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GUEST OBSERVER
The economy seems to be losing momentum as we move through 2015. In the first four months of 2015 the average growth rate of the Leading Index was 0.16% above trend.
That seemed to be a welcome lift in momentum from the second half of 2014 when the average growth rate was 0.67% below trend. However in the last four months the growth rate has slowed from 0.03% below trend to 1.14% below trend.
This emerging below trend growth profile for the economy is certainly in line with our own views. Note that the June quarter national accounts confirmed that Australia’s six month annualised growth slowed to a 2.1% pace in the first half of 2015 with our forecast for the second half of a still below trend 2.5%. Looking further out we expect growth in 2016 of 2.7% (recently revised down from 3.0%).
With trend growth in the economy now likely to be nearer 2.75% than 3% our forecast for GDP growth in 2016 of around trend growth looks a little vulnerable based on this recent print from the Leading Index. The Leading Index gives us a guide into the likely momentum in the economy through the second half of 2015 and into 2016. Today’s print points to a likely ‘below trend’ start to next year.
Key factors behind our current expectation of a modest lift in the growth pace in 2016 are: a lift in consumer spending growth from 2.5% in 2015 to 2.9% in 2016; a modest improvement in non-mining investment spend largely offsetting a sharper slowdown in mining investment and an increased contribution from net exports (adding 1.3ppts to GDP growth, up from 0.8ppts in 2015). These positive factors will be partly offset by a much smaller contribution to GDP growth from dwelling investment as the residential building boom reaches its peak.
Over the last six months the six month annualised growth rate has slowed from being 0.06% below trend to 1.14% below trend. Key drivers of this slowdown have been: S&amp;P/ASX 200 (–0.74ppts); dwelling approvals (–0.20ppts); aggregate monthly hours worked (–0.20ppts); the Westpac-MI Consumer Expectations Index (–0.17ppts); commodity prices in AUD terms (–0.17ppts); US industrial production (–0.08ppts); and the Westpac-MI Unemployment Expectations Index (–0.07ppts).
Partly offsetting these factor has been the yield curve which has added 0.53ppts.This effect has come about despite some recent flattening of the yield curve as the short end of the curve begins to doubt the need for a near term rate cut.
The recent sell off in the sharemarket has been particularly important in explaining the sharp fall in the growth rate between July and August. Of the 0.74ppt fall in the growth rate between July and August, 0.46ppts came from the sharply lower S&amp;P/ASX 200.
The Reserve Bank Board next meets on October 6. There is little chance that the Board will decide to change policy settings. Policy will now be focussed on the growth outlook for 2016. This print of the Leading Index is casting some early doubt around the Bank’s forecast of 3% growth for 2016. However the Bank is still expecting that the unemployment rate has stabilised despite growth in 2015 likely to be in the 2-2.5% range.
A particularly important point here is that the make-up of growth seems to be more ‘jobs intensive’ than we may have expected, with the lift from dwelling construction, household expenditure and net services exports being particularly important. 
The Board is very likely to await more evidence around the labour market and specifically the beneficial impact on the jobs market resulting from the sharp fall in the Australian dollar before it moves again.
At Westpac we do not expect any further rate movements before 2017.
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Bill Evans is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Leading Index slows well below trend: Westpac's Bill Evans

