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EXPERT OBSERVER
Recently the Bank has communicated extensively with the market.
This has included a major speech from the Governor to the Australian Business Economists; his the semi annual appearance at the House of representatives Standing Committee on Economics; and the August Statement on Monetary Policy.
So, it comes as no surprise that the Minutes of the August Board Meeting contain no surprises.
The Board confirms that it does “not rule out adjusting the current package if circumstances warranted”.
The package is highlighted by a 0.25% cash rate and a 0.25% target for the three year bond rate.
The condition for the three year bond target is somewhat looser than for the cash rate target with “progress towards the inflation target” compared with “confident that inflation will be sustainably within the 2–3 per cent target band”.
For that reason “it would be appropriate to remove the yield target before the cash rate itself is raised”.
This policy description has been used consistently since the Board minutes of the April meeting.
It is not entirely clear as to whether “remove the yield target” means abandon yield curve control or adjust the level of the target to, say, 0.40%.
In his appearance at the Parliamentary Committee he opined that the three year target of 0.25% was reasonable since he expected that the cash rate would hold at 0.25% for the next three years.
However, he was guarded as to whether he thought it likely that the 0.25% would hold for five years and therefore it was  not encouraging that the target of 0.25% would be extended to five years.
My preference would be that if in 2022 the Bank was still of the view that the cash rate was unlikely to hold at 0.25% for another three years it would be appropriate to lift the three year target rate to, say, 0.40% thus maintaining yield curve control without having to defend an unrealistic target.
Given that this current language is likely to be used consistently in the Minutes certainly through 2021 the Board can maintain its flexibility on whether to abandon yield curve control or set a different target rate.
Another issue for policy is the Australian dollar. The Governor stated last week that a lower dollar was helpful in boosting jobs through a lift in competitiveness.
With the Bank’s assumption that foreign borders would remain closed until mid- 2021 the benefit of a more competitive dollar is blunted somewhat in the near term.
However, he stated that any move to intervene to lower the dollar would be ineffective if the value of the dollar was in line with fundamentals.
In fact, in the Minutes we see “The Australian dollar had been broadly in line with fundamental determinants, such as commodity prices and interest rate differentials”.
With the outlook for commodity prices encouraging and interest rate differentials moving in a very narrow band the opportunity for a grossly overvalued AUD to emerge prompting some currency intervention seems unlikely.
Adopting a negative interest rate policy to lower the fundamental value of the dollar through a widening the yield differential has been described by the Governor as “ extraordinarily unlikely”.
I am always interested in the detailed economic discussion for insights from the Bank’s extensive liaison work with business.
In that regard “Information from the Bank’s liaison program indicated that the share of contacts expecting to freeze wages or to implement temporary wage cuts was higher than in the past”.
With wages growth being a key determinant of inflation that news will not be comforting for a central bank targeting a return to 2–3% inflation.
All three economic outlook scenarios – base; upside; and downside had inflation below 2% (upside 1.75%) by end 2022 with the downside scenario seeing inflation at 0.5% even by end 2022.
The conclusion was that “underlying inflation pressures would remain subdued for a considerable period”.
On business investment “information from liaison with businesses and recent surveys indicated that weakness in non- mining business investment over recent quarters would become more pronounced in the period ahead”….” Firms were prioritising their liquidity positions in response to uncertainty about future demand”….” many non-residential projects that had not yet commenced were on hold”.
Conclusion
The Bank’s forecasts put the policy debate in a difficult position.
What does “progress towards full employment“ mean?
If the unemployment rate has fallen from the forecast peak of 10% (we think that is too high – more like 8.5–9.0%) to 7% does that qualify as sufficient “progress” to tighten policy?
Yes, a three percentage point fall in the unemployment rate is significant but is it sufficient “progress”?
Surely there is a case for maintaining maximum policy stimulus if you are that far away from full employment and inflation has spent years outside the target band.
On the other hand, if the forecasts prove to be optimistic (and the downside scenario prevails) there should be a  debate around what other policy options might be considered effective.
Perhaps, as we move forward, that debate will merit more attention.
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BILL EVANS is Chief Economist for Westpac. 
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RBA's forecasts put policy debate in a difficult position: Westpac's Bill Evans

