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EXPERT OBSERVER 
This month’s small gain follows a 5.2% fall through August and September. During that period the boost from the tax cuts announced in the May budget had faded while the leadership change; mortgage rate increases; declining house prices and rising petrol prices were weighing on confidence.
It is encouraging that these negatives seem to have, at least for the time being, run their course. Several positives have likely helped stabilise the Index, including strong economic growth, a solid labour market and ongoing recoveries in the previously weak mining states.
The net effect has seen the headline index holding slightly above the 100 line indicating that optimists are just outnumbering pessimists. The slight ascendency of optimists has been the case for 11 consecutive months since December 2017. That contrasts with the previous 12 months between December 2016 and November 2017 when the Index registered below 100 for 11 of those 12 months.
Concerns around interest rates and house prices are still apparent. The sub-group detail showed sentiment amongst households with a mortgage continued to weaken in October, dipping a further 0.8% to be down 6.4% over the last two months. Interestingly, the breakdown by voter group suggests some of the negative sentiment impact from the change in Prime Minister in late August may have reversed with confidence amongst those identifying as Coalition voters recovering about two thirds of the 6.4% drop recorded in September.
Most index components recorded small gains in October. Assessments of family finances showed the most promising revival. The ‘finances vs a year ago’ sub-index rose 2.6% to be comfortably above levels this time last year, albeit still a couple of percentage points below the highs seen earlier this year. The forward view is less convincing. The ‘finances, next 12 months’ sub-index only edged up 0.6% and is 4.1% below its high following the announcement of the tax cuts in the Budget in May.
Consumer expectations for the economy also showed mixed moves. The ‘economic outlook, next 12 months’ sub-index posted a solid 2.3% rally but longer term expectations continued to soften. The ‘economic outlook, next 5years’ sub-index is now down 9.1% from the five year high recorded back in July.
<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/2018/10/10/consumer%20sentiment%201.jpg" alt="">
Spending-related sentiment showed little change on the relatively downbeat tone in recent months. The ‘time to buy a major household item’ sub-index inched 0.1% higher but is still around the lowest levels seen since November last year.
Labour market expectations, which were a notable bright spot in the weak September survey, softened a touch in October. The Westpac Melbourne Institute Unemployment Expectations Index lifted 1.7% (recall that higher reads mean more consumers expect unemployment to rise in the year ahead). Despite this, the index still shows a clear improvement from the softer reads through June-July-August with a solid 5% improvement on a year ago. Most of this is coming from a more balanced performance across the major states, with a particularly dramatic turnaround in labour market expectations in Western Australia.
<a href="https://www.propertyobserver.com.au/images/2018/10/10/consumer%20sentiment%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/2018/10/10/consumer%20sentiment%202.jpg" alt="">
Consumer views around housing continue to deteriorate. The ‘time to buy a dwelling’ index slipped a further 0.9% following September’s 4.8% fall, unwinding all of the 5.5% gain in August. Despite the weakening, buyer sentiment is still well above the lows seen through mid-2017.
Consumer expectations for house prices posted another sharp fall in October. The Westpac Melbourne Institute Index of House Price Expectations dropped 7.4% to 101.4, taking the index below its 2015 low point to the weakest level since the first month the survey question was run, in May 2009. The state detail showed a particularly sharp 20.3% drop in Victoria, suggesting the price correction in Melbourne, which has been slower to come through than in Sydney, is starting to bite.
Bill Evans is the Chief Economist for Westpac
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Consumer sentiment stabilises: Bill Evans

