One of the most significant beachfront projects ever proposed for the small suburb of Miami on the Gold Coast, has taken a major step forward.&nbsp;Monaco Property Group has secured approval for <a href="https://www.apartments.com.au/new-apartments/nalu-miami-122-marine-parade-qld-4220">NALU</a>, a $500 million development comprising just 45 ultra-luxury residences on the iconic former Nobby’s Outlook site.

Acquired by <a href="https://www.apartments.com.au/developers/monaco-property-group">Monaco Property Group</a> in 2024 for $70 million, the rare 7,238 sqm Marine Parade parcel boasts more than 80 metres of uninterrupted ocean frontage.

With approvals now secured, Monaco Property Group will move NALU into its delivery phase. The project has been designed by&nbsp;<a href="https://www.apartments.com.au/architects/bda-architecture">BDA Architecture</a>, who collaborated with&nbsp;<a href="https://www.apartments.com.au/landscape-architect/ldg-landscape-architecture">LDG Landscape Architecture</a> and <a href="https://www.apartments.com.au/interior-designers/tom-mark-henry">Tom Mark Henry Interiors</a>&nbsp;to create the low-rise building, its landscaping, and interiors.

<img alt="NALU" data-entity-type="file" data-entity-uuid="3fdf578e-7cc4-4b17-bbc2-ba853522a5d8" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/122_Marine_Parade_002.jpg?VersionId=zFhJWVzX0jmCO.5iIIxNELImHesTjWS4" />

Residences will range from 237 sqm layouts to beachfront homes exceeding 1,400 sqm.

At the heart of the project is a 2,200 sqm lifestyle precinct with a bathhouse, fitness centre and resort-style pool, elevated by a concierge service.

Jonathan Grasso, Co-Founder of Monaco Property Group, said the council approval marks an exciting milestone for NALU, which will launch in Q1 2026.

“The project will now progress toward construction, working alongside our world-class collaborators to bring NALU to life," Grasso said.

“Our vision is to create a legacy project for the Gold Coast, one that not only honours the history of the site but also elevates its future, setting a new standard for coastal living in Australia. NALU embodies the pinnacle of design and location and will stand as an enduring icon of prestige and liveability.”

<img alt="NALU" data-entity-type="file" data-entity-uuid="6ae8545b-87ca-4dea-90ed-ac273ec6515d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Image7.jpg?VersionId=Wnmie4bu3x2WQonnG4Pwmh39NdZVKeOV" />

Originally developed in the 1970s as Nobby’s Outlook and later refurbished in 2019 as Nalu, the property has long held a place in the local community’s coastal identity. The new vision will build on this legacy, creating luxury residences that capture ocean views while fostering a lifestyle defined by wellness, connection, and ease.&nbsp;

Beyond its residential offering, NALU will deliver significant economic benefits to the Gold Coast through job creation and opportunities for local suppliers and contractors. Construction is anticipated to commence in early 2026, with completion expected in Q3 2028.

Joel Robinson

Monaco Property Group approved for $500 million NALU apartments on Miami beach

The most elevated residential tower in Palm Beach, <a href="https://www.apartments.com.au/new-apartments/corallo-palm-beach-5-palm-beach-avenue-palm-beach-qld-4221">Corallo</a>, has officially launched this week, however only a handful of buyers will have an opportunity to buy in to the 17-storey project.

The $200 million mixed-use project includes ground floor dining and retail and is considered so valuable its developer, <a href="https://www.apartments.com.au/developers/changfa-group">Changfa Group</a>, will be staging its release of one-, two- and three-bedroom apartments and penthouses to the market.

[smartcode_project:default project_id=112194 project_image_fid=806]

<a href="https://www.apartments.com.au/project-marketer/colliers">Colliers</a> International, Director, David Higgins, said the development’s location just metres from the beach on the corner of Palm Beach Avenue and the Gold Coast Highway influenced the sculptural design by the acclaimed Plus Architecture studio.

“<a href="https://www.apartments.com.au/developments/palm-beach-qld-4221">Palm Beach</a> locals understand the rare opportunity here at Corallo, particularly being the tallest building in the suburb and its proximity to the beach and local restaurants, and they’ve represented the bulk of pre-launch enquiries,” Higgins said.

“The orientation of the apartments captures views of the coastline from Surfers Paradise to Currumbin, and the diversity of floor plans and apartment types provide an exceptional level of choice.

“The first release includes just 59 one-, two and three-bedroom apartments and two half-floor penthouses, with flexible use designed to appeal to both owner-occupiers and investors."

&nbsp;

[smartcode_project:default project_id=112194 project_image_fid=799]

In addition to the ground floor amenity, residents will also have access to a private dedicated wellness level offering 734 sqm of resort-style amenities including a pool, cold plunge, wet deck, steam room, sauna, gym, day bed, fire pit, barbecue area, dining area and yoga/stretch deck.

The project is located within walking distance of Tallebudgera Creek, Burleigh Heads village, Currumbin Alley and Palm Beach Currumbin High School. The Gold Coast Airport is under 10 minutes away.

[smartcode_project:default project_id=112194 project_image_fid=814]

Higgins said Palm Beach remained a hotly contested suburb for home buyers, with prices doubling in the past five years.

“What makes Corallo so appealing to the local market is the diversity of apartment types and pricing, with one-bedroom apartments starting from $841,000 and two-bedroom apartments starting from $1.34 million,” he said.

“The ground floor retail and dining offering will further expand on Palm Beach’s village atmosphere and create a meeting place for locals, and those opportunities for connection are highly valued.”

