Melbourne developer Spacious Group has completed Voyage Altona, one of the closest new apartment developments to Altona Beach.

Off the plan purchasers have started moving into the 49-apartment project on Pier Street, with the remaining move-in-ready one-, two- and three-bedroom apartments starting from just over $500,000.

Display apartments have now been fitted out, allowing prospective buyers to inspect the completed residences by appointment.

[smartcode_project:default project_id=112195 project_image_fid=372638]

The completed apartments feature open-plan living and dining areas which extend onto private balconies and terraces, while full-height glazing maximises natural light throughout the interiors.&nbsp;

Hybrid timber-look flooring, stone benchtops, Miele appliances, porcelain-tiled bathrooms and generous storage feature throughout the building which also features landscaped communal areas, expansive shared terraces, lift access and secure on-grade parking.

Drawing inspiration from its bayside setting, Voyage adopts a restrained palette of warm neutral tones and textured finishes. Many of the apartments take advantage of views across Port Phillip Bay, while the indoor-outdoor living spaces have been designed to make the most of the coastal outlook.

[smartcode_project:default project_id=112195 project_image_fid=3286]

Voyage was developed to address what Spacious Group identified as an undersupply of higher-quality apartment product in Altona, with a focus on owner-occupiers looking to remain within the bayside community.

"Voyage responds to very strong local buyer demand for quality, owner-occupier-focused product," says Barry Plant Projects Director Jarrod Farey, who has handled sales since the project's launch.

"The project delivers an elevated lifestyle proposition, with its design and quality of finish far exceeding anything previously produced in the area, as well as its proximity to Pier Street Village and the beach."

The majority of purchasers have been local downsizers and owner-occupiers looking to stay within the Altona community but who previously had limited opportunities to buy a brand-new apartment.

[smartcode_project_cta:default project_id=112195]

Joel Robinson

Spacious Group completes Voyage Altona in Altona's beachside precinct

Homecorp has secured approval for a $360 million apartment development at Budds Beach, paving the way for one of the Gold Coast's most amenity-rich residential projects to launch later this year.

Gold Coast City Council has approved Lýon Residences, a 32-level tower that will deliver 178 two and three-bedroom apartments across a prominent corner site at 8-10 Acacia Avenue and 25-27 Oak Avenue.

The approval comes as developers continue to invest in premium lifestyle-driven apartment projects on the Gold Coast, where owner occupiers are increasingly prioritising amenity as much as apartment size and location.

<a href="https://www.apartments.com.au/new-apartments/l-on-residences-25-27-oak-avenue-surfers-paradise-qld-4217">Lýon Residences</a> has been designed around a resort-style wellness offering, headlined by a Moroccan-inspired spa precinct featuring treatment rooms, a Nordic sauna and steam room, hot and cold plunge pools, a soaking pool and a residents-only juice bar.

The rooftop will include a heated infinity pool and spa, residents' lounge with private kitchen and bar, gymnasium, yoga and Pilates studio, outdoor entertaining areas and barbecue facilities overlooking the Surfers Paradise skyline.

<img alt="Lyon" data-entity-type="file" data-entity-uuid="2d3e29af-8793-486e-a684-52cef862241f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-15%20at%204.32.26%E2%80%AFPM.png?VersionId=ayG2zpLf3SS6Zy8XmKDcQods4kVWb0gm" />

Homecorp Founder and CEO Ron Bakir said Budds Beach provided the ideal location for the company's latest luxury apartment project.

"Budds Beach represents one of the most unique and sought-after pockets of the Gold Coast, and Lýon Residences has been designed to reflect that sense of rarity and refinement," Bakir said.

The project arrives as wellness continues to become a defining feature of new residential developments both in Australia and internationally.

The latest Global Wellness Institute figures show wellness real estate remains the fastest-growing segment of the global wellness economy and is forecast to exceed $1.8 trillion by 2030. Australia continues to rank among the world's 15 largest wellness real estate markets, with developers increasingly integrating health, recreation and community facilities into apartment projects.

Queensland is also experiencing strong population growth, with the Gold Coast continuing to outperform many other Australian cities as demand for new housing remains elevated ahead of the 2032 Olympic and Paralympic Games.

Bakir said the project had been designed to respond to that shift in buyer expectations.

"Strong population growth and sustained demand across the Gold Coast continue to highlight the need for well-designed new housing supply. Lýon Residences responds directly to this demand while setting a new benchmark for residential living," he said.

Each apartment has been designed to maximise views across the coastline, the Nerang River and the Gold Coast hinterland.

Located just minutes from Surfers Paradise beach and the Broadwater, the development also offers easy access to the light rail network, Broadbeach and Burleigh Heads.

Early site works are underway, with construction expected to commence later this year.

Homecorp approved for Budds Beach apartment tower, Lýon Residences

New apartment developments with uninterrupted, north-facing views over Perth's Swan River are exceptionally rare.

Recognising just how limited those opportunities are, <a href="https://www.apartments.com.au/developers/edge-visionary-living">Edge Visionary Living</a>, one of Perth's most respected builder-developers, targeted <a href="https://www.apartments.com.au/developments/applecross-wa-6153">Applecross</a>, assembling an unrepeatable 6,342 sqm riverfront site on the corner of Moreau Mews and Canning Beach Road to create one of Perth's only new north-facing apartment developments directly overlooking the Swan River.

Today, <a href="https://www.apartments.com.au/buildings/riviere-residences-applecross-59-canning-beach-road-applecross-wa-6153">Rivière Residences</a> offers buyers a unique opportunity to choose between completed residences ready to move into now and off-the-plan homes in the final stage, Rivière West.

[smartcode_project:default project_id=28384 project_image_fid=3823]

Across the completed East and Central buildings, residents are already enjoying the development's luxury amenity, while two of the precinct's hospitality venues are now open.

The completed component of the development gives buyers the advantage of experiencing the finished product firsthand, including its uninterrupted river views, while still having the opportunity to secure a residence in the final stage.

"People are wowed by the view and the quality of the apartments,"&nbsp;Edge Visionary Living Sales Executive, Holly McSweeney, says.

"They're looking for the convenience of lock-and-leave living, but they're not looking to downsize on quality."

[smartcode_project:default project_id=28384 project_image_fid=3826]

The rarity of the development hasn't been lost on prospective buyers, McSweeney says.

For McSweeney, it all comes back to a location that is becoming increasingly difficult to replicate.

"Location, location, location," she says. "We are nestled right on the front of the Swan River. You can never get built out, so wherever you are in Rivière Residences, you've got views of the river forever."

The unique waterfront position has resonated particularly strongly with local downsizers. McSweeney says many buyers are long-time Applecross residents looking to transition from large family homes into a luxury apartment without sacrificing space, quality or the lifestyle they've enjoyed for decades.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/N_FowNW0wu8?si=vb25XFq1wZ-iufAW" title="YouTube video player" width="560"></iframe>

A major focus for Edge in recent years has been resident amenity. Across its apartment portfolio, from beachfront developments in Scarborough to luxury towers in South Perth, the developer has increasingly invested in the spaces beyond the apartment itself.

The strategy has largely been shaped by downsizer demand. Many buyers are moving from large family homes with swimming pools and established gardens. While they're looking to leave the maintenance behind, they don't want to compromise on lifestyle.

