<a href="https://www.apartments.com.au/developers/golden-age-group">Golden Age Group</a> has unveiled a new benchmark for wellness-led residential design, announcing the transformation of the 1867-built, heritage-listed Maritima House, into a private wellness clubhouse for residents of its flagship bayside community, <a href="https://www.apartments.com.au/new-townhouses/maritima-brighton-47-south-road-brighton-vic-3186">Maritima Brighton</a>. 
&nbsp; 
The repurposing of the historic property into a high-end private wellness clubhouse responds to shifting priorities among homebuyers, with wellbeing now emerging as a key driver in residential real estate. Research from the Global Wellness Institute shows that up to 90 per cent of health outcomes are linked to where and how we live. 
&nbsp; 
According to recent research, 73 per cent of homeowners and renters say health impacts will be a factor in selecting their next home. Buyers now seek environments that encourage holistic wellbeing, with access to lifestyle-enhancing amenities such as yoga rooms, gyms, pools, parks, and community facilities that support connection and active living.

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&nbsp; 
Designed by award-winning <a href="https://www.apartments.com.au/architects/carr-design">Carr</a>, Maritima Brighton’s wellness offering is situated around the historic Maritima House, once a central point of the Xavier Junior School and now approved for adaptive reuse as the Maritima Clubhouse.&nbsp;

The Maritima Clubhouse facilities are centred around a central courtyard and pool and feature indoor and outdoor amenities including:

<ul>
	<li>A yoga and meditation studio</li>
	<li>Communal infrared sauna &amp; steam room</li>
	<li>Cold plunge bath and magnesium pool</li>
	<li>Fully equipped gym</li>
	<li>Outdoor swimming pool</li>
	<li>Lounge areas and pergola with BBQ facilities</li>
	<li>Landscaping with mature heritage-protected trees and drought-tolerant native plantings</li>
</ul>

This resort-style amenity will be exclusively available to residents of Maritima Brighton, creating a space for relaxation, recovery and community connection just moments from the beach. The project’s proximity to local walking paths, recreational trails, sports grounds and parklands further enhances its health-oriented positioning.

“As wellness becomes central to how Australians choose to live, we are embedding it into the fabric of our communities, not simply as amenity, but as infrastructure.” said Damien Hehir, Development Director, Golden Age Group.

“The Maritima Clubhouse reflects this ethos, bringing meaningful wellness infrastructure to an exceptional bayside location.”

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Nearly all 13 land lots in the first release of land parcels at Maritima Brighton sold in the opening weeks. Brighton downsizers made up the majority of purchasers. The overarching purchasing drivers were security and privacy, with Maritima featuring a&nbsp;monitored gated entry, underground parking and discreet integration into Hartley Street’s quiet residential streetscape.

The broader masterplan will feature&nbsp;83 architect-designed townhomes by Carr. Guided by a refined coastal palette, heritage restoration, and carefully considered landscaping, the masterplan is designed to complement the site’s natural features while protecting its legacy and elevating its future.

[smartcode_project:default project_id=140306 project_image_fid=363737] 
&nbsp; 
“The design approach at Maritima Brighton is grounded in the idea that wellbeing is shaped by the environments we inhabit every day," Carr Director Richard Beel said.

"By centring the masterplan around the heritage Maritima House and surrounding it with wellness facilities, a green canopy, and walkable connections to the bay, we’ve created a community where architecture, landscape and lifestyle work together to support long-term health, ease of living and meaningful connection."&nbsp;

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A 19th-century landmark reimagined as Bayside’s most exclusive wellness centre

Joel Robinson

Golden Age launches Maritima Brighton as "new wave of wellness real estate" hits Melbourne's Bayside

Boutique Melbourne developer <a href="https://www.apartments.com.au/developers/lowe-living">Lowe Living</a> has launched its ultra-luxury <a href="https://www.apartments.com.au/new-apartments/maison-savoy-150-esplanade-brighton-vic-3186">Maison Savoy</a> development, a redevelopment of the former Brighton Savoy Hotel on the Esplanade.

Prices range between $3.7 million for the 174 sqm apartments, the just over $16 million for the penthouses that reach 375 sqm.

Maison Savoy occupies a tightly held coastal position offering views of Port Phillip Bay and sitting moments from the iconic Brighton Bathing Boxes, Royal Brighton Yacht Club and Middle Brighton Baths, and a short walk from Church Street’s retail and dining precinct.&nbsp;

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Lowe Living has brought together a renowned design team: Studio Kennon as architect and interior designer, <a href="https://www.apartments.com.au/landscape-architect/myles-baldwin-design">Myles Baldwin</a> as landscape architect, and Aurora Spa &amp; Bathhouse as the private wellness curator.&nbsp;

The collection comprises a limited selection of two and three-bedroom residences set across two distinct and private buildings that converge around a central oculus with a calming reflective pool.

Visible from above, the garden maintains a constant connection to landscape throughout the development. Cascading climbers soften the architecture, while tree canopies move gently in the sea breeze, introducing light, motion and seasonal change into interior spaces.

Curved glass, honed natural stone, polished plaster, ribbed European clay brickwork and limestone will be used in the build, as well as a restrained palette of natural materials respond to the coastal context.

[smartcode_project:default project_id=140818 project_image_fid=366477]

At the heart of Maison Savoy is a private gym and residents-only European-inspired bathhouse, curated by Sorrento’s Aurora Spa &amp; Bathhouse, an amenity rarely seen within a residential setting.&nbsp;

The full-floor wellness offering includes a hydrotherapy pool, salt room, sauna, steam room, cold plunge pool, foot activation zone and a Vichy rainfall bed, one of only a handful in Australia.

&nbsp;

[smartcode_project:default project_id=140818 project_image_fid=366474]

Each residence will feature state-of-the-art Wolf ovens, cooktops and a combi-microwave oven, integrated wine fridges, concealed butler's pantries, and bathrooms with freestanding baths, double vanities, brushed nickel fixtures and feature glass.

Custom oak veneer joinery and flexible living zones lead to adaptable winter gardens which offer a transitional space with operable glazed windows allowing residents to modulate light, breeze and outlook depending on the season.&nbsp;

[smartcode_project:default project_id=140818 project_image_fid=366480]

Emma Lowe, Co-Founder of Lowe Living, said the uncompromising architecture and design of Maison Savoy reflected a new luxury benchmark for considered, lifestyle-driven living.&nbsp;

“Maison Savoy is one of our most curated and refined residential projects to date," Lowe said.

“Maison Savoy is more than a residential address, it is a legacy in the making. Collaborating with such an esteemed architecture and interior designer in Pete Kennon from Studio Kennon to express the level of quiet luxury and refined architecture that is appropriate for such a rare beachfront location was such an important part of reimagining this iconic site.&nbsp;

“Bringing together the likes of Studio Kennon, Myles Baldwin and Aurora Spa &amp; Bathhouse has ensured we are elevating every single element of the project to reflect the enduring nature of the architectural design response."

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Lowe Living unveils Maison Savoy in Brighton

The <a href="https://www.apartments.com.au/developers/salter-brothers">Salter Brothers</a>-backed project, now around 70 per cent complete with builder <a href="https://www.apartments.com.au/builders/ironside">Ironside</a> on site, is expected to welcome its first residents by October 2026, with new incentives aimed at purchasers preparing for near-term move-in.

The developer is offering a select number of upgrade packages valued at up to $5,000, available on a first-come, first-served basis. These incentives are offered for new purchasers.

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Buyers can choose between two inclusions. The first is a move-in whitegoods package, designed to streamline the transition into a new home by covering key appliances from day one. The second option provides an additional secure basement storage cage, responding to growing demand for flexible storage solutions in apartment living.

The incentive release comes as <a href="https://www.apartments.com.au/new-apartments/candela-ivanhoe-40-upper-heidelberg-road-ivanhoe-vic-3079">Candela Ivanhoe</a> moves into its final stages of construction, with more than half of the residences already sold and a buyer profile heavily weighted toward owner-occupiers.