&nbsp;

[smartcode_project:default project_id=112194 project_image_fid=807]

The on-site sales display, which includes a fully fitted kitchen, bathroom and bedroom, will be open until early works commence in Q1 2026. Each residence at Corallo will feature premium finishes including natural stone, artisanal brickwork, and warm copper accents.

Changfa Group has a two-decade history of delivering premium developments in Australia and internationally, having recently completed its collection of premium townhomes at Lyra, Hope Island, as well as apartment projects in Leichhardt, Carlingford, and Chatswood in New South Wales.

[smartcode_project_cta:default project_id=112194]

$200 million Corallo Palm Beach launches with limited apartment release

In a move that aligns with NSW's accelerated planning incentives for affordable housing, developer&nbsp;<a href="https://www.apartments.com.au/developers/the-one-collection">One Collection</a> has revised its Hills District apartment plans, and taken it to the NSW Government, to secure approval.

The developer, which is currently delivering Horizon Hurstville, is seeking to add 80 more apartments to its <a href="https://www.apartments.com.au/new-apartments/the-one-castle-hill-16-dawes-avenue-nsw-2154">Castle Hill development</a> near Castle Towers. They already have approval for 280 apartments across eight six-storey buildings.

<img alt="One Collection" data-entity-type="file" data-entity-uuid="b3c298ba-1cc5-4db7-9872-607c75f8ceca" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-10-13%20at%2010.19.22%E2%80%AFAM.png?VersionId=wN9KpFIu5ENSGZLLsaZgXQHrXcwEO3Vd" />

Now on the desks of the NSW Department of Planning is 360 apartments, 48 of which will be dedicated to affordable housing.&nbsp;Affordable housing is to be “fully integrated within the building and visually indistinguishable,” according to the planning submission.

The 15,697 sqm block, an amalgamation of 16 sites, spans across Dawes Avenue, Hughes Avenue, and Camdan Crescent, sits 550m from Hills Showground Metro Station.&nbsp;

"The existing context is quickly changing from free-standing homes into residential flat buildings in line with the Hills Showground Precinct planning framework," Place Studio noted.

<img alt="Castle Hill" data-entity-type="file" data-entity-uuid="3ec24948-c185-48fa-af8b-ed25adf302bf" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-10-13%20at%2010.19.04%E2%80%AFAM.png?VersionId=zNDX.IeRROX1RlDeYcS38xn8w_dqgU2t" />

They said the design was informed by the site's unique condition of having three street frontages and was developed to to respond sensitively to iots surrounding context.

"The design adopted a conventional perpendicular alignment to the primary street frontage. The massing of the development was carefully modulated to align with the evolving character of the neighbourhood. The design ensured that the scale was not excessive or out of context, but instead contributed to a cohesive urban form consistent with emerging developments in the area."

<img alt="Castle Hill" data-entity-type="file" data-entity-uuid="f83ffdaa-f960-469d-b6fe-abcece57c9ef" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-10-13%20at%2010.19.09%E2%80%AFAM.png?VersionId=4oKlCyfaKes7jLi1_EMoqa46w2h_YvDZ" />

The apartment mix will be 46 one-beds, 168 two-bed apartments, and 146 three-bedroom units, with 631 parking spaces proposed.

Along the street frontages, the building heights are four storeys with a 7.5 metre setback, and eight storeys with an 11.5 metre setback. It should cost about $150 million to build.

One Collection works hand-in-hand with the respected development and construction firm Masscon, which has built a reputation for leveraging its expertise in the built environment to take on developments others can't. That's what they're achieving at Horizon Hurstville, having taken over the project to deliver it.

First look: One Collection advances plans for Castle Hill apartments

At Yarra’s Edge, <a href="https://www.apartments.com.au/developers/mirvac">Mirvac</a>’s newest tower under construction, <a href="https://www.apartments.com.au/new-apartments/trielle-at-yarra-s-edge-docklands-16-point-park-crescent-docklands-vic-3008">Trielle</a>, sets a new benchmark for elevated living. Rising 45 storeys, 12.5 metres from the Yarra River, the landmark building offers residents access to a private wellness retreat and spa, a resident-only golf simulator, and an elegant lounge, dining and bar complete with a self-playing piano, all without ever having to leave home.

Now, that sense of elevation has reached new heights with the Aerus Sub-Penthouses, a limited release of half-floor riverfront residences on the Collins St axis where the sought-after street meets the Yarra River.

Each Aerus Sub-Penthouse, located across levels 42 and 43, represents the most expansive offering within Trielle, aside from the yet-to-be-revealed crowning penthouses. Spanning between 269 and 301 sqm, these residences are designed to capture natural light and uninterrupted views of the city skyline, Yarra River, and Port Phillip Bay.

[smartcode_project:default project_id=114216 project_image_fid=3784]

Among the collection are three-bedroom sub penthouses, complemented by a media room, and expansive four-bedroom layouts. All include panoramic living areas and oversized master suites with luxury ensuites reminiscent of a five-star hotel, complemented by dedicated dressing rooms finished in timber and natural stone.

The interiors have been crafted by <a href="https://www.apartments.com.au/architects/mirvac-design">Mirvac Design</a>, the developer’s award-winning in-house architecture and design team. Every material has been chosen for quality and longevity, from sculpted stone island benches with feature soft wash LED lighting to bespoke joinery and chevron timber oak flooring.

