National diversified developer Fortis has officially launched Crest &amp; Walker, its latest Brisbane apartment development, with construction now underway on the 20-storey Newstead project.

Award-winning builder BINAH has commenced construction on the Bureau^Proberts-designed building, which will deliver a limited collection of 65 two and three-bedroom apartments on Kyabra Street.

[smartcode_project:default project_id=145922 project_image_fid=373556]

The project marks Fortis' fourth active residential development in Brisbane, following River House, which is nearing completion, alongside projects in New Farm and Hamilton as the national developer continues to expand its South East Queensland pipeline.

Fortis General Manager – Development Queensland Dan Boman said Crest &amp; Walker reflects the developer's long-term commitment to delivering design-led residential projects in Brisbane's established inner-city suburbs.

"We're proud to be strengthening our presence in Brisbane with Crest &amp; Walker, particularly in such a sought-after lifestyle destination as Newstead," Boman said.

"Every Fortis project is shaped by its context, and we approach each one with the respect and care it deserves.

"Our focus is always on creating places that feel connected to their neighbourhood and elevate the everyday experience for residents. Newstead continues to evolve as one of Brisbane's most sought-after urban communities, and Crest &amp; Walker reflects our ambition to contribute meaningfully to that story."

[smartcode_project:default project_id=145922 project_image_fid=373559]

Positioned between Gasworks Plaza and James Street, <a href="https://www.apartments.com.au/new-apartments/crest-walker-newstead-12-kyabra-street-newstead-qld-4006">Crest &amp; Walker</a> has been designed as a boutique residential address offering privacy and generous living spaces within one of Brisbane's most established lifestyle precincts.

The building features a contemporary brick podium softened by integrated landscaping, while the upper levels are characterised by restrained architecture and enduring materiality. Interiors have been designed to maximise natural light, acoustic performance and long-term liveability.

[smartcode_project:default project_id=145922 project_image_fid=373583]

Residences comprise spacious two and three-bedroom floorplans, with two-bedroom apartments priced from $1.55 million and three-bedroom, half-floor residences from $3.95 million.

Residents will have access to a wellness-focused rooftop featuring a swimming pool, sauna, steam room, landscaped dining spaces and outdoor lounge areas overlooking Newstead and the Brisbane CBD.

[smartcode_project:default project_id=145922 project_image_fid=373571]

Sales are being managed by Slaite Projects, with Fortis expecting strong demand from owner-occupiers seeking a high-quality, design-focused apartment in one of Brisbane's most tightly held inner-city suburbs.

Completion of Crest &amp; Walker is slated for late 2028.

[smartcode_project_cta:default project_id=145922]

Joel Robinson

Fortis expands Brisbane pipeline with launch of Crest & Walker in Newstead

The enormity of delivering a true skyscraper in Australia's new development market is often overlooked.

It has taken the best part of a decade since plans for Chevron One were first unveiled, but the 52-storey tower is now complete, with residents collecting their keys and moving into what has become one of the Gold Coast's most recognisable new landmarks.

Rising 127 metres above Chevron Island, Chevron One stands almost twice as high as any other building on the island. Its scale places it alongside the trio of towers at Jewel, arguably the last truly significant addition to the central Gold Coast skyline when they were completed around six years ago.

While there are several developments underway around a similar height to Chevron One, they are more concentrated within clusters of the highest towers in the city. The fact Chevron One sits within a developing precinct, looking back at the other high-rise developments in Surfers Paradise and Broadbeach, makes it a different proposition altogether. It will certainly become a reference point on the Gold Coast skyline.

[smartcode_project:default project_id=6515 project_image_fid=68833]

Developer Bensons Property Group is behind the 52-storey tower, which has just shy of 250 apartments, along with an exhaustive list of resident amenity spread across what is the largest development site ever assembled on Chevron Island.

The tower has been the talk of the town for years, says Ray White Projects Gold Coast agent Caitlin Rosenboom, who is selling the remaining apartments.

"People have been watching Chevron One go up for years," Rosenboom says, adding that many prospective buyers have been surprised by the scale of the views once they step inside.

"It's only when they walk through a completed apartment that they truly understand the position of the building," Rosenboom says.

"The views are jaw-dropping. Whether you're looking east over the ocean, across Surfers Paradise, along the river systems or out to the hinterland, every level offers something different but equally impressive."

[smartcode_project:default project_id=6515 project_image_fid=360215]

One of Chevron One's defining advantages is its location on the eastern side of Chevron Island on Stanhill Drive, a position which protects the views forever.

"There's only one row of houses between Chevron One and the water, and the height restrictions along the river means views from Chevron One can never be built out,"&nbsp;Rosenboom says.

While new apartment developments continue to emerge across the Gold Coast, Rosenboom says opportunities to secure a completed apartment with this level of outlook are becoming increasingly rare.