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GUEST OBSERVER
The Westpac –Melbourne Institute Consumer Sentiment Index fell by 5.6% in September from 99.5 in August to 93.9 in September. 
This solid fall in the Index comes as no surprise. We were somewhat puzzled by the surprise increase in the Index last month of 7.8% and there was always likely to be some correction this month. Of course the deluge of disturbing news around violent gyrations in both Australian and overseas equity markets; poor economic data from China; a disappointing report on Australia’s growth rate and the weakness in the Australian dollar were also likely to have unnerved households.
This print on the Index now marks the 17th out of the last 19 months that the Index has been below 100. A level of the Index below 100 indicates that pessimists outnumber optimists. After acknowledging some volatility in the series the underlying picture is that confidence has been little changed over the last year – firmly stuck below 100 and averaging around 96.
For the September survey we also ask respondents about the news items they most recall. This provides an objective test of our assumptions around the factors driving the movements in the Index. For this survey the most recalled news items were around domestic economic conditions overseas issues. Nearly 42% of respondents recalled overseas news items – the second highest proportion on records back to 1975. The highest proportion came in December 2011 (55%) when the European financial crisis was dominating headlines. Domestic economic conditions (54%) were also important this month. Respondents were significantly more negative around domestic conditions than in June.
News on the Australian dollar was noted by 15.5% of respondents – the highest on the dollar since June 2002.
The government would be pleased to see that ‘Budget and taxation’ caught the attention of only 23.1% of respondents compared to 62.7% in September last year.
This heightened concern around the world economy unnerved respondents about the labour market. Almost all respondents who recalled news items about the jobs market noted that the news was unfavourable. There was a sharp 5.8% increase in the Westpac– Melbourne Institute Index of Unemployment Expectations (a higher print indicates heightened employment concerns). The Index is now at its highest read since December 2014.
Most of the components of the Westpac-Melbourne Institute Consumer Sentiment Index fell in September. Households responded negatively around their own finances. The sub-index tracking assessments of ‘family finances vs a year ago’ fell by 5.7%, while that tracking expectations for ‘family finances over the next 12 months’ fell by 1.1%. Nevertheless, both of these components is comfortably higher relative to September last year (7.6% and 8.7% respectively). The volatile sub-index tracking expectations for ‘economic conditions over the next 12 months’ fell by 11.2% (down 11.5% over the year) while the sub-index tracking expectations for ‘economic conditions over the next five years’ increased by 6.2%.
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However, the biggest move came from the sub-index tracking assessments of ‘time to buy a major household item’ which fell by 13.5% to be down by 13.3% over the year. While the fall in the ‘finances’ components would explain part of this fall the near 5% drop in the Australian dollar since the last survey may have discouraged purchasers who will now be expecting higher import prices.
Confidence around the housing market continues to erode. The ‘time to buy a dwelling’ index fell by 0.9% to be 8.6% down on a year ago and 30% lower than two years ago. The New South Wales Index continues to underperform with a 14% fall this month to be 34% down on a year ago and 55% over the last two years. Within that Index the Sydney component is down by 46% over the last year and has reached its lowest level since the survey began in 1975.
House price expectations are also waning. The Westpac House Price Expectations Index fell from 132.7 in August to 127.3 in September (down by 6.1%). This Index is now down by 17% over the last year although remains well above 100 indicating that more respondents still expect prices to continue to rise.
This month we also asked respondents about their choice of the wisest place for savings. Bank deposits remain the most popular choice at 27% (down from 29.4% in June). However this was lowest proportion registered since September 2009. 
This evidence of lower risk aversion is further highlighted by the lift in real estate as a favoured form of saving. The proportion of those respondents favouring real estate increased from 24.6% in June to 28.2% in September. This represents the highest proportion of respondents favouring real estate since September 2003 – the last time we had an investor-led boom in real estate.
The increase in the proportion favouring real estate is likely to be capturing the improving optimism of investors in the housing market whereas the deteriorating prints on the ‘time to buy a dwelling’ index is probably reflecting affordability concerns of upgraders and first home buyers. In that regard note that the Westpac – Melbourne Institute Index of House Price Expectations continues to point to rising prices, albeit at a slower pace.
The Reserve Bank Board next meets on October 6. We expect the Board will maintain its steady rates policy for the remainder of this year and throughout 2016.
The key to any decision to further cut rates, as expected by the financial markets, will be whether the Bank’s current forecast that the unemployment rate can stabilise around current levels proves sustainable. Despite soft economic growth, jobs growth has been strong over the past year partly because of the strong contribution to jobs from the improving export services sectors. A sustained deterioration in the jobs market will not be apparent until next year complicating the market’s expectations of a rate cut by year’s end.
 
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Bill Evans is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Solid fall in September Consumer Sentiment Index: Westpac's Bill Evans