Kitchens are fitted with a BORA induction cooktop with integrated downdraft extractor, alongside Gaggenau appliances, including a fridge, freezer, and wine fridge. The adjoining butler’s pantry incorporates the exclusive Gaggenau Minimalistic Series including oven, steam oven, microwave, coffee machine and warming drawer, all concealed behind handleless glass panels for a clean, integrated presentation. Bathrooms feature custom Apaisar freestanding baths and basins and natural stone benchtops, continuing Mirvac’s design emphasis on tactile, timeless materials.&nbsp;

<img alt="Trielle at Yarra's Edge, Docklands" data-entity-type="file" data-entity-uuid="c00be724-b0f1-47c0-afed-54f829870704" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Aerus%20sub-penthouse.png?VersionId=Uktd61kpLSqNjwJeDFs7IaZ3xgLlDQmu" />

Michael Wiener, Design Director at Mirvac, says The Aerus Sub-Penthouse embodies the apex of Mirvac’s design ethos.

“Moving through your home is like walking on air - a private sanctuary where the craftsmanship is refined, the proportions generous, and the flow so effortless, you feel completely at ease in the sky,” Wiener says.

“In Aerus, we wanted to create a sense of weightlessness - a home that feels suspended in the skyline, full of light, grounded in luxury.”

[smartcode_project:default project_id=114216 project_image_fid=3777]

The Aerus Sub-Penthouses are expected to attract a mix of local and international buyers seeking a long-term residence of scale and quality in a riverfront setting, from returning expats to established families and business owners who value privacy, craftsmanship, and convenience within walking distance of the CBD.

With an unmatched suite of amenities, Trielle is the most extensively appointed development Mirvac has created to date at Yarra’s Edge. Within the tower will be The Oasis, a 900 sqm podium rooftop wellness retreat designed in collaboration with spa expert Naomi Gregory. Located seven storeys above the Yarra River promenade, it features a 25-metre lap pool, spa and sauna, hot magnesium spa, biophilic gym, yoga and Pilates studio, cold-pail contrast treatment, and day spa treatment rooms. Further amenities include a piano lounge, bookable dining room, cinema room, golf simulator studio, games room, teppanyaki bar, dog wash bay, and two flexible work hubs, The Biblioteca library and Mills Place office space, catering to residents’ evolving lifestyle needs.

Construction of the $350 million tower is underway through Mirvac’s in-house construction arm, with completion anticipated for mid-2027.

[smartcode_project_cta:default project_id=114216]