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Designed by John and <a href="https://www.apartments.com.au/interior-designers/kathy-demos">Kathy Demos</a>, Candela comprises a mix of one to four-bedroom apartments and townhouses, with an emphasis on larger floorplans, natural light, and functional storage, features that align closely with the upgrade offering.

Residences have been planned around everyday liveability, with flexible layouts, private living zones, and generous internal proportions that exceed typical apartment benchmarks in the area. Kitchens are fitted with Miele appliances, while the broader development offers exclusive resident amenities, including a residential lounge and rooftop terrace. A ground-floor café and wellness centre are also integrated into the project, designed to foster community connection while serving both residents and the wider neighbourhood.

[smartcode_project:default project_id=342 project_image_fid=357511]

Salter Brothers says the project has been shaped to support a range of buyers, from first-home buyers to downsizers to young families and even inter-generational lifestyle, with over 90 per cent of purchasers to date intending to live in their homes rather than invest.

Positioned on Upper Heidelberg Road, Candela sits in the heart of Ivanhoe Village, Ivanhoe Station, and a range of local parks and pre-eminent schools, contributing to a Walk Score of 90. This level of connectivity has underpinned demand from buyers seeking a low-maintenance lifestyle without sacrificing access to established amenity.

[smartcode_project_cta:default project_id=342]

Salter Brothers introduces limited $5,000 upgrade packages as Candela Ivanhoe nears completion

Now complete and open, <a href="https://www.apartments.com.au/developers/time-place">Time &amp; Place</a>'s Queensbridge Building introduces a new way of living in <a href="https://www.apartments.com.au/developments/southbank-vic-3006">Southbank</a>, where residences, hospitality and culture come together in a fully realised precinct.&nbsp;

The 65-storey tower is already welcoming residents and guests, with its integrated hotel, dining venues and amenity offering activating the building from day one.

Developed by Time &amp; Place and constructed by <a href="https://www.apartments.com.au/builders/hickory">Hickory</a>, <a href="https://www.apartments.com.au/buildings/the-queensbridge-building-southbank-90-queensbridge-street-southbank-vic-3006">The Queensbridge Building</a> at 90 Queensbridge Street combines 353 residences with the 188-room Hannah St Hotel, operated by TFE Hotels.&nbsp;

The precinct is already active, with Hannah St Hotel welcoming guests and venues such as Coupette, Bar Hannah and the Carriage Lounge operating across the ground and podium levels. Weekends are seeing strong visitation, reinforcing its role as both a residential address and a broader lifestyle destination.

[smartcode_project:default project_id=1504 project_image_fid=360990]

What sets Queensbridge apart is its integration of residential living with a fully operational hotel and hospitality offering, delivering a level of service, activation and convenience rarely seen in Melbourne's apartment market.

Interiors throughout, both in the residential tower and the hotel, were designed by <a href="https://www.apartments.com.au/interior-designers/flack-studio">Flack Studio</a>, with architecture by <a href="https://www.apartments.com.au/architects/fraser-partners-0">Fraser &amp; Partners</a>.&nbsp;

The residences balance rough-cut stone, cool concrete and rich timbers against abundant natural light. Floor-to-ceiling windows and open floorplans carry that through into the layout.

Interior designer David Flack has described the hotel as "part grand hotel, part cultural clubhouse," reflecting the project's ambition to balance hospitality, design and community.

[smartcode_project:default project_id=1504 project_image_fid=362184]

The Queensbridge Clubhouse sits at the heart of the residential offering: lap pools, sauna, steam room, gym, outdoor terraces, private dining rooms and co-working spaces, all bookable through the building's dedicated app. The hotel's wellness amenities extend that offer further, with Hannah St Hotel services available to residents through the Clubhouse.

Time &amp; Place Founder and Director Tim Price said the vision was always to create something more than a residential tower.

"The vision for Queensbridge was to create a building that felt connected to the neighbourhood and to Melbourne itself. It is not just a residential tower, but a place where residents, visitors and the wider community can gather, experience hospitality and enjoy city life together."

[smartcode_project:default project_id=1504 project_image_fid=362170]

The National Gallery of Victoria, Arts Centre Melbourne and the Yarra River promenade are within easy walking distance, and Crown Melbourne and the CBD are next door. The Victorian Government's $1.7 billion Melbourne Arts Precinct Transformation is already underway in the surrounding area, which will only add to the precinct's draw over the coming years.

Many of the remaining apartments sit on the upper levels, with sweeping views across Melbourne's CBD skyline, Albert Park and Port Phillip Bay, the floor-to-ceiling windows and open floorplans are what those floors were designed around.

Price said the development was always intended to contribute to the surrounding neighbourhood rather than stand apart from it.

"We set out to create a building that reflects Melbourne's culture and energy. By combining residences, hospitality and shared spaces, Queensbridge becomes more than a place to live. It becomes part of the neighbourhood."

[smartcode_project:default project_id=1504 project_image_fid=272109]

Only a limited collection of completed two and three-bedroom residences remain, presenting a rare opportunity to secure a finished home within a design-led precinct and move in immediately.

For Time &amp; Place, the completion of The Queensbridge Building marks the close of a significant chapter in delivery. Looking ahead, early plans are underway for a new 22-storey residential project on Park Street in South Melbourne, comprising approximately 300 apartments. More to come in 2026.

Time &amp; Place's Queensbridge Building presents a fully realised, lived experience. For buyers seeking certainty, design quality and lifestyle, it delivers a precinct already brought to life.

[smartcode_project_cta:default project_id=1504]

Now complete: Inside Southbank's newest residential and hotel destination

At <a href="https://www.apartments.com.au/new-apartments/candela-ivanhoe-40-upper-heidelberg-road-ivanhoe-vic-3079">Candela Ivanhoe</a>, a limited collection of loft-style residences introduces a housing typology rarely seen in Melbourne’s established north-east.

Designed as double-level homes within a broader apartment development, these residences respond to buyers seeking the spatial separation and flexibility of a townhouse, while retaining the efficiency, connectivity and greater security from apartment living.

Located at 40 Upper Heidelberg Road, Candela is a 58-residence development currently under construction and scheduled for completion this Spring. More than half the project has already sold, with a strong owner-occupier profile shaping the community.

[smartcode_project:default project_id=342 project_image_fid=357499]

The loft-style offering, exemplified by the four-bedroom ‘Lustre’ residences, reframes apartment living through a clear division of zones across two levels.&nbsp;

The lower floor is anchored by a large open-plan living and dining area, where a full kitchen with Miele appliances, an island bench, and a walk-in pantry sits directly adjacent to the main living space. Timber flooring runs throughout this level, reinforcing the continuity between kitchen, dining, and lounge, while double-glazed windows improve thermal performance and acoustic comfort. Additionally, and a prominent feature of this apartment is its expansive rear glass wall, which measures approximately 5.4 metres in height and 8.5 metres in width, allowing abundant sunlight to illuminate the residence.

The primary living zone connects to an oversized private terrace, designed to accommodate both daily use and larger gatherings. Its scale allows for outdoor dining, children’s play equipment, and flexible seating arrangements, effectively extending the internal living footprint.&nbsp;The master bedroom is also positioned on this level, with direct terrace access, a walk-in robe, and an oversized ensuite that includes a built-in dressing table, establishing a degree of separation from the upper floor bedrooms.

[smartcode_project:default project_id=342 project_image_fid=357502]

Upstairs, the layout shifts to a more private configuration. Three additional bedrooms with built-in robes are arranged around a secondary living area, creating a dedicated zone for children or guests. This level also incorporates a study area suitable for a full-width desk, alongside a central bathroom designed as a combined wet area for bath and shower use. A separate powder room on each level supports functionality for larger households.

The decision to split living across two levels is central to how these residences operate. Rather than relying on a single open-plan arrangement, the design introduces multiple living zones that can be used simultaneously without overlap, supporting families, remote work, and multi-generational living within the same footprint.

[smartcode_project:default project_id=342 project_image_fid=364553]

Interior designer <a href="https://www.apartments.com.au/interior-designers/kathy-demos">Kathy Demos</a> describes the broader design approach as one shaped by natural light and movement through space, noting that “from the atrium to the front door of your apartment… the sun washes the surfaces with light.” This emphasis on daylight is reinforced across the loft residences, where both levels are designed to maximise natural light in living areas and bedrooms, reducing reliance on artificial lighting.