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GEUST OBSERVER
As expected the Reserve Bank Board decided to leave the cash rate unchanged at 2%.
In the Governor’s statement the recent equity market volatility and ongoing weakness in China was noted. However, he chose to nominate offsetting effects in both cases. For China, he noted “stronger US growth” and for the equity markets he noted that “other financial markets have been relatively stable”. If that was a deliberate strategy then we can interpret it as indicating that the Bank is reasonably comfortable with these recent developments.
However it appears that the view on China may have softened somewhat relative to last month given that the minutes to the August meeting noted that “the downside risks to the outlook for Chinese growth identified over the past year had receded somewhat”.
At the August meeting the AUD was trading around USD 0.7275. It has subsequently fallen to USD 0.715. That is despite a modest increase in Westpac’s broad commodity index of 1.5%. Not surprisingly this welcome result encouraged the Governor to repeat the AUD commentary that was used in August: “the Australian dollar is adjusting to the significant declines in key commodity prices”.
Whereas in August the Governor expected the Federal Reserve to start increasing its policy rate “later this year”, he now expects the increase “over the period ahead”. This moderation in the Fed view is not significant for policy with the AUD down at these levels. If for instance the AUD had lifted sharply since the August meeting then a less confident outlook for Fed policy would have been significant for the RBA’s own policy.
In the August Statement on Monetary Policy the Bank revised its unemployment forecast from steadily rising to 6.5% to flattening out around current levels of 6%. The July jobs report printed an unemployment rate of 6.3% but we expect that has not been enough for the Bank to change its view on unemployment. In that regard the commentary used in the August Governor’s statement – “somewhat stronger growth in employment and a steady rate of unemployment over the past year” – was repeated. I expect it would be necessary but not sufficient for the Bank to cut rates to see an  upward revision to that unemployment forecast.
There is no change in the commentary around credit growth (“moderate”) the housing market (“prices continue to rise strongly in Sydney”) and the growth outlook (moderate expansion with “a degree of spare capacity”) and the final paragraph of the statement is unchanged from August with the final line: “Further information on economic and financial conditions to be received over the period ahead will inform the Board's ongoing assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.”
The outlook
Despite the market pricing in a 100% probability of a rate cut by year’s end, Westpac continues to expect that rates will remain on hold over the course of 2015 and 2016. Risks around that view are clearly to the downside with the labour market; momentum in domestic demand; the global economy and the Australian dollar remaining key swing factors.
From our perspective we do not think that the high degree of inertia which the Bank has towards further rate cuts will be tested.
Bill Evans is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Reserve Bank to keep rates on hold throughout 2015 and 2016: Westpac's Bill Evans

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GUEST OBSERVER
The Reserve Bank has made some notable changes to its forecasts in its August Statement on Monetary Policy.
It has retained its forecast for GDP growth in 2015 at a below trend 2.5% but lowered its forecast for growth in 2016 from 3.25% to 3.0%.
It has retained its forecast for growth through to June 2017 at 3.5% and has added an even more optimistic forecast for 2017 of 3.75%.
The lower growth forecast in 2016 can be attributed to a weaker outlook for non-mining investment; lower forecast population growth; and a lower terms of trade (adjusted by 4% from the May Statement).
Significant attention is given in the Statement to the lower forecast for population growth. Annual population growth is forecast at 1.5% over the years to end 2017 – 0.25% below previous forecasts.
That forecast has implications for both demand and supply in the economy. On the demand side both investment and consumption can be expected to be somewhat weaker while growth in supply will also be lower.
Because of weaker supply growth the Bank has been able to adjust its forecast for unemployment despite weaker demand. In May the Bank forecast “unemployment will probably rise further to peak at 6.5% in mid - 2016 and remain elevated for longer”. It is now forecasting that “the unemployment rate is expected to remain little changed from recent levels for some time". Readers should note that this report was finalised on August 6 the day the unemployment rate was announced to have lifted from 6.1% to 6.349%. It is reasonable that the Bank has chosen to look through the monthly volatility of the employment reports and today’s Statement can be read as the Bank formally revising down its peak unemployment rate forecast from 6.5% to around 6%.
In taking 0.25% from its population growth forecast the Bank is effectively revising down its estimate of “trend” or” potential” growth. If, say, it now sees growth in productive capacity at nearer 2.75% than 3% then a lower demand forecast should NOT be interpreted as a signal that policy needs to be adjusted. Demand growth is now seen to be sufficient to stabilise unemployment and therefore rate cuts are seen to be less necessary despite the softer demand.
This discussion neatly overlooks that a central bank should not necessarily be comfortable with unemployment stabilising at above 6% when full employment is generally accepted in Australia to be below 5%.
However this point is covered in the 2017 forecast that growth will reach a stunning 3.75% - well above the assumed “potential” growth of 2.75% (using the lower population growth forecast) and consistent with a solid fall in the unemployment rate. With the drag from the contracting mining investment still set to be running at the current or even more intense pace and the lift from housing investment likely to be easing by then such a growth forecast in 2017 puts a lot of faith in a desired boost to consumer spending and associated non mining investment.
Fortunately the forecast is not based on some expected boost in the terms of trade. Although the Bank does not release point estimates of its terms of trade forecasts Graph 6.2 in the Statement indicates a reasonable assumption that the terms of trade will stabilise in 2016 and 2017.
The Bank’s recent forecasting record highlights downside risks to that forecast. Consider its growth forecasts back in November last year, 3% for 2015 and 3.5% for 2016. Those numbers now stand at 2.5% and 3% respectively.
Overall, however, taking these growth forecasts at face value indicates no pressing need for the Bank to deliver any further policy easing.
While we expected the Bank to lower its growth forecast for 2016 we did not expect it to revise up its very confident underlying inflation forecast for 2016. Recall that in May it revised down its underlying inflation forecast from 2.5% to 2.25%. That represented the first time since 2009 ( aftermath of the GFC) that the Bank had forecast underlying inflation, one year out, below the mid-point of the target range.
The reason given in the text for revising back up the inflation forecast was that the exchange rate assumption for the forecasts had fallen from USD 0.80 to USD 0.74 – a 7.5% fall in the AUD or a 5% fall in the TWI.
It would also be a factor that with the unemployment rate now not expected to rise the degree of spare capacity in labour market would be seen to have lessened imparting a more modest disinflationary pressure.
Other underlying assumptions behind the forecasts are also of interest. The oil price is assumed to be 25% lower than the price used in the May forecasts while the interest rate forecast assumed, ”that the cash rate moves broadly in line with market pricing”. The caveat that “this assumption does not represent a commitment by the Board to any particular path for policy” was noted, as was the case in both February and May.
In February market pricing assumed a 100% probability of a rate cut by May and a cut was duly delivered in May .In May market pricing assumed a 40% probability of a cut by August and no cut was delivered. Current market pricing is in line with May with around a 40% probability assumed by November.
The precedent from May does not provide much encouragement for those folks expecting a November move. It would have been much more interesting if the market pricing of recent weeks had prevailed where the probability of a November cut ranged between 60% and 80%.
Conclusion
Readers will be aware that Westpac expects that we are at the bottom of the cash rate cycle with the next move up not expected until well into 2017. The Bank’s forecasts are certainly in line with those views given its expectations of a 3.75% growth year in 2017. The forecasts for 2016, at 3%, with a stabilising unemployment rate, at around 6%, would be consistent with steady rates in 2015 and 2016.
If, however, it became clear by the second half of 2016 that a 3.75% year was in the offing in 2017 then that rate hike might be delivered earlier than our current timing. However we are much more doubtful about that prospect than appears to be the view of the Bank. Our current view is that 2017 is more likely to be nearer the bottom of the Bank’s 3-4.5% confidence band.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Reserve Bank's noticeable forecast change: Bill Evans

