<a href="https://www.apartments.com.au/developments/broadbeach-qld-4218">Broadbeach</a> offers plenty of reasons to live vertically, but moving from a substantial family home into an apartment can expose the compromises of high-density living. Privacy, room for guests and usable living space tend to matter more when an apartment is intended as a permanent home rather than an occasional coastal base.

A typical residential floor at <a href="https://www.apartments.com.au/new-apartments/the-eveleigh-broadbeach-7-9-surf-parade-broadbeach-qld-4218">The Eveleigh</a>, on Surf Parade,&nbsp;contains just four apartments. The 94-residence development by <a href="https://www.apartments.com.au/developers/hirsch-faigen">Hirsch &amp; Faigen</a> is predominantly made up of expansive three-bedroom homes, with a limited collection of half-floor penthouses above.

Across the apartment floors, <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a> has used the relatively limited number of residences to give each home greater access to natural light and outlook. Living spaces extend towards full-height glazing, while a series of bay windows frame selected views across the Pacific Ocean, city and hinterland rather than treating the building edge as a continuous wall of glass.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360965]

“The apartment floors deliver a collection of homes that embrace controlled outlook via a series of bay windows deliberately framing moments of view,” Rothelowman Director Kim Lowman said.

From outside, those projecting forms contribute to the tower’s faceted profile. Strong horizontal and vertical elements establish its proportions, while the changing position of the sun alters the light, shadow and reflection across the façade throughout the day.

The same attention moves inside the apartments, where the material palette combines warm timber, natural stone, metallic detailing and softer curved forms. Kitchens sit within the main living zone, with stone island benches, integrated joinery and European appliances, before the living areas extend towards the glazing and the outlook.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360981]

Three genuine bedrooms provide room to accommodate family and guests, while two secure car spaces and storage address some of the practical considerations that can become more noticeable when moving from a larger home. Feedback from the display suite has centred on the warmth and restraint of the interiors, with buyers commenting that the residences feel like homes rather than conventional coastal apartments.

A limited collection of half-floor penthouses occupies the upper levels, increasing the scale of the living spaces and adding private balconies and elevated finishes. From this position, the outlook extends between the ocean and hinterland.

Outside the private residences, The Eveleigh separates its shared spaces between the podium and rooftop. The podium is centred on wellness, with subtropical landscaping surrounding a swimming pool and pool terrace, yoga garden, private gymnasium, sauna and hot and cold plunge facilities. Landscaped retreats and pavilions provide additional places to sit away from the main recreation areas.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360966]

Higher in the building, a rooftop pavilion and private dining suite sit alongside resident lounge, barbecue and outdoor dining areas, opening towards panoramic views across the ocean, city and hinterland.

“Buyers are no longer just looking for an apartment, but a lifestyle where they can relax, reset, and enjoy a balanced way of living,” Hirsch &amp; Faigen Director of Sales Matt George said.

Interest to date has come from established owner-occupiers and interstate lifestyle purchasers, including buyers planning a future move to the Gold Coast. Many are coming from larger homes and want to reduce ongoing maintenance without giving up space for family and guests, privacy, two car spaces or the ability to entertain at home.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360969]

Much of that daily life can also take place beyond the building without requiring a drive. Kurrawa Beach and Pratten Park are an easy walk from Surf Parade, while Pacific Fair, Oracle Boulevard, The Oasis, restaurants, cafés, entertainment and public transport are also within walking distance.

The Eveleigh is Hirsch &amp; Faigen's fourth Gold Coast development since entering the market in 2021, following The Hemingway at Palm Beach, The Emerson at Kirra and Yves at Mermaid Beach. Each of the preceding projects sold out before completion.

“Broadbeach had been on our radar throughout our time operating on the Gold Coast,” the developer said. “Following our projects in Palm Beach, Kirra and Mermaid Beach, Broadbeach represented the natural next step for the business.”

The Surf Parade site brought together proximity to the beach, protected coastal outlooks and walkability to dining, shopping and recreation. Hirsch &amp; Faigen also identified the street as an emerging premium residential address, with enough separation from Broadbeach's busier destinations to retain a quieter environment at home.

The Eveleigh is now under construction by Maxcon, with completion forecast for mid-2028. Three-bedroom residences are currently available from $2.87 million.

[smartcode_project_cta:default project_id=149670]

Joel Robinson

The Eveleigh brings house-like apartments to Broadbeach

A long-stalled Campbelltown development site is back in play, with new plans for 139 apartments set to supersede a mixed-use scheme approved almost a decade ago but never built.

The new proposal for 28 Cordeaux Street would deliver 116 market and 23 affordable apartments in a part 14-storey building, bringing a substantial new project into a Campbelltown market where new apartment supply remains limited.

Plans have been filed over the 3,092 sqm corner site at Moore-Oxley Street, around 600 metres from Campbelltown Railway Station and the city-centre retail core.

The site already carries a mixed-use residential approval dating to 2016. Doroch Architects has now been engaged on a larger replacement scheme, which is progressing as a State Significant Development Application following a Housing Delivery Authority determination in August 2025.

The apartment mix comprises 39 one-bedroom, 72 two-bedroom and 28 three-bedroom residences. Two-bedroom apartments make up just over half of the project, while three-bedroom homes account for 20 per cent.

<img alt="First look: New 139-apartment plans revive long-stalled Campbelltown city centre site" data-entity-type="file" data-entity-uuid="136dd5b9-3791-4da6-9e31-76f533f5b4de" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Campbelltown%20da2.png?VersionId=LgOSy9nwf5u.MGswBBwaGGxuX8QpHSl_" />

Of the 139 apartments, 23 will be delivered as affordable housing under the in-fill affordable housing provisions of the Housing SEPP. The affordable component represents 15 per cent of the residential gross floor area and will be managed by a registered Community Housing Provider.

Doroch has sought to break the scale of the building into two distinct elements, with a masonry podium of around four storeys establishing the street edge before the residential tower steps back above.

The corner position has shaped that approach. Cordeaux Street faces toward the commercial and civic centre, while Moore-Oxley Street leads into the lower-scale residential neighbourhood to the south, and the design verification report describes the site as "bridging the commercial core to the north and established residential areas to the south."

The podium will be expressed predominantly in face brick, while the upper levels shift to brushed and grooved concrete cladding with darker metal detailing. Recessed sections, deep balcony edges and landscaping break down the upper form, with an approximately 11.8-metre setback to the northern boundary addressing the adjoining St Peters Anglican School.

<img alt="First look: New 139-apartment plans revive long-stalled Campbelltown city centre site" data-entity-type="file" data-entity-uuid="c8b3d2d3-c561-4bfc-a5d9-a68c0c10dac1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Campbelltown%20da1.png?VersionId=AeAEyJU02Gk2k5noUj2StziCvdQ7fW4B" />

Campbelltown has been starved of new residential developments in the last decade.