At Rivière, <a href="https://www.apartments.com.au/architects/hillam-architects">Hillam Architects</a> designed the resident facilities as an extension of each apartment. A 25-metre heated swimming pool takes advantage of the north-facing river outlook, complemented by a large gym, sauna and steam rooms, private dining spaces, residents' lounges, a cinema, games room, and dedicated wine and whisky rooms.

[smartcode_project:default project_id=28384 project_image_fid=372542]

The waterfront location has also proved to be a major drawcard. Residents are within walking distance of the Raffles Hotel, South of Perth Yacht Club, the Heathcote Cultural Precinct and the cafés, restaurants and boutiques along Ardross Street.

Beyond the location and amenity, McSweeney says many buyers take confidence from Edge's fully integrated development model.

Having delivered apartments across Perth for decades, Edge now designs, develops and constructs its projects in-house, giving the company greater control over quality, delivery and the finished product.

"What I love is when people walk through their apartment for the first time and say, 'This is better than what we imagined,'" McSweeney says. "We hear that all the time."

Completed apartments in the East and Central buildings are now available to inspect by appointment, while Rivière West, the final stage of the precinct, is expected to be completed in the first quarter of 2027.

[smartcode_project_cta:default project_id=28384]

North-facing Swan River views drive demand at Rivière Residences in Applecross

Nearly 60 per cent of apartments at McNab Group's $220 million The Tannery development in Brisbane's West End have sold ahead of the project's public launch, including a suburb-record $2.57 million sale for a two-bedroom apartment.

The early sales campaign has secured buyers for 50 of the project's 87 apartments, highlighting continued demand for larger owner-occupier apartments that combine generous floorplans with premium lifestyle amenities in one of Brisbane's most tightly held inner-city suburbs.

[smartcode_project:default project_id=143337 project_image_fid=374768]

McNab Group Executive Chairman Michael McNab said selling more than half the project before launch reflected changing buyer expectations.

"Selling more than half the project before public sales open tells us buyers are actively seeking apartments that offer something genuinely different," McNab said.

"Today's buyers are looking beyond four walls. They want homes that genuinely enhance the way they live, with spaces that support health, connection and everyday wellbeing."

[smartcode_project:default project_id=143337 project_image_fid=374767]

A key point of difference for the project is the adaptive reuse of the heritage-listed Dixon's Tannery building, which will become The Retreat, a residents-only wellness precinct rather than being redeveloped into additional apartments.

The Retreat will feature a sauna and steam room, hot and cold plunge pools, a commercial-grade gym, Pilates studio, cinema, library, co-working spaces and private dining room. Rooftop amenities will include a swimming pool, landscaped gardens, outdoor entertaining areas and dog-friendly spaces.

[smartcode_project:default project_id=143337 project_image_fid=374760]

Designed by Cottee Parker Architects with interiors by Tom Mark Henry and landscape architecture by Aspect Studios, The Tannery comprises 87 two, three and four-bedroom apartments across 11 levels overlooking the Brisbane River.

Cottee Parker principal Dee Passenger said preserving the original tannery building had been central to the project's design.

"The easy option would have been to maximise the site's development potential with additional apartments. Instead, McNab has chosen to preserve the original tannery as a shared wellness retreat, ensuring this important piece of Brisbane's history remains at the heart of the community."

Passenger said sustainability also played a key role in the design, with materials from the original industrial site salvaged and repurposed throughout the development.

[smartcode_project:default project_id=143337 project_image_fid=374761]

Motiv CEO Carly Cottam said buyers had responded strongly to the combination of larger apartments, wellness facilities and the West End lifestyle.

"We are seeing more buyers looking for homes in the sky that provide the space and functionality of a traditional home, while benefiting from the convenience and lifestyle that apartment living brings," Cottam said.

She said purchasers included both owner occupiers and investors, with demand coming from local buyers as well as interstate purchasers.

Coinciding with the public launch, McNab also announced a partnership with Queensland Ballet, whose neighbouring Thomas Dixon Centre shares historical ties with the original Dixon family.

Located on a 4,465 sqm site at 439 Montague Road, The Tannery overlooks the Brisbane River and is around 10 minutes from the CBD.

Construction is underway, with completion expected in the second half of 2027.

[smartcode_project_cta:default project_id=143337]

More than half of residences sold before public sales as McNab announces significant partnership with Queensland Ballet

McNab's The Tannery nears 60 per cent sold before public release, sets two-bedroom West End record

Iwan Sunito's vision for a landmark mixed-use precinct in Sydney's Inner West has taken a major step forward, with approval granted for the $1.9 billion Five Dock development first unveiled earlier this year.

The approved scheme by <a href="https://www.apartments.com.au/developers/one-global-capital">One Global Capital</a> will deliver an 80,500 sqm mixed-use precinct comprising 840 apartments, integrated hotel accommodation, commercial and retail space, alongside publicly accessible open space designed to create a new destination for the growing suburb.

"This is a significant milestone for One Global Capital and for the future of housing delivery in Sydney," Sunito said.

"The Housing Delivery Authority was established to identify major housing projects capable of delivering meaningful supply more efficiently, and we are delighted that Spencer Street has been recognised as one of those projects.”

He said the declaration reflected the rapid progress achieved since acquiring control of the site.

"In less than seven months we have progressed from taking control of the site to securing entry into one of the NSW Government's most important planning pathways. It reflects the experience of our team, the strength of our consultant group led by Urbis, and our long-term commitment to delivering transformational projects that contribute to Sydney's future."

When the project was revealed earlier this year, Sunito described the opportunity as one of the strongest development sites he had worked on.

"I probably hadn't appreciated the uniqueness of the site until more recently when putting together the concept plans," Sunito said.

"The proximity to the water, and the golf course opposite, is unlike any other part of Parramatta Road. We have a unique position and view corridors over the water that makes this one of the best sites I've worked on."

The development has evolved since its initial announcement, with the approved plans increasing the residential component from the originally proposed 750 apartments to 840 homes while retaining the project's focus on creating an integrated neighbourhood rather than a standalone residential development.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/a-city-within-a-city-iwan-sunito-flags-1-5-billion-mixed-use-precinct-in-five-dock">"A city within a city": Iwan Sunito flags $1.5 billion mixed-use precinct in Five Dock</a>

The precinct will combine apartments with hotel accommodation, commercial workplaces, retail offerings and public spaces, creating a mixed-use environment intended to serve both residents and the broader Five Dock community. The proposal also continues the collaboration between One Global Capital and internationally recognised architect <a href="https://www.apartments.com.au/architects/koichi-takada-architects">Koichi Takada</a>, whose previous work with Sunito includes Infinity, Arc and Skye North Sydney.

Takada previously said the design was driven by a philosophy of integrating nature into the built environment.

"The concept for this development is born from our design approach to naturalising architecture," Takada said.

"The public realm benefits from biophilic design that integrates generous landscaping, and the development is optimised for natural daylight, airflow and water views to foster wellbeing, sustainability and spaces that foster community interaction."

Sunito has consistently described the project as a "city within a city", with a strong emphasis on creating a destination that extends beyond housing.