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GUEST OBSERVER
Our September target for AUD/USD had been 73¢ since we last adjusted our forecasts back in April. At the time the AUD was trading around 79¢. Our year-end target at that time was 72¢, implying a reasonably sized fall through the middle of the year and stability (with downside risk) beyond.
With our September target now achieved, we have decided to lower our year-end target by 2¢ to 70¢ to reflect lower forecasts for global growth and commodity prices and our assessment that markets are largely in denial that the US Federal Reserve is likely to begin raising interest rates in September with a follow up move in December.
When we adopted the end year-end target of 72¢ in April, our contemporaneous estimate of fair value was around 74¢ compared to an actual of 79¢ - a premium of 5¢. (The AUD has traded at a consistent margin above fair value through most of its depreciation in recent years.) At that time our projection of fair value by year end was 69¢, based on our forecasts for commodity prices, interest rate differentials and Australia’s net foreign debt – the key drivers of fair value.
We have recently revised down our outlook for commodity prices and we have also increased our projected net foreign debt, both of which lower fair value. The net effect has subtracted 3¢ from our prior figure, leaving our fair value projection for the end of the year at 66¢.
On the commodity front, in April, when we forecast AUD/USD to reach 72¢ by year’s end we expected the Australian commodities index to reach 188. That has now been revised down to 165 (–12%), with the bulk commodity component forecast falling from 227 to 203 (–11%).
A significant explanation for this downward revision has been our lower forecast for global growth in both 2015 and 2016. The 2015 forecast has been reduced from 3.5% in April to 3.2% and the 2016 forecast has been reduced from 4.1% to 3.6%. Downward adjustments to the growth outlook in the US, China and East Asia have been largely responsible for these changes.
A potential supporting factor for the AUD has been our expectation that market pricing, which had been giving a 60-80% probability of a rate cut by the RBA by year’s end would prove to be unfounded. Recently the market has moved to lower that probability as the Bank appeared to be less committed to a lower exchange rate. The Governor’s statement following the August board meeting omitted the key sentiment around “further depreciation”. 
Prior to August the Bank had been quite successful in assisting the fall in the AUD from 79¢ to 73¢ with a consistent commentary that “further depreciation seems both likely and necessary”. In the August statement the Governor merely noted that the AUD had been adjusting, arguably implying that he was satisfied with its current level.
Pressure for further rate cuts accordingly eased and the currency rebounded almost a cent from its lows, before settling around 73.5¢. This uplift, which was clearly associated with the market’s revision to the outlook for the RBA appears to have now largely run its course.
Moving on to the other major factor at play, the market remains in denial that the Federal Reserve is likely to decide to raise its policy rate at the September 16/17 meeting. Current market pricing is only giving around a 25% probability to a Fed rate hike in September and an 80% probability of one hike by December. We expect hikes in both September and December – events that are likely to give a solid boost to the USD as markets adjust to the “surprise”.
This adjustment is likely to further weigh on high yield currencies such as the AUD as markets begin to alter their expectations about the pace of the narrowing of the interest rate differential between Australia and the US. For example, further out along the curve markets are currently expecting slightly less than three rate hikes by the Fed by the end of 2016. After moves in both September and December markets are likely to scramble to price in at least two more hikes by end 2016, further pressuring the Australian dollar.
We suspect that the potential for this sort of scenario to play out may be influencing the tactical thinking of the RBA. The Bank would see a strengthening of the US dollar as a beneficial trend which would allow for a lower Australian dollar without the need for additional interest rate cuts.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
 