Sustainability measures are integrated at both the building and apartment level. Candela targets an average 7.5-star NatHERS energy rating, supported by double glazing, passive design principles, and a rooftop solar array that contributes to powering communal areas. Water reuse systems and efficient fixtures are also included to reduce long-term consumption.

These residences sit within a broader development that prioritises shared amenity and connectivity. Residents have access to a rooftop terrace, ground-floor lounge, and on-site café, while Ivanhoe Village’s retail, dining, and transport options at your doorstep. A Walk Score of 90 reflects the practicality of the location, particularly for buyers seeking reduced reliance on cars.

Candela has been designed by architect John Demos in collaboration with interior designer Kathy Demos and developer Salter Brothers, with construction led by <a href="https://www.apartments.com.au/builders/ironside">Ironside</a>. As Demos explains, the intent was to focus on how spaces are experienced day-to-day: “We design to anticipate the feeling you want to have in your home. It’s more about substance than surface.”

[smartcode_project_cta:default project_id=342]

Inside the loft-style residences at Candela Ivanhoe

Policymaking

The recently unveiled Federal Budget is expected to support home ownership aspirations for thousands of households, according to Housing Industry Association (HIA) managing director, Graham Wolfe.

&ldquo;This budget will make a difference in the lives of thousands of Australians,&rdquo; he said.

A majority of the housing schemes are targeted to help first home buyers bridge the deposit gap and bring the aspiration of home ownership within reach of a broader range of Australians.

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Under new measures, budding first home buyers will now be able to access up to $50,000 of their own concessional and non-concessional contributions that they can put towards a first home deposit.

This presents an expansion of $20,000 on the previous $30,000 limit that could be released under the First Home Super Saver Scheme, which has been welcomed by the property industry.

The changes &ldquo;provide greater incentive and motivation for tens of thousands of young, aspirational Australians to save a deposit for their first home through a tax effective scheme&rdquo;, said Wolfe.

CEO of Master Builders Australia, Denita Wawn, said: &ldquo;Harnessing the power of compound interest in superannuation to save a deposit makes sense.&rdquo;

The Government has also committed to an extra 10,000 places for the First Home Loan Deposit Scheme, helping first home buyers secure a property with a five per cent deposit.

<h2>A win for single parents</h2>

<img alt="" height="667" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/shutterstock_1156208419.jpg" width="1000" />

The Budget also expands on the success of the First Home Loan Deposit Scheme with the new Family Home Guarantee, which will assist single custodial parents buy a home with a deposit as low as 2 per cent.

&ldquo;These measures build off the economy-saving success of the HomeBuilder scheme by providing more focused support where it is most needed,&rdquo; Property Council chief executive Ken Morrison said.

This new scheme will deliver single parents, the overwhelming majority of whom are women, a step up to gaining the security that comes with home ownership.

&ldquo;Matching the 10,000 places still to open under the Deposit Scheme from July with a new allocation of 10,000 places under the New Home Guarantee will help ensure first home buyers can choose to buy either a new home or an existing home&rdquo;, Wolfe said.

Single custodial parents will need to wait until next week for a fact sheet with further information on eligibility criteria.

<h2>Other measures</h2>

[smartcode_project:default project_id=22584 project_image_fid=71763]

Other measures revealed by Treasurer Josh Frydenberg also help support workers, downsizers and broader communities.

The budget has committed to lowering the minimum age for downsizer contribution from 65 to 60, allowing a one-off post-tax contribution of up to $300,000 per person when they sell their home.

The Federal Government has also announced additional funding under the National Housing and Homelessness Agreement.

&ldquo;A further $124.7 million to assist states and territories to meet their social and community housing requirements will help meet growing demand for housing support&rdquo;, said Morrison.

Master Builders also announced they were pleased to see the Federal Government stepping up to assist the states and territories with their role to provide community and social housing, following calls for boosted social housing investments.

[smartcode_project:default project_id=3233 project_image_fid=160015]

Other measures also include an extension of the Boosting Apprentice Commencement wage subsidy which has helped restore confidence in job training to grow the next generation of homebuilders.

The government has also continued its 10-year, $110 billion spend on infrastructure, which includes $15.2 billion over the next ten years for new rail and road infrastructure projects, helping build communities.

&ldquo;All up, this is a budget for all Australians. It is very welcome and is strongly supported&rdquo;, Urban Taskforce chief executive Tom Forrest said.

The recently unveiled Federal Budget is expected to support home ownership aspirations for thousands of households

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Are first home buyers the winners of the 2021 federal budget?