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EXPERT OBSERVER
The Reserve Bank Board decided to leave the cash rate at 1.50%.
The cash rate has now been on hold since August 2016.
Of course, we were not expecting any change today, but are always interested in the Governor’s Statement.
There were two issues that we thought might change in this Statement, particularly if the Governor had decided to be more upbeat in his commentary.
The first one was whether he would continue to describe the outlook for household consumption as “a continuing source of uncertainty”. This description was used in the September Statement but was dropped from the Minutes of that meeting. However, the comment has been repeated in today’s Statement. Secondly, we remain perplexed as to why the Bank can be optimistic about a lift in wages growth when it is only forecasting that the unemployment rate will fall from the current 5.3% to 5.0% by mid-2020. It was possible that, particularly following the upbeat employment report for August, the Governor may choose to indicate a lower target for the unemployment rate than the 5.0% that has been used in recent Statements. This was not the case and the 5.0% forecast has been retained. Of course, it remains a possibility that this forecast will be lowered in November with the release of the next Statement on Monetary Policy.
In terms of the actual changes in the Statement, we find two areas of interest.
Firstly, the inflation forecast for 2018 has been qualified. In September, a specific 1 ¾ per cent was nominated, whereas in today’s Statement, it is described as “one-off declines in some administered prices in the September quarter are expected to result in inflation in 2018 being a little lower than otherwise”. That probably refers to the recent lift in petrol prices which will affect the December quarter, adding upside risk to the forecast for headline inflation. No doubt, higher oil prices have been considered given the commentary around global inflation.
The second area where we have seen change has been around interest rates and credit. In September, following the out-of-cycle rate rise by one major bank, the Statement noted that the average mortgage rate paid is lower than a year ago. That strong comment is no longer used and it is merely pointed out that while lenders have increased their standard variable mortgage rates by small amounts, they have been reducing mortgage rates for some new loans.
Commentary around credit growth has changed. Whereas in September, housing credit growth was noted as declining, in this Statement, the Governor prefers to point out that “growth in credit extended to owner-occupiers remains robust”. Whilst at an annual rate of 7.4%, this is certainly true, the profile is slowing when we consider that the value of new lending to owner-occupiers (ex re-financing) is now down 5% for the year. Certainly, the new lending statistics support the second point “demand by investors has slowed noticeably”, with our estimate of the value of new lending to investors being a 27% fall (ex re-financing) for the year.
Secondly, in September, the Governor referred to “lending standards are also tighter than they were a few years ago”. This has been replaced with “credit conditions are tighter than they have been for some time”. Arguably, that is a stronger assessment of current credit conditions.
Conclusion
The final paragraph in the Governor’s Statement is identical to the Statement in September, emphasising that progress in reducing unemployment and returning inflation to the target is likely to be gradual.
While markets appear to be pricing in around a 40% probability of a rate hike by end 2019, we remain comfortable with our forecast that rates will remain on hold through 2019 and 2020.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>. 
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No surprises in RBA Governor statement: Westpac's Bill Evans

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EXPERT OBSERVER
Following the strong GDP Report Westpac has lifted its growth forecasts for 2018 and also revised slightly its forecasts for 2019 and 2020.
However, the key themes that growth will slow in 2019 and remain below the 2018 pace in 2020 are intact.
The June quarter GDP report was released this week. Due to upward revisions of around 0.5 percentage points, the Australian economy was revealed to be much stronger than we had been led to believe.
Real GDP expanded by a solid 0.9% in the June quarter and annual growth printed 3.4% – well above potential of around 2.75%. Markets were expecting annual growth of around 2.8% with most of the lift being attributed to revisions of earlier quarters.
These accounts have prompted a review of our growth outlook.
We have lifted our growth forecast for 2018 from 2.7% to 3.3%.
The growth forecast for 2019 has been lifted from 2.5% to 2.7% and the 2020 forecast has increased from 2.8% to 3.0%.
While the levels of the growth forecasts have been lifted, the profile of an economy that will slow into 2019 and lift modestly in 2020 remains.
Furthermore, these growth rates (following 2.4% in 2017) are insufficient to make any meaningful impact on the spare capacity in the economy and therefore our inflation and wages forecasts remain essentially unchanged.]
Bill Evans is the Chief Economist for Westpac
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Westpac still expects a growth slowdown in 2019 despite recent strong GDP report: Bill Evans