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Reserve Bank's eyes on a strong US dollar: Bill Evans

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GUEST OBSERVER
As expected the Reserve Bank Board decided to leave the cash rate unchanged at 2.0%.
However, we were very surprised that in the Governor’s statement on the Australian dollar he did not repeat the sentence “Further depreciation seems both likely and necessary”. Since he introduced that language in May, the AUD has fallen from USD0.787 to USD0.728. This strategy had proved to be quite successful in ‘talking down’ the Australian dollar.
It was reasonable to expect that the strategy would be repeated given that even at USD0.728 the AUD was still above most estimates of fair value. However, the Governor’s statement was scaled back to merely observe that “The Australian dollar is adjusting to the significant declines in key commodity prices”. It is reasonable that markets will interpret this comment as indicating that the Bank no longer sees further depreciation of the AUD as “likely and necessary”.
This perception will impact market pricing for both the AUD and the outlook for interest rates. It is reasonable that a key explanation for markets pricing in around a 60% probability of a rate cut by November is the expectation that the Bank would continue to openly discuss the possibility of rate cuts. A key motivation behind cutting rates would be to further lower the AUD. That motivation now seems to have dissipated.
As we did expect, there are very few additional changes to this statement. The Bank remains confident that inflation will remain consistent with the target over the next one or two years and also notes that the economy is likely to be operating with a degree of spare capacity for some time yet.
In July, we noted that the Governor commented that the unemployment rate had been little changed recently and this was emphasised once again, noting somewhat stronger growth in employment and observing that the unemployment rate had been steady now over the past year. In a recent speech the Governor raised the issue that trend growth in the Australian economy may be lower than 3-3.25% partly explaining the stable unemployment rate despite growth only being 2.5%.
Despite recent evidence of rapid house price growth in both Sydney and Melbourne there was no elevated concern around the house price issue. Strong price rises were noted in Sydney with the qualification that trends were more varied in other cities.
Recent increases in interest rates for housing investors were not noted although the observation that the Bank was working with regulators to contain risks was repeated.
There was a mild surprise in the observation that weaker commodity prices largely reflected increased supply given that softer demand conditions must also be a relevant factor.
Finally, the Bank repeated its expectation that the Federal Reserve will start increasing its policy rate later this year. That move of course is likely to contribute to slowing down any recovery in the AUD that might come as a result of the markets’ perception that the RBA is no longer calling for a lower AUD. The Fed’s decision will be known by 17 September although markets are likely to become more focussed on that event than is currently the case where only a modest probability is given to a Fed move at that time.
Outlook
Clearly there is nothing in this statement that would motivate us to move away from our call that rates will remain on hold in 2015 and through the course of 2016.
As discussed, less urgency around the AUD weakens one argument for lower rates in 2015, although if the RBA observes a very strong market response then it may need to reinstitute its successful strategy at the September and/or October statements.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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RBA Governor's statement scaled back on dollar: Bill Evans

