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EXPERT OBSERVATION
The minutes of the May monetary policy meeting of the Reserve Bank Board repeated the assertion that first appeared in the April minutes. That is that “members agreed that it was more likely that the next move in the cash rate would be up rather than down”. This observation is contingent on the economy evolving in the way the Bank currently expects which is “a gradual pick-up in inflation as spare capacity in the economy is absorbed and wages growth gradually picks up”. Nevertheless the Board observed that spare capacity in the labour market would remain for some time.
Using this terminology might create challenges for the Bank in the future. If the term is ever deleted from the minutes, markets are likely to take that as a sign that the Bank’s policy stance has changed.
Note the “bold” move from the new Governor of the RBNZ (Adrian Orr). He lowered his growth and inflation forecasts and stated, “the Official Cash Rate (OCR) will remain at 1.75 percent for some time to come. The direction of our next move is equally balanced, up or down”.
The Reserve Bank of Australia however did not lower its growth or inflation forecasts in its recent Statement on Monetary Policy but did make a subtle change in the rhetoric of the minutes, “it would be appropriate to hold the cash rate steady and for the Reserve Bank to be a source of stability and confidence”.
That implies a 'badge of honour' to have steady rates, rather than a stance that needs to be justified in a world where other central banks are tightening policy. Perhaps the lead from the RBNZ, who have recognised the risks around the current environment, has had some impact on their thinking.
The clear positive development for the economy has been the strong boost to non-mining business investment particularly non-residential construction and government public works. The Bank is justified in expecting that this strong momentum will be sustained although in our view at a decreasing pace. We expect that non-residential construction which added 0.6 percentage points to GDP growth in 2017 will gradually reduce its contribution to GDP growth to 0.33 percentage points in 2018 and 0.19 in 2019. Equally we also see government public works spending will also grow but at a slowing pace contributing 0.4 percentage points in 2017, 0.31 in 2018 and 0.23 in 2019.
There remains the concern that wage pressures may take some time to emerge. Indeed Deputy Governor Debelle highlighted a key risk to the Bank’s outlook in his speech on May 15. He nominated that risk as being that the level of the unemployment rate needed to spark wage and inflation pressures might be lower than the Bank’s current unemployment forecast. Note that this is a fairly cautious 5.25% (from current 5.6%) by June 2019 and remaining there through to the end of the forecast period by June 2020.
In fact this forecast represents a downgrade of the unemployment outlook. In the February Statement on Monetary Policy the forecast was for the unemployment rate to fall to 5.25% by June 2018 – a full year earlier than the current forecast. In that sense the Bank has actually downgraded an aspect of its growth outlook. This presumably reflects the slowdown in jobs growth we have seen in 2018 with the four month annualised pace slowing to 1.3% from overall growth in 2017 of 3.4%.
These cautious forecasts of the unemployment rate must indicate that the Bank is aware of the risk that the labour market does not tighten sufficiently to boost wages and other incomes. In fact general estimates of the so-called full employment rate (NAIRU) have been around 5% for Australia. In other countries, their traditional NAIRU estimates have been downgraded in the aftermath of the GFC.
Certainly there is still no sign of any lift in wage pressures. The March quarter wages report printed on May 16.
Total hourly wages ex bonuses rose by 0.5% in Q1 compared to a median of market expectations (and Westpac’s) of 0.6%. This is the second quarter of a disappointing wage print, Q4 WPI rose 0.6% compared to a median expectation of 0.7%. The Q4 print was also revised down to 0.5% from 0.6% as it was originally reported. These modest wage outcomes leave annual private sector wages growth “stuck” at 1.9% despite the 3.3% increase for the minimum wage as determined by the Fair Work Commission.
The Board discusses this prospect when it talks about the wage price index not picking up as quickly as in the past when business surveys identified some shortage of suitable labour. The Board discussion moved to international evidence which shows similar inertia in wages and they discussed possible reasons including competitive pressures from globalisation and technological change. We would add: low productivity growth; falling unionisation; high household debt which constrains job mobility and lack of pricing power generally in the economy. As one employer noted “Why should I grant a pay rise if I cannot compensate with a price rise"?
There may be some source of embarrassment in the minutes in that it is noted that “recent data on retail” suggested that momentum had continued in early 2018. Since the Board meeting, the retail sales report showed that real retail sales had grown by a very modest 0.2% in the March quarter.
This downbeat take on the consumer was further supported by the Westpac Melbourne Institute Index of Consumer Sentiment. The May Report showed a further modest deterioration.
This followed the well-received Commonwealth Budget which included personal tax cuts; savings largely explained by tighter scrutiny of the black economy (few specific losers) and an improved fiscal position. The modest 0.6% fall came as a surprise. It was underpinned by a 6.5% fall in the sub Index (household finances compared to a year ago) and although the Budget boosted confidence in the near term economic outlook, it failed to spark interest in respondents’ assessments of their finances.
In the minutes, there was a more detailed discussion on the outlook for housing. In particular, the Board notes that “a further tightening in lending standards in Australia, particularly in the context of the current high level of public scrutiny of Banks, was possible which would affect household borrowing and spending”. The recent release (since the Board meeting) of housing finance data showing that new lending to investors was now down 26% over the year (and 30% from the peak) is certainly consistent with those concerns.
That clearly signals a slowing in credit growth and the Deputy Governor, in his speech, acknowledges that likelihood. The issues are not only around reduced confidence amongst investors but an impact on the amount of funds an individual can borrow. Deputy Governor Debelle postulates that such a tightening has implications for house prices more than consumption. We do not think that argument is strong. For example note the significant impact on household finances in the Consumer Sentiment survey partly reflecting weaker housing – it is risky to assume little wealth effect when prices fall just because it seems to be muted when prices rise.