<html><body>
RBA SPEECH
The Reserve Bank Board met yesterday and decided on a comprehensive package to help support jobs, incomes and businesses as the Australian economy deals with the coronavirus. I would like to use this opportunity to explain this package and to answer your questions.
We are clearly living in extraordinary and challenging times. The coronavirus is first and foremost a very major public health problem. But it has also become a major economic problem, which is having deep ramifications for financial systems around the world. The closure of borders and social distancing measures are affecting us all and they are changing the way we live. Understandably, our communities and our financial markets are both having trouble dealing with a rapidly unfolding situation that they have not seen before.
As our country manages this difficult situation, it is important that we do not lose sight of the fact that we will come through this.
At some point, the virus will be contained and our economy and our financial markets will recover.
Undeniably, what we are facing today is a very serious situation, but it is something that is temporary. As we deal with it as best we can, we also need to look to the other side when things will recover. When we do get to that other side, all those fundamentals that have made Australia such a successful and prosperous country will still be there. We need to remember that.
To help us get to the other side, though, we need a bridge. Without that bridge, there will be more damage, some of which will be permanent, to the economy and to people's lives.
Building that bridge requires a concerted team effort, with us all pulling together in the country's interest. On the economic front, there is very close policy coordination between the Australian Government, the Australian Treasury, the Reserve Bank and Australia's financial regulators. We are all in close contact with one another and are working constructively together and we will continue to do so. This coordination is evident in the various policy statements today.
Governments across Australia are playing their important role in building that bridge to the recovery, with the various fiscal initiatives from the Australian and state governments providing very welcome support. Rightly, the focus is on supporting businesses and households who will suffer a major hit to their incomes. It is increasingly clear that further help will be required on this front and the Australian Government has indicated that additional policy measures will be announced shortly. Australian public finances are in good shape and the country's history of prudent fiscal management gives us the capacity to respond now.
The banks too have an important role to play in building that bridge to the recovery by supporting their customers. Without this support, it will be harder for us all to get to the other side in reasonable shape.
Australia has a strong financial system, which is well placed to provide the needed support to businesses and households. The system has strong capital and liquidity positions and our financial institutions have invested heavily in resilience. As APRA confirmed this afternoon in a public statement, the current large buffers of capital and liquidity are able to be used to support ongoing lending to the economy.
The financial regulators have also confirmed that they are examining how the timing of various regulatory initiatives might be adjusted to allow financial institutions to concentrate on their businesses and work with their customers. APRA and ASIC both stand ready to assist institutions work through regulatory issues arising from the virus. The Council of Financial Regulators is meeting again tomorrow and will also meet with the largest lenders to discuss how they can support their customers and whether there are any regulatory impediments in the way.
The Reserve Bank itself is also playing a role in building that bridge to the recovery. I will now turn to that.
Our major focus is to support jobs, incomes and businesses, so that when the health crisis recedes the country is well placed to recover strongly. Supporting small business over coming months is a particular priority.
Prior to today's announcement, we had already taken several steps over recent days to support the Australian economy.
Over the past week or so we have been injecting substantial extra liquidity into the financial system through our daily market operations. As part of this effort, we will be conducting one-month and three-month repo operations each day. We will also conduct repo operations of six-month maturity or longer at least weekly, as long as market conditions warrant. As a result of these liquidity operations, Exchange Settlement balances have increased from around $2.5 billion a month ago to over $20 billion today.
The Reserve Bank also stands ready to purchase Australian government bonds in the secondary market to support its smooth functioning. The government bond market is a key market for the Australian financial system, because government bonds provide the pricing benchmark for many financial assets. Our approach here is similar in concept to our longstanding approach to the foreign exchange market, where we have been prepared to support smooth market functioning when liquidity conditions are highly stressed. We now stand ready to do the same in the bond market and we are working in close cooperation on this with the Australian Office of Financial Management (AOFM).
In addition to these previously announced measures, today's package has four elements. They are: a reduction in the cash rate to 0.25 per cent; a target of 0.25 per cent for the yield on 3-year government bonds; a term funding facility to support credit to businesses, particularly small and medium-sized businesses; and an adjustment to the interest rate on accounts that financial institutions hold at the RBA.
I will discuss each of these in turn.
<h2 id="1-a-further-reduction-in-the-cash-rate-to-per-cent">1. A Further Reduction in the Cash Rate to ¼ Per Cent</h2>
This brings the cumulative decline over the past year to 1¼ percentage points. This is a substantial easing of monetary policy, which is boosting the cash flow of businesses and the household sector as a whole. It is also helping our trade-exposed industries through the exchange rate channel. At the same time, though, low interest rates do have negative consequences for some people, especially those relying on interest income. The Reserve Bank Board has discussed these consequences extensively, but the evidence is that lower interest rates do benefit the community as a whole, although I acknowledge that the effects are uneven.
With this decision today, the policy rates set by the Reserve Bank of Australia, the United States Federal Reserve, the Bank of England and the Reserve Bank of New Zealand are all effectively at ¼ per cent. Each of us are using all the scope we have with interest rates to support our economies through a very challenging period.
At its meeting yesterday, the Board also agreed that we would not increase the cash rate from its current level until progress was made towards full employment and that we were confident that inflation will be sustainably within the 2–3 per cent range. This means that we are likely to be at this level of interest rates for an extended period.
Before the coronavirus hit, we were expecting to make progress towards full employment and the inflation target, although that progress was expected to be only very gradual. Recent events have obviously changed the situation and we are now likely to remain short of those objectives for somewhat longer.
I am not able to provide you with an updated set of economic forecasts. The situation is just too fluid. But we are expecting a major hit to economic activity and incomes in Australia that will last for a number of months. We are also expecting significant job losses. The scale of these losses will depend on the ability of businesses to keep workers on during this difficult period. We saw during the global financial crisis how flexibility in working arrangements limited job losses and this benefited the entire community. I hope the same is true in the months ahead.
It is also important to repeat that we are expecting a recovery once the virus is contained. The timing and strength of that recovery will depend in part upon how successful we are, as a nation, in building that bridge to the other side. When that recovery does come, it will be supported by the low level of interest rates. We will maintain the current setting of interest rates until a strong recovery is in place and the achievement of our objectives is clearly in sight.
<h2 id="2-a-target-yield-on-3-year-australian-government-bonds">2. A Target Yield on 3-year Australian Government Bonds</h2>
Over recent decades, the Reserve Bank's practice has been to target the cash rate, which forms the anchor point for the risk-free term structure. We are now extending and complementing this by also targeting a risk-free interest rate further out along the yield curve.
In particular, we are targeting the yield on 3-year Australian Government Securities (AGS) and we have set this target at around 0.25 per cent, the same as the cash rate. Over recent weeks, the yield on 3-year AGS has averaged 0.45 per cent, so this represents a material reduction.
We have chosen the three-year horizon as it influences funding rates across much of the Australian economy and is an important rate in financial markets. It is also consistent with the Board's expectation that the cash rate will remain at its current level for some years, but not forever.
To achieve this yield target, we will be conducting regular auctions in the bond market. We published some technical details earlier today and we will keep the market informed of our operations. Our first auction will be tomorrow. As part of this program, our intention is to purchase bonds of different maturities given the high level of substitutability between bonds. We are also prepared to buy semi-government securities to achieve the target and to help facilitate the smooth functioning of Australia's bond market.
I want to make it clear that our purchases will be in the secondary market and we will not be purchasing bonds directly from the Government.
I would also like to emphasise that we are not seeking to have the three-year yield identically at 25 basis points each and every day. There will be some natural variation, and it does not make sense to counter that. It may also take some time for yields to fall from their current level to 25 basis points.
I understand why many people will view this as quantitative easing – or QE. This is because there is a quantitative aspect to what we are doing – achieving this target will involve the Reserve Bank buying bonds and an expansion of our balance sheet.
But our emphasis is not on the quantities – we are not setting objectives for the quantity and timing of bonds that we will buy, as some other central banks have done. How much we need to purchase, and when we need to enter the market, will depend upon market conditions and prices.
Rather than quantities or the size of our balance sheet, our focus is very much on the price of money and credit. Our objective here is to provide support for low funding costs across the entire economy. By lowering this important benchmark interest rate, we will add to the downward pressure on borrowing costs for financial institutions, households and businesses. We are prepared to transact in whatever quantities are necessary to achieve this objective.
We expect to maintain the target for three-year yields until progress is being made towards our goals of full employment and the inflation target. Our expectation, though, is that the yield target will be removed before the cash rate is increased.
<h2 id="3-a-term-funding-facility-for-the-banking-system-with-support-for-business-credit-especially-to-small-and-medium-sized-businesses">3. A Term Funding Facility for the Banking System with Support for Business Credit, Especially to Small and Medium-sized Businesses</h2>
The scheme has two broad objectives.
The first is to lower funding costs for the entire banking system so that the cost of credit to households and businesses is low. In this regard, it will complement the target for the three-year yield on AGS.
The second objective is to provide an incentive for lenders to support credit to businesses, especially small and medium-sized businesses. This is a priority area for us. Many small businesses are going to find the coming months very difficult as their sales dry up and they support their staff. Assisting small businesses through this period will help us make that bridge to the other side when the recovery takes place. If Australia has lost lots of otherwise viable businesses through this period, making that recovery will be harder and we will all pay the price for that. So it is important that we address this.
Under this new facility, authorised deposit-taking institutions (ADIs) in total will have access to at least $90 billion in funding. ADIs will be able to borrow from the Reserve Bank an amount equivalent to 3 per cent of their existing outstanding credit to Australian businesses and households. ADIs will be able to draw on these funds up until the end of September this year.
Lenders will also be able to borrow additional funds from the Reserve Bank if they increase credit to business this year. For every extra dollar lent to large business, lenders will have access to an additional dollar of funding from the Reserve Bank. For every extra dollar of loans to small and medium-sized businesses they will have access to an additional five dollars. These funds can be drawn upon up until the end of March next year. There is no extra borrowing allowance for additional housing loans.
The funding from the Reserve Bank will be for three years at a fixed interest rate of 0.25 per cent, which is substantially below lenders' current funding costs. Institutions accessing this scheme will need to provide the usual collateral to the Reserve Bank, with haircuts applying. The first drawings under this facility will be possible no later than four weeks from today.
This scheme is similar to that introduced by the Bank of England. Unlike the Bank of England's scheme, though, the interest rate is fixed for the term of the funding. This is consistent with our view that the cash rate is likely to stay at its current level for some time. Another difference with the Bank of England's scheme is that we have not included a higher interest rate if credit contracts. While a decline in credit would be undesirable, including a penalty may act as a disincentive for institutions to take part in the scheme.
We are encouraging all ADIs to use the term funding facility to help support their customers. I welcome APRA's confirmation this afternoon that it also supports ADIs using this scheme. I also welcome the Australian Government's announcement that it will support the markets for asset-backed securities through the AOFM. This support is important as it will help non-bank financial institutions and small lenders to continue to provide credit to Australian households and businesses.
<h2 id="4-an-adjustment-to-the-interest-rate-on-exchange-settlement-balances">4. An Adjustment to the Interest Rate on Exchange Settlement Balances</h2>
Under our longstanding framework, the RBA operates a corridor system around the cash rate. Under that system, the balances that banks hold with the RBA overnight in Exchange Settlement accounts earn an interest rate 25 basis points below the cash rate. And on the other side of the corridor, in the event that a bank needed to borrow from the RBA overnight, it would be charged 25 basis points above the cash rate.
Under this arrangement and with the cash rate now at 25 basis points, the interest rate on Exchange Settlement balances would have been zero. We have decided to increase this to 10 basis points. We are not making any change to the arrangements for the top of the corridor.
This adjustment to the corridor reflects the fact that there will be a significant increase in the balances held in Exchange Settlement accounts due to the combined effect of the Bank's enhanced liquidity operations, bond purchases and term funding program. Maintaining a zero interest rate on these balances would increase the costs to the banking system. In the current environment, this would be unhelpful.
The increase in settlement balances is also expected to change the way that the cash market operates. In other countries, where there have been large increases in balances at the central bank, the cash rate equivalent has drifted below the target and transaction volumes in the cash market have declined. It is likely that we will see the same outcome in Australia. The Reserve Bank will continue to monitor the cash market closely and is prepared to adjust arrangements if the situation requires.
So these are the four measures announced earlier this afternoon. Together, they represent a comprehensive package to lower funding costs in Australia and support the supply of credit. Complementary initiatives by APRA and the AOFM are also working towards those same objectives.
The term funding scheme and the three-year yield target are both significant policy developments that would not have been under consideration in normal times. They both carry financial and other risks for the Reserve Bank and they both represent significant interventions by the Bank in Australia's financial markets.
The Reserve Bank Board did not take these decisions lightly. But in the context of extraordinary times and consistent with our broad mandate to promote the economic welfare of the people of Australia, we are seeking to play our full role in building that bridge to the time when the recovery takes place. By doing all that we can to lower funding costs in Australia and support the supply of credit to business, we will help our economy and financial system get through this difficult period.
PHILIP LOWE is the Governor of the RBA
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Monetary policy decisions: RBA Governor Philip Lowe