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The Reserve Bank Board meets on August 4. We expect the Board will decide to keep rates on hold. 
Markets are in full agreement with this view with only a negligible probability of a rate cut being priced in. 
It is a different story for November with market pricing oscillating between 60% and 80% probability of a cut by then. 
With this in mind, attention will focus on the Governor’s decision statement, released at 2:30pm on August 4, and the Statement on Monetary Policy which will print at 11.30am on August 7. 
We are not expecting any surprises in the Governor’ statement. He has finally found the right approach to ‘talking down’ the Australian dollar with the language:
 “Further depreciation seems both likely AND necessary, particularly given the significant declines in commodity prices”. He first used that sentence in May when the AUD was around USD 0.787; followed up in June (USD 0.7682) and then in July (USD 0.744). 
Now at USD 0.73 the AUD has certainly not fallen sufficiently for the Governor to abandon a successful strategy. Further, we suspect that the key reason behind his referring to potential further easing (“We remain open to the possibilities of further easing if that is, on balance, beneficial for sustainable growth”) in speeches is also a desire to maintain downward pressure on the Australian dollar. 
The forecasts for growth and inflation presented in the Statement on Monetary Policy will be of critical interest. 
Recall that in February this year the Bank adopted an approach of assuming ‘market pricing’ for the cash rate profile. At the time the market had a near 100% probability of a further rate cut by June to complement the cut in February. Markets could be excused 
for interpreting that change of approach as, in effect, franking its pricing for another rate cut. The Bank repeated the approach in its May Statement on Monetary Policy, when market pricing only had a 40% probability of a follow-up cut by year’s end price in – not a high enough probability to encourage speculation. 
Next week, with markets pricing in a 65% probability of a further rate cut by year’s end and an 80% probably of a move by early next year, considerable attention will be given to whether the assumption of market pricing is retained. I expect that for the purposes of continuity the Bank will retain the market pricing assumption but would not interpret this as any kind of signal. 
On the other hand, if the Bank drops that assumption, it would be a most discouraging signal for those folks expecting a near term rate cut. 
Note that in the May Statement on Monetary Policy the Bank forecast that underlying inflation would centre around 2.25% in 2016. Apart from during the depths of concerns around the Global Financial Crisis in 2009, this is the first time since the Bank started publishing forecasts that it has forecast underlying inflation to be below than the midpoint of the target range in the next calendar year.
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This is surely a very dovish signal from the authorities. Even though the AUD has fallen from USD 0.80 (the assumption used for its inflation and growth forecasts in May) to USD 0.73 I expect that the Bank will retain its dovish inflation forecast. 
The other risk is around the Bank’s assessment of trend growth. 
As discussed in last week’s note the Governor indicated that the Bank would be reviewing its assumption of trend growth, which has generally been assessed as 3–3.25%. 
Australia has been consistently growing below that pace since the GFC. The assessed negative output gap has weighed on inflation. If however, the trend growth rate was, say, 2.75% then the negative output gap would be smaller and disinflationary pressures less intense. Theoretically, all else being equal, that would imply a need to raise the inflation forecasts. 
We expect that the Bank may make that adjustment in future but not in the next Statement on Monetary Policy. 
Recall that the growth forecasts are currently 2.5% for 2015 and 3.25% for 2016, down from 2.75% and 3.5% respectively in the February Statement. 
Since May the data releases around the real economy have generally been disappointing. In particular the March quarter national accounts and the March quarter Capex survey have revealed a weaker than expected investment profile for both mining and non-mining and no evidence of a recovery in the downbeat 2.5% annualised pace of consumer spending. 
The ‘sticker shock’ effect of further lowering the 2015 forecast seems too high to consider but it does seem likely that the growth forecast for 2016 will be reduced to 3%. 
Policy will be targeted on growth in 2016. At 3%, growth would still be assessed at ‘around’ current estimates of trend and would still be consistent with no policy change. 
However, markets might seize on the disturbing downtrend in the 2016 growth forecasts and speculate on a ‘below trend’ forecast for 2016 in the November Statement on Monetary Policy. 
That would not be a good strategy. 
By then the Bank is likely to have adopted a lower trend growth assumption (say 2.5–2.75%). Even with a further downward revision to the growth forecast in 2016, from 3% to 2.75%, this would still be at or above the newly assessed trend precluding the need for a policy response. 
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BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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RBA will hold: Westpac's Bill Evans