The Deputy Governor does address the issue of the implication for a fragile housing market if the RBA raises rates. He notes that an environment where rates are rising would “highly likely to be one where wages and household incomes are growing faster than currently, improving the ability of households to afford higher mortgage payments.” That is a reasonable argument and does demonstrate that the Bank is mindful of the impact of increasing rates on a fragile housing market.
Westpac continues to expect that the Bank’s policy of “stability and confidence” (rates on hold) will be maintained throughout 2018 and 2019.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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RBA approach backed up by wages and confidence data: Westpac's Bill Evans

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EXPERT OBSERVATION
The Reserve Bank Board decided to leave the cash rate unchanged at 1.5%.
We have been interested to follow the various descriptions of the Bank’s growth forecasts over the last few months.
These have ranged from “a bit above 3%”; “central forecast remains for faster growth in 2018”; “growth above trend”; and today, “Growth to pick-up to average a bit above 3% in 2018 and 2019”.
In our preview of the SoMP, we speculated that the forecast would be modestly shaved to 3% in 2018 and 3 ¼% in 2019.
That would still be consistent with an average slightly above 3% and seems more likely than the 3 ¼%, 3 ¼% which was in the February SoMP. 
In its MYEFO in December the government forecast growth of 3% in 2018/19 and 2019/20 compared to 3.25% for the RBA. In 2018/19 and 2019/20 .
The Bank may choose to “go half way” given it is unlikely the government will change its forecasts in the Budget on May 8.
The other interesting forecast in the May SoMP will be underlying inflation in 2018. In February, the forecast was 1.75%, below the 2-3% target band and following 1.6% in 2016 and 1.8% in 2017 – hardly a vote of confidence in the 2-3% target band.
Commentary in this statement is the same as we have consistently seen with the recent inflation report being described as “in line with the Bank’s expectation”.
That would tend to suggest that it will remain cautious around the inflation outlook and forecast 1.75% for 2018.
Given that the trimmed mean printed 0.5% for the March quarter, the implication is that the Bank does not expect any marked lift in the quarterly pace through 2018.
In the minutes to the April meeting, the Board noted that it was more likely that the next move in rates will be up rather than down.
That sentiment was not in the Governor’s statement in April and did not figure in this statement. In fact, the final paragraph in the May statement is exactly the same as the final paragraph in the April statement.
Commentary in previous statements around the labour market has been unreservedly upbeat. It was therefore interesting to note that the Governor recognised that employment “growth has slowed over recent months”.
Nevertheless, the Governor remains confident that solid employment growth will lead to a gradual reduction in the unemployment rate.
In April, the Governor referred to tightening financial conditions due to the rise in short-term USD interest rates and this observation has been repeated today.
Sentiment around household consumption “source of uncertainty”; housing markets “have slowed”; and the AUD (TWI) “remains within the range it has been in over the past two years”; is consistent with recent statements.
Assessments of the global environment are largely unchanged despite the increase in long-term US bond yields of around 25bps.
Conclusion
We will receive a much more detailed update on the Bank’s views in the Statement on Monetary Policy on Friday. Since the last Statement, housing markets have slowed further; financial conditions have tightened; employment growth has slowed; and equity markets have become more volatile.
All of these factors point to the Bank having even more scope to remain patient with respect to policy.
As we have consistently argued since mid- 2017, Westpac continues to expect that the cash rate will remain on hold in 2018 and 2019.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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No rate change in 2018 and 2019: Westpac's Bill Evans

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EXPERT OBSERVER
The minutes of the Reserve Bank’s Board meeting on April 3 contained a surprise in the final paragraph – “it was more likely that the next move in the cash rate would be up, rather than down”. 
We have seen the Governor make that statement in speeches but have not previously seen a formal confirmation from the Board. 
The timing is particularly pertinent given developments around financial conditions; the jobs market; and a looming Inflation Report. 
Think back to April 2016. Markets were relatively benign with one cut priced in over the next 12 months. Today markets are priced for one hike by mid-2019. 
Then we saw the March 2016 Inflation Report. Markets were expecting a rise of 0.5% in the underlying inflation measures while our analysis of the RBA’s forecasts suggests it was expecting 0.6%. 
In the event the underlying CPI measures printed an average of 0.175%. The Board had been forecasting 2.5% for annual underlying inflation for 2016. On the basis of that March Report the forecast was lowered to 1.5% and the Bank cut the cash rate by 0.25% in both May and August 2016. 
On April 24 there will be another Inflation Report, this time for the March quarter 2018. Westpac (and the market) is once again forecasting 0.5% for the average of the underlying measures. This time, however, the Bank is forecasting 1.75% for 2018 implying an average of around 0.45% for each quarter. 
What caused the big surprise in 2016? 
“House purchase” (the cost of building a home) rose by only 0.2% whereas we expect 0.7% (following 0.6% last quarter) for March 2018. 
Most of the demand related components were lower in 2016 than we expect in 2018. 
Clothing and footwear (–2.6% in 2016; –2.0% in 2018); household contents (–0.4%; –0.3%); communication (–1.5%; -0.9%); audio visual (–3.5%;-2.2%); holiday travel (–2.0%; –0.2%) are all expected to be less negative in 2018 than 2016 but nevertheless signalling deflationary forces. 
We also expect the large seasonal components pharmaceuticals (4.8% in 2016; 5.3% in 2018) and education (3.1% in 2016; 3.8% in 2018), to be higher in 2018.