"The size of the site is something that would be incredibly difficult to replicate today," she says.

"That's allowed Chevron One to deliver the sort of amenity, open space and resident facilities that very few projects can offer. There are not many completed apartment buildings on the Gold Coast right now that can compete with the combination of scale, quality and amenity."

[smartcode_project:default project_id=6515 project_image_fid=68839]

There's around 2,000 sqm of amenity solely for the use of residents of Chevron One. Club One features a uniquely shaped swimming pool that mirrors the footprint of the building itself, set within a extensively landscaped gardens. There's also an indoor pool and spa, a fully equipped gym with a Pilates room, a yoga garden, a bookable private dining area and lounge that can host up to 30 people, and a 24-hour concierge service.

As for the buyers, Rosenboom is fielding enquiry from everywhere: Sydneysiders and Melburnians looking at the new and off-the-plan market following the changes in the Federal Budget, as well as those looking to relocate, through to South East Queenslanders seeking either a permanent home or a weekender bolthole.

"The Gold Coast lifestyle continues to resonate with people relocating from the southern states, and when they see the views and the quality of what's been delivered at Chevron One, it becomes very easy for them to understand the appeal," Rosenboom says.

A diverse mix of one, two and three-bedroom apartments remain available, with each offering "something a little different", be it the orientation and views, configuration, or level, to suit a wide variety of buyers.

The remaining apartments are ready to inspect in person, by appointment.

[smartcode_project_cta:default project_id=6515]

A decade in the making: Residents to move into Chevron One as construction wraps up

A general rule of thumb in new apartment developments is that the penthouses get the rooftop.

It's a formula that's become commonplace across Australia's apartment market. Residents might have access to a pool, gym or barbecue facilities on a dedicated lower level, but the most desirable outdoor spaces are typically reserved for the highest-priced homes at the top of the building.

<a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Property Group</a> has taken the opposite approach.

Rather than dedicating the rooftop to a handful of buyers, the Gold Coast developer has made it the centrepiece of its Flourish collection, creating expansive shared spaces from the best vantage point in the building.

The philosophy has reached its most ambitious expression at <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a> in Palm Beach, where two rooftop precincts connected by a skybridge will deliver one of the most extensive lifestyle offerings seen in a residential apartment project on the Gold Coast.

[smartcode_project:default project_id=150017 project_image_fid=374053]

"We're seeing a clear move toward developments that offer more than just an apartment," Sherpa Group founder Christie Leet said.

"People want spaces that support how they actually live, whether that's working from home, staying active, or spending time with family and friends.

"That's where amenity becomes critical. It's not just about what's included, but how those spaces are designed to be used every day."

[smartcode_project:default project_id=150017 project_image_fid=374052]

The breadth of amenity has already attracted buyers across multiple demographics. Younger first home buyers have been drawn to Soleira's one-bedroom apartments, a product rarely delivered in Palm Beach, while families have responded to practical inclusions such as the shallow children's pool adjoining the main lap pool and the extensive communal recreation areas.

Instead of a single rooftop, Soleira delivers two distinct lifestyle zones.

[smartcode_project:default project_id=150017 project_image_fid=372547]

The southern rooftop has been dedicated to wellness, featuring a gym, yoga and Pilates studio, work-from-home facilities, a wellness centre, spa, and hot and cold plunge pools.

The northern rooftop focuses on recreation and entertaining, incorporating a heated resort-style pool, private dining rooms, pizza ovens, barbecues, a golf simulator, children's recreation areas, and what is expected to be the Gold Coast's first rooftop basketball court, which will also double as a squash court.

[smartcode_project:default project_id=150017 project_image_fid=374054]

Beyond the rooftops, Soleira will introduce 1,500 sqm of curated retail beneath the towers, creating one of Palm Beach's first genuinely mixed-use lifestyle precincts where cafés, restaurants and convenience retail become part of residents' everyday lives.

Sherpa has also retained management rights across the development, allowing it to oversee the long-term operation of the building through a 24-hour concierge model. The developer is also exploring additional revenue streams within the precinct aimed at helping offset ongoing body corporate costs for residents.

[smartcode_project:default project_id=150017 project_image_fid=370962]

While Soleira is the largest project Sherpa has delivered, the rooftop-first philosophy has been evolving for several years.

It began with <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>, the first project released under the Flourish brand. Rather than competing at the ultra-luxury end of the market with oversized half-floor and full-floor residences, Sherpa focused on creating lifestyle-driven apartments supported by resort-style shared spaces.

Amargo introduced more than 800 sqm of rooftop amenity, combining wellness facilities, heated pools, entertaining areas, cabanas, pizza ovens and private dining spaces into what was designed as an extension of residents' homes rather than a facility used only occasionally.