"We want to create a development that's not only to be seen, but to be experienced by the whole local community," he said.

The approval comes as Five Dock continues its transformation ahead of the opening of the Sydney Metro West line, with the new Five Dock station set to significantly improve connections between the Inner West, Parramatta and the Sydney CBD.&nbsp;

The precinct will also benefit from its proximity to the Parramatta Road corridor, nearby waterfront parklands and established retail and dining offerings that have made Five Dock one of Sydney's most tightly held Inner West suburbs.

Iwan Sunito secures approval for $1.9 billion Five Dock mixed-use precinct

Westpac

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Westpac chief executive Brian Hartzer has rejected claims that the big four banks are worsening the housing price slump by cutting off credit.
"Let's be clear: we want to lend", Hartzer said in his opinion column in the Australian Financial Review.
"For Westpac, the recent decline in credit growth was due entirely to a reduction in new applications; average approved loans sizes actually increased slightly, while our approval rates remained unchanged".
"As to the perception that the royal commission has made banks scared to lend, for Westpac this is simply not the case", Hartzer said.
Hartzer did suggest the increase in scrutiny of customers' expenses and income, plus the building of additional buggers into loan serviceability calculations, had added to the time and cost of getting a loan.
"My view is that the housing market remains fundamentally sound and, overall, the adjustments are nothing to be alarmed about."
Median house prices in Sydney fell 10 percent in 2018, according to CoreLogic, while the second biggest capital housing market Melbourne saw 9.1 percent falls, accelerated in the latter part of the year.
Hartzer said the falls needed to be seen in the context of a 75 percent jump in Sydney prices between 2011 and 2017, and a 55 percent rise in Melbourne prices over the same period.
He cautions that investors have been given further "reason to pause", ahead of the looming general election and Labor's proposed tightening of tax breaks for negatively geared property.
He said "uncertainty around potential taxation changes relating to residential property" was weighing on demand from property investors while buyers were putting off decisions to buy, upgrade or invest until after the election. 
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j.ballantyne1990-6AQqhLzZaK

Westpac boss Brian Hartzer rejects blame for worsening housing price slump

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EXPERT OBSERVATION
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The December Quarter CPI printed 0.5%qtr, compared to the market median of 0.4% and Westpac’s forecast for 0.3%. At two decimal places, the rise in the CPI was 0.53%qtr, so a hard 0.5%. With base effects, the annual rate has eased back to 1.8%yr compared to 1.9%yr in Q3, 2.1%yr in Q2 and 1.9% in Q1. But with another sub 0.6% print, the six month annualised pace is down to 1.2%yr (using seasonally adjusted data – raw CPI six month annualised is 2.0%yr but this incorporates a seasonally stronger pace in H2). Inflation continues to bump along just at, or just under, the bottom of the RBA’s target band.
Following the December quarter 2017 CPI, we argued that searching for inflation in the Australian economy has been as fruitless as Vladimir and Estragon’s wait for Godot. While this report does suggest we have at least found a bottom in the disinflationary pulse, it is still too early to call an inflationary pulse is underway and there are some hints in the December 2018 report that the current scenario has much longer to run.
The average of the core measures, which are seasonally adjusted and exclude extreme moves, rose 0.4%qtr meeting market expectations. In the quarter, the trimmed mean gained 0.43% while the weighted median lifted 0.36%. The annual pace of the average of the core measures printed 1.8%yr which is the same as the September quarter print.
Incorporating revisions, the six month annualised growth in core inflation is 1.8%yr which is well below the bottom of the RBA target band and the slowest pace June 2016.
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/JanFeb19/Dec2018CPI.jpg" alt="CPi">
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A small number of upside surprises but nothing that changes the fundamental picture
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Some standouts in the quarter – on the positive side there was a stronger rise in alcohol &amp; tobacco (3.2% vs 2.8% expected), a surprising rise in utilities (0.1% vs –0.3% expected), a smaller fall in auto fuel (–2.5 vs –4.2% expected), a surprising jump in household contents &amp; services (0.5% vs –0.5% expected) and a stronger bump in holiday travel (2.6% vs 1.6% expected all due to strong domestic holiday prices). On the downside, food rose just 0.9% (1.2% expected) due to a smaller than expected rise in fresh fruit &amp; vegetables, clothing &amp; footwear fell –0.2% (a small rise was expected). Everything else came in close to expectations or just slightly stronger.
We think is worth noting the continued modest gains for housing expenditure. Housing costs overall rose as expected (0.2%) rents rose 0.2% (we thought they would be flat), dwelling prices rose just 0.4% (as we expected) while utilities rose 0.1% vs our –0.3% expected. The surprise in utilities was the jump in electricity prices that outweighed the normal seasonal fall in gas prices. 
There remains a number of near term negative risks for both rents and dwelling purchase costs in NSW and Victoria. Given that rents and dwelling purchases are worth around 15% of the CPI on their own, this is significant for headline inflation, and even more so for core, where their weight is somewhat higher.
Tradables fell 0.3% in the December quarter. The tradable goods component fell –0.1% due to automotive fuel (-2.5%), audio, visual &amp; comp equipment (-3.3%) and wine (-1.9%). The tradable services component fell 0.7% due to international holiday travel &amp; accommodation (-0.8%).
Non-tradables component rose 0.9% in the December quarter. The non-tradable goods component rose 1.5%, due to the excise tax increase for tobacco (9.4%). The non-tradable services component rose 0.6%, due to domestic holiday travel &amp; accommodation (6.2%).
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/JanFeb19/DecCPIComp.jpg" alt="CPICop">
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Low inflation remains embedded in the economy
</div>
For the first time in two years inflation forecasters have underestimated the quarterly rise in the CPI. Does this signal a turnaround and the return of a more sustainable inflationary pulse? We don’t think so. While there are some isolated inflationary pressures; tobacco prices are clear standouts as well as embryonic indicators that the disinflationary pulse in retail, particularly in the household goods &amp; services and domestic holidays &amp; travel, may be ending. But, we are still seeing weakness in clothing and footwear while the moderation in housing costs (rents and dwelling purchases in particular) is a significant offset. We are, however, watching the surprising bump in electricity prices to see if this continues.
As housing has a significant group weighting in the CPI (15%) it has a meaningful impact on the estimates of both inflation and core inflation. As such, with core inflation below the bottom of the RBA’s target band we can find little to suggest any risk of a meaningful acceleration.
Justin Smirk is senior economist at Westpac.
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An upside surprise but inflation remains well contained: Justin Smirk