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EXPERT OBSERVER
The Westpac-Melbourne Institute Index of Consumer Sentiment fell 9.5% to 79.5 in August from 87.9 in July.
The scale of the fall comes as a major surprise. At 79.5, the Index is back near the extreme low of 75.6 seen back in April when Australia entered a national lockdown.
Since the July survey we have seen Victoria enter Stage 4 restrictions and evidence of some ‘hot spots’ in New South Wales. Under those circumstances it is certainly reasonable to have expected a sizeable fall in Consumer Sentiment.
However, collapsing to only 5.1% above the lows we saw in April when consumers were first confronted with a national lockdown may well prove to be a significant overreaction.
The biggest surprise was in NSW where sentiment collapsed by 15.5% – well in excess of the 8.3% fall in Victoria. Remarkably, the index in NSW has reached 77.8, below Victoria’s read of 78.
Even in Queensland, where cases have been largely eliminated, there was a fall of 8.1% putting the index in Queensland at 79.7, only slightly above NSW and Victoria.
The index in South Australia fell by 5.8% to 81.8 while only Western Australia was stable, falling by 1.5% to 85.9.
While some of the weakness in NSW and Queensland will reflect the direct economic drag from Victoria’s lockdown and the closure of interstate borders, the overall response seems disproportionate to the evidence on developments around the virus.
This emphasises the fear of the unknown.
Consumers across the nation appear to have been rattled by the developments in Victoria and fear that other states may also succumb to the ‘second wave’ outbreak.
NSW has seen several clusters although, after more than a month, there has been no evidence that these cases will develop into a Victorian-style disaster.
Queensland has seen even fewer cases and faces even more secure prospects.
Our view is that these fears are likely to have become overblown. While consumers are right to be concerned, virus risks still look low outside Victoria. Even in NSW new case counts remain well below the levels seen when Victoria’s outbreak started to ramp higher in the second half of June.
Certainly, the prospect of Victorian-style outbreaks taking hold across all of Australia seems remote. Fears across the nation will be lowered further as and when lockdown measures start to improve the situation in Victoria
Victoria’s progress in containing the virus with its current heavy lockdown policies will be much clearer by the first week in September when we conduct the next survey.
BILL EVANS is <a href="https://westpaciq.westpac.com.au/Article/44613/14186/" target="_blank">Westpac's chief economist</a>
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Consumer sentiment collapsed in August especially in NSW: Bill Evans

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EXPERT OBSERVATION
I have never seen a more uncertain economic outlook than we currently face both domestically and globally.
Nevertheless it is important to try to set out a framework for assessing the outlook. In this note we take the unusual approach of looking at the prospects of the states and build the national picture up from the individual states.
Victoria has entered Stage 4 lockdown which is likely to continue until mid-September.
Developments in Victoria have been rapid. When the government released its economic forecasts on July 23 the underlying assumption was that Stage 3 lockdown in Victoria would ease from mid-August.
That assumption was in line with our original figuring where we assumed that activity in Victoria had lifted by 1.5% with the gradual reopening of the economy between early June and the renewed lock down in early July. We expected that the renewed lock down would "lose" that 1.5% through July and August.
Using the same underlying assumption as the government, which assumed a reopening by mid-August we expected growth to lift in the second half of the quarter by 1.5% for a flat growth result for Victoria.
Hours worked data subsequently indicated that, both in Victoria and nationally, the recovery in June was indeed faster than that 1.5% estimate – nearer 4%.
Hours worked had collapsed by 12% in April/May highlighting the impact of the original lock downs across the country.
The introduction of Stage 4 restrictions in Melbourne and regional Victoria (Stage 3) can be expected to see activity fall below the April/May levels ("only" Stage 3 across the whole state) losing that 4% gain in July plus a further 5% through the September quarter (this forecast is based on the official guidance that jobs affected over that six week period will total around 250,000 – or around 10% of the existing workforce).
In total we now expect the Victorian economy to contract by 9% in the September quarter.
Note that the base fall of 12% in April/May represents the extreme initial response to a shutdown from "normal" activity levels.
This forecast is consistent with activity in the Victorian economy contracting by 16% over the June and September quarters. (7% in the June quarter and 9% in the September quarter) taking activity below that low point in April/May.
With the Stage 4 restrictions now likely to stay in place for most of September Victoria's recovery will be delayed until the December quarter when we expect the 9% loss in the September quarter to be partially reversed (growth of 6%) as the state moves from Stage 4 through to Stage 2.
Bill Evans is Westpac's economic spokesman and the head of economic research
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Global and domestic economic outlook never been more uncertain: Bill Evans