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EXPERT OBSERVER
As expected, the Board of the Reserve Bank decided to leave the cash rate unchanged at 1.50%. There were very few changes in the Governor’s statement from the statement on August 7.
The Governor confirmed the central growth forecast for GDP growth to average “a bit above 3 per cent” in 2018 and 2019. Positive business conditions were noted but once again, “one continuing source of uncertainty is the outlook for household consumption”.
The rhetoric around the labour market was a little more upbeat. The unemployment rate at 5.3% was described as “the lowest level in almost six years”. Reports of skill shortages were noted and while wages growth was described as quite low, “it has picked up a little recently”. However despite that more positive assessment, the forecast for the unemployment rate remains unchanged to settle at 5 per cent “over the next couple of years”.
Since the last Board meeting, the Australian dollar had fallen from around USD 74.40 to USD 71.90. Furthermore, the Trade Weighted Index (TWI) had fallen from 63.5 to 61.8 (down 2.6%). This unusually large move prompted extra commentary on the AUD. It is still described as remaining within the two year range, but “it has depreciated against the USD along with most other currencies”. The move against the USD is around 3.3% compared to 2.6% for the TWI. It is a little surprising that the commentary seems to attribute all the weakness in the AUD to USD strength.
Since the August Board meeting, Westpac has increased its standard variable mortgage rate by fourteen basis points. It is interesting that the Governor continues to describe rates as “some lenders have increased mortgage rates by small amounts”.
The commentary around the housing market is unchanged with Sydney and Melbourne markets continuing to ease and housing credit growth declining to an annual rate of 5 ½ per cent.
The closing paragraph in the Governor’s statement is unchanged with the key commentary “further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual”.
Conclusion
Since the last Board meeting, Westpac extended its public forecasts to 2020. We expect the RBA to keep the cash rate on hold over the extended period. It is our view that the global economy, where growth appears to have peaked in 2017, will be slowing through 2020, particularly as the US economy slows under the weight of  further rate increases from the Federal Reserve and a curtailment of the fiscal stimulus..
The normal RBA policy of raising the cash rate at a time of strong global growth has been replaced in this cycle with other ways to tighten financial conditions. These have included macroprudential policies around banks’ mortgage books, and the rise in wholesale funding costs which has impacted the borrowing costs of banks, corporates, and in some cases, households.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>. 
 
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Reserve Bank Board a little more upbeat on the labour market: Bill Evans

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EXPERT OBSERVER
The Wespac Leading Index has posted a solid rebound from last month’s below trend.
Despite this, the Leading Index growth rate has still slowed materially since the start of the year, from +1.31% in February to +0.55% in July.
Over the course of the last six months the Leading Index has only dipped below zero on the one occasion which was last month. That is sending a more positive signal around the growth outlook than we are expecting at Westpac. We are expecting growth over the remainder of 2018 and into 2019 to hold slightly below trend particularly in light of an uncertain outlook for the consumer. Falling property prices; amid a slowdown in jobs growth; fading jobs confidence and high household debt are likely to create headwinds for growth.
Three components account for the bulk of the slowdown in the Leading Index growth rate over the last six months: a turnaround in the Westpac-MI Unemployment Expectations Index (–0.35ppts); reduced support from commodity price gains (–0.28ppts); and a narrowing yield spread that mainly reflects rising short term interest rates (–0.27ppts).
These drags have been partially offset by some lift in aggregate monthly hours worked (+0.22ppts); and dwelling approvals (+0.08ppts) although the momentum in both of these components remains patchy month to month. While the remaining components have seen little change since February, US industrial production has continued to provide steady support.
The Reserve Bank Board next meets on September 4. Earlier in the month the Bank released its latest Statement on Monetary Policy which provided an update of its forecasts. Of most interest was a downward revision to the Bank’s inflation forecast for 2018 from 2.25% to 1.75%. If correct that would mark five consecutive calendar years when headline inflation has printed below the bottom of the Bank’s 2–3% target band.
The Reserve Bank still expects inflation to lift to 2.25% by 2020 and anticipates that the next move in the cash rate will be up. An obvious headwind to the Bank’s plan to move inflation back into the target zone is the impact that five years of underperformance in inflation will have on households’ and firms’ expectations.
The reason why the Bank is reluctant to lower its 2–3% target range is because such a move may have a further dampening impact on inflationary expectations.
Westpac is sceptical that the Bank will be successful in lifting inflation particularly under the weight of low inflationary expectations.
In fact, yesterday Westpac extended its forecasts to now expect the bank to remain on hold in 2020. This complements its existing forecast which has the bank on hold in 2018 and 2019.
Bill Evans is the Chief Economist for Westpac.
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Falling property prices to create headwinds for growth: Bill Evans