Click here <a href="https://www.propertyobserver.com.au/images/2018/4/23/core.jpg" target="_blank">to enlarge.</a>
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Finally there was a 10% fall in fuel prices in 2016 whereas they have been steady in 2018. This component would have been “trimmed out” of the 2016 numbers although there would have been some indirect effects through business costs that may have further biased down the 2016 numbers. 
So we can reasonably conclude that the housing weakness and strong deflationary effects we saw in 2016 are unlikely to be replicated in the same size in 2018 dismissing the prospects of a 2016 style shock. Nevertheless the themes remain the same – weakening housing and deflation in demand related components precluding us from entirely dismissing a repeat of the 2016 episode. 
Further, I don’t expect that Governor Lowe would respond to such a shock in the way we saw with Governor Stevens. True, both were or are observing a rapidly cooling housing market. 
In March 2016 Sydney house prices had fallen 4.2% (six month annualised) compared with an increase of 18% a year earlier. 
In Melbourne prices were up by 2.8% compared to 21% a year earlier. 
Today the numbers are Sydney (–5.4%; 21%) and Melbourne (2%; 16%). Note the second boom in house prices in both Sydney (21%) and Melbourne (16%) followed the 2016 rate cuts.
Click here <a href="https://www.propertyobserver.com.au/images/2018/4/23/dwelling_prices.jpg" target="_blank">to enlarge.</a>
 
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Governor Lowe has the benefit of observing that the Stevens’ rate cuts achieved little in restoring inflation pressures (note we are still experiencing deflationary pressures in the demand related components of the CPI) while the cuts did reignite the housing market requiring another round of macroprudential policies. 
However Governor Lowe is now facing a significant tightening in financial conditions, partly emanating from offshore, that was not apparent for Governor Stevens. 
The Bank Bill Swap Rate which determines funding costs for most corporates and commercial borrowers has lifted by around 30 basis points - spreads against the risk free rate are now the widest since 2009. 
This rate also drives the wholesale funding costs of banks and non- banks. 
Various explanations have been put forward to explain this development. It appears to be the unfortunate coincidence of a number of factors which are impacting both the demand and supply of US money market instruments. On the supply side the US Treasury has sharply lifted its issuance of short term assets to fund the lifting of the debt ceiling and the fiscal stimulus.
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On the demand side we have seen the US Federal Reserve begin to shrink its balance sheet after years of quantitative easing while US corporates who had accumulated vast quantities of short term paper investments are now eschewing those investments in favour of very short term liquidity in anticipation of managements’ decisions on the use of this liquidity. 
This flexibility comes in response to tax changes announced in the recent overhaul of tax arrangements which has freed up these liquid investments. In addition, the BEAT tax has encouraged US branches of foreign banks to replace inter-office loans with direct wholesale funding.
These forces have boosted the LIBOR rate which has fed directly into the BBSW rate as Australian banks convert more expensive US funding to AUD or switch demand back to the domestic markets. 
While conditions for business borrowers have tightened, banks have not adjusted their standard variable mortgage rates therefore moderating the impact on the economy of these higher rates. 
However, banks must be experiencing some pressure. This would be despite the fact that banks have raised their retail deposit shares of funding from around 50% pre GFC to around 60%. 
At least one mortgage lender has raised its mortgage rates (another bank Suncorp raised rates by 5bps). Members Equity Bank has raised its owner occupier principal &amp; interest (P&amp;I) rates by 6 bps; Investor P&amp;I by 11 bps; and investor interest-only loans by 16 bps. This entity would not have the extensive access to retail deposits that we see for the banks and would therefore most likely be disproportionately affected by the increase in wholesale rates. ME Bank also attributed the rate hike to increased compliance costs associated with the regulator. 
These policy moves from the regulator can also be expected to tighten financial conditions over the medium term. The Reserve Bank’s Financial Stability Review notes that, according to their estimates, directions to move borrowers from interest only loans to principle and interest may have implications for households’ disposable incomes. 
Around 30% of the current stock of mortgage credit is expected to move from IO to P&amp;I over the next 4 years. The step up in mortgage payments when the IO period ends is estimated to be in the range of 30 to 40 per cent even after factoring in the typically lower interest rates charged on P&amp;I loans.
Click here <a href="https://www.propertyobserver.com.au/images/2018/4/23/funding.jpg" target="_blank">to enlarge.</a>
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This constant pressure on the household balance sheet can, arguably, lower the “neutral” interest rate over that period. Currently the Reserve Bank estimates it as a cash rate of 3.5%. 
Finally it would be remiss not to point out further confirmation of our view that the growth pace of the labour market would ease significantly in 2018. Recall that employment growth over 2017 has been around 3.4% while the momentum in the first three months of 2018 has slowed to 1.2%. We remain comfortable with an expectation of around 2% employment growth in 2018 – a pace likely to hold the unemployment steady around 5.5%. 
In conclusion we do not see the decision by the Board to speculate that rates have bottomed out as significant. The basic trends in inflation remain in place along the lines of what we saw in 2016. In such an environment there will always be a chance of a much lower Inflation Report on April 24 than we are expecting (recall 2016). However, until recently, the hurdle for lower rates has been much higher than 2016. 
In 2016, we did not experience this bout of tightening financial conditions either through rising funding costs or regulation. Combine that with a slowing housing and jobs markets and if anything, the Board’s declaration does look a little bold. 
Westpac remains very comfortable with its out of market call for the cash rate to remain on hold in 2018 and 2019.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>. 
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Benign inflation number will result in no cash rate jump: Bill Evans

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As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 1.5%.
While we expected that result, we were not expecting any significant surprises in the Governor’s Statement.