[smartcode_project:default project_id=146527 project_image_fid=366550]

That approach continued with Flourish Oasis, where the same amenity-led philosophy was refined into a more boutique development. Strong demand from Sherpa's growing VIP database saw much of the project sold before it reached the broader market, reinforcing buyer appetite for apartment communities centred around shared lifestyle experiences.

Flourish Amargo is slated for completion mid-way-through next year, with Oasis to be delivered by late 2027. Flourish Soleira is expected to complete in 2030.

[smartcode_project_cta:default project_id=150017]

Sherpa takes amenity to the sky as Flourish Soleira captures booming Palm Beach demand

As apartment living continues to evolve across Sydney's growth corridors, the quality and distribution of shared spaces is increasingly shaping how residents experience home. Rather than functioning as add-ons, amenities are being embedded into the daily rhythm of a building, supporting everything from quiet retreat to social interaction, often within a single vertical community.

At <a href="https://www.apartments.com.au/new-apartments/aeris-melrose-park-nursery-street-melrose-park-nsw-2114">Aeris</a> in Melrose Park, this approach is resolved through a layered amenity offering that unfolds from ground level through to its upper podium. Developed by <a href="https://www.apartments.com.au/developers/sekisui-house-australia">Sekisui House Australia</a> in partnership with Hankyu Hanshin Properties, the project introduces 468 apartments across two towers and a mid-rise building, positioned at the highest point of the broader masterplan.

[smartcode_project:default project_id=426 project_image_fid=359199]

The amenity experience begins at street level, where two courtyards sit within a landscaped setting that connects residents to the wider network of parks and green spaces. These green spaces are not isolated pockets but part of a wider pedestrian network that links Aeris to the surrounding <a href="https://www.apartments.com.au/developments/melrose-park-nsw-2114">Melrose Park</a> precinct, including Central Park, future schools, and the Town Centre opening in July 2026. The result is a transition that moves from public to private without abrupt boundaries, allowing residents to pass through shaded, tree-lined environments before reaching the building itself.

Moving upward, the focus shifts to the level five podium, where the primary communal facilities are concentrated. This space brings together a 16-metre swimming pool, outdoor seating areas, and a communal BBQ zone arranged to take advantage of elevated outlooks. Seating is positioned beneath pergolas, creating pockets of shade that extend the usability of the space throughout the day. The pool edge aligns with views toward the wider district, reinforcing the sense of elevation that defines the project’s positioning.

In the adjacent building, this is complemented by quieter, more contemplative spaces, including an outdoor cinema set within the same level. Positioned to operate primarily in the evening, it introduces a different tempo to the shared environment, shifting from daytime activity to after-hours use without requiring separate zones.

[smartcode_project:default project_id=426 project_image_fid=360299]

The podium also accommodates an intimate private resident gym. Located on the lower levels, it gives residents convenient access to fitness facilities without leaving the building.

Above, the elevated podium sky deck extends the amenity offering, providing additional open-air spaces with elevated outlooks across the surrounding landscape. While more restrained in program, this upper level reinforces the project’s vertical progression, from ground-level greenery to elevated outlook, allowing residents to move between distinct spatial conditions within a single address.

This distribution of amenities reflects a deliberate response to how residents use space across the day. Sekisui House Australia Sales and Marketing Director Peter Kalaf points to the role these shared areas play in shaping buyer demand. Aeris has been conceived as more than a collection of apartments, with the podium pool, gym and outdoor cinema forming part of a broader lifestyle offering that extends the home beyond each individual residence.

[smartcode_project:default project_id=426 project_image_fid=360300]

What distinguishes Aeris is not the inclusion of these elements individually, but how they are arranged in relation to one another. Active, social, and passive spaces are layered vertically rather than separated, allowing residents to choose between them without leaving the building or moving far from their apartment. This proximity supports both routine use, such as a morning swim or evening workout, and more occasional gatherings, whether around the BBQ area or within the cinema setting.

The amenity design also sits within a broader framework of connectivity across Melrose Park. The Melrose Park Town Centre, anchored by Coles and Dan Murphys, features a mix of retail, dining, health and lifestyle offerings, bringing everyday convenience closer to residents. By the end of the year, more than five hectares of parks and open space, equivalent to around seven football fields of green space on residents' doorstep, will further enhance the precinct, allowing the internal facilities at Aeris to operate as an extension of the wider neighbourhood rather than a substitute for it.

Construction at Aeris continues to gather momentum, with ground floor slabs expected to be completed in late 2026 before the first sections of the buildings begin to rise above ground.