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EXPERT OBSERVER
However the minutes of the Monetary Policy Meeting of the Reserve Bank Board contain increased confidence for the consumer outlook.
The themes we have seen in previous minutes around a continuing global economic expansion tempered by some policy induced slowdown in the Chinese economy remain. As before, the issue around international trade is highlighted as a source of uncertainty for the global outlook. The forecasts for the Australian economy which were set out in the recent August Statement on Monetary Policy are described as largely unchanged.
Of most interest in the commentary around the economy relates to a more confident assessment of the risks around the consumer. “Recent data on wages growth and expectations of a further tightening in labour market conditions had provided more comfort that household income growth would continue to increase gradually and support the outlook for consumption”. In previous minutes, the outlook for household spending was described as a source of uncertainty. In these minutes, the Board points out that “the more recent increase in minimum wages, the announcement of future tax cuts, and expectations of a further tightening in labour market conditions had reduced some of the uncertainty around the outlook for consumption.”
Commentary around the housing market is unchanged with Sydney and Melbourne house prices having “declined further in July and across a broad range of properties”. No real outlook is provided, although the Board continues to point out that “some further tightening of lending standards by banks was possible”.
The investment outlook remained positive, although non-mining business investment was expected to grow at a more moderate pace than over the previous year. The pipeline for building construction work was still reasonable supporting the growth outlook in the near-term but, by implication, slowing further out.
The minutes confirm the forecasts in the August SoMP which anticipate both headline and underlying inflation failing below 2 per cent to 1 ¾ per cent in 2018. This downward revision to the previous 2 ¼ per cent and 2 per cent respectively is attributed to some one-offs on childcare, TAFE and car registration fees and utilities prices. Appropriately, Board Members note that there is a risk that the recent decline in wholesale electricity prices could have more persistent effects. Certainly Westpac is of that view.
Finally, as expected, the minutes emphasise that reducing the unemployment rate and returning inflation towards to the mid-point of the target remain the necessary conditions to support higher rates. It is reiterated that the next move in the cash rate would more likely be an increase rather than  a decrease.
Conclusion
Today Westpac released an update to its forecasts, extending them out to the end of 2020. We anticipate the cash rate remaining on hold through 2018, 2019 and 2020. Factors which we consider important in this profile are: a steady weakening in the housing market through 2018 and 2019, low inflation, benign wages growth, and clear signs of a slowdown in the world economy.
The Minutes mention most of these factors but appear to be overly hopeful that economic activity and income growth will be sufficient to justify a rate hike at some point.
Bill Evans is the Chief Economist for Westpac
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Overly hopeful RBA board minutes contain few surprises: Bill Evans