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EXPERT OBSERVER
The theme around the economic outlook from both the July Board Minutes and the Governor’s speech, which was delivered 90 minutes after the release of the Minutes, is best summarised by the conclusion in the Minutes “Economic conditions had stabilised and the down turn had been less severe than earlier expected” .
However, appropriately, the outlook hinged on developments around the virus both domestically and globally. The Board concludes, “However the nature and speed of the economic recovery remained highly uncertain”.
Perhaps the best “summary” of the degree of positive surprise to the Board is set out in the Minutes when the Board refers to the Bank’s original forecast of a 20% reduction in hours worked in the June quarter.
Having fallen by 9.5% in April and a further 0.7% in May, hours worked recovered by 4% in June (not known at the time of the Board meeting) resulting in the overall fall being only around a third of the Board’s original expectations.
From my perspective the most interesting insights in the Minutes and the Speech are around the discussion of policy options.
The Minutes discuss “How the elements of the Bank’s March policy package could have been configured differently” ­– setting a lower cash rate (say 0.1%) or purchasing more bonds than necessary to achieve the target bond rate.
The Board concluded that there was “no need to adjust the package of policy measures in Australia in the current environment”.
The policies which were considered included: “negative interest rates; foreign exchange intervention; the purchase of private sector assets; and direct government financing”.
The conclusion was “all such options entail significant costs and involve very difficult trade offs and, for some policies, there are legitimate questions about their effectiveness”.
These issues were covered in more detail in the Governor’s speech.
He quickly dismissed negative interest rates confirming the Board’s view in the Minutes as being “extraordinarily unlikely”. He accepted that the main potential benefit was “downward pressure on the currency” (in the Q and A he did extol the benefits of a lower currency) but referred to a dislocation of the supply of credit and “encourage people to save more”. Unfortunately, as with the last time he referred to negative rates (November last year) he did not provide any detail to the dynamics he had in mind.
In contrast, he spent a great deal of time discussing direct government financing partly, I expect, because Stan Fischer ( Vice Chair of the Federal Reserve during the Janet Yellen period) “recently argued that central bank financing of government spending may be appropriate in some circumstances” provided there are strong safeguards to avoid the inflation problem which might result  from printing money. That could be done principally through the central bank determining the degree of financing – not the government. While recognising this argument he dismissed money printing for Australia since the government was able to finance itself in the market on very favourable terms, therefore maintaining fiscal discipline.
The practice of QE which the RBA now embraces is considered different because the RBA only buys in the secondary market and the government is committed to paying interest to the RBA rather than just issuing an “IOU” to the RBA which might threaten its profits; its contribution to government revenue and, potentially, requiring a recapitalisation. In the Fischer model that policy is close to printing money where the central bank has control of the process.
While I felt that the arguments around negative rates were not developed there were some serious arguments against intervention in the FX markets. These arguments against intervening (including when the AUD is broadly in line with fundamentals) are complicated by “financial risks to the public balance sheet” and “complicate international relationships”.
While these assessments are fairly definitive he did conclude that “the Board has not ruled out future changes while” recognising that there are limitations to what more can be achieved through monetary policy”.
He clearly supported the use of fiscal policy maintaining that the government’s balance sheet is sound with low debt ratios compared to most countries.
With interest rates at record lows “the public balance sheet is well placed to smooth out the shock to private incomes and support the economy through the pandemic”.
The speech and the Minutes present unified cases for steady policy while still leaving the door slightly ajar for further stimulus if absolutely necessary.
In the Q and A I reminded the Governor of the final words in a recent speech from Deputy Governor Debelle which concluded “ the Reserve Bank will maintain the current policies to keep borrowing costs low and credit available, and stands ready to do more as the circumstances warrant.” I asked for some clarity on “do more” but, given the theme of the speech, did not make any progress.
The key to any future policy developments might lie with the Australian dollar – certainly the Governor was particularly enthusiastic in his admiration for a low AUD.
Bill Evans is the chief economist at Westpac 
 