The only other notable development set to come to market this year is ALAND's Queen Square, a mixed-use precinct on over two hectares that will comprise apartments above a vibrant ground-level retail and hospitality dining precinct.

First look: New 139-apartment plans revive long-stalled Campbelltown city centre site

First Look: Sherlock Construction pitches apartments for low-rise Deception Bay

Queensland builder-developer MAYD has revealed the first look at its major North Kirra beachfront development, lodging amended plans that reduce the number of apartments and increase the proportion of larger residences.

The project is planned across a substantial 4,742 sqm amalgamated site spanning seven lots at <a href="https://www.apartments.com.au/new-apartments/2-6-pacific-parade-bilinga-qld-4225">2-6 Pacific Parade</a> and 27-33 Golden Four Drive in Bilin​ga, directly opposite Nor​th Kirra Beach.

<a href="https://www.apartments.com.au/developers/mayd-group">MAYD</a> secured the site for $32.5 million in 2025, in what was one of the Gold Coast's largest property transactions of the year.

The development will be delivered across two stages, with the first stage carrying an estimated gross realisation value of around $360 million.

The latest amendments seek to reduce the overall apartment count and shift the project further toward the owner-occupier market, with larger residences designed for buyers wanting considerably more space than traditionally offered in a beachfront apartment.

The residential mix will include townhomes, oversized two-bedroom apartments, substantial three-bedroom residences and four-bedroom homes.

MAYD has appointed Cera Stribley to lead the architecture and interiors, with the Melbourne-based design practice drawing on the beachfront setting through a series of ocean-facing terraces and heavily landscaped balconies.

Strong horizontal forms and curved balconies will define the exterior, with subtropical landscaping integrated throughout the building to soften the built form and increase the connection between the residences and the beachfront.

The project will also include an extensive collection of resident wellness and lifestyle facilities, continuing the broader shift across the Gold Coast's luxury apartment market toward larger homes supported by resort-style amenity.

<img alt="MAYD" data-entity-type="file" data-entity-uuid="d1bcbb05-e659-4b47-8bd4-1e595315e2ad" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%202.05.03%E2%80%AFPM.png?VersionId=jj0XEud1X1DuLt7_KyElhjMdZGOXmLHP" />

MAYD Founder Todd Mould said North Kirra was increasingly appealing to buyers attracted to the more established, lower-density character of the southern Gold Coast.

"North Kirra presents one of the most compelling luxury residential opportunities currently emerging in Australia, combining absolute beachfront with the character and authenticity that buyers are increasingly seeking, and the same sense of tight-knit community that defined Burleigh and Currumbin perhaps 10 or 15 years ago," Mould said.

"With Gold Coast Airport on its doorstep, it also offers a level of accessibility that broadens its appeal across almost every market demographic."

The project comes as the southern Gold Coast continues to attract an increasing share of high-end apartment development and buyer activity.

Kirra in particular has emerged as one of the region's more tightly held beachfront markets, with its relatively low-density character, established surf and hospitality scene and proximity to Gold Coast Airport differentiating it from the higher-density markets further north.

Mould said those characteristics had informed the approach MAYD and Cera Stribley had taken to the project.

"We've worked closely with Cera Stribley to create a vision that is deeply connected to its surroundings," he said.

"Inspired by the coastline itself, the architecture has been shaped around space, privacy and resort-style living, creating a collection of homes that reflects the next generation of luxury on the southern Gold Coast."

MOTIV Managing Director Carly Cottam, who has been appointed to market the project, said buyer attention had continued to move south along the Gold Coast.

"Purchasers who may once have defaulted to Broadbeach, Main Beach or Surfers Paradise are increasingly recognising the value of a genuine beachfront location that offers lower density, strong amenity and a more established sense of community," Cottam said.

"Kirra has a powerful combination of growing demand and genuine scarcity. Beachfront supply is inherently constrained, the area remains relatively low density, and buyers are increasingly placing a premium on locations that feel established, uncrowded and authentic rather than heavily developed."

Cottam said the proximity to Gold Coast Airport was also proving increasingly important for interstate and second-home buyers.

"Being minutes from Gold Coast Airport makes it particularly compelling for interstate buyers, frequent travellers and second-home purchasers who can access an authentic coastal lifestyle almost immediately after stepping off a flight."

The acquisition takes MAYD's active development portfolio to more than $500 million, with the North Kirra project representing one of its largest undertakings to date.

MAYD is targeting an early 2027 launch.

First look at MAYD's North Kirra mixed-use precinct

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Castle Hill, the longtime hub of the Hills District, has been one of the major beneficiaries of Sydney's Metro expansion, with improved connectivity helping drive continued population growth, development and buyer demand across the Hills District.

But despite that growth, the suburb has seen relatively few major new apartment projects brought to market over the past 18 months.

Hills District developer Reve Group is looking to fill that gap with <a href="https://www.apartments.com.au/new-apartments/nova-r-ve-castle-hill-2-garthowen-crescent-castle-hill-nsw-2154">Nova Rêve</a>, a major new mixed-use precinct on the corner of Garthowen Crescent and Old Castle Hill Road, a short walk from Castle Hill Metro Station and Castle Towers.

[smartcode_project:default project_id=152737 project_image_fid=377679]

The project will comprise three residential towers alongside a hotel, restaurants, cafes and a skybar, more than 1,600 sqm of ground-floor retail and almost an acre of landscaped gardens.

It represents the largest project undertaken by Reve Group, the development arm of the Kassis family, which has been building across the Hills District for more than 30 years through Kassis Homes.

[smartcode_project:default project_id=152737 project_image_fid=377675]

Nova Rêve also represents a significant step up from the family's first apartment development, Grand Rêve, which was delivered nearby on Garthowen Crescent.

Grand Rêve introduced larger, house-like apartment layouts and premium inclusions including Wolf and Sub-Zero appliances to the Castle Hill market.

Nova Rêve takes that approach to a precinct scale, combining the residential component with hospitality, retail and substantial public and resident landscaping.

[smartcode_project:default project_id=152737 project_image_fid=377685]

Reve Group Managing Director Sam Kassis said the project reflected the family's three decades of building in the Hills, which has evolved from trophy homes on quarter-acre blocks to larger-scale apartment development.

"Grand Rêve was our first apartment project here and it showed us what this pocket of Castle Hill could be. Nova Rêve is the refinement of that idea: not just apartments, but a place the whole suburb can use," Kassis said.

A key part of that approach is the hotel, which has been designed to operate as an amenity for the wider Castle Hill community rather than solely hotel guests.