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To date Westpac has issued public forecasts for the outlook for growth and financial markets to March 2020.
These forecasts are incorporated in the August Market Outlook publication.
We are now extending those forecasts to end 2020.
Last year around this time we surprised markets by forecasting no change in the RBA cash rate out to end 2019. At the time markets were priced for at least three rate hikes (25 basis points per move) and the overwhelming majority of forecasters were anticipating the rate hike cycle to begin in 2018.
Markets have now partly moved into line with our view with only around a 50% probability of one rate hike by the end of 2019. Furthermore, 65% of forecasters in the Bloomberg survey are still expecting the cycle to begin by the third quarter of 2019.
Our view is that the cash rate is likely to remain on hold not only through 2018 and 2019 but also 2020.
Some may argue that we are unrealistically forecasting that Australia will completely miss the global rate hike cycle if rates remain on hold for such an extended period.
We differ from that view arguing that financial conditions are affected by more forces than just the RBA cash rate.
Through 2017 and 2018 we are already observing tightening conditions in the absence of RBA rate hikes.
This tightening is emanating from heightened macroprudential policies from the banking regulator APRA and the rise in wholesale funding costs for banks and corporates.
New lending to housing investors has fallen by 25% over the last year; housing credit growth is likely to slow from 6.5% in the year to September 2017 to 4% in 2018/19 and 2019/20. The bank bill rate has “settled” at around 25 basis points above those levels, which prevailed in previous years and is priced in markets to remain there for at least the next year or so.
As a direct reflection of that tightening in financial conditions we are now seeing housing markets weakening with outright price falls in both Sydney and Melbourne. These price corrections look set to be sustained for at least the remainder of 2018 and 2019 with soggy markets likely prevailing through 2020.
Housing markets typically recover when there is an increase in new buyers in the market. That increase can be attributed to a boost in affordability or a rise in confidence. In previous cycles affordability has been boosted by multiple rate cuts from the Reserve Bank; lower prices; and rising incomes.
In this cycle the Reserve Bank has made it clear that short of a major global financial shock (most likely emanating from China) or a major collapse in the local housing market, it will resist cutting the cash rate.
Neither of those scenarios figure in our central case.
Furthermore, we do not envisage a marked lift in income growth over the forecast period. Accordingly the “responsibility” for the restoration of affordability in the two major housing markets will accrue to prices. So an extended period of price weakness is required before we return to levels of affordability that will attract new buyers and stabilise the markets.
Bill Evans is the Chief Economist for Westpac
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Westpac expects RBA cash rate to remain on hold until 2021: Bill Evans

