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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

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

Joel Robinson

Spacious Group completes Voyage Altona in Altona's beachside precinct

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

Homecorp approved for Budds Beach apartment tower, Lýon Residences

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

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

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

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

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

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

Bill Evans

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