Sky-high sanctuaries: Mirvac unveils The Aerus sub-penthouses at Trielle

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

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

Richard Holden

<html><body>
EXPERT OBSERVER
Economists expect the cash rate to remain steady for yet another year even though inflation is on the floor. 
The Reserve Bank kicks off its first meeting for the year next Tuesday facing the same dilemma it did throughout last year.
It hasn’t got easier.
The bank has a very public, fairly clear objective: to keep inflation <a href="https://www.rba.gov.au/monetary-policy/framework/stmt-conduct-mp-7-2016-09-19" target="_blank">between 2% and 3%</a>. But it keeps missing it. Over and over and over again, and on the downside.
As the following chart shows, inflation has been below the bank’s target band for nearly all of the past four years.
<hr>
<img src="https://images.theconversation.com/files/256541/original/file-20190131-42594-1p06f0z.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="">
<hr>
During his decade in office, the previous governor Glenn Stephens achieved an average inflation rate of 2.46% – almost bang in the centre of the target band.
During his subsequent two and half years in the job, Philip Lowe has averaged just 1.87%. At no point during Lowe’s term of office has the average fallen within the target band. The rate for December, <a href="https://www.propertyobserver.com.au/http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0">released on Wednesday</a>, was 1.8%.
Next Wednesday Lowe will make an unusual address to the <a href="https://www.npc.org.au/speakers/philip-lowe-npc-sydney-address/" target="_blank">National Press Club</a>, during which he will outline his thoughts about the year ahead.
It is a year which The Conversation’s forecasting panel predicted will be free of interest rate adjustments, making it a record 40 months without a rate move – Lowe’s entire term in office.
<hr>
<a href="https://images.theconversation.com/files/256590/original/file-20190131-112389-hml5ue.JPG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/256590/original/file-20190131-112389-hml5ue.JPG?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
<hr>
<h2>The RBA has more than one target</h2>
Although the inflation target is an important part of the Reserve Bank’s mandate, it is also asked to <a href="https://www.rba.gov.au/monetary-policy/framework/stmt-conduct-mp-7-2016-09-19" target="_blank">focus on other things</a>. Among them are GDP growth, employment, and (probably less explicitly) the Australian dollar and house prices.
And therein lies the problem. Unless the rate moves needed to meet all those objectives point in the same direction, the bank needs to make trade-offs, or sideline one or more of its objectives.
A classic principle of economics is that a policy-maker needs one instrument (or policy tool) for each objective. It is called the <a href="https://www.propertyobserver.com.au/https://www.jstor.org/stable/2282568?seq=1#metadata_info_tab_contents" target="_blank">Tinbergen Rule</a>, after the 1969 Nobel Laureate.
The bank has four or five objectives, but really only one tool – the cash rate, stuck at 1.5% since Lowe took the job.
Throw in the ability to partially shape market expectations through speeches by Lowe and Deputy Governor Guy Debelle (so-called “open mouth” operations), and maybe it has two.
Since Lowe took office, the casualty of this imbalance between instruments and objectives has been the inflation target. And it’s unlikely to change for some time.
<h2>So why is inflation so low?</h2>
Australia is not alone. Advanced economies around the world have had several years of low wages growth, low productivity growth, and low inflation. Populations are ageing, less keen on spending, and have a glut of excess savings.
Add to this the fact that technology and international trade have made a whole range of goods probably permanently cheaper and it’s hard to find inflationary pressure.
Potentially making things worse in Australia is the decline in house prices in Sydney and Melbourne eating into consumer confidence and with it, spending. <a href="https://theconversation.com/vital-signs-so-far-its-more-of-a-house-price-blip-than-a-bust-in-the-making-109568" target="_blank">With well over half of the economy coming from private spending, already soft consumer spending could be hit further.</a>
So far, RBA Governor Philip Lowe has been doing an admirable impression of Mr Micawber, in the Charles Dickens novel David Copperfield. When it comes to inflation, he is hoping “something will turn up”. But it hasn’t, even with historically low levels of unemployment.
Worse still, it doesn’t even seem to really be ticking up in the United States, <a href="https://www.thebalance.com/unemployment-rate-by-year-3305506" target="_blank">despite the lowest year-end unemployment rate since 1969</a>.
<h2>And why does it target inflation?</h2>
The bank targets inflation in order to maintain credibility.
The high levels of inflation in the 1970s and ‘80s – despite quite high levels of unemployment – led to the realisation that expectations had a lot to do with it.
Put simply, if people believe prices are going to rise sharply they will demand steep wage rises, which will cause prices to rise sharply. It becomes a “wage-price spiral”.
Macroeconomists and central bankers realised that a credible commitment to keep inflation low would remove the need for the large wage rises, cutting off the spiral before it got going.
The bank describes the rationale for its inflation target <a href="https://www.rba.gov.au/inflation/inflation-target" target="_blank">this way</a>:
The Governor and the Treasurer have agreed that the appropriate target for monetary policy in Australia is to achieve an inflation rate of 2–3%, on average, over time. This is a rate of inflation sufficiently low that it does not materially distort economic decisions in the community. Seeking to achieve this rate, on average, provides discipline for monetary policy decision-making, and serves as an anchor for private-sector inflation expectations.
That’s been the logic for the past 25 years. We have certainly done away with inflationary spirals. We are in the age of secular stagnation, with an excess of savings chasing too little spending. A world where, since the turn of this century, robust growth has only really been possible when accompanied with financial bubbles–first in dot-coms, then in housing.
<h2>So what’s a central banker to do?</h2>
<a href="https://theconversation.com/vital-signs-its-time-to-discuss-a-new-framework-for-central-banking-101978" target="_blank">There is an active debate</a> among <a href="https://www.rba.gov.au/speeches/2018/sp-dg-2018-04-12" target="_blank">central bankers</a> and leading macroeconomists about whether to abandon the inflation targeting framework.
Luminaries like former US Treasury Secretary <a href="https://www.brookings.edu/research/why-the-fed-needs-a-new-monetary-policy-framework/" target="_blank">Larry Summers</a> argue that inflation targets are, <a href="http://shakespeare.mit.edu/hamlet/hamlet.1.4" target="_blank">to borrow from Hamlet</a>, “more honour’d in the breach than the observance”.
Right now Lowe faces a real dilemma. If he doesn’t cut rates, the inflation target will become more and more of a joke. It will add to pressure on him to articulate a new monetary policy framework for a new secular-stagnation era.
If he does, he risks re-inflating the housing bubble, boosting already sky-high household debt, and giving himself even less wiggle room if a recession hits.
On Tuesday he’ll leave the cash rate at 1.50%. And on the first Tuesday of the next month, and the the next, and the one after that…
But I think he’ll begin serious internal discussions about a new monetary policy framework, and the mechanics of getting into (and out of) a massive bond-buying program (otherwise known as quantitative easing or printing money) if needed to ward off the next recession should the cash rate remain or get so low he can’t cut it further.
He might have already started. He might drop further hints on Wednesday.
<hr>
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a>, Professor of Economics, <a href="http://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a>
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-yet-another-year-of-steady-rates-whats-the-point-of-the-rba-inflation-target-110574" target="_blank">original article</a>.
</body></html>

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Yet another year of steady rates: Richard Holden