[smartcode_project_cta:default project_id=426]

Elevated amenity anchors daily life at Aeris, Melrose Park

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

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

Rba Insights

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The year ahead: RBA Governor Philip Lowe

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At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
The global economy grew above trend in 2018, although it slowed in the second half of the year. Unemployment rates in most advanced economies are low. The outlook for global growth remains reasonable, although downside risks have increased. The trade tensions are affecting global trade and some investment decisions. Growth in the Chinese economy has continued to slow, with the authorities easing policy while continuing to pay close attention to the risks in the financial sector. Globally, headline inflation rates have moved lower due to the decline in oil prices, although core inflation has picked up in a number of economies.
Financial conditions in the advanced economies tightened in late 2018, but remain accommodative. Equity prices declined and credit spreads increased, but these moves have since been partly reversed. Market participants no longer expect a further tightening of monetary policy in the United States. Government bond yields have declined in most countries, including Australia. The Australian dollar has remained within the narrow range of recent times. The terms of trade have increased over the past couple of years, but are expected to decline over time.
The central scenario is for the Australian economy to grow by around 3 per cent this year and by a little less in 2020 due to slower growth in exports of resources. The growth outlook is being supported by rising business investment and higher levels of spending on public infrastructure. As is the case globally, some downside risks have increased. GDP growth in the September quarter was weaker than expected. This was largely due to slow growth in household consumption and income, although the consumption data have been volatile and subject to revision over recent quarters. Growth in household income has been low over recent years, but is expected to pick up and support household spending. The main domestic uncertainty remains around the outlook for household spending and the effect of falling housing prices in some cities.
The housing markets in Sydney and Melbourne are going through a period of adjustment, after an earlier large run-up in prices. Conditions have weakened further in both markets and rent inflation remains low. Credit conditions for some borrowers are tighter than they have been. At the same time, the demand for credit by investors in the housing market has slowed noticeably as the dynamics of the housing market have changed. Growth in credit extended to owner-occupiers has eased to an annualised pace of 5½ per cent. Mortgage rates remain low and there is strong competition for borrowers of high credit quality.
The labour market remains strong, with the unemployment rate at 5 per cent. A further decline in the unemployment rate to 4¾ per cent is expected over the next couple of years. The vacancy rate is high and there are reports of skills shortages in some areas. The stronger labour market has led to some pick-up in wages growth, which is a welcome development. The improvement in the labour market should see some further lift in wages growth over time, although this is still expected to be a gradual process.
Inflation remains low and stable. Over 2018, CPI inflation was 1.8 per cent and in underlying terms inflation was 1¾ per cent. Underlying inflation is expected to pick up over the next couple of years, with the pick-up likely to be gradual and to take a little longer than earlier expected. The central scenario is for underlying inflation to be 2 per cent this year and 2¼ per cent in 2020. Headline inflation is expected to decline in the near term because of lower petrol prices.
The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.
Source <a href="https://www.rba.gov.au/media-releases/2019/mr-19-01" target="_blank">RBA</a>
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Weakening house prices as 2018 adjustment continues: RBA Governor Philip Lowe's February 2019 meeting statement

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Downsize risks acknowledged in December 2019 Minutes of Reserve Bank Board