Insights into RBA thinking February 2020: RBA Minutes

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EXPERT OBSERVER
The minutes of the November monetary policy meeting of the Reserve Bank Board give us no significant reason to change our view that the next rate cut will occur in February.
While some forecasters have been promoting the idea of a move in December, the minutes provided the flavour of a Board that is in no hurry to make the next cut. The minutes conclude that “the Board would continue to monitor developments”. It also referred to “having already delivered a substantial monetary stimulus in recent months, there was a case to wait and assess the effects of this stimulus, especially given the long and variable lags”.
Nevertheless, the minutes do not want to leave the reader in any doubt that the Board continues to have a clear easing bias. The minutes concluded that the Board “was prepared to ease monetary policy further if needed” and also noted that “members reviewed the case for a further reduction at the present meeting”.
Some commentaries interpreted the latter remark as indicating that the Board was close to cutting rates at the meeting. However, my view is that it was used to emphasise a strong easing bias, particularly aimed at containing any upward drift in the AUD rather than any serious risk of an unexpected move in November.
The second important issue around the policy outlook is the “effective lower bound” (ELB) of the cash rate. Westpac has argued since July that the ELB will prove to be 0.50% and will be reached in February 2020. One factor that has been important to our thinking has been the response of the Westpac-MI Consumer Sentiment index to the rate cuts that began in June 2019. The index has been on a clear downward trend ( see Figure 1) since that first cut and the Board has recognised that by noting that “a further reduction in interest rates could have a different effect on confidence than in the past”. Put another way, the Board “recognised the negative effects of lower interest rates on savers and confidence”.
There are two elements to this downward pressure on confidence through these recent cuts; firstly the impact on consumers of the explanation behind very low rates and, secondly, the media coverage around the banks’ responses to ultra-low rates.
In that regard, the Board was informed that it appears that banks still have adequate scope to pass on future rate cuts. The minutes noted that “while close to a quarter of deposits were estimated to be earning interest at rates between 0-50bps, most deposits earned interest at rates over 1%”. The RBA reports that banks’ response to the cumulative 75bp reduction in the cash rate was to lower interest on at-call retail deposits by an average of 60-70bps.
As noted above, this reduction in deposit rates is affecting the confidence of savers, whereas the data also showed that borrowers had been repaying existing loans at a faster pace. This observation puts one of the most important channels of monetary policy, a boost to spending from the increased cash flows of borrowers, at some risk.
<a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2019/2019-11-05" target="_blank">Read full report </a><a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/November/er20191122BullRBADecemberOnHold.pdf" target="_blank">'RBA December on hold' (PDF 129kb)</a><a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2019/2019-11-05" target="_blank"> </a>
<div>
BILL EVANS is Chief Economist for Westpac
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Ideas for unconventional monetary policy: Bill Evans

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EXPERT OBSERVER 
In last week’s note we opined that the Effective Lower Bound (ELB) for the RBA’s cash rate is 0.5% which we expected to be reached in February next year.
After that point we argued that the RBA would assess that the benefits to the currency and household cash flows from further cuts were likely to be offset by unintended consequences such as a negative impact on confidence of very low rates, financial instability, and a lowering of inflationary expectations as agents associated ultra-low rates with falling inflation.
We pointed out that our forecasts indicate that by that time, it seemed unlikely that the RBA would be satisfied that the economy was moving towards full employment, its potential growth rate, and inflation within the 2–3% band.
The RBA would also be concerned that with inflation still stuck below 2% and acknowledging that no further monetary policy action would be forthcoming, this would also encourage falling inflationary expectations as agents would sense that the RBA had run out of options.
Another risk in these circumstances might be that traders would also choose to bid up the AUD in the context of a dormant central bank.
Such a time might be appropriate for the Bank to consider unconventional monetary policies.
The Governor has publicly dismissed negative interest rates as an option but has indicated that, were the RBA to embark on a course of unconventional monetary policy, an asset purchase program would be the most likely policy option.
These programs have been used in other jurisdictions over the period 2008 to 2017.
Between 2008 and 2012 the programs were aimed at addressing disruptions in liquidity in the financial markets. They covered intervention in public sector bonds, commercial paper, agency debt, agency Mortgage Backed Securities, corporate bonds, and bank covered bonds.
From that point on, programs were aimed explicitly at monetary accommodation (with the Fed’s 2019 purchase plan to address overnight funding market issues).
In Australia’s current circumstances, given that Australian banks are flush with liquidity, any action from the RBA would be directed at monetary accommodation.
Read the full report: <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/October/er20191025BullQEStrategy.pdf" target="_blank">'RBA options for QE Strategy' (PDF 144kb)</a>
BILL EVANS is the Chief Economist at Westpac
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Options for effective Quantitative Easing strategy for the RBA: Bill Evans