<html><body>
EXPERT OBSERVER
There are two things that can happen to an asset price bubble. It can burst dramatically, or deflate slowly.
Which brings us to the Australian housing market.
Prices in Sydney and Melbourne continue to decline at a modest rate. The <a href="https://www.corelogic.com.au/research/monthly-indices" target="_blank">CoreLogic index</a> has Sydney prices down 6.1% for the last 12 months, and Melbourne down 3.4%.
This barely dents the huge increases in previous years and is consistent with “deflate slowly” scenario.
What could cause a pop?
<h2>Interest-only loans could do it</h2>
As I have <a href="https://theconversation.com/vital-signs-if-it-looks-like-a-bubble-and-sounds-like-a-bubble-75050" target="_blank">said here before</a>, one of the worries is interest-only loans.
Around A$360 billion of these loans are due to be rolled over over the next three years. If they are not, they will convert to principal-and-interest loans, which are much more expensive to maintain.
Given that only about 15% of loans currently issued are interest-only, down from 40% in recent times, that means a lot of people are starting to pay the more expensive principal and interest. For some, the jump in repayments will be as high as 40%.
That’s scary enough. But <a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2018/2018-10-02" target="_blank">this week’s minutes of the October Reserve Bank board</a> meeting point to another concerning possibility – an old-fashioned credit crunch.
The bank put it this way:
Members discussed the release of the interim report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry… Members observed that while the regulators had already overseen a tightening of lending standards, and a degree of tightening of lending standards had been implemented by banks in anticipation of the Commission’s findings, it was possible that banks could tighten lending conditions further given the issues raised in the report. Members noted that it would be important to monitor the future supply of credit to ensure that economic activity continued to be appropriately supported.
Translation: the banks have stopped lending as much, and might lend even less; this could be bad for the economy.
Could it blow up the housing market?
Well, possibly. Here’s how.
<h2>Here’s how it would happen</h2>
If the amount of housing credit available is significantly reduced, it is hard for people to buy properties.
That means it becomes hard for people to sell – or even move from one property to another. A market with fewer buyers and sellers in it (what economists call a “thin market”) means more volatile prices.
This turns the price someone gets from selling a property into more of a lottery. There’s a decent chance the seller gets much less than she thought.
Worse still, most people are highly leveraged in residential property – often putting down a deposit of just 10% to 20%.
<h2>Owners would get hit rather than their banks</h2>
All the drop in the selling price hits the owner, because the bank gets paid back no matter what.
So a 10% drop in price can wipe out all the seller’s equity in the property.
Even if the owner has paid down, say, half the loan, that’s a big hit.
It’s the prospect of this that causes people not to want to sell. If an owner can hold on, they will.
So which properties end up on the market? Precisely those of the people who really need to sell.
<h2>They would sell because they had to</h2>
Knowing this, and without much competition, buyers turn the screws, pushing down prices still further and exacerbating the problem.
Of course, for that to happen people need to sell.
Why might that be? There are are number of reasons. Their repayments could rise because of rates rising. Even without an official rise in the cash rate by the RBA, banks can, and recently have, raised rates because of their funding costs in money markets.
A borrower might need to change cities because of their job, or might lose their job and be unable to meet repayments. Or a borrower might have an unexpected expense, perhaps relating to health care. The list goes on.
<h2>We can’t be sure it won’t happen</h2>
It is hard to predict whether any of those things will happen to people in sufficient numbers to cause a meltdown.
But that’s the whole point – it is hard to be confident that it won’t happen.
And if it does occur then the consequences could be huge.
<h2>Game theory suggests it might</h2>
It might seem perverse that the big four banks could voluntarily cut back on lending and cause a collapse in prices that craters their own loan books. Yet that’s exactly the lesson from the work of <a href="https://www.nobelprize.org/prizes/economic-sciences/1994/press-release/">John Nash</a>, who won the 1994 Nobel Prize in economics for his work on game theory. In a strategic setting, what is best for the individual might not be best for the group.
If individual banks don’t cut back their lending but others do, they will get stuck with the worst loans.
Avoiding that fate might mean creating market conditions that hurt all existing loans.
It’s the paradox at the heart of game theory.
<h2>But I’m hoping for the best</h2>
I’m still betting on the residential property market deflating slowly, rather than popping.
But unfortunately you don’t need to get too creative to imagine scenarios that involve a very loud pop – for property owners, the banks and the economy more generally.<img src="https://counter.theconversation.com/content/105137/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;">
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a>, Professor of Economics and PLuS Alliance Fellow, <a href="http://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a>
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-the-housing-market-might-deflate-but-it-might-pop-heres-how-105137" target="_blank">original article</a>.
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How the housing market might pop: Richard Holden

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<a href="https://www.propertyobserver.com.au/http://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0" target="_blank">Wednesday’s GDP figures</a> were good. Growth was up 0.9% in the June quarter and 3.4% over the past 12 months.
As they say in baseball: “You can’t boo a home run.” But you can ask how likely the batter is to do it next time. The detail behind the figures raises further questions.
<h2>How good were they really?</h2>
Even before we get to that, it’s worth noting than GDP per capita was up 0.5% in the quarter, amounting to a 1.8% increase over the year. That’s good, but half as much as headline growth. Per capita growth is what drives living standards.
Even on an annual basis per capita growth bounces around. The following chart shows it is usually less than 2% and only occasionally reaches 3%, but never too far from zero – even excluding the GFC.
<iframe style="border: none;" src="https://datawrapper.dwcdn.net/M9J5L/1/" frameborder="0" width="100%" height="400"></iframe>
Growth per capita is volatile in no small part because immigration is volatile.
Standard economic theory tells us that in the long run immigration has very little impact on GDP per capita unless it drives a shift in the population’s mix of skills.
But in the short run it depresses GDP per capita because the fixed capital (such as buildings and machines) has to be shared between more workers.
Since immigration is somewhat lumpy, and the skill mix is neither obvious nor constant, there can be pretty substantial swings in GDP per capita in a high-immigration economy. At 1.6% per annum, Australia’s population growth is roughly double the OECD average, so it’s best not to get too hung up on the quarterly numbers.
<h2>Good for how long?</h2>
The larger and more pressing question in whether this quarter’s good numbers will last.
There are reasons to be sceptical. First, household expenditure was a key component of the recent growth numbers. As ABS chief economist Bruce Hockman put it:
Growth in domestic demand accounts for over half the growth in GDP, and reflected strength in household expenditure.
We’ve been sustaining strong household expenditure by saving less, but that’s unlikely to continue.
<div>Infographic currently not available</div>
In an economy in which heavily indebted households face mortgage rate hikes from three of the big four banks (likely to be four soon) despite no official increase in interest rates, household spending will come under pressure.
Wages growth is still languishing at around 2% (<a href="https://www.propertyobserver.com.au/http://www.abs.gov.au/ausstats/abs@.nsf/mf/6345.0" target="_blank">the most recent wages price index came in at 2.1%</a>), meaning that households aren’t earning much extra income.
<iframe style="border: none;" src="https://datawrapper.dwcdn.net/ZF9Ok/1/" frameborder="0" width="100%" height="400"></iframe>
Add to this a lower Australian dollar putting pressure on the price of imports –such as mobile phones, iPads and computers, to name a few – and it seems brave to predict continued robust consumer spending.
<h2>Special for how long?</h2>
It is also worth being a bit cautious about the case for Australian exceptionalism. Yes, we’ve had a run of 27 odd years of continuous economic growth. Yes, we weathered the financial crisis better than most.
But we are also part of a global economy that is yet to see the full effects of the Trump trade war. And we are subject to the same sort of pressures that other advanced economies are facing: stubbornly low wages growth despite historically low unemployment, inflation that won’t grow, and an uncertain outlook for China – our most important trading partner.
<iframe style="border: none;" src="https://datawrapper.dwcdn.net/E8STr/3/" frameborder="0" width="100%" height="400"></iframe>
Can we really return to the trend growth rates of the 1990s while the countries we compare ourselves with struggle? I hope so, but I doubt it.
The newly minted treasurer, Josh Frydenberg, couldn’t help but take credit for this week’s good news. Fair enough. But he might want to be cautious. Quarterly numbers have a habit of reversing themselves. And with an election not too far away it’s politically risky to tie oneself too closely to the vagaries of the macroeconomy in general and the forecasts of Treasury and the Reserve Bank in particular.
Reserve Bank Governor Phil Lowe might have mentioned that to Frydenberg in their much photographed recent meeting.<img src="https://counter.theconversation.com/content/102717/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;">
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a>, Professor of Economics and PLuS Alliance Fellow, <a href="http://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a>
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-national-accounts-show-past-performance-no-guarantee-of-future-results-102717" target="_blank">original article</a>.
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j.ballantyne1990-6AQqhLzZaK