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EXPERT OBSERVER
The ‘cautiously optimistic’ consumer mood that prevailed through 2018 has evaporated with sentiment beginning the new year with a slightly pessimistic view. At 99.6, the Index is below the 100 level, indicating that pessimists outnumber optimists, although only by a slim margin. This is the first time sub-100 reading from the survey since November 2017.
Confidence has come under pressure from a number of fronts including a continued slide in house prices; disappointing updates on Australia’s economic growth; ongoing concerns around global trade wars; and political uncertainty. Indeed, the continued optimism late last year was something of a surprise, implying the consumer mood was still getting considerable support from low interest rates, diminished fears of rate increases, a firm labour market, and at the margin, lower petrol prices. Other factors may also have weighed negative on sentiment in January including the Australian cricket team’s first domestic test series defeat to India.
Click here <a href="https://www.propertyobserver.com.au/images/2019/1/16/sentiment.jpg" target="_blank">to enlarge</a>.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/1/16/sentiment.jpg" alt="">
The January sentiment fall is significant, marking the biggest monthly decline in over three years. January reads should be treated with some caution as the Index is adjusted to remove a regular boost to sentiment over the holiday season. However, even allowing for this, the update clearly marks a poor start to the new year. The Index is down 5.3% compared to this time last year.
All index components recorded declines with the biggest falls around expectations for the economy and assessments of current finances.
On the economy, the ‘economic outlook, next 12mths’ sub-index dropped 7.8%, the biggest fall since September 2015 when sentiment was hit by a sharp sell-off in financial markets and a disappointing update on Australia’s growth. The ‘economic outlook, next 5yrs’ sub-index also showed a sizeable 5.9% decline. Despite the weakening, both of sub-indexes remain comfortably above their long run average levels suggesting the economy is still a support for sentiment overall.
<a href="https://www.propertyobserver.com.au/subscribe" target="_blank"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/1/Subscriber%20strip%20ad.jpg" alt=""></a>
Consumer views on family finances also recorded a poor start to the year. The ‘finances vs a year ago’ sub-index posted a sharp 5.9% decline taking it back to near 2018 lows. The sub-index tracking expectations for ‘finances, next 12 months’ recorded a milder 3.1% fall. Pressure on family finances remains a key weak spot for sentiment with both sub-indexes well below long run average levels. Slow wages growth and falling house prices remain significant headwinds.
Consumer attitudes towards major purchases were more resilient, the ‘time to buy a major household item’ sub-index dipping just 1.3%. However, this sub-index remains below average with the weak reads around family finances pointing to a continuation of the sluggish consumer spending growth seen through 2018.
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Matthew Hassan is a senior economist with <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
 
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Consumer sentiment declines to lowest point since house prices declined: Westpac

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In 2017/18, real economic output grew by 2.8% nationally, accelerating from 2.3% in 2016/17, according to the latest State by State Growth Report from Westpac.
The NSW economy performed over the past four years with output growth averaging an above trend 3.1% - the strongest four year performance for the state since the late 1990s.
The report found: "output growth was 2.8% in 2014/15, surging to 4.0% in 2015/16 and then moderating to 3.1% in 2016/17 and 2.6% in 2017/18 particularly as housing has become less supportive."
By industry, agriculture, real estate and professional services led the growth moderation in 2017/18.
Construction added a 0.4ppts to growth with broad strength as investment responded to the growing needs of a rising population.
<img src="https://www.urban.com.au/images/2018/11/22/WESTPAC%20NSW.JPG" alt="">
The Victorian economy has been performing strongly, in particular, driven by a population boom.
Output growth was 3.5% in 2017/18, matching the average for the past four years but down from on last year.
Andrew Hanlan, the report author, noted: "State demand grew to 4.7% in 2017/18, up from 4.2%, the fastest pace in a decade.
"On a per capita basis, output grew by 1.2% in 2017/18, in line with the national average.
"Construction remained a key growth driver."
<img src="https://www.urban.com.au/images/2018/11/22/WESTPAC%20NSW%202.JPG" alt="">
In Western Australia output bounced back from a 1.8% decline this year to grow by 1.9% this year.
The construction sector added 0.2ppts to activity in 2017/18, a turnaround from a 2.6ppts drag in 2016/17.
Mining output was a key growth driver, adding 0.8ppts, with new capacity coming on stream, according to the report.
"Consumer related sectors were subdued, significantly underperforming gains across the rest of the country as household incomes remained under pressure," Hanlan said.
<img src="https://www.urban.com.au/images/2018/11/22/WESTPAC%20NSW%204.JPG" alt="">
The Queensland economy grew 3.4%, the strongest levels since 2011/12.
Construction added 0.4ppts to activity, a turnaround from a -0.1ppts impact in 2016/17 and from the sharp negatives in 2014/15 and 2015/16.
"srowth was broadly based across a range of business sectors, indicative of an improvement in underlying conditions," Hanlan said. 
<img src="https://www.urban.com.au/images/2018/11/22/WESTPAC%20NSW%203.JPG" alt="">
The South Australian economy expanded by 2.0%, slightly reduced on last year's 2.4% but in line with the long term average.
This is an improvement on the previous six years, when growth averaged just 0.9%.
Andrew Hanlan found: "the health sector added an exceptional 0.8ppts to activity, well above the national average (0.4ppts) boosted by the progressive roll-out of the National Disability Insurance Scheme.
"Construction advanced, +0.3ppts, after three years of modest negatives, with home building and business investment expanding," he added.
<img src="https://www.urban.com.au/images/2018/11/22/WESTPAC%20NSW%205.JPG" alt="">
The 2017/18 year was a standout for Tasmania, with output growth of 3.3%, a doubling of the 1.5% rise in 2016/17 and the strongest post GFC result in a decade.
"Per capita output growth of 2.3% in 2017/18 was the envy of all other states," stated Hanlan.
"State final demand grew by 4.1% in the year, with broad based strength across the consumer, housing, business investment and public demand."
The health sector was a key growth driver, +0.7ppts.
Of the 19 broad industries, none were a drag on activity in 2017/18 - a relatively rare outcome, Hanlan said.
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How each state economy is performing: Westpac

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EXPERT OBSERVATION 
The expected bounce in employment appeared in the October Labour Force Survey with a 32.8k rise.
The market median was for 20k. However, just as we saw in September, the mix was again positive with a 42.3k rise in full-time and a small 9.5k decline in part-time employment. In addition hours worked rose 0.3% following on from a 0.4% gain in September.
<a href="https://www.propertyobserver.com.au/images/2018/11/15/westpac%201.jpg" target="_blank">Click here</a> to enlarge:
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/11/15/westpac%201.jpg" alt="">
 