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GUEST OBSERVATION
The bipartisan parliamentary vote to transform the A$3.9 billion Building Australia Fund into a pot of cash to drought-proof Australia, the <a href="https://www.farmonline.com.au/story/6287475/future-drought-fund-to-pass-final-hurdle-in-parliament/" target="_blank">Future Drought Fund</a>, should not be taken as universal endorsement.
Labor opposed the idea before caving in, saying it did not “<a href="https://www.canberratimes.com.au/story/6288761/drought-proofing-fund-to-pass-parliament/?cs=14231" target="_blank">want to be painted as a party that opposes support for farmers</a>”.
Rather, it simply shows that Australian politicians coalesce on some things: few miss the opportunity to be photographed with an affectionate child, and even fewer are willing to be critical of public funds being handed to drought-stricken farmers.
But support for something (or feeling too scared not to oppose something), doesn’t necessarily make it the right policy.
Australian governments have sought to drought-proof parts of inland Australia through publicly funded irrigation schemes for much of the past century.
Whenever dryland farmers experienced drought, they were viewed as having experienced a natural disaster, even though the variability of dryland rains was well understood.
Then, from the 1960s, things changed.
First there was a growing realisation that public monies spent on irrigation were not the best means of dealing with a variable climate.
We’ve moved away from thinking about drought as disaster
Second, governments started to describe drought differently, culminating in a 1992 National Drought Policy that required farmers to be more self-reliant and absorb the impacts of drought as something to be expected.
The decades that followed continued this trend with all states and the Commonwealth agreeing on national principles in 2013. Concessional loans and a farm management deposit scheme with taxation advantages were available to help farmers, but would only be useful to those that were viable in the long term.
A <a href="https://www.humanservices.gov.au/individuals/services/centrelink/farm-household-allowance/how-much-you-can-get" target="_blank">Farm Household Allowance</a>, set at the level of Newstart and available for up to four years in return for setting out a plan to improve the farmer’s financial circumstances, was also introduced in 2015 and refined in 2018.
Part of the thinking was that climate change is expected to make droughts more common and severe, although there are good reasons for encouraging adaptation to the existing climate in any case.
However, getting the balance right between “supporting” farm businesses and encouraging them to adapt and be self-reliant isn’t straightforward, especially when the climate and political cycles coincide.
It’s hard to imagine politicians being fiscally prudent when they know they have access to a drought slush fund and are heading into an election during a drying phase.
So, what’s wrong with the new drought fund?
First, there is mounting evidence that farm businesses can actually benefit from drought in the longer term. This seems to occur because businesses that go through a drought develop coping strategies that when invoked in good years produce much greater profits.
That is not to say that droughts are financially a good thing – but it does mean that shielding farm businesses from drought runs the risk that they will not adapt.
Second, an obsession with drought undoes much of the good work done in reclassifying it as something to be expected rather than a natural disaster. Nearly all of the natural disaster payments made in the decade leading up to 2012-13 – one of the driest on record – were spent on rebuilding after floods and storms rather than droughts.
Third, while repurposing the Building Australia Fund as the Future Drought Fund is designed to appeal to rural and regional voters, it is unlikely to help them. Agriculture simply does not generate the jobs that it once did and public pronouncements about drought-proofing will not change the underlying economics of farm businesses and regional communities.
Farming is generally helped by scale, and that means bigger farms with bigger machines displacing smaller farms. The upshot is fewer jobs and the shutdown of small towns, allowing only the larger regional centres to survive. Finding ways to manage this social phenomenon should be the priority rather than shielding farms from drought.
But it’s hard to be optimistic. Politicians love handing cheques to farmers as much as they love photographs with adoring children.<img src="https://counter.theconversation.com/content/121744/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
Lin Crase, Professor of Economics and Head of School, University of South Australia.
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/just-because-both-sides-support-drought-relief-doesnt-mean-its-right-121744" target="_blank">original article</a>.
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Just because both sides support drought relief, doesn’t mean it’s right: Lin Crase

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EXPERT OBSERVER
The minutes of the Reserve Bank Board meeting for August have provided one significant surprise.
In both the Governor's decision statement following the meeting and the Statement on Monetary Policy( similar version), the conclusion included "the Board would continue to monitor developments in the labour market closely and adjust monetary policy if needed to support sustainable growth in the economy and the achievement of the inflation target over time".
In these minutes, the emphasis has changed to the following "the Board judged it appropriate to assess developments in the global and domestic economies before considering further change in the setting of monetary policy. Members would consider a further easing of monetary policy if the accumulation of additional evidence suggests this was needed to support sustainable growth in the economy and the achievement of the inflation target over time".
So the message here is that policy could be eased in response to an unexpected deterioration in the global economy without the labour market providing an adequate justification for a rate cut.
Clearly, the Board has become more concerned about the global outlook: "trade and technology disputes had increased the downside risks to the global outlook", "uncertainty around trade policy had already had a negative effect on investment in many economies", and "a number of central banks had reduced interest rates this year and further monetary easing was widely expected".
This is not to say that concerns around the labour market have eased. As we observed with the increase in the RBA's unemployment forecasts and the downward revision to wage growth forecasts, the Board has noted: "there appeared to have been more spare capacity in the labour market than previously appreciated", and there is "a more subdued outlook for wages than three months earlier".
There appears to be a somewhat positive spin on the outlook for the real economy: "Although, the outlook for consumption remained uncertain, the risks around the outlook were more balanced than they had been for some time", "evidence that conditions in housing markets were showing signs of a turnaround had strengthened in July", and "signs of a turnaround in housing markets suggested there were some upside risks to dwelling investment later in the forecast period".
This commentary is consistent with the growth forecasts which anticipate GDP growth lifting from 2½ per cent in 2019 to 2¾ per cent in 2020. Westpac's forecasts are for 2.25% in 2019 and 2.5% in 2020. However, Westpac sees the clear downside risks to these forecasts coming from global developments, and it appears that the RBA Board is harbouring similar concerns.
As we saw in the Governor's testimony to the parliamentary economic committee, the Board has been briefed on unconventional monetary policy measures. The minutes cover the various measures that have been adopted overseas, but correctly qualify the assessment since "full evaluation could not been undertaken as many of these measures were yet to be unwound". It also noted that "effectiveness depended upon the specific circumstances and the nature of the financial system".
As we saw in the Governor's testimony, at this stage the Board seems to favour purchasing government bonds which were expected to flow through to lower interest rates for private borrowers. It also noted that "a package of measures tended to be more effective than measures implemented in isolation".
Conclusion
We do not think that after emphasising the labour market as the key factor for policy in the May, June and July minutes, the importance of the labour is in any way diluted. However, as a small open economy, a responsible central bank could not be seen to dissociate policy from global developments given the alarming signals around the world economy.
It is also important to be clear that the forecasts in the Statement on Monetary Policy, on which these minutes are based, assume market pricing for the cash rate path. At the time of the forecasts, the market pricing discounted two further rate cuts — one by the "end of this year", and a second in the "first half of 2020".
Despite this rate path, the forecasts indicate a lower profile for wages growth (reaching only 2.4% in 2021), an increase in the unemployment rate forecast (from 5% to 5.2% in December 2020), and the trimmed inflation rate forecast now below 2% by end 2020 (at 1.9%). These forecasts indicate that despite two more rate cuts, the RBA still does not expect the unemployment rate to go remotely close to its stated desired 4.5% over the forecast horizon, or reach the 2-3% target band for inflation before 2021.
Consequently, we remain comfortable with our forecast that the RBA will next cut the cash rate in October by 25bps and wait until early 2020 (February) for the second cut of 25bps.
BILL EVANS is Westpac's Chief Economist
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Reserve Bank Board highlights global risks for policy: Bill Evans