Past performance of national accounts no guarantee of future results: Richard Holden

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Expert observer.
Unfortunately for the RBA, the health of the economy is not measured on the Geologic Time Scale
This week: Interest rates remain on hold as the RBA talks up employment growth, green shoots remain in manufacturing, and China strikes back in the Trump-led trade war.
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<img src="https://images.theconversation.com/files/213330/original/file-20180405-189824-p0txhe.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="">
On Tuesday, the RBA left official interest rates unchanged at 1.50% for the 18th consecutive meeting, tying their all-time record. They will break that record next month when they do the same thing.
And the <a href="https://www.rba.gov.au/media-releases/2018/mr-18-07" target="_blank">official statement</a> by governor Philip Lowe sounded like it came from a guy who had gone from crossing his fingers to crossing his toes as well. For example:
“The Australian economy grew by 2.4 per cent over 2017. The Bank’s central forecast remains for faster growth in 2018.”
Um, why? The same macro model that got 2017 wrong is now going to get 2018 right?
Or this one:
“The unemployment rate has declined over the past year, but has been steady at around 5½ per cent over the past six months. The various forward-looking indicators continue to point to solid growth in employment in the period ahead, with a further gradual reduction in the unemployment rate expected.”
But a few months ago, those same forward-looking indicators were saying the plateau in the unemployment rate wouldn’t happen.
And finally (but only because I have space constraints):
“Notwithstanding the improving labour market, wages growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wages growth over time.”
If “over time” is read analogous to “life in the Mesazoic Era evolved over time” then I suppose that may be right.
Unfortunately for the RBA, the health of the economy is not measured on the Geologic Time Scale. Stubbornly low inflation, persistently hopeless wage growth, and with the <a href="https://www.propertyobserver.com.au/http://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/3101.0" target="_blank">Australian population growing at 1.6% p.a.</a>, that 2.4% GDP growth number looks pretty weak. The real question is whether the RBA is not cutting rates because it thinks monetary policy is ineffective at this level, or because it’s scared of fuelling (further fuelling?) a (the?) housing price bubble.
<a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/8731.0Main+Features1Feb%202018?OpenDocument" target="_blank">ABS data</a> released Wednesday showed a drop in building approvals in February. Total dwelling approvals were down 6.2%, driven by a 16.4% drop in apartments, compared to a 1.9% rise in houses. For the 12 months to February 2018, that puts the total down 3.1%, again driven by a large (14.8%) drop in apartments and a rise (6.1%) in houses.
This is all evidence that demand – often from offshore – has dried up in one important sector of the market: apartments. It is still too early to know what the fallout will be, but this is exactly the kind of pattern one sees in property markets when the music has stopped.
The Australian Industry Group’s <a href="https://www.aigroup.com.au/policy-and-research/economics/economicindicators/" target="_blank">Performance of Manufacturing Index</a>, released this week, hit a record high of 63.1 index points for March. Perhaps more importantly, the survey indicated that capacity utilisation was at a record high of 81.2%. This matters because it suggests stronger employment and wage growth in the sector.
On the other hand, manufacturing is about 6.5% of GDP, so even strong growth in the sector has a relatively modest overall effect. But, as they say in baseball, you can’t boo a home run.
US jobs figures continued to impress, with payroll processor ADP releasing figures Thursday Australian time that the economy added 241,000 jobs in March. The official figures from the BEA come out Friday US time, with market expectations at an addition of 185,000. So if the official figures line up with ADP, this will be further evidence of strong employment growth.
<h2>Trump trade war update</h2>
This week, China struck back, again. The Trump administration recently instituted roughly US$50 billion worth of tariffs on steel, cars, automotive and aircraft parts, consumer products like televisions, and other goods. Almost immediately, China responded with tariffs of a similar value on 106 types of American goods.
Those 106 types of goods include soybeans and others produced in the Trump heartland. This was a cleverly designed, targeted measure, designed to hurt Trump politically.
His response:
That reveals his mercantilist view of trade: that it’s a zero-sum game rather than something that increases the size of the economic pie and makes both countries better off. But hey, maybe he has a big reading backlog and isn’t up to 1817, when David Ricardo pointed this out with his theory of <a href="https://www.investopedia.com/terms/c/comparativeadvantage.asp" target="_blank">“comparative advantage”</a>.
<img src="https://counter.theconversation.com/content/94405/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">Let’s hope it does, and President Trump gets the message that he needs to knock this off. All he is doing is making America poorer. And the game theory of it is worse. Tariffs beget tariffs.
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a>, Professor of Economics and PLuS Alliance Fellow, <a href="http://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a>
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/vital-signs-australias-stubborn-growth-problems-are-moving-at-a-geologic-pace-94405" target="_blank">original article</a>.
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Australia’s stubborn growth problems are moving at a geologic pace: Richard Holden