It will include restaurants, cafes, skybars and all-day dining, alongside conference and event facilities catering to business functions, community groups and private events.

At ground level, more than 1,600 sqm of shops and cafes will open onto the surrounding streets and landscaped areas.

Almost an acre of gardens designed by Land and Form Studios will run through the precinct, incorporating pathways, seating, barbecue areas and children's play spaces.

[smartcode_project:default project_id=152737 project_image_fid=377680]

Reve Group's Romio Georges said creating an active ground plane had been central to the planning of Nova Rêve.

"There are gardens with pathways, barbecues, seating and play areas, shops and cafes opening onto the street, and a hotel with restaurants and a skybar that anyone in Castle Hill can walk into," Georges said.

The project's elevated position on one of Sydney's highest ridgelines will also provide apartments with outlooks toward the Sydney skyline, surrounding parkland and the Blue Mountains.

More than 80 per cent of the apartments will occupy corner positions, with Turner responsible for both the architecture and interiors.

&nbsp;

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</main>

Nova Rêve arrives as Reve Group bets on Castle Hill's next growth phase

Recession

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GUEST OBSERVATION
The facts are not in dispute.
Annual GDP growth has fallen to <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0" target="_blank">1.8%</a>. On a per-capita basis we have had three consecutive quarters of negative growth. The last time that happened was during the drought and recession of <a href="https://theconversation.com/expect-weak-economic-growth-for-quite-some-time-what-wednesdays-national-accounts-tell-us-118273" target="_blank">1982</a>, almost four decades years ago.
The most recent inflation reading was literally <a href="https://theconversation.com/vital-signs-zero-inflation-means-the-reserve-bank-should-cut-rates-as-soon-as-it-can-on-tuesday-week-115931" target="_blank">zero</a>. Real wage growth has been stagnant <a href="https://theconversation.com/this-is-what-policymakers-can-and-cant-do-about-low-wage-growth-101025" target="_blank">for six years</a>. Household debt is nearly <a href="https://bit.ly/2K0KbIZ" target="_blank">double</a> disposable income. And underemployment is <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/ausstats/abs@.nsf/mf/6202.0" target="_blank">more than 8%</a>, on top of a 5.2% rate of unemployment.
What is in dispute is what to do about it.
We’ve entered secular stagnation
After being been told for years that the economy is in good shape and that we are <a href="https://www.businessinsider.com.au/video-prime-minister-malcolm-turnbull-on-his-1-billion-ideas-boom-2015-12" target="_blank">“transitioning away from the mining boom”</a>, it’s time to face the reality that, like most advanced economies, we are in a low-growth, low-interest rate, low-inflation trap.
Former US Treasury Secretary Larry Summers has argued for some time that advanced economies, almost universally, are suffering from what he calls “<a href="https://theconversation.com/secular-stagnation-its-time-to-admit-that-larry-summers-was-right-about-this-global-economic-growth-trap-112977" target="_blank">secular stagnation</a>” — a protracted period of low growth caused by too much savings chasing too few productive investment opportunities.
If the description applies to us, and it does, there are only two ways to escape it.
We’ve two options
One is unconventional monetary policy: measures that have the effect that pushing interest rates below zero would have.
The other is aggressive fiscal policy: either big (and if necessary, repeated) tax cuts or a big (and if necessary, repeated) boost in government spending, each of which would put the <a href="https://theconversation.com/vital-signs-when-it-came-to-the-surplus-both-bill-and-scott-were-having-a-lend-116806" target="_blank">surplus</a> at risk.
What would an aggressive-enough monetary policy look like?
The starting point is a concept known as the “equilibrium real interest rate”. It’s the real (inflation-adjusted) rate of interest consistent with stable macroeconomic performance (which means full employment without financial bubbles).
1: Aggressive monetary policy
There is <a href="https://www.brookings.edu/wp-content/uploads/2019/03/On-Falling-Neutral-Real-Rates-Fiscal-Policy-and-the-Risk-of-Secular-Stagnation.pdf" target="_blank">compelling evidence</a> that in advanced economies such as Australia the equilibrium real interest rate is negative.
But getting there in a low-inflation environment is hard. The Reserve Bank can, if it chooses, set the cash rate as low as 0% (<a href="https://theconversation.com/the-reserve-bank-will-cut-rates-again-and-again-until-we-lift-spending-and-push-up-prices-118263" target="_blank">this week it cut it to 1.25%</a>) but it can’t safely move it much lower than zero. If it did, if people and firms found themselves having to pay money in order to keep money in banks, they might simply take their money out, giving the Reserve Bank even less control.
This problem is known as the “zero lower bound”. It means that if the bank needs to cut rates beyond than zero it’ll probably have to do something else that has a similar effect.
The most likely candidate is “<a href="https://theconversation.com/now-is-the-time-to-plan-how-to-fight-the-next-recession-111497" target="_blank">quantitative easing</a>” (QE), whereby the central bank buys long-term government bonds and other securities from investors that have them, effectively forcing cash into their hands, which the zero interest rate means they have little choice but to spend.
It shows up in lower longer-term interest rates (rates for borrowing 5, 10 or even 30 years into the future) and should boost spending and borrowing just as much as cutting short-term rates.
There are at least three difficulties with QE in Australia.
The first is that because the Reserve Bank has never done it before, there are questions about how it would mechanically execute on it. The United States and European experience is helpful in providing a template.
The second difficulty is getting out. Nobody, including the US Federal Reserve, really knows what happens when QE is unwound.
Third, if secular stagnation persists, then QE needs to be a long-term strategy. But is it possible for a central bank to expand its balance sheet buying bonds and securities indefinitely, even if it was buying them at a modest pace? Again, nobody knows.
2: Aggressive fiscal policy
If nothing else, the headaches with monetary policy suggest that fiscal policy might be an attractive alternative. It might also be more effective.
As Reserve Bank governor Philip Lowe noted <a href="https://www.rba.gov.au/speeches/2019/sp-gov-2019-06-04" target="_blank">in a speech on Tuesday</a>, done in a good way government spending on infrastructure could both boost the economy and boost longer term productivity, giving a double benefit. It could be complemented by “structural policies that support firms expanding, investing, innovating and employing people”.
It’s hard to argue with Lowe’s logic. So hard in fact that some of us have been saying <a href="https://www.afr.com/opinion/big-project-spending-a-good-way-to-kickstart-stagnant-economy-20150819-gj2i7v" target="_blank">exactly what he just said for some time</a>.
A quicker way to boost the economy would be to splash cash, either as Kevin Rudd did in the form of cash payments during the global financial crisis, or in the form of <a href="https://theconversation.com/its-the-budget-cash-splash-that-reaches-back-in-time-114188" target="_blank">tax offsets</a> of the kind the Morrison government announced in the 2018 and 2019 budgets.
Delivered straight into bank accounts, both have <a href="https://theconversation.com/election-tip-23-9-is-a-meaningless-figure-ignore-the-tax-to-gdp-ratio-115432" target="_blank">much the same effect</a>, even though one is classified as spending and the other as cutting tax.
The obstacle to doing such things is this government’s – make that this country’s – obsession with balanced budgets.
The surplus can wait
I have <a href="https://theconversation.com/vital-signs-do-deficits-matter-any-more-112680" target="_blank">argued strongly</a> and still believe that debt and deficits do matter, but at the moment we are in serious danger of falling into recession. That makes it imperative to act.
Given the politics of budget deficits and the narratives around economic management, it might be that the burden of action falls on the organisation the least able to pull it off in the present circumstances. That’s the Reserve Bank.
If Australia does dip into recession in the next year or two it will be an unforced error.
Not only would the government be responsible for it by not having taken strong enough action on spending when it could, the bank would also be responsible by taking action too late and letting things get to the stage where it had to act while interest rates were near zero.
Richard Holden, Professor of Economics, UNSW
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/vital-signs-if-we-fall-into-a-recession-and-we-might-well-have-ourselves-to-blame-118387" target="_blank">original article</a>.
</body></html>