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EXPERT OBSERVATION 
Last week the Reserve Bank surprised by lowering its inflation forecasts for 2018 (both underlying and headline).
Headline was lowered from 2.25% to 1.75% and underlying was lowered from 2% to 1.75%.
If correct, that means underlying inflation will have printed below the bottom of the 2-3% target range for three calendar years in a row. Headline inflation will have printed below the bottom of the 2-3% target for five calendar years in a row.
Economists and policy makers generally focus on underlying inflation when assessing the meaning of the “signal” from any inflation print. That is appropriate because the underlying measure “trims out” any large “one off” movements that might be misinterpreted.
However, when assessing inflation over the long term the headline measure is important since it should be a more reliable driver of inflationary expectations.
After all, expectations could be reasonably expected to be influenced by what has actually happened rather than a statistical interpretation of the data.
Inflationary expectations are critical from a theoretical perspective to delivering an inflation outcome. They impact workers’ wage demands and firms’ pricing decisions.
“Inflationary expectations” are like “the natural rate of unemployment” or “the neutral policy interest rate”. They are highly attractive concepts for economists. However they are notoriously difficult to measure.
Consider the “natural rate of unemployment”. For Australia that measure is generally accepted to be 5%. As such it is expected that any unemployment rate below 5% will be associated with rising wage pressures. However evidence from other countries indicates that in this period of accelerating technological development, which is often “job substituting”, natural rates are lower.
We expect that it is highly likely that the natural unemployment rate will also be lower in Australia. But we will not know for sure until we get there. Certainly the Federal Reserve had a view that the rate was around 4.75%. But as the rate fell through 4.75%, wage pressures were missing.
We are not sure what the position of the Reserve Bank is on this issue given that the unemployment forecasts envisage the unemployment rate holding above 5% until near the end of 2020 and yet wage pressures are expected to build through the forecast period.
Policy makers forecasts and market watchers try to measure inflationary expectations. The Reserve Bank uses a range of measures – market economists’ forecasts; unions’s forecasts; inflation swaps; and the 10 year inflation indexed bond. These measures have been gradually falling and are described by the Bank as “generally consistent with the inflation target”.
However, the inflation target has been fixed for twenty years yet the expectations which used to be well above the target are now around the target. One exception is the measure which is widely used by other central banks, including the FED, the 10 year inflation indexed bond. Implied inflation expectations have steadily fallen from 3% to 2% over the last 10 years - well below the 2.5% target.
This comfort that inflationary expectations appear to be settling around the inflation target is the key reason why the Bank resists the periodic calls to lower the target.
The Bank believes that the existence of the target is a dominant driver of inflationary expectations. Consequently, if the target were to be lowered, then expectations would fall and a more disinflationary environment would evolve. This puts considerable weight on the target as a driver of expectations.
But, as discussed, the Bank has been unable to even reach the bottom of the target zone for five calendar years. Furthermore, they have made it quite clear that the next move in rates is up. Reasonably, economic agents could conclude that, even after five years, there is no urgency to reach the target.
We are unable to find a definitive measure of inflationary expectations. However after five years of underperformance of headline inflation below 2%, economic agents would be excused if they expected such conditions to persist.
With the Bank not prepared to use its interest rate “weapon”, and other policies around credit supply actually constraining activity, there must be a risk that, at least from an expectations perspective, low inflation is embedded in the system for longer than the Bank and the market is currently expecting.
In fact, Governor Lowe has often responded to demands to lower the target by claiming that others favour a higher target in order to boost inflationary expectations.
A reasonable query on the purity of the target could be made around the need to monitor financial stability when setting policy. That approach was confirmed by the Governor’s comments in a panel discussion at the Sintra Conference in June.
“To try to get it back to 2.5% very quickly, it would be mainly through people borrowing more money, and having higher asset prices — I think that’s a much bigger risk to our economy than people having surprisingly low inflation expectations.”
Reasonably, we can conclude that after five years of missing the bottom of the target zone, a more aggressive pursuit of the inflation target has been constrained by the need to address Australia’s challenges around financial stability.
The Bank is currently forecasting that despite three years of above trend growth (3.25% in 2018; 3.25% in 2019; and 3% in 2020 against a trend growth rate of 2.75%) inflation (headline and underlying) will only have lifted to 2.25% by 2020.
Perhaps that looks cautious but with inflationary expectations potentially anchored at or below 2%, it might be a tough target to achieve unless the Bank was willing to signal that it was prepared to pursue its target more aggressively.
Bill Evans is the Chief Economist for Westpac.
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RBA's inflation expectations may be anchored despite official target: Bill Evans

