, allowing for a seasonal fall in vehicle prices, and modest gains elsewhere, transport costs are likely to rise 2.9% in the June quarter contributing 0.29ppt.
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Airfare data suggests domestic holiday travel prices are rising rather than the seasonal norm for a fall.
Normally domestic holiday travel costs fall in the June quarter as it is the offseason for the Australian travel/holiday industry. But BITRE airfare data suggests there were some modest gains in the quarter.
In addition, the weaker AUD is pointing to some price gains for international holidays.
When you add in the ongoing falls in the price of audio visual and computer equipment, recreation and culture is forecast to rise 0.7% in the June quarter contributing 0.07ppt.
<a href="https://www.propertyobserver.com.au/images/2019/7/16/domestic%20travel.jpg" target="_blank">Click here</a> to enlarge:
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/16/domestic%20travel.jpg" alt="">
Core inflation remains below the bottom of the band.
The trimmed mean is forecast to rise 0.3% with the annual pace easing back to 1.5% from 1.6% over the year.
Our forecast for the average of the RBA core measures of inflation is a modest 0.3% in the June quarter with the annual rate easing back to 1.3% from 1.4% over the year.
This will see the two quarter annualised pace of the average of the core measures ease back to 1.0% from 1.2% over the year.
Traded goods and services are forecast to rise 0.8% in the June quarter/0.7% over the year and non–traded prices are forecast to rise 0.4% in the June quarter /1.9% over the year.
<a href="https://www.propertyobserver.com.au/images/2019/7/16/indicator%20of%20cpi.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/7/16/indicator%20of%20cpi.jpg" alt="">
JUSTIN SMIRK is ‎a senior economist, Westpac Group and can be contacted <a href="https://www.westpac.com.au/about-westpac/westpac-group/" target="_blank">here</a>.
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CPI forecast to rise for June quarter: Westpac's Justin Smirk

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GUEST OBSERVER
The February Gauge printed a decline of 0.3 percent/mth taking the annual rate down slightly from 2.0 percent/yr to 1.9 percent/yr.
The three month change dipped to 0.8 percent from 1.2 percent in January.
As February is the mid-month of Q1 it provides the Gauge's first estimate of the Q1 CPI.
More recently, the end quarter reading has provided a better guide to the CPI than the mid-month.
As such, we will wait for the March reading to get a more comprehensive update.
However, since March 2016 neither measure has provided us with a reliable guide to the CPI.
As such we recommend the cautious application of the Gauge as a leading indicator of the CPI.
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Justin Smirk is ‎senior economist, Westpac Group and can be contacted <a href="https://www.westpac.com.au/about-westpac/westpac-group/" target="_blank">here</a>.
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Justin Smirk

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