rh-YsoTT2xMuQ

If we fall into a recession (and we might) we’ll have ourselves to blame

<html><body>
GUEST OBSERVATION
Australia’s nearly three decades of uninterrupted economic growth won’t last forever.
Sooner or later policymakers will need to respond to a downturn that could come from any number of sources. A severe downturn in our main trading partner, China, a collapse of the local property market, global financial turmoil, or an unfortunate confluence of multiple factors are all possible triggers.
The real question is not whether or even when a recession will come, but how well positioned we will be to respond.
And, unfortunately, the answer right now is “not very”.
To understand what will be required to battle the next Australian recession it’s useful to distinguish between two broad types of economic trouble.
Two types of threat
The first is what one might call a “run-of-the-mill business cycle downturn”. Think Australia, 1990. In this scenario interest rates are raised to ward off inflation but eventually choke off business investment and private spending. Unemployment rises and GDP falls.
The central bank responds by cutting interest rates, and the federal government responds with “Keynesian” economic stimulus (extra government spending and/or tax cuts).
The second type of trouble is different, what might be called “mass financial panic”.
Think the United States in 2008. In this scenario an event (such as massive mortgage defaults) causes financial institutions to fail. If those financial institutions are connected to others then the entire financial system seizes up because everyone stops lending money to each other at once. It’s like a car going from 100km/h to 5km/h in half a second. It hurts.
The Keynesian response is completely insufficient in these circumstances. What’s needed is to get credit moving again.
And this requires people not only believing that they should lend money, but also believing that others will lend money, keeping the economy afloat and making the exercise worthwhile. Coordinating what economists refer to as “<a href="http://personal.lse.ac.uk/dasgupt2/hob_main" target="_blank">higher-order beliefs</a>” requires overwhelming financial force. It’s a kind of <a href="https://www.propertyobserver.com.au/https://www.carnegiecouncil.org/education/008/expertclips/005" target="_blank">Powell doctrine</a> in which the US went in with far more troops than it needed after Iraq’s invasion of Kuwait in the early 1990s in order to overwhelm the enemy.
It was the thinking behind then US Treasury Under Secretary Larry Summers’ <a href="https://www.newyorker.com/magazine/2009/10/12/inside-the-crisis" target="_blank">US$50 billion rescue package to head off the Mexican peso crisis in 1994</a>, and what then US Federal Reserve Chairman Ben Bernanke and US Treasury Secretary Hank Paulson did to avoid a repeat of the Great Depression in 2008.
The Reserve Bank is less than prepared
How well is Australia prepared to respond quickly in either of these scenarios?
Scenario 1 requires the Reserve Bank to cut interest rates and the government to spend money fast. With interest rates already at an historically low 1.50% – and perhaps lower by the time trouble arises – there’s little room left to cut further.
Unorthodox measures might be necessary, like so-called “quantitative easing”. This involves large purchases of long-term bonds to flood markets with money. While there is now experience from the US and Europe about how to do this, in Australia the Reserve Bank would be breaking new ground. Getting into such a program is not simple, and getting out might be very complicated.
But of course jacking up interest rates now to give the bank room to cut later isn’t a solution. That could trigger a recession itself. The bank has to grapple with how to respond to even a standard recession in the new age <a href="http://larrysummers.com/category/secular-stagnation/" target="_blank">of permanently low real interest rates</a>.
We’ve money to spend, but not the means
The government’s fiscal response requires having the capacity to run large budget deficits, which means being able to borrow. Australia’s capacity to borrow is currently good, with <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook45p/DebtPosition" target="_blank">net debt as a proportion of gross domestic product at around 19.2%</a>.
This is low by both international and historical standards. A former chair of President Obama’s Council of Economic Advisers, Christina Romer, and one of the world’s leading macroeconomists, David Romer, have <a href="https://eml.berkeley.edu/%7Edromer/papers/Romer&amp;RomerCrisesandPolicyRevised.pdf" target="_blank">persuasively documented</a> how vital such “fiscal capacity” is. Australia gets an A on that count.
But a cash splash needs to be spent, and fast. That means having “shovel-ready projects” lined up ahead of a recession hitting. Sending cheques to households is easy, but is often used to pay down debt or offset other expenditures rather than on spending.
We need to prepare ahead
A proposal being pursued by the <a href="http://www.grandchallenges.unsw.edu.au/" target="_blank">New Economic Equality Initiative</a> at the University of NSW is to prepare in advance of a recession a “green stimulus” plan. It would be a list of significant environmental expenditures — from tree planting to waterway cleanups, to cycle-path construction to dune repair — that would be documented and ready to implement immediately.
These would be projects that would stimulate demand but also have a high social return. To do them right would take planning ahead of time. It can’t be done well on the fly when a recession has already hit. Otherwise, well, think pink batts.
Preparing for a financial crisis as opposed to a mere recession is harder. Having the budget capacity to provide massive guarantees of bank deposits and other financial obligations is a must.
Last time, we got lucky
Equally important, though, is having regulatory agencies that can see trouble ahead and act swiftly. The Reserve Bank did an outstanding job a decade ago, but next time it won’t have then Treasury Secretary Ken Henry on the board and Kevin Rudd in the prime minister’s chair.
The Australian Securities and Investments Commission has shown itself to be functionally incompetent over an extended period, as the Hayne Royal Commission highlighted all too clearly. Capacity-building is a prerequisite for an effective response to a future crisis.
Regulators need to understand the interconnectedness of different financial institutions, the types of risk they are exposed to, where their funding is coming from and more. To some extent they need to know what they don’t know. It’s a big ask, but it is vital.
In many ways Australia got lucky in 2008. The Reserve Bank had a lot of room to slash interest rates and did it aggressively. The government had close to zero net debt and could spend fast. Ken Henry’s aphorism, “go early, go hard, go households” was heeded by an unusually intellectually curious and adept prime minister. China – our biggest trading partner – enacted an aggressive stimulus plan of its own.
The US Federal Reserve Chair just happened to be the world’s leading expert on the 1929 Great Depression, and the US Treasury Secretary was the former head of Goldman Sachs, an eminence of the banking world. Our response at home was matched by a near-perfect response abroad.
We won’t be that lucky again. Now is the time to plan how to fight the next recession.
Richard Holden, Professor of Economics, UNSW
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/now-is-the-time-to-plan-how-to-fight-the-next-recession-111497" target="_blank">original article</a>.
This is part of a major series called Advancing Australia, in which leading academics examine the key issues facing Australia in the lead-up to the 2019 federal election and beyond. Read the other pieces in the series <a href="https://theconversation.com/au/topics/advancing-australia-66135" target="_blank">here</a>.
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Now is the time to plan how to fight the next recession: Richard Holden