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EXPERT OBSERVER
Some might be forgiven for thinking the wheels have fallen off Australian politics over the past decade with the same number of PM changes as Italy, a fractured Senate and “minority government” at times making sensible visionary long-term policy making hard.
With the May 18 Federal Election offering a starker than normal choice political uncertainty may see another leg up. Polls give Labor a clear lead, albeit it’s narrowed a bit.
There is anecdotal evidence that uncertainty around elections causes households and businesses to put some spending decisions on hold - the longer the campaign the greater the risk.
Fortunately, this time around it’s a relatively short campaign at five weeks. However, hard evidence regarding the impact of elections on economic indicators is mixed and there is no clear evidence that election uncertainty effects economic growth in election years as a whole.
In fact, since 1980 economic growth through election years averaged 3.6% which is greater than average growth of 3.1% over the period as a whole. In terms of the share market, there is some evidence of it tracking sideways in the run up to elections, which may be because investors don’t like the uncertainty associated with the prospect of a change in policies.
The next chart shows Australian share prices from one year prior to six months after federal elections since 1983.
This is shown as an average for all elections (but excludes the 1987 and 2007 elections given the global share crash in late 1987 and the start of the global financial crisis (GFC) in 2007), and the periods around the 1983 and 2007 elections, which saw a change of government to Labor, and the 1996 and 2013 elections, which saw a change of government to the Coalition.
The chart suggests some evidence of a period of flat lining in the run up to elections, possibly reflecting investor uncertainty, followed by a relief rally.
IMG
However, the elections resulting in a change of government have seen a mixed picture. Shares rose sharply after the 1983 Labor victory but fell sharply after the 2007 Labor win, with global developments playing a role in both.
After the 1996 and 2013 Coalition victories shares were flat to down.
So based on historical experience it’s not obvious that a victory by any one party is best for shares in the immediate aftermath, and historically the impact of swings in global shares arguably played a bigger role than the outcomes of federal elections.
The next table shows that 9 out of the 13 elections since 1983 saw shares up 3 months later with an average gain of 4.8%.
IMG
The next chart shows the same analysis for the Australian dollar. In the six months prior to Federal elections there is some evidence the $A experiences a period of softness and choppiness, which is consistent with policy uncertainty, but the magnitude of change is small. On average, the $A has drifted sideways to down slightly after elections
IMG
Political parties and shares
Over the post-war period shares have returned 12.7% pa under Coalition governments and 10.7% pa under Labor governments. It may be argued that the Labor governments led by Whitlam in the 1970s and Rudd and Gillard more recently had the misfortune of severe global bear markets and, if these periods are excluded, the Labor average obviously rises to 15.8% pa, although that may be taking things a bit too far.
But certainly, the Hawke/Keating government defied conventional perceptions that conservative governments are always better for shares. Over the Hawke/Keating period from 1983 to 1996 Australian shares returned 17.3% pa, the strongest pace for any post-war Australian government.
Once in government, political parties are usually forced to adopt sensible macro-economic policies if they wish to ensure rising living standards and arguably there has been broad consensus on both sides of politics in recent decades regarding key macroeconomic fundamentals – eg, low inflation and free markets.
Policy differences starker than since the 1970s However, after narrowing in the 80s and 90s with the rationalist reform oriented agenda kicked off by Hawke and Keating, in recent years the policy differences between the Coalition and Labor have been intensifying again to the point that they are now arguably starker than they have been since the 1970s (when there used to be more of a focus around “class warfare”).
In part this is consistent with rising interest in populist policies globally which in turn reflects angst over low wages growth, widening inequality, globalisation and automation. Each side of politics is now offering very different visions on the role and size of government. And so the policy uncertainty around this election is greater than usual.
The Coalition is focused on containing government spending and encouraging economic growth via infrastructure spending, significant personal tax cuts (to return bracket creep and cap taxation revenue at its long term high of around 24% of GDP) and mild economic reforms.
By contrast Labor is focused on spending more on health and education and in the process allowing the size of the public sector to increase.
This is proposed to be funded by “tax increases” including: 
<ul>
<li>cancelling the Coalition’s middle and upper income personal tax cuts scheduled for next decade and reimposing the 2% Deficit Repair Levy on incomes above $180,000;</li>
<li>restricting negative gearing to new residential property (and no other assets) and halving the capital gains tax discount from January 1 2020; </li>
<li>stopping cash refunds for excess franking credits; and </li>
<li>a 30% tax rate on distributions from discretionary trusts; It’s not proposing to spend all the extra revenue this will raise with some earmarked for higher budget surpluses (ie paying down public debt).</li>
</ul>
It’s also promising a sharp lift in the minimum wage towards being a “living wage”, some labour market re-regulation, far more aggressive climate policy (with a 45% reduction in emissions on 2005 levels by 2030, which is almost double the Coalition’s policy) and in relation to superannuation key changes are likely to include a resumption of the increase in the Super Guarantee, lower non-concessional contributions and a lower income threshold for the application of the 30% tax rate on super contributions.
Intervention in the economy is likely to be higher under a Labor government. Perceptions that a more left leaning Labor government will mean bigger government, more regulation and higher taxes and hence act as a drag on productivity and be less business friendly may contribute to more nervousness in shares and the $A than usual around this election.
More specifically there are a number of risks:
<ul>
<li>There is a danger that relying on tax hikes on the “top end of town” will dampen incentive in that Australia’s top marginal tax rate of 47% is already high – particularly compared to our neighbours: 33% in NZ; 20% in Singapore; and 15% in HK. Australia’s income tax system is already highly progressive: 1% of taxpayers pay 17% of the total personal income tax take (with an average tax rate of 42%) &amp; the top 10% pay 45% of tax compared to the bottom 50% who pay around 12% (with an average tax rate around 11%). </li>
<li>The proposed changes to franking credits even though they only impact around 8% of taxpayers are potentially a negative for stocks with high-franked dividends. </li>
<li>The proposed changes to capital gains tax and negative gearing have been estimated to cause a 5 to 12% decline in home prices &amp; a boost to rents of 7 to 12%. This is risky as the property market is already weak. This could further impact construction/property stocks, banks &amp; retail shares.</li>
<li>Higher minimum wages and some labour market reregulation risk higher unemployment, a less flexible labour market and are a negative for hospitality and retail stocks. </li>
<li>The focus on economic reform needed to boost productivity looks to have fallen by the wayside in the face of populism – eg, why aren’t we considering injecting more competition into the health sector along with spending more on it?</li>
</ul>
That said there are some offsets in relation to ALP policies that investors need to allow for: 
<ul>
<li>Some ALP policies may not pass the Senate, including those around negative gearing and repealing the middle &amp; upper income tax cuts that have already passed into law.</li>
<li>Labor is planning bigger budget surpluses which is positive.</li>
<li>Labor policies encouraging “build to rent/affordable housing” are positive, but it’s unclear how much impact they will have.</li>
<li>Labor policies focussed on greater spending and tax cuts more targeted to lower saving low income earners may provide more of a short-term boost to economic growth.</li>
<li>Labor has a track record of taking sensible advice &amp; responding quickly to help the economy in a crisis (think 1983 and in the GFC). In the short term, this could include a First Home Buyer grant to mute the property downturn.</li>
</ul>
Concluding comment:
The now wider left right divide in Australian politics suggests greater uncertainty going into this election potentially affecting all asset Australian classes. But the bigger concern is the dwindling prospects for productivity enhancing reform, which could be an ongoing dampener on growth in living standards.
DR SHANE OLIVER is the Head of Investment Strategy and Chief Economist for AMP Capital
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The 2019 Australian Federal election and investors: Shane Oliver

