Pre-Budget Economic Performance for NSW

Posted on May 12, 2015 by ATB Chartered Accountants

With the 2015 federal budget to be announced tonight businesses will be looking for opportunities to invest in Australia’s future securing jobs and reducing unemployment. Let’s have a look at the current economic performance for NSW in terms of housing and retail, hospitals, planning and the Reserve Bank’s recent lowing of the cash rate.

HOUSING AND RETAIL

NSW has been confirmed as Australia’s top-ranking state for economic performance by CommSec. This is now the second quarter in a row that this has occurred. The main reason for this rank is the steady growth of the housing sector as population growth is increasing the demand for new housing facilities and an increase in retail expenditure.

Shopping centre owners and investors are capitalising on this growth through expressing an increased interest in developments which incorporate housing and retail facilities, in particular surrounding metropolitan suburbs. Ganghui Pty Ltd, a Chinese company, purchased the Compass Centre, Bankstown, recently due to its capacity for 477 apartments as well as over 8,000sq m in retail area.
In April, more than 50 projects for group housing, senior living and units/town-housing/villas were reported to the Land and Housing Corporation as being in the construction phase of development. Most of these projects are located in metropolitan and central coast areas, with a few being developed in country areas.

HOSPITALS

Private and public hospitals have seen a great deal of activity in recent months with several reported at tender stage. These include Gosford Hospital early works; Tamworth Rural Referral Hospital; Norwest Private Hospital; St George Hospital Acute Services, and University of Canberra Public Hospital. As well as this, a recent application has been submitted for the redevelopment of St Vincent’s Private Hospital, estimated at $95.3 million.

PLANNING

A western NSW town , Blayney, will potentially host the second only-purpose goat abattoir in Australia. This $38 million project will have the capacity to process 4,500 head per day for exporting. This will comprise mainly of rangeland goats as stipulated by the EIS of the Department of Planning and Environment.
Belconnen, a suburb which spans across the ACT and NSW border, has proposed to develop a new planned community called Parkwood. It has passed the first checkpoint of the NSW planning system and will see around 5,000 new homes developed in NSW, as well as 6,500 in ACT. If plans are approved, Parkwood will become the first suburb shared across the border of NSW and ACT.

The Department of Planning and Environment have approved a proposal for Yass Valley Shire Council to rezone the land within the NSW portion of the area. The ACT plans to provide state services to both sides of the town’s border, with the community having its own schools, shopping centres and office buildings. Construction is expected to begin in 2024.

RBA PASSES 2% CASH RATE

Following their May meeting, the RBA have lowered the cash rate to 2% in attempt to further depreciate the Australian dollar, and to balance consumer expectations across the economy.
Despite the growth in household expenditure and employment growth over the past six months, Glenn Stevens, RBA governor, has forecasted that a weakness in business capital expenditure in both mining and non-mining sectors are putting pressures on the economy. Public spending is said to be reduced in upcoming months.

The cash rate cut was passed in order to counteract this forecasted trend in the economy in attempt to encourage private sector investment outside mining, and to increase job creation and innovation.
Issues may be encountered in Sydney’s property market with home loan rates being reduced to a record low of 4% this month. This will save borrowers approximately $1,200 on their mortgage repayments this year, however, this may be up to double for individuals in large cities. This will further encourage the recent growth trends of the housing market through increasing demand.

ANZ was the first of the four major banks to lower their home loan rate by 0.25%, effective from Friday, 07 May 2015. The Commonwealth Bank of Australia and National Bank of Australia have opted to lower their rates by 0.20%, while Westpac have yet to announce whether a rate cut will be made.

Treasurer Joe Hockey responded to this cut in the cash rate by urging Australian households and businesses to invest and borrow money, however, expressed concerns for superannuation fund owners as they will experience lower returns in coming years.

The quarterly statement on Monetary policy will be announced by the RBA in coming days where it is expected that details of the weaknesses in the economy, such as low commodity prices, fall in capital investment, fiscal spending restraints and high unemployment, will be addressed.

By Michael Mekhitarian

This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.