Source: Westpac IQ
Perhaps more important is the continuation of the trend improvement in unemployment.
Sure, in the month unemployment was flat at 5.0%, but this is a good result seeing as the 0.3ppt drop in unemployment to 5.0% in September was due to a large drop in participation rather than a strong employment print.
As such there was always a risk the participation rate would bounce this month. Participation did rebound this month, but the 0.1ppt rise to 65.6% still left it under the 65.7% print in August.
<a href="https://www.propertyobserver.com.au/images/2018/11/15/westpac%202.jpg" target="_blank">Click here</a> to enlarge
 <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/11/15/westpac%202.jpg" alt="">
Source: Westpac IQ
Last month suggested that you need to take a holistic view of the Labour Force Survey and accept that some of the monthly volatility is associated with the survey groups being rolled into, and out of, the sample. This meant that while the 5.6k print (revised to 7.8k) on employment was too soft compared to underlying momentum, the fall in unemployment to 5.0% was also too aggressive. As such Westpac was forecasting a bump in employment in October and also a rise in unemployment (to 5.1%).
The fact that employment had a robust rise in October, and the unemployment rate was flat due a modest rise in participation, suggests the trend decline in unemployment remains in place. We had been forecasting that unemployment would end the year around 5.1%. Based on the current trend, it is more likely to be around 5.0%, if not below. It is only our expectation for participation to drift back up to 65.60% (currently 65.56%) that is holding unemployment at 5.0% at year end.
In terms of risks for November, the ABS notes that the outgoing sample group has the same employment to population group as the sample average, so by itself, the rolling of that group will not impact employment. However, that same group has a higher unemployment rate compared to the sample average so rolling that group out will lower the sample average. All else held equal, this presents downside risk to our unemployment forecast for November.
<a href="https://www.propertyobserver.com.au/images/2018/11/15/westpac%203.jpg" target="_blank">Click here</a> to enlarge
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/11/15/westpac%203.jpg" alt="">
Source: Westpac IQ
For a few months we have noted the robust labour market conditions in Victoria where unemployment had fallen to be almost on par with NSW (the national low for a large state). The last time this happened was when Victorian unemployment was on a rising trend. This matters because Victorian wages have been more responsive to changes in labour market conditions than the other states but especially compared to NSW. This month unemployment fell 0.1ppt to 4.5% in Victoria while it was flat in NSW at 4.4% (a 10 year low for this state). So Victoria continues to narrow the gap to NSW in terms of unemployment suggesting we need to keep a close eye on Victorian wages going forward.
<a href="https://www.propertyobserver.com.au/images/2018/11/15/westpac%204.jpg" target="_blank">Click here</a> to enlarge
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/11/15/westpac%204.jpg" alt="">
Source: Westpac IQ
By state, the largest gains in employment were in NSW (+16.3k following +1.1k in September) while Victorian employment fell (–3.5k after a robust +20.7k). It is the ongoing trend decline in Victorian participation that has been a key driver of falling national unemployment hence we are a little nervous about following this trend to generate a sub 5% unemployment rate by end 2019. Victorian female participation has trended below female participation in NSW, a very rare event. In that regard, while we would expect to see female participation rise in Victoria, we have to acknowledge that female participation could ease in NSW from its current record high level.
<a href="https://www.propertyobserver.com.au/images/2018/11/15/westpac%205.jpg" target="_blank">Click here</a> to enlarge
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/11/15/westpac%205.jpg" alt="">
Source: Westpac IQ
Employment fell again in Qld (–3.2k following –11.9k in September) and unemployment rose 0.3ppts to 6.3. Meanwhile, the recovery in the other mining state, WA, continues with a 3.1k lift in employment (+3.3k in September) while the unemployment rate fell again by 0.3ppt to 5.7%. This is the first time WA unemployment has been below 6.0% since January 2018.
Overall, we emphasise the need to look through the monthly volatility in the Labour Force Survey and focus on the broader trends in the labour market. The pace of employment growth has eased back from the 4.3%yr peak in 2017 to 2.5%yr in October and the six month annualised pace is also 2.5%. Both seem about right compared to leading indicators if you take into account the employment overshoot through 2017/2018. As such, while we do expect participation to trend higher, the rising trend in female participation may have come to an end (for now) just as male participation has stabilised.
The October survey is a sound update and it increases the risk that the unemployment rate could end this year with a 4 handle.
Justin Smirk is senior economist at Westpac.
You can find the complete chart pack <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2018/November/Labour-FI_chart_packOct18.pdf" target="_blank">here</a>. 
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Employment stats show continuing robust trend: Westpac's Justin Smirk

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EXPERT OBSERVATION
Consumer sentiment has continued to recover from the mild setback in the September quarter.
The headline index remains 1.6% below its July peak but is now more comfortably above the 100 line, indicating optimists outnumber pessimists.
Indeed, while confidence may still not be particularly strong, there has been a clear improvement over 2018.
November marks the twelfth successive month that optimists have outnumbered pessimists contrasting with the previous twelve months when pessimism held sway for 11 out of 12 reads.
This is a surprisingly strong result. In particular, respondents are much more positive about their own finances.
That is despite consistent reports around weakness in the housing markets in the major capitals and the sharp falls in the equity market through October.
Low interest rates and their prospect of being sustained for some time are clearly supporting confidence.
For example, the confidence of those respondents with a mortgage increased by 4.3%. However, on a more cautionary note, measures of spending intentions have been weaker.
Four of the five index components recorded gains in November.
Assessments of family finances showed a promising rise, the ‘finances vs a year ago’ sub-index was up 4.9% to its highest level since early 2016.
The ‘finances, next 12 months’ sub-index rose by 3.2%. Consumers in NSW showed particularly strong gains, a somewhat surprising result given the continued correction in Sydney house prices.
Consumer expectations for the economy showed an exceptional rise in longer term expectations. This was supplemented by a positive for shorter term views as well. The ‘economic outlook, next 12 months’ sub-index posted a 1.7% rise, and, at 104.3, remains well above its long run average of 90.7
. The ‘economic outlook, next 5 years’ sub-index jumped 9.7% in November to reverse most of the sharp drop seen over the previous three months.
The wider consumer mood is more buoyant but attitudes towards spending are more downbeat. The ‘time to buy a major household item’ sub-index fell 3.5% in November, to an 18 month low.
Responses to our annual question on Christmas spending plans also point to a subdued near term outlook for demand.
A third of Australians expect to spend less on gifts than they did last year, with 56% expecting to spend about the same and just 10% expecting to spend more.
The net balance of ‘more minus less’ is marginally more negative than last year, and the weakest read since 2014. Despite the higher reads in overall confidence this question suggests that we are unlikely to see any improvement over last year’s lacklustre Xmas spend.
Labour market expectations improved a touch in November.
The Westpac Melbourne Institute Unemployment Expectations Index declined 1.9% (recall that lower reads mean more consumers expect unemployment to fall in the year ahead).
The index continues to show a clear 7.9% improvement on a year ago, led by Victoria where the state index has fallen 16.5%.
Consumer views around housing are very interesting. Buyer sentiment improved sharply but price expectations fell to new lows.
The ‘time to buy a dwelling’ index posted a strong 11.8% surge to be up 16.7% on a year ago to the highest level since March 2015.
Consumers in NSW showed a particularly strong gain with a 26% jump taking the state index to a five year high and suggesting the decline in Sydney house prices is starting to generate some interest from buyers.
Because the NSW Index has been so low this stunning improvement only restores the Index to just below its long term average. The other state, Victoria, where prices have recently shown significant weakness improved only modestly with “Time to Buy” up only 3.3%.
Consumer expectations for house prices posted another fall in November.
The Westpac Melbourne Institute Index of House Price Expectations fell 2.3% to 99 – on a par with the weakest read we have ever seen on this index, when it was first compiled back in May 2009. T
he state detail continues to show particularly weak reads in NSW and Victoria, both hitting new lows in November with Victoria’s index down 25% over the last three months alone.
The house price corrections underway in Sydney and Melbourne now look to be firmly embedded in consumer expectations.
The Reserve Bank Board next meets on December 4. The Reserve Bank recently released its November Statement on Monetary Policy. In the Statement it noted that “the Board does not see a strong case to adjust the cash rate in the near term”. That confirms that no move can be expected at that December meeting.
On the other hand the Bank raised its growth forecast for 2018 and maintained its above trend growth forecast for 2019. Furthermore, it lowered its unemployment forecast and slightly lifted its inflation forecast.
These moves could be interpreted that be Bank is more confident to raise rates during 2019. It is Westpac’s view that growth in 2019 will slow to 2.7% particularly under the weight of a weakening housing market; a contraction in construction; and a slowdown in jobs growth.
Today’s Consumer Sentiment Report portrays a more confident consumer than we had expected although this confidence is not boosting spending intentions.
Westpac continues to expect that the Reserve Bank will keep the cash rate on hold in 2018, 2019 and 2020.
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bevans-rYk9SxEa4r