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The Australian Bureau of Statistics <a href="http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/5609.0Main%20Features1January%202018?opendocument&amp;tabname=Summary&amp;prodno=5609.0&amp;issue=January%202018&amp;num=&amp;view=" target="_blank">housing finance figures</a> released Tuesday reveal a modest increase in the total value of dwelling commitments, up an overall 0.7% for the month of January on a seasonally adjusted basis. The investor segment (up 1.1%) was stronger than owner-occupied housing (up 0.5%).
Yet the overall rise in value masked the fact that the number of dwellings purchased fell. Purchases of established dwellings was down 4.7% on the month, and new dwellings down 1.5%. 
On the other hand, construction of new dwellings was up 3.1%. Now we can’t tell too much by a single month’s data, but if those kind of numbers were part of a broader pattern then there would be reason to be concerned.
Banks have tightened their underwriting standards and the Australian Prudential Regulation Authority has cracked down on interest-only loans. So housing credit is harder to come by – although it’s still ridiculously easy to obtain. 
However, the construction sector works on a bit of a time lag. So there are a bunch of projects underway that were premised on the loose credit of recent years.
When they are finished there will be a lot of properties for sale and a relative paucity of buyers. That would have a price impact, spook potential buyers and their bankers further, and could lead to a sharp pullback in the construction sector. A sector which constitutes 8% of GDP and 9% of employment.
As the kids say, “sad face emoji”.
Now this scenario is not for certain. But it’s definitely something to keep and eye on in coming months.
The closely watched <a href="https://business.nab.com.au/nab-monthly-business-survey-february-2018-28876/" target="_blank">NAB Business Conditions Survey</a> hit all time highs in February. The business conditions index was up three points to 21 index points, the highest level since the monthly survey began in March 1997. Yet business confidence was down two points to nine.
NAB chief economist Alan Oster pinpointed the reason for the divergence in the two measures, saying:
The fall in confidence may reflect the turbulence seen in international financial markets in early February, but confidence remains above average, suggesting that the impact was relatively limited.
The survey also showed that forward orders were strong, rising from three index points to 11, which seems to bode well for future economic growth. It also confirmed the recent trend of strong employment growth, with 400,000 jobs added in 2017.
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a>, Professor of Economics and PLuS Alliance Fellow, <a href="http://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a>
This Vital Signs column was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/vital-signs-five-economic-red-flags-to-watch-for-in-2018-87851" target="_blank">original article</a>.
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Pullback in construction sector could emerge: Richard Holden

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In a radically unsurprising decision on Tuesday the Reserve Bank of Australia left official interest rates unchanged at 1.5%.
<a href="https://www.rba.gov.au/media-releases/2018/mr-18-05" target="_blank">In their announcement</a> there was plenty of what amounts to copy-and-paste from previous rate decisions.
For instance:
“Employment grew strongly over the past year and the unemployment rate declined… Notwithstanding the improving labour market, wage growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wage growth over time.”
And on inflation it’s still low with the consumer price index (CPI) and underlying inflation (inflationary pressures in the economy that are predominantly due to market forces like supply and demand), below 2%.
<iframe src="https://datawrapper.dwcdn.net/5TxE0/3/" frameborder="0" scrolling="no" width="100%" height="449"></iframe>These are the key factors that make raising rates unlikely. Indeed, perhaps the only thing preventing a cut in rates is the fear of a housing bubble.
On that front the RBA seemed to report progress, saying:
<blockquote>
“[the Australian Prudential Regulation Authority] APRA’s supervisory measures and tighter credit standards have been helpful in containing the build-up of risk in household balance sheets, although the level of household debt remains high.”
</blockquote>
Little wonder that markets are not predicting an increase in rates this year.
On the labour market front, <a href="http://www.media.anz.com/phoenix.zhtml?c=248677&amp;p=irol-jobad&amp;nyo=0" target="_blank">the ANZ job advertisements survey</a> revealed that the strong growth in ads from previous months was largely maintained. Although for the month of February ads were down 0.3%, the robust growth in previous months means that ads are still up 13.3% on the previous 12 month period. It seems that the strong employment growth from last year is set to continue, but there is still no real sign of this translating into wage growth.
The global puzzle of why employment growth is strong while wages growth is weak endures. And, as the RBA comments reveal, it is weighing on the minds of central bankers.
The volatile <a href="http://www.abs.gov.au/ausstats/abs@.nsf/latestProducts/8731.0Media%20Release1Jan%202018?OpenDocument" target="_blank">building approval data</a> jumped around again in January, with approvals up 17.1% in January, following a 20% fall in December. Approvals for apartments jumped a massive 42.2% in January. That’s an interesting figure for two reasons.
The strong growth in supply of apartments is one factor that is (slowly) helping housing affordability. In cities like Sydney, with geographic constraints on all sides, the only place to go is up in terms of building new dwellings.
And less happily, sharp increases in supply are typically how bubbles burst. An important question is who is going to buy all these new apartments, and how speculative are those purchases.
There is scant evidence on this point, but <a href="http://www.news.com.au/finance/real-estate/flipping-properties-to-be-debt-free/news-story/6a426435d073784bd0b10d1798be7ff5" target="_blank">plenty of anecdotal fears</a> about people purchasing off the plan with significant leverage in the hope of flipping at a quick profit. The apartment market is a key indicator to watch in 2018.
<a href="http://www.abs.gov.au/ausstats/abs@.nsf/latestProducts/5206.0Media%20Release1Dec%202017?OpenDocument" target="_blank">National accounts data</a> showed the Australian economy grew at the same rate in 2017 as is did in 2016, with GDP growth coming in at 2.4%. This points to one of the big, unresolved macreconomic questions of our time.
Is the “new normal” for economic growth something like 2% ? (This would put GDP growth per capita well below that.) Or was the great recession a damaging and long, but ultimately a temporary lull, and that we will return to 3%-plus growth sooner or later. I have consistently said I think its the former, but again it is too early to tell.
<a href="https://www.propertyobserver.com.au/http://www.abs.gov.au/ausstats/abs@.nsf/mf/5368.0?OpenDocument">International trade data</a> released Thursday showed Australia’s trade balance at A$1.1 billion, up slightly from the previous month.
Speaking of trade, the biggest economic news of recent weeks was <a href="https://theconversation.com/americas-allies-will-bear-the-brunt-of-trumps-trade-protectionism-92735" target="_blank">the Trump administration’s announcement</a> that it would impose significant steel and aluminium tariffs (25% and 10% respectively). This has the potential to trigger a global trade war and tank economies around the world, although such a cataclysm is a fair way off yet.
Make no mistake, this is terrible policy. The worry is that its not just another cunning and cynical move by Trump, but that he actually believes in it. He has railed against trade deficits for 20 years, revealing the poverty of his understanding of economics.
<img src="https://counter.theconversation.com/content/92829/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">For now its wait-and-see, but the fact that National Economic Council director Gary Cohn resigned in the wage of the announcement suggests that Trump might not flip-flop on this issue - and that there is more bad news to come.
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a>, Professor of Economics and PLuS Alliance Fellow, <a href="http://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a>
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/vital-signs-the-one-thing-holding-back-an-rba-rate-cut-92829" target="_blank">original article</a>.
Vital Signs is a weekly economic wrap from UNSW economics professor and Harvard PhD Richard Holden (<a href="https://twitter.com/profholden" target="_blank">@profholden</a>).
Vital Signs aims to contextualise weekly economic events and cut through the noise of the data affecting global economies.
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The one thing holding back an RBA rate cut: Richard Holden