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Morgan Stanley has forecast the current property downturn will be the largest since the early 1980s.
<div class="_1665V undefined">
“We now see a 10-15 per cent peak to trough decline in real house prices, from 5-10 per cent previously, which would mark the largest decline since the early 1980s," the investment bank said.
“This downgrade largely reflects the downturn’s extended length, as we expect the relatively orderly declines to date will continue.”
The early 1980s saw a severe global economic recession.
<p data-gtm-vis-recent-on-screen-6236702_632="1539287775296" data-gtm-vis-first-on-screen-6236702_632="1539287775296" data-gtm-vis-total-visible-time-6236702_632="4000" data-gtm-vis-has-fired-6236702_632="1">The current modelling now points to larger home price falls arising from new housing supply.
“All housing market drivers remain a drag, but supply-demand balance was the main driver of this quarter’s decline, adding to the drag in previous quarters from tightening credit supply,” Morgan Stanley says, according to the Business Insider website.
</div>
<div class="_1lC_G"> The category measures the gap between completions and the net increase in households.</div>
<div class="_1665V undefined">
“On the supply-side, the run-up in construction from the east coast apartment boom has continued longer than we expected, with completions around 215,000 annualised.
<p data-gtm-vis-recent-on-screen-6236702_632="1539287785316" data-gtm-vis-first-on-screen-6236702_632="1539287785316" data-gtm-vis-total-visible-time-6236702_632="4000" data-gtm-vis-has-fired-6236702_632="1">“On the demand side, net migration has fallen noticeably in the past few quarters, trimming our underlying demand estimate to around 175,000.”
</div>
“We struggle to see improvement in any of our components over the next year, with pre-existing headwinds of net supply, an RBA on hold and sustained focus on lending standards, all independent of potential negative gearing/capital gains tax changes,” Morgan Stanley says.
<div class="_1665V undefined">
With households two times more leveraged to housing than in the early 1980s, the impact on housing equity would be larger again.
</div>
<div class="_1lC_G">Morgan Stanley suggest the large correction comes with a small risk of a disorderly price decline.</div>
<div class="_1665V undefined">
“An acceleration of declines are in our bear case, and we will continue to monitor stress points, including arrears trends,” it says.
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Morgan Stanley forecast property downturn will be the largest since the early 1980s

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EXPERT OBSERVER
Wayne Swan and Kevin Rudd spent big and spent bold, and it almost certainly kept us out of recession. <a href="https://theconversation.com/profiles/richard-holden-118107"> </a>
A little more than a decade on from the the collapse of Lehman Brothers, the largest bankruptcy in history, many of the world’s advanced economies are only now beginning to recover fully.
I was on the faculty at the University of Chicago at the time and, like many, followed the events of the 2008 US summer with a combination of interest and outright fear.
It is hard to describe how scary the two months around the Lehman bankruptcy were. Two anecdotes convey some of that fear, however.
The first was when I spoke to an economics official in the Obama administration who said: “Go get cash and bottled water. Automatic teller machines might not be working two days from now.”
The second reflects just how severely money markets froze up. Goldman Sachs – Wall Street’s most venerable firm – was largely on the good side of trades on credit default swaps, the instruments behind much of the crisis. Yet its stock price was utterly hammered. It wasn’t until legendary investor Warren Buffett sank US$5 billion into Goldman that confidence was restored.
On one day Goldman stock was down by a staggering nearly 50% in intra-day trading. It very nearly went the way of Lehman – all because of what amounted to a modern-day bank run.
<img src="https://images.theconversation.com/files/236990/original/file-20180918-158246-1o295vy.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="">Goldman &amp; Sachs stock price.
<hr>
The Obama administration responded with spending (including on tax rebates for households and firms), big interest rate cuts and measures to ensure banks had access to funds. Combined, these helped avoid a repeat of the Great Depression.
When Australia splashed cash
Australia, too, spent big: A$10 billion in October 2008 and a further A$42 billion in February 2009. More than half of the second sum, $A26 billion, went on infrastructure. Another $12.7 billion was spent on cash bonuses, including $900 for every Australian on less than $80,000.
And we cut interest rates, massively, and guaranteed bank deposits.
The International Monetary Fund, the Organisation for Economic Cooperation and Development, and most good economists think what we did was essential to ensure Australia avoided a severe downturn.
Prime Minister Kevin Rudd and his treasurer, Wayne Swan, deserve a lot of credit.
Yet there are those on the conservative side of politics who claim the stimulus spending was wasteful, not that helpful, and locked in an era of higher government spending.
Wasteful? Not really
As prime minister in 2016, Malcolm Turnbull encapsulated the view that the spending was a waste when he <a href="https://www.propertyobserver.com.au/http://www.abc.net.au/7.30/interview:-prime-minister-malcolm-turnbull/7542756" target="_blank">told the ABC’s Leigh Sales</a>: “I think what shepherded Australia through the GFC successfully was the Chinese stimulus and the large amount of cash that John Howard left in the bank.”
Here’s what I think.
The Chinese stimulus helped, but China didn’t do it to help Australia. It did it to help itself, with a happy byproduct being continued demand for Australian resources.
Does Mr Turnbull really think the Chinese government was either mistaken (because stimulus spending doesn’t help) or benevolent (because it wanted to help Australia)? These are not terms normally associated with Beijing.
The “large amount of cash” left by the Howard government was indeed very important. It allowed the Rudd government to spend big without running up huge government debt. As the noted UC Berkeley economists Christina and David Romer <a href="https://eml.berkeley.edu/%7Ecromer/Reprints/Crises%20and%20Policy/Romer&amp;RomerCrisesandPolicy.pdf" target="_blank">have pointed out</a>, using evidence from 24 advanced economies, fiscal and monetary policy “space” is important in ensuring the stimulus programs work.
So, yes, Howard’s debt-free budget was important, but only because it gave the government room to spend.
There is an important point here. Namely, that prudent fiscal management through ordinary times is essential in order to build up the firepower to respond in extraordinary times.
Australia still enjoys government debt to GDP that is low by OECD standards, but its growth has been very rapid even in post-crisis years because of the structural gap between government revenues and expenditures. Both sides of politics say they are committed to narrowing it. We shall see.
Space matters
“Space” to act with monetary policy (official interest rates) is also important.
It’s the basis for much of the talk about a “new monetary policy framework” that would lift interest rates from their present lows in Australia and overseas to around 5%. It’s a goal articulately and <a href="https://www.brookings.edu/research/why-the-fed-needs-a-new-monetary-policy-framework/" target="_blank">forcefully argued for by former US Treasury Secretary Larry Summers</a>. Getting there would give central banks the firepower they might need.
These lessons have been learned to varying degrees, but are now thankfully at least part of the mainstream debate.
And regulation
One thing that everyone should have learned from the financial crisis in general, and Lehman in particular, is the need for effective regulation of financial institutions.
The combination of massive leverage, opaque financial instruments and radical interconnectedness of financial firms in the US was a disaster waiting to happen.
In many ways it still could be.
Republicans in the US want to dramatically roll back the Dodd-Frank Wall Street Reform and Consumer Protection Act introduced by President Obama in response to the financial crisis.
Although far from perfect, it helped de-risk the US financial system.
In Australia the failings of financial regulators play out every day at the Hayne Royal Commission, in excruciating detail.
It entitles us to ask if Australian regulators can’t prevent outright theft by financial institutions, how equipped are they to prevent more complicated transactions that might put the financial system at risk?
The answer is: not very.
We’ve learned some things
A decade after Lehman it’s fair to say we have learned lessons.
We know how to use big and bold fiscal (spending) policy and monetary (interest rate) policy to create a virtuous circle of beliefs that can pull us out of a downturn.
And we know that we need to reload both fiscal and monetary policy in the good times so we are ready for the bad times.
But on financial regulation the US might be about to go backwards, and we never really went forwards.<img src="https://counter.theconversation.com/content/103514/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;">
Richard Holden is a Professor of Economics and PLuS Alliance Fellow, UNSW
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. 
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The GFC and me, ten years on, what have we learned? Richard Holden