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EXPERT OBSERVER
Good morning and thank you for the opportunity to speak here. Today, I want to talk about long-term developments in the Australian equity market.
Equities are important for the Australian economy. Today, the equity market is one of Australia's largest financial markets. The total value of companies listed here is a bit under $2 trillion; as you can see in Graph 1 this is more than 100 per cent of GDP. This has not always been the case: the equity market has rapidly grown as a share of GDP over the past 20 years. Before the 1960s, the government bond market was by far the most important financial market in Australia.<a id="r1" href="https://www.rba.gov.au/speeches/2018/sp-so-2018-12-13#fn1"> </a>
<div class="image-graph">
<div class="title">Graph 1</div>
<img src="https://www.rba.gov.au/speeches/2018/images/sp-so-2018-12-13-graph1.gif" alt="Graph 1: Australian Financial Markets">
</div>
Equities are also an important part of Australians' retirement savings. While most people don't own shares directly, anyone with superannuation usually holds equities indirectly through their fund's investments. Payments from listed companies, in the form of dividends and share buybacks, were worth almost $100 billion dollars in the past twelve months. By way of comparison, this is equivalent to about 5 per cent of household income.<a id="r2" href="https://www.rba.gov.au/speeches/2018/sp-so-2018-12-13#fn2"> </a>
Listed companies employ a substantial number of people and many of Australia's well-known companies are listed on the stock exchange. This doesn't mean that the performance of the stock exchange is the same thing as the performance of the economy. But by understanding developments affecting listed companies, we can gain timely insights into what's happening in the economy more broadly.
And, the Reserve Bank pays close attention to the equity market in particular because it is a transmission channel for monetary policy. When interest rates go down, share prices tend to increase, and this increases the wealth of households who hold those equities. Higher share prices, in turn, make it relatively cheaper for companies to issue shares, allowing them to expand.
Today I would like to take a step back and look at the Australian equity market through a longer-term lens. I will focus on returns of equities and the composition of the equity market through time. I will conclude with some observations on price to earnings ratios. Many of the graphs and numbers in this presentation draw, in part, from historical datasets compiled by staff at the RBA. These data – like all historical data – should be interpreted with some caution. Nonetheless, we think that they are of a sufficient quality to provide some useful insights and we will soon make them more widely available to interested researchers.
So how do the returns on equity investments compare to other financial assets in Australia? The return on equity includes gains from both share price changes (or ‘capital gains’) and dividends paid out. Graph 2 shows cumulative returns on financial assets from $100 invested in 1900, adjusted for inflation. Over the long run, equities have been worth much more to investors than other investment options: they have returned about 5 percentage points more than long-term bonds on average each year. This accumulates to a very large amount of money over a long period of time. If you had put $100 into the equity market in 1900 in a portfolio that tracked the stock market index, you would have over $100,000 today after adjusting for inflation; this is more than 100 times what you would have earned from a Government bond or a bank deposit. Perhaps more relevant to our own investment decisions, if you had put $100 into the equity market when you were 20 years old, given average returns it would have been worth more than $1,000 when you retired at age 65. If you had invested it in government bonds, it would have been worth only a quarter of that.
<div class="image-graph">
<div class="title">Graph 2</div>
<img src="https://www.rba.gov.au/speeches/2018/images/sp-so-2018-12-13-graph2.gif" alt="Graph 2: Cumulative Real Returns">
</div>
But investing in the equity market comes with risk. The equity market is more volatile than many other markets: average volatility in the returns generated by equities in Graph 2 is double that of bonds. This means that at any point in time, investors get a return that can be very different from the average return. Developments such as the global financial crisis have emphasised this. In the middle of the financial crisis, share prices fell by around 50 per cent. If you had a superannuation portfolio based on equities, the value of your retirement funds would have declined significantly, and remained lower for quite some time. If you were in, or close to, retirement, you may have had to lock in some of these lower share prices. This emphasises the value of a diversified portfolio but also the importance of taking a longer-run view on the equity market.
There are of course different sorts of companies on the stock exchange, and you might expect that they would provide different return profiles. This is true for some: companies like utilities, for example, generally have more bond-like properties (and so are quite correlated with bond prices). At the same time, returns in broader sectors have been remarkably similar over the past century. You can see this in Graph 3 which shows the cumulative returns on equities in three broad sectors over the past 100 years – the Reserve Bank often looks at the broad sectors resources, financials and ‘others’. Indeed, the average annual returns over that period across the three sectors have been within ½ percentage point of each other. Of course, resources stocks have been a bit more volatile, in part reflecting their exposure to volatile commodity prices.
<div class="image-graph">
<div class="title">Graph 3</div>
<img src="https://www.rba.gov.au/speeches/2018/images/sp-so-2018-12-13-graph3.gif" alt="Graph 3: Total Return Indices">
</div>
What about compared with overseas? Graph 4 shows the average annual returns on stocks in Australia, the United States and the United Kingdom since 1900. (The total return is the dividends – the red bars – and the capital gains – the blue bars – taken together.) At around 10 per cent, the average annual returns are very similar. The pattern is not much different if you look at capital gains and dividends separately.
<div class="image-graph">
<div class="title">Graph 4</div>
<img src="https://www.rba.gov.au/speeches/2018/images/sp-so-2018-12-13-graph4.gif" alt="Graph 4: Total Return On Equities Since 1900">
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Over shorter periods there is more divergence, as you can see in Graph 5. In particular, over the past 25 years Australian stock prices have gone up a bit less than the rest of the world, particularly the United States, as you can see in the blue bars in Graph 5. But Australian companies pay high dividends, due in part to the specific tax treatment they receive; I am referring to franking credits, which were initially introduced in 1987. Taking this into account, Australian stocks have generated above-average returns (the combined red and blue bars) over the past 25 years.
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<div class="title">Graph 5</div>
<img src="https://www.rba.gov.au/speeches/2018/images/sp-so-2018-12-13-graph5.gif" alt="Graph 5: Total Return on Equities Since 1993">
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Let's have a closer look at the companies that make up the Australian securities exchange (or, abbreviated, the ASX). Graph 6 compares the concentration of the stock exchange for different countries. The bars show what share of the total market capitalisation is accounted for by the top 10 companies. On this metric, the ASX is quite concentrated in large companies, with the top 10 companies accounting for a bit less than half of the market capitalisation of the ASX.
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<div class="title">Graph 6</div>
<img src="https://www.rba.gov.au/speeches/2018/images/sp-so-2018-12-13-graph6.gif" alt="Graph 6: Largest 10 Companies' Share of Total Exchange">