We were wrong.
Readers will be aware that Westpac has been consistently critical of the RBA’s GDP growth forecasts for 2018 and 2019 of 3 ¼ per cent in both years.
We have consistently argued that the number will be more in line with 2.5%. In all recent statements, the Governor has noted “the Bank’s central forecast for the Australian economy is for GDP growth to pick up to average a bit over 3% over the next couple of years”. This is confirmed in the official forecasts from the February Statement on Monetary Policy of 3 ¼ per cent in 2018 and 2019.
In today’s statement, he notes “the Bank’s central forecast is for the Australian economy to grow faster in 2018 than it did in 2017”. Tomorrow, with the release of the December quarter national accounts,  the measure of GDP growth in 2017 will print. Consensus  expects  growth of 2.5%. Westpac expects 2.4%. On the reasonable assumption that the RBA has a similar estimate (forecast in February SoMP was 2.5%), the above statement can be interpreted as the Bank now feeling comfortable with growth being above 2.5%, which is a major qualification of the Bank’s previous growth outlook.
This change does not seem to be indicated by a change in rhetoric around the economy. Indeed, the Governor points out that growth in exports “is expected to recover from the temporary weakness at the end of 2017”. Arguably, we could interpret this observation as attributing the lift in growth in 2018 mainly to a pick-up in exports. While the Reserve Bank does not supply independent estimates of its forecasts for household consumption, we have always presumed that it is more optimistic for household spending in 2018 than in 2017.
Certainly, Treasury’s forecasts indicate an expected boost to consumer spending in 2018. The RBA continues to highlight the outlook for household consumption as a “continuing source of uncertainty”.
While this change in the attitude to growth appears to be somewhat more dovish, the Bank does show some more confidence about wages. The Governor points out that “the rate of wage growth appears to have troughed”. This is an upgrade from the wages commentary in previous statements. The facts are of course that annual wages growth lifted in the December quarter from 2.0% in the September quarter to 2.1%, also consistent with the Governor’s comment, “wage growth remains low”.
The commentary around housing has also changed somewhat. The two major markets, Sydney and Melbourne, are now singled out and described as “have slowed”.
There is no change in the commentary around inflation (“likely to remain low for some time”); the Australian dollar (“remains within the range it has been in over the past two years”); employment (“forward looking indicators continue to point to solid growth”); Terms of Trade (“expected to decline over the next few years”); and the global economy (“has strengthened over the past year”).
The recent volatility in the share market is recognised, although no implications for markets or the global economy are drawn.
Conclusion
The Reserve Bank appears to be less confident about the growth outlook. Nevertheless, we still believe that it expects to be raising interest rates beginning sometime in late 2018 and into 2019. That would be in line with current market pricing.
In contrast, Westpac is not surprised to see the Bank more cautious on the growth outlook and we continue to expect that the cash rate will remain on hold in 2018 and 2019.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Reserve Bank stays on hold: Implies a more cautious assessment of the growth outlook

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Expert Observer
As expected, the Minutes of the March Monetary Policy Meeting of the Reserve Bank Board provided no real surprises although from our perspective there is some confusion as to the Bank’s growth forecast for 2018.
When the Governor made his statement following the Meeting, he changed the growth assessment for 2018 from “a little above 3%” to “faster than 2017”. That appeared to be a substantial change given that the expectation was that growth in 2017 (to print the following day in the December quarter GDP report) was expected to be only 2.5%. In today’s Minutes, we get a third variation where growth in 2018 is described as “expected to exceed potential growth”.
Potential growth is assessed by the RBA as 2.75%. So, we can conclude that despite sending somewhat different signals, the Statement and the Minutes are both pointing to a somewhat lower growth outlook for 2018. Note that the forecast for the February Statement on Monetary Policy was 3.25% and we will receive the next forecast on May 4.
The discussion around consumption is little changed. There is still “uncertainty surrounding the outlook for consumption growth”. Note that this meeting did not have the advantage of knowing the substantial upward revision for consumption in 2017. Based on partials, it was reasonable to expect consumption growth in 2017 to be around 2.2%.
The final number printed 2.9%. In response to that faster momentum, Westpac has revised up its GDP forecast for 2018 form 2.5% to 2.7%. However, we still expect growth of 2.5% in 2019, indicating a slowdown in the economy in that year. Even with this faster actual consumption path in 2018, we still think the Bank will remain uncertain around the consumption outlook, particularly given the reference to the impact of high household debt levels on consumption.
There is a special consideration of the switch from interest-only to principal and interest loans, and the associated impact on borrowers’ cash flows. The Board notes that “the increase in payments would be significant for some individual households”, but concludes that this impact represents “a small proportion of household disposable income”. We concur with that assessment.
There is a long discussion on the outlook for business investment, concluding that there may be some upside risks to the Bank’s forecasts in growth in non-mining business investment over the medium term.
The discussion on the labour market continues to be dominated by the word “gradual”; “wages growth was expected to rise gradually and spare capacity in the labour would continue to decline gradually”.
Housing markets in Sydney and Melbourne are recognised to have slowed and housing credit growth had eased, particularly under the weight of tighter credit standards. However, the Board is not fully satisfied and still noted that household balance sheets continued to warrant “careful monitoring”.
It is noteworthy that the Minutes assess financial market pricing as indicating that the cash rate is expected to remain unchanged during 2018 with a 25bps increase expected in the first half of 2019.
Commentary around the Australian Dollar is unchanged “on a trade-weighted basis, the Australian Dollar remained within its range of the preceding two years”. Overall conditions in the global economy are assessed as continuing to improve with a broadly based upswing. Nevertheless, the minutes repeat the Bank’s long-held view that Australia’s terms of trade are likely to “decline over the following few years”.