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

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There is no Australian recession in the immediate horizon, if the yield curve is taken as an indicator, according to LF Economics latest analysis.
The research, Australian Economic Cycles and the Yield Curve, says the yield curve is an accurate predictor of recession and financial instability.
It relies on the 2-Y/10-Y bond yield curve, which it says can indicate larger downturns in economic activity, while avoiding the smaller declines and also the 90-Day/10-Y yield curve, which can detect both large and smaller declines in growth.   The economic forecaster says the economy will keep lumbering along without recession despite “anemic levels of real GDP growth, kept in positive territory only by our disgraceful population Quantitative Easing, public sector deficits, household sector dis-saving and record levels of private debt”.
It does note that shocks can swiftly make an impact.
The research is based on the premise that when yields on bond and bills with shorter-term maturities surpass longer-term maturities (the yield spread inverts), it is a “clear indicator economic growth will decline in the near future”.
Typically, the yield curve is calculated by subtracting the 2-Y Treasury bond yield from that of the 10-Y Treasury bond. The US provides a case study for demonstrating the accuracy of the inverted yield curve as a predictor of recession, usually one to two years in advance.
<a href="https://www.propertyobserver.com.au/images/2017/06/30/US10Yr.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/30/US10Yr.png" alt="">
The Australian data is also accurate, it says. The quarterly 2-Y/10-Y public bond yield curve demonstrates the impending early 1980s recession, the near mid-1980s recession, the early 1990s recession and the GFC. It turns out there was plenty of warning for the GFC, with the yield curve turning negative in 2006Q2.
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Aust10yearYield.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/30/Aust10yearYield.png" alt="">
 <a href="https://www.propertyobserver.com.au/images/2017/06/30/AustTwoYields.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/30/AustTwoYields.png" alt=""> 
“Using the 90-Day bill/10-Y public bond yield allows for superior detection of future downturns in economic growth, including rises in the unemployment rate” says the research.
This yield curve picks up the small increases in the rate during the mid-1980s, 2001 and 2013/14, but these periods were not recessions. The mid-1970s recession is obvious, it says.
<a href="https://www.propertyobserver.com.au/images/2017/06/30/Aus90DayBill.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/30/Aus90DayBill.png" alt="">
Recently, a research paper by the RBA attempted to detect historical recessions while filtering out noise by employing standard econometric techniques. It concluded that “Because the coincident indices present a smoother perspective of the business cycle in the 1960s and 1970s, they identify fewer recessions in this period than does GDP. Over the past 45 years, the coincident indices locate three recessions – periods when there was a widespread downturn in economic activity; in 1974-1975, 1982-1983 and 1990-1991.”
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Yield curves don't indicate recession in the near term: LF Economics