Solid lift in consumer sentiment: Bill Evans

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Credit growth has been slowing as the housing sector cools in response to tighter lending conditions.
However, in the September quarter, a burst of strength in the business segment provided some temporary respite.
Total credit grew by 0.4% in the month of September, including a 0.35% rise for housing and a 0.6% expansion in business
Annual credit growth is 4.6% currently, moderating from 5.3% a year ago. Housing growth has eased to 5.2% from 6.6% over this period. Business grew by 4.4% over the past year, up a fraction from 4.2% a year earlier. Personal credit continues to contract, down 0.9% in the year to September 2017 and falling by a further 1.5% over the past year.
Business credit remains volatile around a modest uptrend. The September quarter saw a brisk rise of 2.0%, up sharply from gains in the three previous quarters (0.9%, 0.8% and 0.6%). The pace of the past three months is unlikely to be sustained given the current economic and financial backdrop.
On housing, indicators point to a further cooling of conditions. House prices have turned, moving lower following a strong run, and dwelling approvals are down from the 2016 peak and are likely to move lower still after an extended upswing, to bring them more in line with underlying requirements.
Tighter lending conditions and rising funding costs will continue to weigh on the housing sector over coming months - recall that 3 of the 4 major retail banks raised mortgage rates over August and September.
Momentum in housing credit, as measured by 3 month annualised growth, has slowed progressively from a peak of 6.8% in May 2017 to be 4.7% currently.
Tighter lending conditions were largely directed at the investor market. The upshot is a marked slowing in investor credit growth. For the three months to September, investor credit almost stalled, advancing by only 1.4% annualised.
The slowing in the owner-occupier market has been less pronounced - but the trend is lower. The 3 month annualised pace for owner-occupier housing credit is 6.4% currently, a moderation from a peak of 8.7% last July.
Turning to business credit, this is volatile around a modest uptrend, as noted above. Annual growth is 4.4% currently - three months earlier it dipped to 3.2%.
In 2017, the business mood improved, mirroring the global trend. This has translated into an increase in business investment in the real economy by the non-mining sectors.
Currently, business credit growth is undershooting growth in non-mining business investment, the reverse of the experience in recent years, suggesting a greater reliance by businesses on other sources of funding, including retained earnings.
Andrew Hanlan is a Senior Economist for Westpac
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Credit growth slowing as housing sector cools, responding to tighter lending conditions: Andrew Hanlan