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RBA minutes and governor’s speech closed the door on any further stimulus, for now: Westpac's Bill Evans

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EXPERT OBSERVER
The drop in confidence reverses all of last month’s impressive gain, taking the Index back to the weak levels seen in May but still leaving it 16% above April’s extreme low of 75.
The timing of the survey is relevant. It covered the week in which the lock down was announced for Melbourne but the survey closed before the news of a significant cluster was reported for Sydney.
Sentiment has been rocked by the resurgence in Coronavirus cases over the last month. After averaging about ten a day through late May and early June, new cases have lifted significantly, running at close to 200 a day in the July survey week.
These increases have been almost exclusively in Melbourne prompting the state government to reinstate lockdowns for the city and several regional areas, and the closure of Victoria’s state borders – measures that were announced in the first half of the survey week.
Daily responses suggest these announcements were followed by a slight firming in sentiment in the second half of the week.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/7/15/Consumer%20sentiment.jpg" alt="">
It is of some concern that the survey pre-dates the news of a significant cluster of cases in Sydney which emerged last weekend – a day after the end of the survey.
State readings underscore the importance of virus-related developments: Victoria’s sentiment index plunged 10.4% in July but sentiment across the rest of the nation showed much milder declines (down 4.5% on a combined basis).
While milder, the weakness in other states is also likely to be linked to the outbreak in Victoria, reflecting concerns about the virus spreading interstate and spill-over effects on the wider economy.
The component detail shows the renewed COVID threat hit consumer expectations for the year ahead hard but also significantly undermined medium-term expectations for the economy.
The ‘economy, next 12mths’ sub-index recorded the biggest decline, slumping 14% in July to be 25% below pre-COVID levels – that compares to the 40% drop during the ‘first wave’ of the virus in March-April.
The ‘economy, next 5yrs’ sub-index recorded a sharp 10.3% fall.
This is disconcerting as medium- term expectations for the economy held up reasonably well during the initial COVID shock – only falling 5.1% in March–April – and were slightly above pre-COVID levels in June.
Bill Evans is the chief economist at Westpac 
 
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Westpac consumer sentiment drops as new COVID-19 cases shake confidence: Bill Evans