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A potential hard landing in the property market could morph into a recession fuelled by record high household debt and the control wielded by big banks, according to a grim forecast by the Organisation for Economic Co-operation and Development.
The Paris-based OECD said in its latest economic report that alongside a shakeout in China and ongoing weakness in business investment, the single biggest threat to Australia is from a potential hard landing in the property market after years of double-digit price gains, according to a report.
Putting the risk of a recession at around one in five, the report said several potentially destabilising events were possible. (Table 2). 
“Threats to stability from overheating in terms of output or inflation has lessened in recent years, however, macrofinancial indicators underline the threat from the housing market, with house prices and related indicators pointing to continued vulnerability,” says the report. 
It cautioned that “a fall in house prices and or demand could have significant macroeconomic implications. Specifically, the market may not ease gently but develop into a rout on prices and demand with significant macroeconomic implications”.
RBA Governor Philip Lowe recently said the combination of record high household debt to income when wages were growing slowly was a “sobering combination” and could lead to a slowdown in spending which would hurt the economy.
The 13th Annual Demographia International Housing Affordability Survey recently ranked Sydney as the second least affordable housing market behind Hong Kong. 
Sydney’s “median multiple”, or the median house price divided by the median household income is 12.2,  with Melbourne not far behind. 
The OECD report noted that households account for around half of Australia's total debt, which has soared well above 250 per cent of gross domestic product, compared with around a third of the total in 1995.
Continuing price gains in Sydney and Melbourne are feeding concern that ultra-low official interest rates, as well as tax breaks that favour older generations, are distorting the housing market, worsening inequality, affordability, and concentrating systemic risks in a handful of big lenders. 
Furthermore, yields are on a downward slide as investors fall over themselves to buy at prices that imply they are betting only on future capital gains rather than meaningful rental returns, the AFR article said citing OECD data.
<img src="https://www.urban.com.au/images/2017/03/3/OECD.png" alt="">
Source: OECD
The OECD report also noted that “banking remains highly concentrated, potentially compromising competition and making Australia vulnerable to ‘too big to fail’ risks.
Low interest rates have also fuelled a surge in housing mortgages which has pushed Australia towards the top of the OECD rankings for household debt and to around one-third more than the group's average, it said. 
The OECD lists a potential shakeout in global trade caused by a misstep on US Federal Reserve rate hikes, rising protectionism, and the risk of a Chinese yuan devaluation, there is now a "non-negligible risk" of recession in Australia over the next two years.
The grim warning comes amid positive GDP numbers for the fourth quarter helped by the rise in global commodity prices. The RBA has pegged its economic growth forecast of 3 percent for the next two years.
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Property market crash could fuel recession: OECD

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GUEST OBSERVER:
Australian GDP rose by 1.1 percent in the December quarter 2016, following a 0.5 percent decline in the September quarter and beating market expectations (of a 0.8 percent rise).
Annual growth was running at 2.4 percent in December, which is below potential growth of around 2.75 percent. The key points from the GDP data are:
Much stronger-than-expected consumer spending growth of 0.9 percent quarter on quarter (contributing 0.5 percentage points to fourth quarter growth). The retail data showed a moderate contribution to spending from retail sales but the pick-up in household consumption was quite broad-based across services (recreation &amp; culture, transport services, health services, rent).
The household savings ratio fell further to 5.2% in the December quarter, well down from around 9% in recent years. The wealth effect from the surge in dwelling prices has encouraged households to draw down on their savings in the face of weak income growth, but given already very frothy housing market conditions in Sydney and Melbourne it’s hard to see this trend extending for much longer. Basically wages growth will need to pick up or else consumer spending will slow back a touch;
A rebound in dwelling investment (contributing 0.1 percentage points to fourth quarter growth), as expected, given the positive pipeline of residential construction still to be completed. This positive trend from residential construction will continue in 2017, albeit at a slowing pace;
Better-than-expected private business investment (contributing 0.2 percentage points to fourth quarter growth). Non-residential building growth was stronger than forecast, engineering construction rose (despite partial indicators suggesting a fall) and machinery and equipment capital spending also improved. The quarterly capital expenditure survey showed that mining capex has further downside over the next year and non-mining capex growth will be subdued so business investment growth is still likely to be constrained; Public spending contributed 0.3 percentage points to fourth quarter growth because of a solid lift in investment (following a large fall in the prior quarter). State capex budgets show that government investment are likely to remain elevated for the medium-term; Inventories detracted 0.2 percentage points from growth, as expected; and Net exports contributed 0.2 percentage points to growth, also as expected, with both export and import_ volumes lifting in the December quarter.
<a href="https://www.propertyobserver.com.au/images/2017/03/02/image003.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/03/02/image003.png" width="729" height="475">
Source: ABS, AMP Capital
 
IMPLICATIONS: 
The overall sense from the GDP and the broader activity data is that the Australian economy remains in okay shape, but it’s hard to see a sharp further reacceleration of growth in the near-term. We see growth averaging around 2.5-3% in 2017. Mining investment will remain a drag on growth, housing investment is positive but slowing, net exports will be a positive driver of growth but consumer spending may still be constrained.
The big positive for Australia is in the sharp turnaround in nominal GDP - which is a measure of GDP that also allows for changes in prices. Nominal GDP was up by 3.0% in the December quarter and 6.1% over the year which is due to the surge in commodity prices recently. The upswing in nominal outcomes is also evident in the uplift in company earnings, observed in the just completed company reporting season.
The strength in nominal incomes will flow through to governments and businesses, but the flow back to households may be limited given the constrained Federal budget and uncertainty around how long commodity prices can remain elevated. 
The turnaround in Australia’s nominal income story, better activity data, stability in the labour market and excessive strength in the Sydney and Melbourne housing markets means that it will be hard for the RBA to cut the cash rate again in the months ahead unless we see a further leg down in underlying inflation. As a result we are dropping our forecast for another rate cut in May. Our base case is now for rates to be on hold this year. That said if the RBA is to do anything on rates this year a cut is more likely than a hike given the downside risks on inflation. A rate hike is unlikely until later next year.
CoreLogic dwelling price data today showed that the momentum in Sydney and Melbourne housing markets is not slowing down, with Sydney dwelling prices up by 18.4% over the year and Melbourne 13.5% higher (see chart below). Housing affordability issues are now reaching a critical point in Australia and Australian governments should up their efforts around this issue – with the May Federal Budget providing a good opportunity.
<a href="https://www.propertyobserver.com.au/images/2017/03/02/image007.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/03/02/image007.png" width="743" height="484">
Source: ABS, AMP Capital
 