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GUEST OBSERVER
The minutes of the monetary policy meeting of the Reserve Bank Board provided no real surprises from the perspective of the policy outlook.
Consistent with the Governor’s statement which was released shortly after the July Board meeting the Board still points out that the Australian dollar had provided less assistance to the economy than would normally be expected and “further depreciation seemed both likely and necessary”.
The outlook for policy remains data dependent with the Board concluding that “information to be received over the period ahead on economic and financial conditions would continue to inform the Board’s assessment of the outlook and hence whether the current stance of policy remained appropriate”.
There was no real enthusiasm about the outlook for growth. Indeed, it was noted that: “early indications were that the strength in the March quarter had not carried through to the June quarter”. Investment intentions remain subdued despite non-mining business profits having increased over the past year and surveys of business conditions improving over recent months.
Of most interest was the discussion around the labour market. Recall that a key policy guideline for the Bank has been that if the economy grows below trend (generally assessed as 3%) then the unemployment rate can be expected to edge up. Over the last year or so, growth in the economy has been stuck around a sub-trend 2.5%yr yet the unemployment rate has remained steady. The Bank attributes that to slowing population growth (1.4% for the 2014 year compared to a peak 1.8% in 2012). It is argued that easing population growth is consistent with below average growth in output and a steady unemployment rate. That may mean that the Bank is reassessing its assessment of trend growth at 3-3.25%. However, the Board is not satisfied with the current level of unemployment arguing that spare capacity remains and that wages growth remains historically low (lowest year end outcomes since the early 1990s) and that unit labour costs have been little changed over four years. Such developments indicated that inflationary pressures were well contained and likely to remain so.
The discussion around housing provided no new insights. The outlook for dwelling investment remains strong while house prices continue to grow rapidly in Sydney and to a lesser extent Melbourne. At this stage there was no evidence that the regulators’ greater scrutiny of investor housing was affecting growth.
Consumption spending continues to disappoint although it has been growing at a faster pace than household income. We were surprised to note that the Banks’ liaison suggested that retail sales were likely to be flat in June, despite the expected lift from the generous tax concessions provided to small business in the Budget.
On the international front there was a slightly more positive take on the Chinese property market: “Chinese property markets had improved somewhat and residential property prices had risen for the first time in a year”. Overall growth in Australia’s major trading partners appeared to have been around average in the June quarter.
Westpac expects that the first tightening by the US Federal Reserve will occur in September. The minutes point out that market pricing suggests a later date although they also highlight commentary from Fed officials that suggests it could be a little sooner. This is far from definitive but it is not unreasonable to conclude from this commentary that the Board is also expecting an earlier move.
The Bank now provides helpful analysis of the impact of mortgage offset accounts on overall household debt. The Board points out that despite this adjustment the household debt to income ratio had increased over the year although there was no apparent discomfort with that observation.
The outlook
From my perspective the most significant insight from these minutes is the reconciliation of below trend growth and steady unemployment. On the one hand that may signal that any decision from the Bank to lower its growth forecast for 2016 below 3% (previously accepted trend) may not necessarily signal a need to cut rates if trend growth is in fact now lower due to weaker population growth. On the other hand the Board makes it clear that it is still uncomfortable with the level of the unemployment rate. Stability in that rate at a rate of growth below previously accepted trend is not enough to argue against further stimulus while spare capacity operates in the labour market.
Markets are giving only a limited chance to a rate cut in August but still persist with around a 70% chance of a move by November. We still believe that there will be insufficient evidence on the growth outlook in 2016 by then and, given a clear apparent high degree of uncertainty from the Bank, would not see the first window for a cut coming before early 2016.
From our perspective evidence around activity momentum in the second half of 2015 will not be apparent until the first half of 2016 and therefore any policy adjustment would need to wait until then.
We are currently looking for some modest improvement in growth in 2016 back towards around 3%, a level that would likely maintain steady rates. Accordingly we maintain our call that rates will remain on hold over the course of 2015 and 2016.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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RBA minutes indicate future policy will be data dependent: Bill Evans

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As expected the Reserve Bank Board left the cash rate unchanged at 2% at its July Board meeting.
There were very few changes in the Governor’s statement from the statement following the June Board meeting.
Even though the Australian dollar has declined from around  USD0.77 at the June meeting to around USD0.75 today the Governor repeated his comment, “Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices”.
The closing paragraph was also almost identical with the key sentence remaining: “Information on economic and financial conditions to be received over the period ahead will inform the Board's assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.” That effectively means that the Bank is prepared to move on rates if it deems that necessary and effective, squashing any suggestion that 2% is some agreed floor for the cash rate. That sentiment was even more clearly enunciated in the Governor’s speech on June 10 when he said “We remain open to the possibility of further policy easing if that is, on balance, beneficial for sustainable growth”.
The commentary around the Australian economy included some interesting deviations from the June statement. Firstly, in June the Governor referred to “Household spending has improved”. That sentiment would have been based on the expectation that household spending would print a 0.7% rise in the March quarter national accounts which were due to be released the following day. Along with a strong 0.9% pick up in the December quarter that would have indicated that the annualised pace of spending had picked up from 2.5% to 3%. However the accounts recorded that spending grew by only 0.5% and the December quarter was downgraded. Overall the conclusion has to be that household spending remains stuck around a 2.5% pace rather than lifting as had been anticipated by the Bank last month.
On the other hand the June statement excluded any discussion on employment whereas in July the Governor states “the rate of unemployment, though elevated, has been little changed recently” even though that appears to be a bland statement of the facts the decision to point that out must indicate that the Bank is less convinced that the unemployment rate will rise consistently through the course of this year.
Despite no discussion on the weak investment in both mining and non-mining sectors it must still be assumed, given the results in the national accounts, that both mining and non-mining investment are underperforming significantly relative to previous expectations.
Developments in Greece and China get a mention in the statement as one explanation for volatile markets but there appears to be little anxiety with their impact being largely restricted to financial markets.
Outlook
Westpac’s current view is that rates will remain on hold through both 2015 and 2016. However the risks are clearly to the downside and will be dependent upon the Bank’s confidence in the outlook for the unemployment rate and economic growth. We continue to expect the unemployment rate to edge up further and while there appears to be some evidence in the statement that the Bank might be having some doubts around their long held view that the unemployment rate would edge up further we think they are still expecting such a result.
Secondly, they currently expect that GDP growth will lift from 2.5% in 2015 to 3.25% (trend) in 2016. Any substantial downward revision to that 2016 estimate should trigger a further policy response. The next test of that forecast will come in August and while there is a case for the Bank lowering that number to 3% that is not sufficient to support another rate cut. For that reason we think the first practical ’window’ for lower rates would be November when the data might be pointing to a softening growth outlook. The most important determinant of that forecast will be the momentum in the economy in the second half of 2015. By the November Board meeting the September quarter national accounts will still be one day away making it difficult to gauge momentum in 2015 H2. As with this year that would tend to push any further cut into the first half of the following year.
For our part there is insufficient evidence to lower those growth numbers sufficiently to justify a rate cut. Consequently we retain our position that rates will remain on hold in 2015 and 2016.
Bill Evans is chief economist at Westpac.
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Few changes following RBA's July meeting: Westpac's Bill Evans