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EXPERT OBSERVER 
The consumer mood deteriorated in August, giving back about half of the surprisingly strong gains seen in June and July. Those gains look to have been partly a positive response to the tax cuts announced in the May Budget, which passed into legislation in June, the first round of cuts coming into effect in July. The June-July gains also came against a backdrop of adverse developments on the global trade front and an emerging price correction in the Sydney and Melbourne housing markets.
Despite the latest decline, the Index is still in positive territory overall, 5.5% above the average in 2014 to 2017. August marks the ninth successive month that the Index has been above the 100 level, indicating optimists outnumber pessimists, a clear turnaround on the twelve months in which 11 out of 12 readings were below 100.
Reduced rate rise fears may also have contributed to the lift in sentiment since earlier in the year. Every six months we gauge respondents’ outlook for interest rates. Back in February, 58% of respondents expected rates to rise over the next year down slightly from 61% in August 2017. The proportion fell further to just below 50% in August 2018.
All index components recorded declines in August, but the biggest falls were around expectations for the economy: the ‘economic outlook, next 12 months’ sub-index down 4.9% and the ‘economic outlook, next 5yrs’ sub-index down 3.1%. Both sub-indexes recorded strong gains last month. Despite the August pull-back, both ‘economic outlook’ sub-indexes remain well above their levels a year ago and 9-10pts above their long run averages.
Consumer views around family finances showed a milder pull back in August but remain weaker overall. The ‘finances vs a year ago’ sub-index dipped 0.5% and the ‘finances, next 12 months’ sub-index declined 1.1%. Both remain 1-2pts below their long run averages. Household budgets have come under persistent pressure from a range of factors, including: slow growth in wages, rising electricity and petrol costs, and declining house prices.
Consumers remain relatively downbeat on spending. The ‘time to buy a major household item’ sub-index declined 1.7%, giving up all of last month’s firming. At 122.4, the sub-index is 5ppts below its long run average and well below the levels associated with buoyant spending conditions.
Consumer views on unemployment continue to soften, pointing to a shift in labour market conditions. The Westpac Melbourne Institute Unemployment Expectations Index rose 2.8% to 129.3 and has now risen 7.2% from its February low (recall that higher reads mean more consumers expect unemployment to rise in the year ahead). The Index, which can also be viewed as a measure of consumers’ sense of job security, is now back near its long run average levels, suggesting consumers expect little change in the unemployment rate over the next 12mths. That would in turn imply a continuation of the slower employment gains seen since the start of the year with employment growth over the first half of 2018 more in line with growth in the working age population. Whether the shift marks a more sustained turning point in the labour market – something that has been seen during the lead in to the last two Federal elections – remains to be seen.
Consumer views around housing improved in August. The ‘time to buy a dwelling’ index posted a solid 5.5% gain and is now up 15.1% on a year ago and over 20% from its mid-2017 low. At 108.8, the index is at its highest level since September 2016. However, it remains well below the long run average of 120. The biggest lifts over the past year have been in Sydney and Melbourne where markets have seen significant price declines. Despite this, the average ‘time to buy a dwelling’ sub-indexes for these cities over the last three months has still been more subdued (102 and 101 respectively compared to 105.8 nationally). The easing rate rise fears evident in consumers’ mortgage rate expectations would have undoubtedly contributed to this lift in housing sentiment.
Consumer expectations for house prices stabilised in August. The Westpac Melbourne Institute Index of House Price Expectations edged 0.3% higher to 112.8 in August. That followed a sharp 13.1% drop over the previous two months. Expectations showed solid gains in NSW and Vic (both up 4.8%), the states that had led the declines in June-July (down 22% and 23% respectively).
The Reserve Bank Board next meets on September 4. Last week the Bank released its latest Statement on Monetary Policy which provided an update on its forecasts. Of most interest was a downward revision to the Bank’s inflation forecast for 2018 from 2.25% to 1.75%. If correct that would mark five consecutive years when headline inflation has printed below the bottom of the Bank’s 2-3% target band.
The Reserve Bank still expects inflation to lift to 2.25% by 2020 and anticipates that the next move in the cash rate will be up. An obvious headwind to the Bank’s plan to move inflation back into the target zone is the impact that five years of underperformance in inflation will have on households’ and firms’ expectations. Lower expectations will make it that much more difficult to lift inflation back into the band. Price expectations impact households’ wage expectations and claims, while firms’ pricing decisions are also influenced by expectations.
Certainly it will be quite some time before the Bank has a case to adjust the cash rate.
Westpac reaffirms its view that rates will remain on hold in both 2018 and 2019.
Bill Evans is the Chief Economist for Westpac
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Consumer optimism fades, but housing sentiment rises: Bill Evans