Conclusion
Given that the national accounts were not available at the time of the Board meeting, it is not certain that the Bank has decided to lower its 2018 growth forecast from 3 ¼ per cent. Certainly, Westpac assessed the December quarter report as justifying a modest lift in our growth forecast from 2.5% to 2.7%. A growth forecast of 3 ¼% in an economy where potential is 2.75% would normally be associated with a central bank that expects to tighten policy at some stage over the course of the year. We certainly have believed that the Bank held such an expectation.
The ongoing emphasis on “gradual” with regard to the labour market and inflation increase the probability that the Bank is reassessing that view. It was always our expectation that such a reassessment would occur over the course of 2018.
We continue to expect that the cash rate will remain on hold in 2018 and 2019.
With growth slowing to below trend in 2019, we cannot see a case for higher rates in that year either.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Confusion on the RBA's growth forecast for 2018

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The minutes of the monetary policy meeting of the Reserve bank Board on 5 December contains some noteworthy changes in the wording relative to the November minutes.
In describing the key issue for the Board, the following sentence was used in the concluding paragraph: “how far, and when, stronger conditions in the economy and labour market might feed through into higher wage growth and inflation remained important considerations shaping the outlook”.
The sentence was used “the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time”. This is the same wording that was used at the conclusion of the minutes to the October meeting, whereas in November “at this meeting” was excluded. A reasonable person might interpret the decision to include “at this meeting” as indicating a greater urgency about moving policy. However, we notice that this term has been used intermittently over the course of 2017 (March, June, July and October). Consequently it would be inappropriate to read anything into the use of this term.
The Board maintains its forecast that wage growth will “increase gradually over the next year or so”. But, of course, we are aware of the official forecasts that underlying inflation will hold at 1.75% in 2018, only lifting to 2% in 2019. As we have seen in recent speeches from the Governor, much store is being given to surveys which indicate that “more firms had been reporting difficulty in finding suitable labour”. This is not surprising given that full-time employment is currently growing at around its fastest pace in a decade although this is partly offset by the rise in the participation rate, leaving the unemployment rate at 5.4%, still well-above the generally accepted full-employment level of 5%.
The Bank seems somewhat tentative that the current strong labour market will continue with the outlook indicating that “employment growth would be somewhat above average over the next few quarters”.
Other encouraging signals from the economy continue around business investment with “investment intentions had been revised higher, particularly for the business services sector."
At the meeting the Board was also presented with scenarios under which public investment was higher than currently forecast over the following three years. These scenarios were encouraging, particularly around higher profits; worker’s incomes; productivity; and private investment prospects. With housing markets slowing substantially, the finances of state governments are likely to come under some pressure with the expected result that scenarios for public investment lifting even further than currently expected seem unlikely to prove accurate.
Of course, the source of concern remains the consumer. The meeting occurred the day before the release of the September quarter national accounts which showed that consumer spending growth slowed to the weakest we have seen since the December quarter 2008. The minutes report that “household consumption continued to be a significant risk, given that household incomes were growing slowly and debt levels were high”. This is a more concerning description of the outlook compared to November which used the term “uncertain.”
The slowdown in the Sydney housing market is recognised with prices declining. House price growth was reported as easing in Melbourne, while prices in Perth and Brisbane had been unchanged. The minutes note that “growth in household credit had slowed somewhat, but members agreed that household balance sheets still warranted careful monitoring”. It is worth noting that in response to a question around household leverage which I asked the Governor at a public dinner on November 21, he noted that household credit growth of around 6% was “okay”.
The developments described in the minutes are consistent with our own view that household credit growth will slow to around 4½% in 2018, still modestly boosting household leverage due to ongoing weak income growth but not representing any threat to financial stability.
In the Governor’s statement following the December 5 Board meeting, he changed the wording around the Australian dollar to indicate that there was no longer any official sensitivity around the level of the AUD; “the Australian dollar remains within the range that it has been in over the past few years”. The minutes provide a little more colour on this issue, noting that “members noted that while the Australian dollar had depreciated by around 5% in trade weighted terms over this period (November) it had moved within a relatively narrow range over the previous 2½ years and was a little higher than the level of early 2016”. This confirms the reasonable view that the Bank is relatively comfortable with the current level of the AUD. Despite a generally upbeat assessment of the world economy, the minutes confirm that the Bank still expects Australia’s terms of trade to fall over the forecast period. No doubt the Bank’s ongoing caution around China is a factor here. The minutes point out a tightening in financial market conditions in direct response to managing risks in the shadow banking sector. These concerns around China’s financial stability have been a consistent theme from the Bank for some time. Conclusion: The concluding paragraph in the minutes clearly lays out the compass for policy. Strength in the labour market and expected associated spill-over effects is expected to continue, although policy will only be adjusted when it is clear that wage and price pressures return.
Westpac has a more cautious view on the sustainability of the current jobs and business environment while expecting that soft income growth and high debt levels will continue to constrain the consumer. We note that even the RBA now describes household consumption as  a “significant risk”. Accordingly, we do not expect to see the necessary conditions which are outlined by the RBA to emerge over the course of 2018.
We retain our view that the overnight cash rate will remain on hold in 2018 and 2019.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Cash rate will remain on hold in 2018 and 2019: Westpac's Bill Evans

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The Westpac Melbourne Institute Index of Consumer Sentiment rose 3.6% to 103.3 in December from 99.7 in November.