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You will notice that the countries with the larger concentrations (on the right-hand side of the graph) tend to be smaller economies. Among similar-sized exchanges, the level of concentration seen at the ASX is not unusual. It means, however, that an investor in a market capitalisation-weighted portfolio of equities is exposed to developments in a smaller set of companies.
This concentration has been a feature of the Australian stock exchange throughout its existence. In fact, it has been largely the same set of companies that have comprised most of the universe of Australian stocks over its history. Graph 7 tries to illustrate this point. The top panel takes all companies listed at the ASX (weighted by market capitalisation) and then distributes them according to the year the company (or its immediate predecessor) was founded. The purple section marks companies that are currently in the top 100 companies of the ASX. The bottom panel does the same aggregated across a number of developed economies. What stands out, is that for the ASX there are a lot of high purple bars on the left hand side of the panel, that is a lot of the top 100 companies are old and they are large in terms of market capitalisation. In fact, the average listed Australian company when weighted by market capitalisation is about 100 years old. This makes our listed companies, on average, substantially older than those in the United States or Japan (which make up a large share of the graph in the bottom panel). But it is comparable to the United Kingdom, France and Germany, although stock exchanges there existed several hundred years before ours.
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<div class="title">Graph 7</div>
<img src="https://www.rba.gov.au/speeches/2018/images/sp-so-2018-12-13-graph7.gif" alt="Graph 1: Listed Companies by Founding Date">
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A striking number of large, still-existing Australian companies were founded in the 1800s, in many cases before the existence of stock exchanges in Australia. These are mostly the predecessors of the banks and mining companies, which have their origins in colonial banks and 19th century mining booms, respectively. By contrast, very few large public Australian companies have been founded in the past 50 years (and many of the large listings, such as the Commonwealth Bank of Australia and Telstra, have been privatisations). In this respect, Australian markets are something of an outlier globally.
That said, the stock exchange has not been completely static over the past century, and there have been substantial compositional shifts at times. Graph 8 shows the ASX shares of the three large sectors – financials, resources and ‘others’ – through time.<a id="r9" href="https://www.rba.gov.au/speeches/2018/sp-so-2018-12-13#fn9"> </a>
<div class="image-graph">
<div class="title">Graph 8</div>
<img src="https://www.rba.gov.au/speeches/2018/images/sp-so-2018-12-13-graph8.gif" alt="Graph 8: Equity Market Sectors">
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The resources sector (in orange) has tended to expand and contract with mining booms and commodity prices. During the mining boom of the 2000s, the share of the stock market capitalisation accounted for by resources companies doubled over a period of about five years: at their peak, resources companies made up about a third of the ASX 200. But this pales in comparison with the experience of the late 1960s boom, where the resources sector was worth at its peak in 1970 around 65 per cent of the exchange by market capitalisation. Of course, resources booms tend to be followed by busts, and so the large share shrunk within a few years. On average, the resources sector has a larger weight on the stock exchange than it has in the real economy.<a id="r11" href="https://www.rba.gov.au/speeches/2018/sp-so-2018-12-13#fn11">[11]</a> This could reflect that financing mines can be a speculative, risky investment; equity can be a more attractive way to finance such investment, allowing investors (with a matching risk appetite) to share in the potentially large upside without saddling the company with large debt repayment obligations if the resources discovery (and the associated revenue) disappoints.
The ASX is bank-heavy and the financial sector (in blue) more broadly makes up about a third of the exchange by market capitalisation: almost exactly the same share as it did 100 years ago. But, in fact, through most of the 20th century the sector was quite small, reflecting the regulation following the Great Depression, and only regaining its historical share in the 1980s and 1990s. The sector has also diversified quite a lot since its early days, with diversified financials and insurance companies accounting for a much larger share than they used to.
Other sectors (in green) have reflected changes in the industry composition of the Australian economy over the past 100 years. The rise and fall of manufacturing was reflected on the exchange, with manufacturers frequently featuring in the top 10 companies through the 1940s and 50s; most of these have since delisted. A company that ferried people across Sydney Harbour was in the top 50 companies on the exchange for decades, until its business model was disrupted by the construction of the Harbour Bridge. More generally in the transportation sector, ferries, steamships and railroads have largely been replaced by road infrastructure and air travel. On the other hand, some sectors played a significant role in the economy but not on the stock exchange. Agriculture, forestry and fishing is one example, which for the first half of the 20th Century accounted for up to 30 per cent of GDP, but has rarely featured in much size on the stock exchange.
More generally, the size of the equity market relative to GDP – one measure of capital market development – has fluctuated around about 100 per cent of GDP over the past two decades. This is broadly in line with the markets of other developed economies. Australian companies have continued to raise capital on the stock market, and the number of listed companies has continued to increase, albeit a bit more slowly of late. All this suggests that equities remain an important source of funds for Australian companies in a wide range of industries.
Finally, I would like to touch on valuations. In the global low-interest environment of recent years, some commentators (including the Reserve Bank) have raised the prospect that this has led to a ‘search for yield’ by global investors, where they bid up the price of risky assets and thus increase the risk of a sharp correction down the road. One simple way of measuring this for the equity market is a price-to-earnings ratio, shown here in Graph 9 for both Australia and the United States. By this measure, Australian equities are not showing signs of heightened valuations.
<div class="image-graph">
<div class="title">Graph 9</div>
<img src="https://www.rba.gov.au/speeches/2018/images/sp-so-2018-12-13-graph9.gif" alt="Graph 9: Price-to-earnings Ratios">
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This graph also emphasises that, in the long run, share prices are driven by fundamentals, that is, company profits or ‘earnings’. The Australian share market will likely be dominated in the future by companies able to sustain profit growth over long periods of time, as it has been in the past. This may be the current large listed companies, many of whom have managed to play a role in Australia's listed equity market for a very long period of time, as I discussed. Or it may be others.
Some of the points I've discussed today are unlikely to change. The stock market will most likely remain both an important source of funds for Australian corporates, and an investment vehicle for Australian households and foreign investors. Equities will be more volatile than safer assets, but will very likely yield higher returns over the long term, and the composition of the market will continue to broadly reflect the structure of the real economy.
Thank you.
Marion Kohler is the RBA's <a id="r*" href="https://www.rba.gov.au/speeches/2018/sp-so-2018-12-13#fn*"></a>Head of Domestic Markets Department.
To read the original article <a href="https://www.rba.gov.au/speeches/2018/sp-so-2018-12-13" target="_blank">click here</a>.
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The RBA's long view on Australian equities