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
 
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soliver-smf6LQXgW9

Australia avoids recession as growth rebounds: Shane Oliver

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Australia faces the prospect of a recession in 2017, going by a forecast by economist and author Steve Keen, the lone voice against the average consensus for growth in the 2017 BusinessDay Scope survey of economists.
Professor Keen predicted GDP for the year to December at minus one percent, implying recession, while also predicting a fall in wages of 0.5 percent. It repeated his earlier forecasts.
Meanwhile, the Reserve Bank faces no pressure to adjust interest rates at its first meeting for the year on Tuesday and is likely to keep rates unchanged throughout the year — a rarity — says the survey published by The Sydney Morning Herald.
Approaching its 40th year, the BusinessDay survey is made up of forecasts from 27 economists in the diverse fields of financial markets, academia, consultancy and industry.
Over the years, its average predictions have been more accurate than those of any of its individual members.
The rare event of interest rates unchanged throughout the year was predicted accurately earlier too by the same survey, in 2014 and 2004.
A boost in commodity prices and trade surplus will help the Australian economy grow 2.4 percent in 2017, says the average of the forecasts, an increase from the most recent result of 1.8 per cent, but well below the the implied forecast of 3 percent in the treasury's mid-year budget update, the report says.
Keen is not the only pessimist.
Two others are also quite pessimistic about GDP growth too, and they are the two who came closest to getting it right last year. Stephen Anthony of Industry Super and Bill Mitchell of the University of Newcastle each predicted only 1.6 percent.
“Worldwide, the huge expansion in liquidity is pushing up asset prices instead of sparking investment,” Anthony was cited as saying in the report.
"And in Australia mining investment has further to slide.”
"That makes us a one-trick pony. We've got high-density dwelling investment driving the economy; potentially unsustainably as a result of effervescence coming in through China and our interest rate settings. That's really the only driver we've got. It will come off at some point in 2017.
"Other than that, consumption is weak, public investment is weak, public consumption is weak, and while net exports are helping, they are driven by Chinese monetary expansion, which will continue for a while before tailing off after 2017. Our growth rate will stay low, between 1 and 2 percent."
Among the others, two of the panel expect growth to exceed the treasury's 3 percent forecast: HSBC's Paul Bloxham, who expects 3.4 percent, and ANZ's Richard Yetsenga, who predicts 3.3 percent. Five agree with the treasury number.
Most of the panel (although not Anthony and the ACTU's Margaret McKenzie) expect a Trump-driven boost in US economic growth to more than 2 percent.
Three of the panel expect growth of 3 per cent. All expect China's reported growth to be close to the official target of 6.5 to 6.7 percent, in part because of revelations that at least one province has faked data in order to meet the target. Most expect global growth to chug along at around 3.1 percent.
Trade, prices, wages and jobs
Last year's jump in the price of iron ore should run out of steam. After climbing from $US40 a tonne to more than $US80 by December, the panel's central forecast is for a retreat to $US70. But six of the 27 expect further increases, two of them, Mardi Dungey of the University of Tasmania and Neville Norman of the University of Melbourne, to about $US100 a tonne.
The panel's central forecast is for Australia's terms of trade – with the nation running a substantial surplus – to close 2017 little changed, but two of the panel, Sally Auld of JP Morgan and Julie Toth of the Australian Industry Group, expect further jumps of 7 and 10 percent, while Michael Blythe of Commonwealth Bank and Paul Dales of Capital Economics expect sharp falls of 7 and 8 percent.
The panel expects inflation to recover from 2016 low range of 1 to 1.5 percent to 1.9 percent by December, which is just below the bottom of the Reserve Bank's 2 to 3 percent target band. Though two of our forecasters, economist Saul Eslake and Richard Robinson of BIS Shrapnel, expect underlying inflation to climb to anything near the middle of the band, 2.4 percent for Eslake and 2.3 percent for Robinson.
Wages should mercifully increase by more than prices, in part because of the extra money high commodity prices will give to employers, climbing 2.1 percent in 2017 after a record-low 1.9 percent in 2016. The highest wage growth forecast is 2.7 percent, from Victoria University economic modeller Janine Dixon. 
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Prof Steve Keen again says Australia in for recession in 2017; but survey expects GDP to grow 2.4 percent

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<div>The Australian National Accounts recorded that real GDP growth came in at a seasonally adjusted -0.5 percent for the third quarter and +1.8 percent for the year. </div>
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<div>Oops.</div>
<div> </div>
<div>This was the first negative quarterly result for GDP since the Queensland flood-affected quarter of March 2011, and only the fourth such result since Australia's last recession in 1991. </div>
<div> </div>
<div>With a negative contribution of -0.2ppts net exports were a drag on growth this time around, and there was a big drop in public capital expenditure (for a contribution of -0.5ppts) after a surge of government investment last quarter, summarily in helicopters, healthcare, and hepatitis drugs.</div>
<div> </div>
<div>Household consumption contributed 0.3ppts to growth this quarter, but there wasn't much joy elsewhere. </div>
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<div>With downward revisions to previous quarters, this takes annual GDP growth all the way down to +1.8 percent. </div>
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<div>Nominal GDP fared somewhat better, growing by +0.5 percent in the quarter, and by +3 percent over the year.</div>
Income boost
<div>It's often been pointed out that in a country such as Australia with its volatile bulk commodity prices, real GDP isn't always an ideal measure of how things are tracking. </div>
<div> </div>
<div>In this quarter, for example, there was a large +4.4 percent jump in the terms of trade, meaning that the index is now up by +1.4 percent over the past year. </div>
<div> </div>
<div>Given that the terms of trade index has been falling since Q3 2011, this is hugely welcome news!</div>
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<div>Behind the scenes, of course, commodity export volumes have been ramping up over time.</div>
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<div>Thus while real GDP contracted, real gross national income, real gross disposable income and real net national disposable income all rose to record highs in the September quarter, and we can expect to see further gains in Q4. </div>
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<div>In real terms, gross national income increased by +0.9 percent over the quarter and +3.2 percent over the year. </div>
<div> </div>
<div>Essentially, then, this this quarter has been the mirror image of the dynamics we've seen in previous quarters, shifting to strong income growth and weaker GDP growth.</div>
<div>Two-speed</div>
<div> </div>
<div>Research by SGS Economics and Planning has shown that Sydney and Melbourne have beendominating economic growth, while many regional economies are presently running slower as they adjust to life post-resources boom. </div>
<div> </div>
<div>State final demand was very weak in Western Australia at -3.8 percent as capex continues to work through its decline. </div>
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<div>At the industry level, construction was the biggest loser, contracting by -3.6 percent, and swiping some -0.3ppts from GDP growth. </div>
<div> </div>
<div>Compensation of employees grew by +1.3 percent over the quarter and a positive +3.1 percent over the year, while the household savings ratio ticked down to 6.3 percent. </div>
<div> </div>
<div>I'll look at the impact on household incomes and expenditure in a separate post. </div>
The wrap
After 100 consecutive quarters without a recession, the economy posted a negative GDP result for the third quarter, but real national income measures surged to a record high.   
<div>Whether or not we experience a technical recession next quarter is open for debate, but it looks to be unlikely based on the recent growth in retail spend. </div>
<div>
 Overall, strong public investment figures in the first half of the year masked a softening underlying trend in growth in the economy. </div>
<div> </div>
<div>An annual GDP growth figure of +1.8 percent feels much more in line with the metrics we've seen elsewhere, including low employment and wages growth, soft inflation, and a budget in deficit. </div>
<div>
 If hours worked are said to be the best measure of the health of the economy, then the conclusion is clear: the economy stuttered in the first half of 2016, although there was at least a moderate improvement of +0.5 percent in Q3. </div>
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<div>In the face of an obviously weaker result, a key question for the government now is whether it uses low yields to borrow and invest in infrastructure, as the Reserve Bank doesn't sound particularly keen on cutting the cash rate too much further!</div>
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<div>
PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>. 
His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.
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