This is a surprisingly strong result and confirms the lift we have seen in the Index over the last three months. The average reading for the Index in the December quarter is 5% above the average for the September quarter when we saw a disturbing slump in consumer spending. This result is supportive of the view that consumer confidence may have bottomed out during that September quarter.
In turn, growth in consumer spending is likely to have also bottomed out in the September quarter. However, with ongoing weak income growth; a low savings rate; and high debt levels we cannot be confident that consumers have the capacity to sharply lift spending despite higher confidence.
A less threatening outlook for interest rates appears to have boosted confidence. During that September quarter households were spooked by media and many commentators saying that interest rates were likely to start rising in the new year. That effect has now calmed down significantly.
Also supporting a more positive assessment for respondents’ finances is coverage of the government’s recent speculation around possible tax cuts.
With the labour market remaining strong respondents are generally more confident about the domestic economy and there is likely to have been a ‘feelgood effect’ from the passing of marriage equality legislation.
Media coverage of tax cuts in the US combined with easing tensions in North Korea, may also be supporting an improved outlook for international conditions.
All five components of the Index improved in December. Responses on family finances support the assessment around interest rates and tax cuts although it is unlikely that respondents are experiencing any relief in terms of wage increases. The ‘finances vs a year ago’ sub-index posted the biggest gain, rising 5.6% to 89.6 – an 18 month high but still well below the 100 mark indicating more consumers are seeing their finances deteriorate than improve. The forward view continues to be more positive the ‘finances, next 12mths’ sub-index posted a further 1.8% rise to 107.3, the most positive reading in a little over two years.
Views on the economy also posted solid gains, the ‘economic conditions, next 12 months’ sub-index rose 5% and the ‘economic outlook over the next five years’ sub-index was up 3.4%.
The ‘time to buy a major household item’ sub-index rose 2.8% but at 122.1 remains well below the long run average of 127.5 and still pointing to subdued consumer spending plans for the Christmas period.
The December survey included additional questions on news recall that provide insight into the factors shaping sentiment. Overall, recall levels were again low suggesting consumers are getting less exposure to news in general. The highest recall rates were for news on ‘economic conditions’ (19%); ‘budget and taxation’ (19%); interest rates (19%); inflation (10%); jobs (10%); and international conditions (9%). News on all of these topics was viewed as more favourable than three months ago, with particularly big improvements around international conditions, the economy and interest rates.
Consumers continue to become more comfortable about the outlook for jobs. The Westpac Melbourne Institute Unemployment Expectations Index declined 2.4% to 127.6 in December, the index reaching its lowest level since May 2011 (recall that lower reads mean more consumers expect unemployment to fall in the year ahead). The index can be viewed as a measure of consumers’ sense of job security. Qld consumers showed a particularly big improvement in December. Notably, all major states now have index reads below their long run averages, meaning consumer expectations for labour markets are marginally better than average.
The ‘time to buy a dwelling’ index rose 2.3% to 100.6, the first reading over 100 since the start of the year. The state detail continues to show materially weaker reads in NSW (90) and Vic (88) as affordability remains a constraint whereas there are much more positive assessments in Qld (121) and WA (122).
The Westpac Melbourne Institute Index of House Price Expectations edged 0.4% lower to 135. Price expectations continue show a sharp slide in NSW where the state index fell a further 12% in December to be down by 24% over the year. In contrast the Vic index was up 2% for the month and 10% for the year, with Qld and WA posting strong gains in the month (up 8% and 9% respectively). The variations mainly reflect the sharper slowdown in price growth evident in the Sydney market.
Responses to additional questions on the ‘wisest place for savings’ continue to indicate high levels of risk aversion. Nearly two thirds of consumers still favour safe options – deposits, superannuation or paying down debt – with only 12.8% nominating real estate and 8% nominating shares. About the same proportion of consumers favour ‘pay down debt’ (20.4%) as favour real estate and shares combined.
The Reserve Bank Board next meets on February 6. As discussed above, markets and general commentary have cooled their fervour for rate hikes in 2018. In turn that has helped boost Consumer Sentiment along with other factors discussed above.
However we doubt whether this welcome lift to confidence will be sufficient to see the Bank achieve its ambitious growth forecast in 2018 of 3.25%. Constraints around incomes; savings; and debt are still likely to keep consumer spending growth below trend.
The Bank’s forecasts for core inflation (1.75% in 2018) and the cooling in the Sydney property market (which is once again apparent in this survey) are also likely to be significant headwinds to higher interest rates.
We confirm our view that the cash rate is likely to remain on hold at 1.5% through 2018.
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Time to buy NSW dwelling sentiment weakening: Westpac's Bill Evans

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Guest Observer
As expected the Reserve Bank Board decided to leave the cash rate unchanged at 1.50%.
There are very few significant changes in the Governor’s statement relative to the statement in October.
On the positive side, the Governor has chosen to point out that prospects for non-mining business investment have improved “with the forward looking indicators being more positive than they have been for some time”.
Since the October meeting, there have been two significant retail sales reports. The report for August showed retail sales contracting by 0.6% and July sales being revised down to –0.2%. The report for September showed no bounce back from those disappointing results with sales being reported as flat. We were interested in how the Governor would assess the outlook for household consumption. In the event, all he did was point out that it was “one continuing source of uncertainty”.
There was also a disappointing inflation report since the last meeting. Underlying inflation printed 0.35% for the September quarter compared to market expectations of 0.5%. It now seems highly unlikely that underlying inflation will reach the 2% for 2017 that the Bank has been forecasting. Nevertheless, the statement only notes that “inflation remains low and is likely to remain so for some time”. However, the Governor repeats the Bank’s central forecast for “inflation to pick up gradually as the economy strengthens”.