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The latest chart pack gives an insight into how the RBA came to its decision to leave the cash rate on hold at a record low 1.5 percent.
GDP growth continues to rise towards the four percent mark.
It is now at its highest point since 2012.
Click here <a href="https://www.propertyobserver.com.au/images/2018/12/5/GDP.jpg" target="_blank">to enlarge.</a>
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CPI remains unpredictable, hovering above or below the two percent region.
Click here <a href="https://www.propertyobserver.com.au/images/2018/12/5/CPI.jpg" target="_blank">to enlarge.</a>
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The gap between disposable income and consumption is narrowing.
Click here <a href="https://www.propertyobserver.com.au/images/2018/12/5/income-consumption.jpg" target="_blank">to enlarge.</a>
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Consumer sentiment continues to rise to levels not seen since mid 2016.
Click here <a href="https://www.propertyobserver.com.au/images/2018/12/5/consumer-sent.jpg" target="_blank">to enlarge.</a>
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Housing loan approvals for investors and owner occupiers continue their downward trajectory after tighter lending criteria.
Click here <a href="https://www.propertyobserver.com.au/images/2018/12/5/loans.jpg" target="_blank">to enlarge.</a>
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Housing loan approvals for investors head lower given tighter lending: RBA chart park

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Securitisation and the housing market: RBA's Christopher Kent

Trade policy development pose significant risk to solid growth outlook: RBA November minutes

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Households are spending more money despite growth in household income remaining low, the RBA's November domestics economic conditions report suggests.
Household consumption growth has been stable at around three percent over the last year, however growth in household income remains low.
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Goods consumption grew by 3.5 per cent over the year to the June quarter.
The strong percentage growth in expenditure on food and clothing more than offset a decline in motor vehicle sales. 
Consumption of services grew by 2.6 per cent, supported by growth in the consumption of recreation and communication services.
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There have been some sizeable upward revisions to consumption growth in recent quarters, notably to consumption of overseas travel services, which has become more complicated to measure after the discontinuation of outgoing passenger cards in mid 2017.
By state, consumption growth continues to be strongest in New South Wales and Victoria. 
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Disposable income growth has been driven by labour income, which is growing at around its fastest year-ended rate since 2012.
It is still tracking however below its long-run average.
"Housing and equity prices will weigh on household wealth," the RBA noted.
Click here to enlarge.
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Household consumption growth stable but income growth remains low: RBA