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GUEST OBSERVATION
As we had forecast the Reserve Bank Board decided to lower the cash rate by 25bps to 2%.
For Westpac this brings to a close an interesting six months in forecasting. When we changed our view on 4 December, 2014 we were the only institution in the Bloomberg survey who forecast that the cash rate would be at 2% by May 2015.
The most surprising aspect of the Governor’s statement is that he has not chosen to indicate a ‘soft’ easing bias. In fact, the explanation behind the decision indicates renewed optimism in the economy with the obvious implication that rates are likely to be on hold for some time. Specifically, he commented: “The Board judged that the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand.”
The language around the Australian dollar was the most strident we have seen. Not only does he predict that a further depreciation seems likely but also labels it as “necessary”.
It must have been a disappointment for the Governor to see that the Australian dollar lift to around US 79c (from 78.50). This is clearly the market response to the final paragraph which signals an end, at this stage, to the easing cycle.
Consistent with the final paragraph the commentary around consumer spending and the labour market is more upbeat than in previous statements – “the available information suggests improved trends”.
Those doubting that a cut would be delivered today placed most emphasis on risks in the housing market. The Governor addresses that issue by pointing out that outside Sydney trends in the housing market have been varied. Once again he emphasises the macroprudential tools that the Australian Prudential Regulation Authority (APRA) is now enforcing within the banking system. It is our view that these guidelines will have a cooling impact on housing markets.
In our previews to this meeting we emphasised that we expect that the Bank will lower its growth forecasts for 2015 and 2016 due to a weaker outlook for business investment, both mining and non-mining. The Governor clearly highlights business investment as the key drag on private demand.
He also maintains the line that the economy will be operating with a degree of spare capacity for some time yet.
For the first time in this cycle the Governor speculates on the policy of the Federal Reserve with the expectation that the Fed will be tightening later this year. Clearly that will provide an important contribution to the Governor’s expectation that the Australian dollar will depreciate further. Westpac shares that view with our current expectation that the Fed will begin tightening in September with a follow up move in December.
The outlook
We have consistently argues that 2% will be ‘the resting place’ for this easing cycle. The Bank will now take time to assess the sustainability of their current forecast that economic growth in 2016 will exceed 3%. That is above trend growth and consistent with stability and an eventual fall in the unemployment rate. For our part the next significant date will be the November Board meeting. By that time the Bank will have sufficient information around the momentum in the economy through 2015 for it to assess whether its relatively positive outlook for growth in 2016 can be sustained.
Our current forecast is that despite an ongoing drag from mining and non-mining business investment there will be a sufficient lift in household demand (both consumption and dwelling investment) to justify a 3% growth rate in 2016. However, with record weak income growth, fragile confidence and ongoing headwinds from fiscal policy the risks to this outlook are to the downside.
In addition the absence of an easing bias and Australia’s ongoing yield advantage over other countries could frustrate the Bank’s ambitions to see a substantially lower AUD.
Bill Evans is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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RBA adopts optimistic tone and abandons easing bias: 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.

&nbsp;

[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.

&nbsp;

[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.

&nbsp;

[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.

&nbsp;

[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.

&nbsp;

[smartcode_project_cta:default project_id=152737]

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Bill Evans

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