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GUEST OBSERVATION
Rural and regional Australia is a big place – too big to be contained in one rural policy or represented by a single political party.
Several features of contemporary rural and regional Australia stand out, though, as deserving of serious policy attention.
The Indigenous estate
Indigenous peoples are among rural and regional Australia’s largest landholders. <a href="http://www.nntt.gov.au/Maps/Determinations_map.pdf" target="_blank">Native title rights are recognised</a> on more than 37% of the Australian landmass. Exclusive possession native title applies to around 13%. Both these numbers will grow.
The cultural and social significance of the Indigenous estate is immense. So too is its economic significance. Aboriginal and Torres Strait Islander enterprises are active in agriculture, mining, infrastructure development, land and water management, and protected area management.
Governments have taken some positive steps to assist Indigenous enterprise. Changing procurement policy to encourage local suppliers is an excellent example. This must be seen in the context, however, of the missteps of the <a href="https://www.anao.gov.au/work/performance-audit/indigenous-advancement-strategy" target="_blank">Indigenous Advancement Strategy</a> and failure to engage with the <a href="https://www.1voiceuluru.org/what-happened-next/" target="_blank">Uluru Statement from the Heart</a>.
Respecting Aboriginal and Torres Strait Islander aspirations for sovereignty and “closing the gap” on health, safety, education and employment are not mutually exclusive. Indeed, finance, insurance and business models that are relevant to the collective and enduring nature of native title rights will go a long way towards realising the economic potential of the Indigenous estate.
<a href="https://images.theconversation.com/files/258446/original/file-20190212-174857-qdk0nc.PNG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/258446/original/file-20190212-174857-qdk0nc.PNG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
Native Title determinations as at December 31 2018. Native Title exists in green areas (darker green denotes exclusive title) and does not exist in brown areas (lighter brown denotes title extinguished). <a class="source" href="http://www.nntt.gov.au/Maps/Determinations_map.pdf" target="_blank">National Native Title Tribunal</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/" target="_blank">CC BY</a>
New labour markets
Agriculture, mining and other resources industries contribute mightily to Australia’s GDP. Yet their contribution to employment is comparatively small.
In 2016, agriculture, forestry and fishing accounted for 215,601 <a href="https://profile.id.com.au/australia/industries?EndYear=2006&amp;DataType=UR&amp;WebID=245" target="_blank">jobs in regional Australia</a>. Mining provided 102,639 jobs. By contrast, health care and social assistance provided 445,087 jobs, retail 341,190, construction 292,279, education and training 291,902 and accommodation and food services 253,501.
Health care and social assistance and education and training contributed more new regional jobs over the last decade than any other industry.
This is not about commodity price cycles and their short-term impact on labour demand. It is about the relentless substitution of labour with technology as business owners strive to lift productivity and lower costs. Advances in automation and telecommunications will accelerate this trend.
The policy imperative is not to ignore resource industries or the workers who depend on them, but to face up to structural change in the labour market.
It is not unreasonable for regions hit by job losses following mine or plant closures to look for new projects to fill the void. But it is important to recognise that fewer jobs will be on offer in the resources industries. And these jobs will require higher levels of skills and training.
Maintaining high employment across non-metropolitan regions will depend, ultimately, on continued growth in other industries.
Climate action
In the land of drought and flooding rain, climate variability is a given.
Managing for that variability is something we need to do better, even before taking climate change into account. The South Australian <a href="https://www.mdbrc.sa.gov.au/sites/default/files/murray-darling-basin-royal-commission-report.pdf?v=1548898371" target="_blank">Murray-Darling Basin Royal Commission into water use</a> shows that political commitment to cross-border cooperation and the maintenance of environmental flows is fragile.
What evidence we do have on rural and regional Australians’ beliefs about climate change suggests uncertainty and lack of trust in government are <a href="https://doi.org/10.1080/08941920.2012.686650" target="_blank">more prevalent than outright denial</a>. A <a href="https://www.propertyobserver.com.au/https://journals.sagepub.com/doi/pdf/10.1177/0963662512449948" target="_blank">precautionary approach</a> to climate is favoured over business as usual.
Why a precautionary approach? Because <a href="https://acola.org.au/wp/PDF/SAF07/social%20and%20political%20context.pdf" target="_blank">failure to act on climate presents a number of risks</a>. These include:
<ul>
<li>reduced market access for regions and industry sectors not seen to be reducing emissions</li>
<li>failure to develop cost-effective and industry-specific technologies for reducing greenhouse gas emissions</li>
<li>lost opportunities to develop markets in carbon sequestration</li>
<li>escalating economic and social impacts on rural and regional communities as climate variability increases.</li>
</ul>
Importantly, only the last of these risks is actually contingent on climate change.
Transition planning
The sustainability challenges facing rural and regional Australia are not solely environmental.
In the 21st century, industries require stable, high-speed telecommunications infrastructure. That’s no less true of agriculture and mining than it is of tech start-ups and e-retailers. Unfortunately, the <a href="https://theconversation.com/will-australias-digital-divide-fast-for-the-city-slow-in-the-country-ever-be-bridged-60635" target="_blank">digital divide</a> between urban and rural Australia is a significant constraint on innovation.
The industries of the 21st century also require stable and responsive institutional and governance infrastructure.
The rural politics we see reported in the media looks every bit as polarised and resistant to change as anywhere. Yet Australia’s best rural policies have always been the result of collaborative approaches to planning and innovation.
Landcare and regional natural resource management programs stand out for the positive relationships they have built across the agriculture, conservation, industry and Indigenous sectors.
While federal and state infrastructure funding is critical for the regions, so too is support for integrated and collaborative planning. <a href="https://www.cleangrowthchoices.org/" target="_blank">Place-based approaches</a> are not a panacea but it is always in specific places, and specific communities, that business, services, natural resource management, energy, transport and telecommunications infrastructure, and so on, come together.
Electoral diversity
Social conservatism, support for traditional rural industries and scepticism about climate change are all highly visible in rural politics today.
I have outlined some of the risks arising from climate scepticism, but contemporary social conservatism carries political risks too.
Most obvious is the alienation of voters who do not share these views. They include:
<ul>
<li>
<a href="https://www.farmersforclimateaction.org.au/" target="_blank">farmers</a> who want meaningful action on climate</li>
<li>lifestyle migrants with no historical loyalty to the National Party</li>
<li>young people with more socially progressive attitudes.</li>
</ul>
It is worth remembering that in the plebiscite on marriage equality <a href="http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/1800.0%7E2017%7EMain%20Features%7EResponse%20map%7E17" target="_blank">most rural and regional electorates took the progressive option and voted yes</a>.
Aboriginal and Torres Strait Islander voters warrant extra attention. <a href="https://www.themonthly.com.au/issue/2012/october/1349327287/marcia-langton/comment-it-s-knockout" target="_blank">Indigenous voters have swung elections in the Northern Territory</a> with their preference for candidates who respect local leadership and priorities over traditional party allegiances and ideologies. Candidates for any seat with a large Indigenous population ignore these voters at their peril. As the <a href="https://aec.gov.au/Indigenous/" target="_blank">Australia Electoral Commission</a> works to lift the Indigenous vote, this influence will grow.
In sum, the issues that matter to rural and regional Australians are far more diverse than those discussed here. Many will disagree with how I have represented one or other issue. That, really, is the point.<img src="https://counter.theconversation.com/content/110971/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
Stewart Lockie, Director, The Cairns Institute, James Cook University
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/people-and-issues-outside-our-big-cities-are-diverse-but-these-priorities-stand-out-110971" target="_blank">original article</a>.
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People and issues outside our big cities are diverse, but these priorities stand out: Stewart Lockie

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EXPERT OBSERVER
Taking a blanket approach when implementing major policies unfairly undermines already weak property markets.
Western Australian Treasurer Ben Wyatt complained to the Australian Prudential Regulation Authority (APRA) that lending restrictions introduced across Australia by commercial banks were hurting the Perth property market and wider economy.
The restrictions were introduced to tighten investor lending in Sydney and Melbourne, but the effect has been felt Australia-wide, particularly in the weaker economic states, and Perth prices, which had stabilised, are once again falling.
The WA Treasurer’s complaints were “very unsurprising” but “expected when you apply a blanket approach to reforms across Australia”.
And this will also be one of the unintended consequences of Labor’s proposed changes to negative gearing and capital gains tax which they will introduce if they are elected into power at the upcoming federal election, which is very likely.
Overall the Perth property market had experienced continued weakness in recent years due to poor economic growth following the end of mining boom, a soft job market creating very slow population growth and, in some areas, oversupply of units.
Click here <a href="https://www.propertyobserver.com.au/images/2018/12/19/Perth1.jpg" target="_blank">to enlarge</a>.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/12/19/Perth1.jpg" alt="">
This weakness in the market has been reflected in negative growth for both houses and units over the past five years.
Click here <a href="https://www.propertyobserver.com.au/images/2018/12/19/Perth2.jpg" target="_blank">to enlarge</a>.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/12/19/Perth2.jpg" alt="">
People have been hoping for a few years that the market would reach the bottom but unfortunately this has not been the case.
Its economic growth has only been 0.9 per cent which means, relative to the other states, WA's overall economy is the weakest in Australia.
It was clear that applying a blanket approach across Australia when it came to the implementation of major policies did not work.
RiskWise and WargentAdvisory’s report in June into the Impact Analysis: Negative Gearing, CGT &amp; Australia’s Residential Property Markets clearly demonstrated the impact the proposed changes would have on weaker economies, Perth being one of them.
Every time there is a major policy or strategy introduced the potential consequences of it need to be assessed at the capital city level as well as the regional level (i.e. at the Statistical Area Level 4, or SA4 level), otherwise there will be unintended consequences, as you can’t expect not to have a major impact on weak areas.
The drop in property prices in Perth due to the credit restrictions is a very clear warning sign of what will happen in that property market and other weaker markets (outside Sydney and Melbourne) if a blanket approach for changes to negative gearing and capital gains tax is implemented.
In such cases the government needs to consider measures to boost demand. We identified these in our report and they include such things as further concessions for first home buyers and lifting restrictions for foreign investors in those areas. 
Government at both the state and federal level need to support these weaker markets by devising incentives for them such as increasing infrastructure to boost the economy and job creation and, therefore, population growth.
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