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The latest chart pack gives an insight into how the RBA came to its decision to leave the cash rate on hold at a record low 1.5 percent.
House prices continue to decline from the late 2017 peak.
Click here <a href="https://www.propertyobserver.com.au/images/2018/11/8/RBA%20statpack%201.JPG" target="_blank">to enlarge.</a>
<a href="https://www.propertyobserver.com.au/images/2018/11/8/RBA%20statpack%201.JPG" target="_blank"><img src="https://www.urban.com.au/images/2018/11/8/RBA%20statpack%201.JPG" alt=""></a>
Housing loan approvals for owner-occupiers and investors continue to decline.
In 2016 there were a similar amount of approvals for investor loans and owner-occupier, but since then the gap has grown.
Investor haven't been higher the owner-occupier approvals since 2015.
Click here <a href="https://www.propertyobserver.com.au/images/2018/11/8/RBA%20statpack%202.JPG" target="_blank">to enlarge.</a>
<a href="https://www.propertyobserver.com.au/images/2018/11/8/RBA%20statpack%202.JPG" target="_blank"><img src="https://www.urban.com.au/images/2018/11/8/RBA%20statpack%202.JPG" alt=""></a>
Wage price index growth has shown a steadiness over the last few months, coming after a steady decline over the last four years.
The index sits just over two percent, well down on its highs of over four percent some 10 years ago.
Click here <a href="https://www.propertyobserver.com.au/images/2018/11/8/RBA%20statpack%203.JPG" target="_blank">to enlarge.</a>
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Despite no official rate rises for 26 consecutive months, variable interest rates continue to fluctuate.
The average standard variable reference rate has been hovering around the 5.5 percent mark for the last four years, but saw a sharp increase half way through 2018, when three of the big four decided to hike their rates.
New loans continue to decline to four year lows.
Click here <a href="https://www.propertyobserver.com.au/images/2018/11/8/RBA%20statpack%204.JPG" target="_blank">to enlarge.</a>
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Fixed interest rates are slowly heading down towards the four percent mark, having been nearly eight percent 10 years ago.
It's the lowest fixed interest rates have been in three years.
Click here <a href="https://www.propertyobserver.com.au/images/2018/11/8/RBA%20statpack%205.JPG" target="_blank">to enlarge.</a>
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Variable rates fluctuate as fixed rates continue to decline: RBA Chart Pack

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The November meeting of the RBA has seen the cash rate remain on hold at 1.5 percent.
It has now stayed at record lows for 27 consecutive months.
The August rate hold marked the two year anniversary of the last change to the cash rate by the RBA. 
CoreLogic head of Research Tim Lawless said that despite record cash rate lows, rates are still rising.
"Although the cash rate remained on hold for a record 27th month, it’s important to note that mortgage rates to investors are up as much as fifty basis points over the same time frame," Lawless said.
"That’s the equivalent of two cash rate hikes, and variable rates for owner occupiers have increased by 15 basis points over the past two months alone. 
"The rise in mortgage rates, particularly for investors who are now paying a 55 basis point premium over owner occupiers, together with tighter lending conditions more broadly, has been a key factor in taking the heat out of the housing market. 
Lawless said that despite relatively strong economic conditions, with GDP running at a six year high and unemployment at a six year low, the recent core inflation reading was tracking at 1.7% and wages growth remains subdued.
"The ongoing fall in Australian dwelling values is also likely to be weighing more heavily on the RBA’s deliberations, with CoreLogic indices showing the housing market downturn is becoming more broad based, with most regions around Australia showing a clear slowdown in growth rates, if not declining values," Lawless suggested.
"Although mortgage rates have edged higher over recent months, the cost of debt remains at the lowest levels since the 1960’s. 
"With the cash rate remaining on hold for the foreseeable future and funding cost pressures easing, we are likely to see mortgage rates remain close to their current levels which should help to keep a floor under housing demand, especially with housing affordability now improving and labour markets strengthening. "
The Reserve Bank has left the cash rate on hold today at 1.50 per cent, marking eight years since the last cash rate hike in November 2010.
In November 2010 the average loan size was $309,900. Today it is $395,800; a 28 per cent increase, according to RateCity research.
Rates have also changed significantly in this time. The average discounted variable rate in November 2010 was 7.15 per cent. Today it is 4.65 per cent.
As a result, the average Australian is paying approximately $52 less in loan repayments each month, based on a 30-year loan.
RateCity<a href="http://ratecity.com.au/">.</a>com<a href="http://ratecity.com.au/">.</a>au research director, Sally Tindall, said it’s incredible to think there is a now a generation of first home buyers who’ve never experienced an RBA rate hike. 
“Eight years is a long time between increases. Interestingly, the average home owner is paying less per month on their mortgage repayments now – but only marginally,” she said.  
“The RBA is unlikely to hike rates in the near future, but that doesn’t mean people should become complacent about paying down their debt.
“Keep an eye on your rate and shop around to see what other lenders are offering. The banks are desperate for new business, particularly as their profit margins are squeezed which is a win for borrowers.”
1300HomeLoan Managing Director John Kolenda said all signs point to the RBA leaving official rates at the all-time low of 1.5 per cent until next year and possibly 2020 with a rate cut now more likely in the long term than an increase.
Kolenda said the RBA once had form for getting amongst the action on Cup Day, but it has now been eight years since the central bank lifted its cash rate on the day that stops the nation, while its last rate movement was in August, 2016.
“It’s a pretty safe bet that the RBA’s cash rate will stay at 1.5 per cent when the Melbourne Cup is next held in November, 2019,” Kolenda said. 
“While there are some good signs for the domestic economy with lower unemployment and more first home buyers getting back into the market, the US-China trade war, housing conditions easing in Sydney and Melbourne, uncertain household consumption and the coming federal election will all influence the RBA to maintain its watching brief.
“Lenders have already increased rates out-of-cycle so there is no need for the RBA to do anything.”
 
 
 
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