There has also been clear further deterioration in the Sydney housing market. At this stage, the Bank is comfortable to note that “housing market conditions have eased further in Sydney”, without speculating about future dynamics. It will give the Governor considerable comfort to be able to note “housing prices have shown little change over recent months”.
Despite a further fall in the unemployment rate to 5.5% with annual jobs growth lifting to 3.1%, the Governor has chosen to maintain his measured description of the labour market, “the labour market has continued to strengthen”. He also repeats that some lift in wages growth can be expected over time. While we expect that the forecasts for the unemployment rate in Friday’s Statement on Monetary Policy will remain at 5.5%, there is a chance that the forecast for 2019 will be reduced to 5.25%.
 
This morning we released a note outlining our expectations for the Bank’s growth forecasts, which will be released on November 10. We expect the Bank to retain its growth forecasts from the August Statement on Monetary Policy at 3.25% in 2018, and 3.5% in 2019. The Governor notes that “the central forecast is for GDP growth to pick up and to average around 3% over the next few years”.
Since the last Board meeting, the AUD had depreciated from USD 0.788 to USD 0.768. Despite this welcome move, the Bank repeats its warning that “an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast”.
Until recently, many forecasters were expecting the Bank to adopt a tightening bias in the November statement. Westpac was not of that view. Today’s statement repeats the neutral bias language of recent statements.
Conclusion
There remains a difference of opinion between us and the Bank on the growth and inflation outlook. The Bank is expecting above-trend growth next year despite uncertainty around the household sector and with the associated closing of the output gap along and a gradual move towards full employment, they will continue to forecast inflation moving back to 2½ per cent in 2019.
We accept that if that dynamic does come to pass, then the Bank will see opportunity to raise rates next year. However, our growth outlook is much flatter, particularly given our view on household incomes and wages, we do not expect that the need will arise to raise rates in 2018.
To read the full RBA report <a href="http://www.rba.gov.au/media-releases/2017/mr-17-23" target="_blank" style="font-size: 12.16px;">click here</a>.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a><a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2017/2017-05-02" target="_blank">.</a>
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Very few significant changes in RBA outlook: Westpac's Bill Evans

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The key economic event next week will be the release of the September quarter Consumer Price Index. 
Westpac’s forecasts are: 0.74% for headline; 0.27% for Trimmed Mean; and 0.32% for weighted median. 
The jump in the headline is largely driven by sharply rising electricity prices. They are expected to increase by 18% in Sydney; 5% in Melbourne; 12% in Brisbane; 10% in Perth and 20% in Adelaide. The more modest increase in Melbourne is due to the increases being spread over the September and March quarters while Perth is not on the national grid. In the other states energy prices are generally adjusted in the September quarter. 
The direct impact of the rise in electricity prices adds 0.46 percentage points to the headline inflation measure. 
Of course, policy is impacted by the movements in the underlying measures: the Trimmed Mean and the Weighted Median. 
Our estimates indicate that momentum in these core measures is slowing. The six month annualised rate would slow from 2.1% three months ago to 1.7%. Underlying inflation for the first 9 months of the year would be printing 1.3%, making it likely that the actual result will settle below the mid- point of the Reserve Bank’s forecast range of 1.5%-2.5% (already 0.5% below the mid- point of the target range). 
Key assumptions behind our forecasts include the expectation that margins in food retailing; clothing and footwear ;household goods; and recreation will remain under pressure. Health costs are expected to continue to fall while the softening in the Sydney and Melbourne housing markets is likely to take some pressure off housing construction costs (usually the largest component of the Trimmed Mean). 
We also note that in the minutes of the October meeting of the Reserve Bank Board it was noted that "liaison with businesses had suggested that a number of firms, particularly in the retail and manufacturing sectors, were largely absorbing increases in energy costs into margins rather than passing them through to final prices.” 
The surprise 0.6% fall in nominal retail sales in August and the downward revision to the July number (0% to -0.2%) also point to subdued price pressures in the retail sector in the September quarter. 
The other issue challenging the outlook for inflation is the expected revisions to the weights to be used in the Consumer Price Index. The revised weights (reviewed every 6 years) are aimed at a more accurate mix of the expenditure patterns of consumers. The net impact is typically negative since consumer spending tends to rise for items where relative prices have declined and vice versa. The Australian Bureau of Statistics estimates that previous changes in weights have lowered the CPI by around 0.2 percentage points. 
Our preliminary estimates point to a reduction in the measure of the CPI of a little more than this benchmark with the headline rate being reduced by up to 0.4% and the underlying by 0.3%.
So, if momentum in underlying inflation is slowing into 2018 and there is a technical need to lower the forecasts then the Bank will face a challenge in credibly maintaining its 1.5-2.5% forecast for underlying inflation in 2018 and its 2-3% forecast for underlying inflation for 2019. 
Recall the last time the Bank was confronted with the need to significantly revise inflation forecasts. In April 2016 the Bank was expecting an underlying CPI print of around 0.6% and the result was 0.2% and internally the Bank lowered its underlying forecast from 2.5% ( 2-3%) to 1.5% ( 1-2%). It cut rates in May by 0.25%. That move was followed by another cut of 0.25% in August. 
The result of that “pure” response to the inflation shock was to reignite house prices. Macro prudential policies , largely targeting investors, and a rate hike from the banks successfully deflated the booming housing market in 2015. House price inflation in Sydney slowed from 25% (6 month annualised) to -4.4% (April 2016).In response to the subsequent rate cuts house price inflation in Sydney lifted to 22.4% (January 2017). The recent “second round” of macro prudential policies has since slowed house price inflation in Sydney to 1.7% in September 2017. Comparable but less volatile trends were apparent in Melbourne. 