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EXPERT OBSERVER
It is hard to find signs of rising inflationary pulse
The September Quarter CPI printed 0.4%qtr, compared to the market median and Westpac’s forecast for 0.5%. At 2 decimal places the rise in the CPI was 0.44%qtr so a sound 0.4% but it was the third consecutive 0.4% print holding the six month annualised pace at 1.6%yr. With base effects, the annual rate has eased back to 1.9%yr compared to 2.1%yr in Q2, 1.9% in Q1 and 2017 Q4 and 1.8%yr in Q3. Inflation continues to bump along just at, or just under, the bottom of the RBA’s target band.
Following the December quarter 2017 CPI we argued that searching for inflation in the Australian economy has been a fruitless as Vladimir and Estragon’s wait for Godot. This has not changed as we are still waiting to see how long this record breaking performance can continue. There were some hints in the September suggesting this scenario has much longer to run.
The average of the core measures, which are seasonally adjusted and exclude extreme moves, rose 0.3%qtr meeting our expectations. In the quarter, the trimmed mean gained 0.37% while the weighted median lifted 0.28%. The annual pace of the average of the core measures printed 1.7%yr, a further deceleration from 1.7%yr in Q2 2018 and 2.0% in Q1.
Incorporating revisions, the six month annualised growth in core inflation is only 1.5%yr which is well below the bottom of the RBA target band and the slowest pace September 2016.
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/Sept_OCt18/sept18CPIchart.JPG" alt="CPI " title="history">
Components of the CPI broadly as expected but some interesting surprises in the finer details
Some standout in the quarter – on the positive side there was a bump from food (0.5%),and surprising rise for clothing &amp; footwear (0.2% vs –0.3% expected), rising auto fuel (1.4%) and a larger than expected seasonal bump in holiday travel (3.3%). On the downside, the bump from tobacco was less than expected (just 1.8%) while health costs fell more than expected (–0.4%), car prices fell again (–0.1%) and the fall in household content &amp; services was larger than expected (–1.2%) with a larger than expected 12% fall in child care. We had highlight child care as a clear risk to our forecasts.
The most interesting new bit of information in the survey was for housing expenditure. While housing costs overall rose as expected (0.4%) rents rose 0.2% (we thought they would be flat), dwelling prices rose just 0.1% (we thought 0.4%) while utilities rose 0.8% vs our –0.4% expected. Overall the mix on housing is softer than expected as there are a number of near term negative risks for both rents and dwelling purchase costs in NSW and Victoria. Given that rents and dwelling purchases are worth around 15% of the CPI their own this is significant for headline and inflation even more so for core where their weight is somewhat higher.
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/Sept_OCt18/Sep18CPIcontribs.JPG" alt="CPI " title="contribs">
Tradables rose 0.8% in the September quarter. The tradable goods component rose 0.4% due to automotive fuel (1.4%), fruit (2.4%), furniture (1.9%), and vegetables (1.6%). The tradable services component rose 4.0% due to international holiday travel &amp; accommodation (4.3%).
Non-tradables rose 0.3% in September quarter. The non-tradable goods component rose 0.5% due to tobacco (1.8%), beer (0.9%) and takeaway &amp; fast foods (0.7%). The non-tradable services component rose 0.1% due to domestic holiday travel &amp; accommodation (2.4%) and property rates &amp; charges (2.3%).
Low inflation remains embedded in the economy
We have now two consecutive years where forecasters have over-estimated the CPI print. The average error since the December quarter 2016 is +0.14ppt. Core inflation came in below expectations (0.3%qtr vs 0.4%qtr expected) but there error on core inflation is more random and does not have a consistent bias. The average error on core since December 2016 is just 0.006ppt. So analysts are broadly getting the core inflation pulse corrected but are still underestimating the disinflationary pulse which has seen greater than usual discounting in some sectors \which are then trimmed out of the core measures.
There are some isolated inflationary pressures; rising petrol and tobacco prices are clear standout as well as embryonic indicators that disinflationary pulse in retail may be easing but the moderation in housing costs (rents and dwelling purchases in particular) are a significant offset. This is significant as this group weighting means it has a meaningful impact on the estimates of both inflation and core inflation. As such, with core inflation well below the bottom of the RBA’s target band we can find little to suggest any risk of a meaningful acceleration.
Our preliminary estimate for the 2018 Q3 CPI is 0.7%qtr which will see the annual pace lift a touch to 2.0%yr as the recent rise in petrol prices makes a larger contribution in the December quarter. We are also expecting a modest recovery in dwelling purchase prices. Under our current scenario, even with a modest lift in housing costs and rising fuel prices inflation, inflation is expected to be at, or just under, 2.0%yr all the way out to end 2019.
On a festive note the ABS reports that this is the 70th birthday of the CPI in it’s current form – the index has quarterly history that goes back to the September quarter 1948.
Justin Smirk is a Senior Economist at Westpac
<div style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">
<h1 style="box-sizing: border-box; font-size: 36px; margin: 18px 0px; color: #621a4b; font-family: ChronicleSemibold, 'Times New Roman', Times, -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; line-height: 1.1;">It is hard to find signs of rising inflationary pulse</h1>
</div>
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">The September Quarter CPI printed 0.4%qtr, compared to the market median and Westpac’s forecast for 0.5%. At 2 decimal places the rise in the CPI was 0.44%qtr so a sound 0.4% but it was the third consecutive 0.4% print holding the six month annualised pace at 1.6%yr. With base effects, the annual rate has eased back to 1.9%yr compared to 2.1%yr in Q2, 1.9% in Q1 and 2017 Q4 and 1.8%yr in Q3. Inflation continues to bump along just at, or just under, the bottom of the RBA’s target band.
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">Following the December quarter 2017 CPI we argued that searching for inflation in the Australian economy has been a fruitless as Vladimir and Estragon’s wait for Godot. This has not changed as we are still waiting to see how long this record breaking performance can continue. There were some hints in the September suggesting this scenario has much longer to run.
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">The average of the core measures, which are seasonally adjusted and exclude extreme moves, rose 0.3%qtr meeting our expectations. In the quarter, the trimmed mean gained 0.37% while the weighted median lifted 0.28%. The annual pace of the average of the core measures printed 1.7%yr, a further deceleration from 1.7%yr in Q2 2018 and 2.0% in Q1.
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">Incorporating revisions, the six month annualised growth in core inflation is only 1.5%yr which is well below the bottom of the RBA target band and the slowest pace September 2016.
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;"><img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/Sept_OCt18/sept18CPIchart.JPG" alt="CPI " title="history" style="box-sizing: border-box; max-width: 100%;">
<div style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">
<h1 style="box-sizing: border-box; font-size: 36px; margin: 18px 0px; color: #621a4b; font-family: ChronicleSemibold, 'Times New Roman', Times, -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; line-height: 1.1;">Components of the CPI broadly as expected but some interesting surprises in the finer details</h1>
</div>
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">Some standout in the quarter – on the positive side there was a bump from food (0.5%),and surprising rise for clothing &amp; footwear (0.2% vs –0.3% expected), rising auto fuel (1.4%) and a larger than expected seasonal bump in holiday travel (3.3%). On the downside, the bump from tobacco was less than expected (just 1.8%) while health costs fell more than expected (–0.4%), car prices fell again (–0.1%) and the fall in household content &amp; services was larger than expected (–1.2%) with a larger than expected 12% fall in child care. We had highlight child care as a clear risk to our forecasts.
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">The most interesting new bit of information in the survey was for housing expenditure. While housing costs overall rose as expected (0.4%) rents rose 0.2% (we thought they would be flat), dwelling prices rose just 0.1% (we thought 0.4%) while utilities rose 0.8% vs our –0.4% expected. Overall the mix on housing is softer than expected as there are a number of near term negative risks for both rents and dwelling purchase costs in NSW and Victoria. Given that rents and dwelling purchases are worth around 15% of the CPI their own this is significant for headline and inflation even more so for core where their weight is somewhat higher.
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;"><img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/Sept_OCt18/Sep18CPIcontribs.JPG" alt="CPI " title="contribs" style="box-sizing: border-box; max-width: 100%;">
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">Tradables rose 0.8% in the September quarter. The tradable goods component rose 0.4% due to automotive fuel (1.4%), fruit (2.4%), furniture (1.9%), and vegetables (1.6%). The tradable services component rose 4.0% due to international holiday travel &amp; accommodation (4.3%).
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">Non-tradables rose 0.3% in September quarter. The non-tradable goods component rose 0.5% due to tobacco (1.8%), beer (0.9%) and takeaway &amp; fast foods (0.7%). The non-tradable services component rose 0.1% due to domestic holiday travel &amp; accommodation (2.4%) and property rates &amp; charges (2.3%).
<div style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">
<h1 style="box-sizing: border-box; font-size: 36px; margin: 18px 0px; color: #621a4b; font-family: ChronicleSemibold, 'Times New Roman', Times, -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; line-height: 1.1;">Low inflation remains embedded in the economy</h1>
</div>
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">We have now two consecutive years where forecasters have over-estimated the CPI print. The average error since the December quarter 2016 is +0.14ppt. Core inflation came in below expectations (0.3%qtr vs 0.4%qtr expected) but there error on core inflation is more random and does not have a consistent bias. The average error on core since December 2016 is just 0.006ppt. So analysts are broadly getting the core inflation pulse corrected but are still underestimating the disinflationary pulse which has seen greater than usual discounting in some sectors \which are then trimmed out of the core measures.
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">There are some isolated inflationary pressures; rising petrol and tobacco prices are clear standout as well as embryonic indicators that disinflationary pulse in retail may be easing but the moderation in housing costs (rents and dwelling purchases in particular) are a significant offset. This is significant as this group weighting means it has a meaningful impact on the estimates of both inflation and core inflation. As such, with core inflation well below the bottom of the RBA’s target band we can find little to suggest any risk of a meaningful acceleration.
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">Our preliminary estimate for the 2018 Q3 CPI is 0.7%qtr which will see the annual pace lift a touch to 2.0%yr as the recent rise in petrol prices makes a larger contribution in the December quarter. We are also expecting a modest recovery in dwelling purchase prices. Under our current scenario, even with a modest lift in housing costs and rising fuel prices inflation, inflation is expected to be at, or just under, 2.0%yr all the way out to end 2019.
<p style="box-sizing: border-box; color: #2d373e; font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Fira Sans', 'Droid Sans', 'Helvetica Neue', sans-serif; font-size: 14px;">On a festive note the ABS reports that this is the 70th birthday of the CPI in it’s current for – the index has quarterly history that goes back to the September quarter 1948.
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It is hard to find signs of rising inflationary pulse: Westpac's Justin Smirk