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There was plenty of news in Australia this week.
The influential NAB Monthly Business Survey had a smiley face (literally) on it for the first time since mid last year, with the index up 5 points to +11.
Business confidence itself was unchanged at +6.
It reported that there had been “a reprieve from the steady moderation in business conditions seen late last year”.
Yet retail, manufacturing and mining performed poorly, with wholesale picking up the slack. Retail was now the weakest sector in the survey.
Translation: consumer confidence is bad. And when you think that consumer spending accounts for nearly 75% of GDP that is certainly cause for concern.
Private sector credit was up 0.7% in December for a 5.6% annual rate of growth, according to the Reserve Bank.
How does one square that with my claims about consumer confidence?
Easy, the credit expansion was chiefly due to a growth in investor loans, which were up at an annual rate of 6.2%.
In fact, over the last three months that rate was edging toward the Australian Prudential Regulatory Authority “speed limit” of 10% – coming in about 1% below.
This raises thorny questions for APRA. Does it impose tighter constraints on banks lending to investors – like even higher deposit requirements?
What if growth goes over 10% – do they shift the goalposts?
<a href="https://www.propertyobserver.com.au/images/2017/02/07/Screen%20Shot%202017-02-07%20at%2012.54.53%20pm.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/07/Screen%20Shot%202017-02-07%20at%2012.54.53%20pm.jpg" alt="">
We are used to thinking of central banks as having to perform a balancing act with monetary policy where they don’t let the economy get too hot or too cold, and have to be worried about an interest rate rise causing a sharp contraction/recession.
Perhaps APRA faces an analogous, though new, problem.
If it tightens so-called “macroprudential” standards – like deposit requirements – it risks causing a sharp contraction in housing prices.
And that could lead to forced selling, and pretty soon it could amount to a fire sale.
Or, if you like, a macroprudentially-induced housing run.
Australia’s trade surplus came in at a record A$3.51 billion in December, beating estimates of around A$2.2 billion. This seems like good news. And as they say in baseball “you can’t boo a homerun”.
But the record figure came on the back of a sharp rise in commodity prices, once again highlighting how dependent our economy is on cyclical movements in prices of things we dig out of the ground.
And the RBA will not be pleased at the accompanying leap in the Aussie dollar, which surged past US76 cents on the news.
The RBA puts a lot of emphasis on a lower Aussie dollar in that it helps exporters, and US76 cents is getting outside their comfort zone.
Although I have expressed scepticism about their thinking many times before in The Conversation.
Over the pond, the US Federal Reserve kept interest rates steady, in the band of 0.5%-0.75%, after its December hike of 25bp.
In its press release the Fed said, “the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace.
Job gains remained solid and the unemployment rate stayed near its recent low.
Household spending has continued to rise moderately while business fixed investment has remained soft.
Measures of consumer and business sentiment have improved of late.
Inflation increased in recent quarters but is still below the Committee’s 2 percent longer-run objective.”
Other than business investment being soft, that sounds like everything is going according to plan. And so far it is.
But then there is President Trump.
We have yet to see the impact Trump will have on consumer and business confidence, let alone what happens if he starts a series of trade wars.
Or if he convinces Congress to introduce his cash-flow-based tax plan.
I will provide more detail on that in future columns, but it is a dangerous attempt to provide preferable tax treatment for exporters over importers.
It has the very real prospect of causing huge disruption, and a large increase in the prices of many staple goods like textiles and food.
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a> is a Professor of Economics and PLuS Alliance Fellow at UNSW and author for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
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Richard Holden

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