This would be a definitive lesson for the new Governor that rigid adherence to an inflation targeting policy is likely to create disturbances in asset markets if inflation is structurally slowing. 
We have seen central banks offshore take a similar approach by tending to look through the immediate data on inflation and pitch policy towards a medium term view (although the Bank of England seems poised to make a policy mistake). This is why we are confident that the FED will raise rates in December despite core PCE running at 1.4%. 
Chair Yellen continues to voice confidence in the medium term “achievability” of the 2% target, with a particular aim of holding up inflationary expectations. 
The FED also has a more difficult task in balancing risks around asset markets than we have in Australia. 
Consider the cumulative increases in the various national house price indices since 2010. 
Case Schiller (US): 35%; Core Logic (Australia) 43%; CREA (Canada): 68%. 
Australia has an effective macro prudential policy approach for dealing with housing markets. Four banks control around 90% of the housing assets and there is a central regulator ( APRA). In the US, the housing market is much less concentrated with the unregulated sectors also playing a significant role. 
The policy mix which the RBA has enunciated of targeting asset markets with macro prudential and growth/inflation with interest rates is, arguably, unavailable to the FED and policy needs to be set with an “eye” on asset markets. 
That does not mean that the RBA would risk financial stability in the light of a stubbornly low inflation print but it does mean that raising rates while growth and inflation underperform is also not an attractive or necessary option. Recall that in the October minutes the RBA Board specifically noted that moves towards higher interest rates in other economies did not have” mechanical implications” for the setting of policy in Australia. The timing of any changes in interest rates would be dependent on developments in domestic economic conditions. 
So, in conclusion, there is a significant risk that inflation falls short of the RBA’s current forecasts in 2018 and 2019. However financial stability risks preclude cutting rates. On the other hand raising rates in such an environment seems equally unnecessary while effective macro prudential tools are available to deal with unwelcome developments in asset markets.
Bill Evans is chief economist at Westpac.
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Inflation - an inconvenient truth

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The minutes of the monetary policy meeting of the Reserve Bank Board emphasised some positive developments in the economic data but provided a strong statement around the Bank’s policy guidelines.
However in these minutes, the Board has chosen to emphasise its independence. “Members observed that moves towards higher interest rates in other economies were a welcome development but did not have mechanical implications for the setting of policy in Australia, where the timing of any changes in interest rates would be dependent, as always, on developments in domestic economic conditions. Members also noted that monetary conditions in other advanced economies had been eased significantly more than in Australia since the onset of the financial crisis”.
In that regard, the minutes noted that the Bank of Canada had increased its policy rate “in response to stronger than expected economic growth”. The Bank of England had indicated some tightening presumably in response to a lift in inflation associated with the weak sterling ( in my view a potential policy mistake). Markets also expected the ECB to begin reducing the pace of asset purchases in 2018.
Commentary around the domestic economy was generally upbeat:
“There had been a pick-up in household consumption growth in the June quarter”. That comment came before the release of the August retail sales data showing the weakest growth in retail sales since 2013.
Employment growth “had been well above that required to absorb increases in the labour force”, although the Board did note that growth in jobs had been  based in household services (particularly health care &amp; education) and construction. Our reading is that outside those areas growth has generally been modest. Indeed the outlook for jobs growth was somewhat more subdued than we have seen in the past, “slightly above average growth in employment over the remainder of 2017”.
Residential construction, which has plateaued, is expected to hold around current levels “over the subsequent year or so” – a little vague from my perspective, although presumably meaning all of 2018. Westpac has a more pessimistic view around that cycle than appears to be the Board’s thinking.
Private non-mining business investment has increased to be almost 10% higher than at the start of 2016 – the outlook remained positive and firm’s estimates of future capital spending has increased.
“Public investment was expected to continue to be supporting economic activity”.
On the other hand, subdued price pressures continue across the economy and  retail electricity prices are expected to increase significantly in the September quarter. (Westpac’s estimate is 13%) . It is of some interest that business liaison indicates that retail and manufacturing businesses were largely absorbing increases in energy costs into margins.
Every six months, the Board reviews the Bank’s Financial Stability Review. These minutes help us understand the key issues from the Review that were presented to the Board. In that regard, concerns around China financial risks “remained pronounced” with excessive growth through the less regulated channels including banks off balance sheet activities.
Domestically, attention always turns to household indebtedness. While the Board noted that indebtedness had edged higher, it also highlighted the strength of household’s balance sheets, noting in particular “household assets far exceeded debt with non-housing assets alone being over two times larger than total household debt”.
The concluding paragraphs in the minutes continue to emphasise the Bank’s key views, firstly that growth would increase gradually over the coming year; strong employment growth and increasing wage growth would boost income growth and household spending; and the importance to continue to assess the various risks in the housing markets and household balance sheets.
<h3>Conclusion </h3>
We have always argued that the policy process next year will be dependent on the strength of the domestic economy and not be dictated by any global trend to higher interest rates. It is interesting that the Board has chosen to emphasise this strategy in its minutes.
While the RBA does not release the detailed forecasts behind its general view that growth will be comfortably above trend next year, we can discern from the rhetoric that the Board, to date, has a more upbeat outlook for incomes; consumer spending; jobs growth; wages growth and the construction cycle than is our own view.
We have been encouraged by these minutes to expect that if the economy evolves in the way we anticipate, the Board will see no need to raise rates in 2018.
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The RBA Board ties policy to domestic economic developments - remains generally upbeat

<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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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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