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EXPERT OBSERVATION
Dwelling approvals rose 3.3% in September, reversing part of the 13% slide over the previous two months but with the monthly move a touch below the consensus expectations of a 3.8% rise.
Despite this, the detail was weak. The monthly gain centred on the famously volatile high rise unit segment, which had fallen sharply over the previous two months. The September high rise bounce was also heavily concentrated in Victoria. Approvals outside of this narrow state segment were significantly weaker (our estimates suggest total dwelling approvals ex Vic high rise were down about 7.5%).
Private detached house approvals declined 2.7% to be down 7.3% since June – a significant shift for what is usually a more stable segment.
Private units in total posted a 9.2% bounce, retracing some of the 20% decline over the previous two months. With-in this, ‘high rise’ approvals jumped 40-50% although this looks to be exaggerated by seasonal adjustment. A sharp fall in 'medium density' partially offset the gain.
By state, the Vic recorded an outsized 30.5% gain but was softer ex high rise (we estimate down 2.3% in seasonally adjusted terms). The other major states recorded big falls, NSW down 6.8%, Qld down 10.5% and WA down 19%.
The total value of renovations edged up 0.8%, the slight trend decline over the first half of the year showing signs of leveling out. Notably, trend approvals in NSW and Vic are down 7.6% since the start of the year.
The total value of non res building approvals declined 3.8%. Trends remain difficult to pick out due to high volatility but the segment looks to be tracking lower in most states.
Overall, the headline gain in dwelling approvals this month is a 'head fake'. Excluding a sharp spike in Vic high rise, something that is very unlikely to sustain, reveals a fairly broad based picture of weakness. Tightening credit conditions are clearly impacting both residential and non residential sectors. The pace of decline remains hard to pin-point but building activity is more clearly tracking towards a contraction in activity heading into 2019.
Matthew Hassan is a Senior Economist for Westpac
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Australian dwelling approvals had an unconvincing bounce: Matthew Hassan

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EXPERT OBSERVATION
Unemployment fell to a six year low of 5% in September. If you look at the labour market holistically, the large monthly drop looks like survey volatility rather than a new lower trend. Nevertheless, it is our view that the labour market is sound and that unemployment has been trending down.
Westpac forecasts the unemployment rate to hold above 5% to end 2018 before a soft patch in the June quarter 2019 (due to both election uncertainties and correction to the 2017/2018 strong patch) will lift unemployment to 5.3%. Once past the soft patch, steady employment growth will take unemployment back down to 5.0% by end 2019 and 4.8% by end 2020. 
We use business and household surveys to guide our near term employment forecasts while our medium term profile is driven by our fundamental view on household demand, services exports and non-mining investment.
Our participation forecasts are dynamic responding to changes in employment growth. The forecasts are, however, bound by the assumption that participation will not hit a new record high.
Household and business surveys guide the near term
When forecasting the near term pace of employment growth we use the labour market indicators from the household and business sentiment surveys.
From the Westpac-Melbourne Institute Consumer Sentiment Survey there is the question on household unemployment expectations (do they expect unemployment to rise or fall?) which has a good fit with the momentum in the labour market. Unemployment expectations have risen modestly (households expect unemployment to rise a little thus a softening in the labour market) but still holding a historically robust level. However, employment overshot unemployment expectations through the second half of 2017 so an undershoot through to the mid 2019 would be a normal course of events.
The multiple business surveys in Australia have questions that are applicable to the labour market. To generate a broad, deep labour market indicator, Westpac compiles all the relevant indicators from these surveys into the proprietary Westpac Jobs Index from which we generated a simple model of annual employment growth. It is true that the Jobs Index is more stable than the annual pace of employment growth but we have found it provides a useful guide on both the near term pace of employment growth and, more importantly, major turning points. Currently the Jobs Index is pointing to employment growth of 2½%yr. Actual employment growth in the second half of 2017 overshot the jobs index. Looking ahead we expect employment growth to undershoot the job index through to early 2019.
Using these indicators we expect the pace of employment growth to hold around current levels through to the end of the first quarter of 2019. This will see the annual pace dip to around 2% by end 2018 which is softer than what our indicators are suggesting in response to our allowance for some employment undershoot following the 2017 overshoot.
Looking further out household demand and non-mining investment drive our forecasts
<div>Looking further out our fundamental economic view defines our employment profile. There are various indicators you can use to do this, and multiple ways to generate a model, but we have found that simple models based on well understood measures best suit our needs for a 'not-just-reliable' guide but also one that is simple to understand and explain. The two economic fundamentals we use are adjusted household demand (which is household consumption, housing activity – both dwelling construction and renovations – and net services exports) and non-mining business investment.Annual growth in adjusted household demand peaked at 4.4% in the second half of 2015 before slowing to 2.2% in the first quarter of 2018. We have found that the growth in adjusted household demand has a two quarter lead on quarterly growth in employment. Again, as we saw with the near term employment leading indicators, employment growth has outpaced our adjusted household demand model's estimates, stretching from 2017 Q2 to 2018 Q1. As such, our forecasts incorporate a period of employment undershoot before returning to fundamentals in the last quarter of 2018. By end 2018 our model suggests employment should be growing a little more than 20k per month on average.Non-mining investment staged a relatively modest recovery lifting to almost 8%yr in the March quarter from where we are forecasting the pace to flatten to around 0%yr in early 2019. The recent peak is quite modest compared to what was seen back in the late 1990s and the first half of the 2000s when the pace often peaked around 20%yr. Nevertheless, the recent increase does point to a very modest near term lift in employment growth through 2018 before it slows in late 2019. And there is also the issue of the 2016/2017 overshoot. Given the expected correction, we see employment through to the end of the first half of 2019 undershooting the model's estimate (an average monthly gain of around 25k). </div>
Participation has peaked, for now, but will recover as employment recovers
Once you have an employment profile, an estimate of participation is required to round out the forecasts. As readers would be aware, the strong employment growth through 2017/2018 did not lead to a large fall in unemployment as participation lifted from an October 2016 low of 64.4% to a January 2018 high of 65.8%. In the September Labour Force Survey, the fall in the unemployment rate to 5.0% was supported by a sharp 0.24ppt dip in participation to 65.44%. The all time record high in participation was 65.79% in November 2010. It recently hit 65.78% in January 2018.
There are two factors to consider in regards to participation. The structural longer run issue, such as rising female participation, education, aging population etc and the short-run dynamics where participation rises and falls with employment. In the long-run the cross currents of rising female participation and declining male participation (associated with an aging population - for now females are pushing out their age of retirement so the aging population is not a net negative for them) suggests we may have past a medium term peak in participation. Our forecasts focus on the short-run dynamics of participation associated with employment bounded by our view we have seen a structural peak.
A further reason to be cautious about lifting the participation rate back to record peaks is the observation that the recent improvement in male employment has not produced the lift in male participation that it has in the past. In fact while annual growth in male employment has lifted, the annual change in male participation has moderated.  On this basis the participation rate drifts up a little through to the first quarter of 2019, before it drifts down a little as employment slows, limiting the rise in unemployment to 5.3%. Through the second half of 2019 and into 2020, employment lifts to an around trend pace and the participation rate continues to drift higher but remains short of the most recent peak of 65.78%.
Unemployment set to drift down to less than 5% by end 2019 while the rise in employment to population will remain shy of a new record high 
Once you have an employment and participation profile you can generate a profile for the unemployment rate and, as a cross check, an employment to population profile (including population estimates). Our forecasts result in the unemployment rate rising to a peak of 5.3% in the June quarter of 2019 before easing back to 5.0% year end then trending down to 4.8% by end 2020. The employment to population rate dips a little from 62.2% to 62.1% by the June quarter 2019 before entering a trend rise to 62.6% by end 2020. While not returning to the previous peak of 62.9% (August 2008) employment to population rises over this period highlighting that an employment pace of 2% is slightly faster than our current estimate of population growth.
Justin Smirk is a Senior Economist for Westpac
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