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EXPERT OBSERVER
As expected, the Reserve Bank board kept its policy settings unchanged at the Board meeting in July.
The assessment in July confirms the theme in the June Board meeting (“it is possible that the depth of the downturn will be less than earlier expected”) with, “Conditions have stabilised recently and the downturn has been less severe than earlier expected”.
However, as with June, the outlook is described as “highly uncertain”.
On August 7, the Bank will release its revised forecasts out to December 2022 (extended from June 2022 in May).
We will be interested in how this more positive assessment channels into the forecasts.
From a policy perspective the most interest will be in the assessment of the medium term outlook.
We assess that the Bank expects it is extraordinarily unlikely to see the need to adjust policy settings in 2021.
But recall that in its “upside scenario” in the May Statement on Monetary Policy the Bank assessed an unemployment rate of 5% by June 2022. Such an improvement in the unemployment rate would probably see it considering a move in its three year bond target at that time since it confirmed today ”the yield target will remain in place until progress is being made towards the goals of full employment and inflation”.
The unemployment rate in the base case is forecast to be six and a half per cent by June 2022 – down from nine per cent in December 2020.
That nine per cent  is likely to be reduced (Westpac is currently at eight per cent) reflecting the “less severe” near term conditions but I would be surprised if the Bank has seen enough evidence around the growth risks to lower the base  unemployment forecast in June 2022, particularly given the Governor’s understandable caution around the virus both domestically and internationally.
Growth through to December 2020 is also likely to be revised up from minus six per cent to nearer Westpac’s forecast of around minus four per cent.
But that will be largely offset by a considerable reduction in the 2021 growth forecast of six per cent (Westpac’s forecast is three per cent).
Evidence that the Bank may adjust its 2021 forecasts downwards comes through the Governor’s observation that “As some businesses rehire workers as demand returns, others are restructuring their operations”.
Of considerable interest will be the Bank’s assessment of the level of activity in the economy by end 2021 relative to the end of 2019. Current forecasts are for activity to be only around 0.4 percentage points below that level.
Westpac is more cautious at around 1.2 percentage points but both estimates will have activity more than five percentage points below trend over those two years.
And, of course, bear in mind that those forecasts in May assumed an AUD at USD 0.64 over the forecast period. Readers will be aware that Westpac expects the AUD to lift to USD 0.72 by December 2020 and to USD0.76 by end 2021.
Markets have been expecting that the Governor might comment on the AUD’s current level which is above USD 0.695.
However, while I am sure that he would like a lower AUD there is not much point in criticising its level if he has no intention of addressing the issue through policy. Policies such as negative interest rates and/or unsterilized intervention have been variously described as extraordinarily unlikely.
The Statement today clearly signalled steady policy except with respect to targeting the three year bond rate “will do whatever is necessary to ensure bond markets remain functional and to achieve the yield target for three year AGS”.
That statement implies that the Bank has adequate commitment to add to the AUD 40 billion it has already purchased, although only around a quarter was purchased in the two – three year maturity range.
Those purchases were in a year when the Budget deficit lifted from “balance” to a deficit of (we forecast) AUD 95 billion. This year (2020/2021) we expect the deficit to balloon to AUD 240 billion, making for a more active RBA, specifically if domestic and global growth surprise to the upside or market stability falters.
The Deputy Governor Guy Debelle seemed more flexible by ending his speech to the Economic Society last week with, “the Reserve Bank will maintain the current policies to keep borrowing costs low and credit available, and stands ready to do more as the circumstances warrant”.
Candidates for those “circumstances” range from a rampant AUD to another global crisis.
Bill Evans is the chief economist at Westpac
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The RBA expects it is extraordinarily unlikely to see the need to adjust policy settings in 2021: Bill Evans

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EXPERT OBSERVATION
This week we received important updates to the state of Australia’s labour market.
In times of economic crisis the labour market, quite rightly, attracts more attention than any other economic series.
The most indelible imprint that recessions make on economies is the legacy of high sustained unemployment.
Following the recession of the early 1980’s it took six years for the unemployment rate to return to its pre-recession level; after the early 1990’s recession it took fifteen years; and the 4% unemployment rate we enjoyed in the lead up to the Global Financial Crisis has never since been achieved – nearly thirteen years later.
On June 18 the ABS reported that the unemployment rate had jumped to 7.1% in May – the highest since October 2001.
Employment decreased by 227,700 following a 607,400 reduction in employment in April.
The unemployment rate would have been much higher if not for a number of factors:
Over the April-May period 623,600 people left the labour force (that is employed or actively looking for work and available for work) – largely, we expect, due to displaced workers being discouraged with the prospects of finding work; complications around school closures or the physical limitations of looking for work during a shutdown.
Without these people leaving the workforce the unemployment rate would have been 11.3%.
In May over 360,000 did not work at all but were categorised as “employed” because they still had an attachment to their employer (reasons include being stood down for less than four weeks; insufficient work; or no work available).
This represents a reduction from 750,000 in April as some workers who had been stood down transitioned to actually losing their jobs.
In May nearly 1.2 million did some work, but worked fewer hours than usual.
BILL EVANS is Westpac’s economic spokesman and the head of economic research
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How the government responds to unemployment will be crucial to COVID-19 recovery: Bill Evans