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EXPERT OBSERVER
As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 1.50%.
This represents the twenty-second consecutive meeting (last change in August 2016) that rates have been on hold. The previous longest run of steady rates was sixteen consecutive meetings in 1995/96.
There were a number of changes/ additions to the statement following the July meeting. Previously, the Governor had noted the growth outlook being “a bit above 3 per cent in 2018 and 2019”.He repeated that line. But previously  he made no inference as to that impact on capacity. In today’s statement he asserts that the growth outlook “should see some further reduction in spare capacity”. This was borne out in the discussion on the labour market when he noted that the unemployment rate was likely to fall to around 5 per cent over the next couple of years.
Recall that in the May Statement on Monetary Policy, the Bank revised its unemployment forecast from 5 ¼ per cent (end 2018) and 5 ¼ per cent (end 2019) to 5 ½ per cent (end 2018) and 5 ¼ per cent (end 2019). The forecasts that will be updated in the August Statement on Monetary Policy which will be released on August 10 are now likely to include a forecast that the unemployment rate by end 2020 will be 5 per cent. A reasonable criticism of the Bank’s unemployment forecasts and rhetoric around increasing wages growth was that a low-point of 5 ¼ per cent was still comfortably above the generally accepted NAIRU for Australia of 5 per cent. With the unemployment rate staying above the NAIRU, it was questionable as to whether the expected lift in wages growth would occur.
Our view, based on offshore evidence, is that the NAIRU in this cycle is likely to be below 5 per cent, so even with this new lower unemployment forecast, it still seems a big call to expect sustained upward pressures on wages growth.
In July, the Bank noted the increase in short-term wholesale interest rates over recent months. However, it provided little guidance as to the implications. “It remains to be seen the extent to which these factors persist”. Fortunately, that sentence has been deleted, but, still, no real guidance is provided in the current statement. It is observed that retail deposit rates have not risen and some lenders have increased mortgage rates by small amounts. It would have been helpful for the Bank to have given its own view on the sustainability of this move and any implications from the associated tightening in financial conditions.
The Governor notes that “the drought has led to difficult conditions in parts of the farm sector”, but has not clarified whether these developments have any significant implications for risks and growth forecasts.
The August Statement has the benefit of an update on inflation developments. The June quarter inflation report was slightly below market expectations but not sufficient to alter the Bank’s views. Having said that, a literal interpretation of the sentence “the central forecast is for inflation to be higher in 2019 and 2020 than it is currently” would be that the forecasts for inflation in the August Statement on Monetary Policy are set to be lifted. The forecasts for underlying inflation in the May Statement on Monetary Policy were for underlying inflation to be 2 per cent in 2018 and 2 per cent in 2019. That outlook seems consistent with the June inflation report. We would be surprised if the forecast for underlying inflation in either 2018 or 2019 is lifted in the August SOMP.
One clue to this puzzle is that the Governor points out that headline inflation to the September quarter is likely to fall to 1 ¾ per cent. As such, the forecast for headline in the May SOMP of 2 ¼ per cent in 2018 and 2019 indicates a lift from the expected September reading. Such fluctuations in the headline number are unlikely to have any implications for policy.
In July, the Governor referred to “nation-wide measures of housing prices are little changed over the past six months”. The CoreLogic national index was actually down 1% and this index is now down by 1.2%. That sentence has not been repeated in the August Statement, although the easing in Sydney and Melbourne housing markets is confirmed. The Governor has also dropped the comment that “some further tightening of lending standards by banks is possible” and now makes the less controversial comment that lending standards are tighter than a few years ago.
There has been a significant change in the global commentary. In July, the Governor noted “the Chinese economy continues to grow solidly”. In this statement, that is replaced with “growth in China has slowed a little, with the authorities easing policy”.
Conclusion
Westpac has long held the view that the RBA cash rate will remain on hold over the course of 2018 and 2019.
In his statement, the Governor does not provide a convincing commentary that wage pressures can be expected to lift; the housing slowdown and the associated wealth effect will not be headwinds for the economy; any evidence that inflation pressures are likely to build; and why global developments are not pointing to some challenges for Australia. Consequently we see no reason to be persuaded to change our view that rates will remain on hold.
Bill Evans is the Chief Economist for Westpac
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RBA remains on hold; with no apparent change in sentiment: Bill Evans

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

Joel Robinson

The Eveleigh brings house-like apartments to Broadbeach

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

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

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

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

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

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

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