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EXPERT OBSERVATION
Remarkably, consumer confidence is now back around pre-COVID levels, having recovered all of the extreme 20% drop seen when the pandemic exploded in March–April.
Confidence has clearly been buoyed by Australia’s continued success in bringing the Coronavirus under control, which has in turn allowed for a further easing in social restrictions over the last month.
The Index is now only 2% below the average in the preceding September to February period. Note that sentiment was already on the weak side prior to the COVID shock with the Index through this earlier period showing a persistent excess of pessimists over optimists. With the unemployment rate set to remain elevated; extensive restrictions staying in place and the economy facing permanent structural change it would be surprising if the recent upward momentum continues and is able to sustain a stable level of confidence which is above that previous period.
We have also seen more even confidence levels in the major states as restrictions begin to be eased extensively across the country. Victoria lagged NSW in May with an 8.4% lift compared to 23%. However in June confidence in Victoria has jumped by 11.7% (to 94.9) compared to 4.8% in NSW (95.5). Overall confidence is now at comparable levels across both states.
While the monthly gains are impressive, the Index is still relatively weak by historical standards – in pessimistic territory overall and down 7% on a year ago. The general picture is of continued intense pressure on family finances and concern about the near- term outlook for the economy but with firming optimism around prospects for finances in the year ahead and the economy’s medium term outlook.
The contrast between that medium-term outlook in this recession and the last recession in the early 1990s is important. This component of the Index is around 50% higher than the average over a long four years in that earlier period. Respondents are confident that they can see eventual better times ahead whereas in the early 1990s there was a pervasive mood of despair for years.
Bill Evans is an economic spokesman and researcher at Westpac.
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Consumer sentiment back near pre-COVID-19 crisis levels: Bill Evans

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EXPERT OBSERVER
With the unemployment rate unlikely to fall below 6% and central banks unconvinced about any urgent need to be pre-emptive the cash rate target is likely to hold at 0.25% at least until end of 2023. However the RBA can remain an effective force in the Policy debate through its management of the three year bond yield target.
On Tuesday the Reserve Bank Governor Lowe made a major speech where he outlined the Bank’s key economic forecasts.
These forecasts are based on the Bank’s central outlook for the policy response to the Covid Crisis whereby domestic shutdowns are gradually eased through the June and September quarters and “mostly removed by late in the year”.
Westpac released forecasts on March 31 where the central outlook for the Crisis was similar to the Bank’s central view.
We are encouraged that our forecasts are broadly in line with the forecasts the Governor released in his speech. Westpac forecast that the economy would contract by around 9.5% in the first half of 2020 (RBA minus 10%); the economy would contract by 5% over 2020 (RBA minus 6%); the unemployment rate would lift to 9% by end June (RBA 10%); implying that growth would bounce back by 4–5% in the second half of 2020, (RBA similar).
We do however differ with the RBA’s forecast for growth in 2021 with the RBA forecasting 6–7% and Westpac at 4%.
It appears that, next year, we are heading for a repeat of the last few years when RBA growth forecasts were consistently significantly above our own forecasts. That bullish view is despite the observation that “the twin health and economic emergencies that we are experiencing now will cast a shadow over our economy for some time to come”.
The other key observation was around the outlook for interest rates. The Governor indicated that he expected the three year bond target to remain in place for a “number of years”.
He also reiterated that the cash rate target would not be lifted before the three year bond yield target was lifted.
The choice of the three year bond target rate as the same as the cash rate target is strategic since it sends a clear message that if the Bank is prepared to purchase three year bonds at the overnight cash rate it is reasonable to expect that it is comfortable with the cash rate holding at 0.25% for the full three years.
This does not mean that it cannot lift the rate for the bond yield target. A higher target rate would imply that the Bank now expects the cash rate to be lifted within the three year window therefore signalling an appropriately tighter monetary policy.
A lift in the target rate would see the market’s timing for the cash rate increase brought forward and the arbitrage between swap markets and the bond rate would pin point that expected timing.
BILL EVANS is the <a href="https://westpaciq.westpac.com.au/Article/42804/16785/" target="_blank">Chief Economist at Westpac</a>
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RBA likely to hold cash rate at 0.25% till 2023: Bill Evans

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EXPERT OBSERVER
The Westpac-Melbourne Institute Index of Consumer Sentiment plunged 17.7% to 75.6 in April from 91.9 in March.
This is the single biggest monthly decline in the forty seven year history of the survey, taking the Index beyond GFC lows to levels only seen during the deep recessions of the early 1990s (64.6) and early 1980s (75.5).
However, it is pertinent to note that the lows in previous recessions were reached after one to two years of continuous deterioration compared to the one month collapse we have seen here. Certainly we cannot rule out the Index dropping below the historic low of 64.6 we saw in November 1990.
The details of the survey which are discussed below are all very disturbing and reflect the large shocks to jobs and spending. However the most surprising message is the collapse in confidence in the housing market.
The survey comes after an extremely turbulent month in which the Coronavirus outbreak has evolved from serious concern to full-blown pandemic. Confirmed cases globally have soared from around one hundred thousand at the time of the last survey to nearly two million currently. In Australia, the number of cases has surged from just 76 a month ago to around 6,500.
Australian governments have instituted widespread shutdowns on movement and social activity that have effectively banned many forms of economic activity.
While the drop in confidence this month is severe, it could well have been worse. Despite the bleak and threatening backdrop, Australia’s pandemic experience to date has been much less debilitating than that of the hardest hit areas abroad.
The number of cases is high but has not overwhelmed Australia’s health system, with recent evidence showing a clear slowing in new cases that indicates policy measures are working to contain the spread.
These developments give some support to our view that the Australian economy will lift in the December quarter following three consecutive quarters of economic contraction.
We have also seen a swift and effective response from governments, highlighted by the Federal government’s $130 billion JobKeeper Payment scheme.
Westpac has estimated that without the Payment the unemployment rate would have soared to 17% by the end of June compared to a peak of 9% with the Payment scheme.
Note that previous recessions saw the unemployment rate peak at 11.2% (early 1990s) and 10.4% (early 1980s).
All five component sub-indexes fell in April. By far the biggest falls were in the near term outlook for the economy and in attitudes towards spending – reflecting the immediate effects of the shut-down.
The ‘economy, next 12 months’ sub-index recorded a spectacular 31% drop (the biggest monthly fall on record), taking it to 53.7. That compares to a low of 53.2 during the GFC and lows during previous recessions of 34.2 (early 1990s) and 42.1 (early 1980s).
Bill Evans is the Chief Economist at Westpac Banking Corporation
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Consumer sentiment plunges in April: Bill Evans

The new <a href="https://www.apartments.com.au/new-apartments/yarraville-green-42-stephen-street-yarraville-vic-3013">Yarraville Green</a> development in Melbourne's inner west is showing that landscaping can be just as influential as architecture, with buyers responding strongly to the garden-first approach adopted from the outset by developer Excelon Projects and the project's design team.

Excelon appointed Six Degrees Architects and landscape architects SBLA to work collaboratively on the development, with a brief to create "a sustainable, design-led building with a focus on community."

That approach has resonated with buyers. According to Next Chapter Director Tom Hirini, who is leading the sales campaign, the landscaped communal garden has become one of the project's defining features, alongside its boutique scale and European-inspired cluster housing concept.

Local downsizers, right-sizers and established families already living in Yarraville and surrounding suburbs have accounted for the majority of purchasers.

[smartcode_project:default project_id=144913 project_image_fid=297740]

Yarraville Green will comprise 53 homes, including apartments and townhomes, arranged around the shared central garden to maximise connections to the landscaped open space. Parking has been moved underground, allowing the ground plane to be dedicated to greenery, pedestrian movement and communal spaces.

The landscape extends well beyond passive planting. Productive garden beds, a pergola, communal gathering spaces, garden sheds and a pet wash have all been integrated into the masterplan, creating spaces designed to encourage everyday interaction between residents.

[smartcode_project:default project_id=144913 project_image_fid=297741]

The interiors continue Excelon's focus on craftsmanship, incorporating bespoke elements by Melbourne artisans including leadlight detailing by Adadaz, hand-turned timber hardware by Auburn Woodturning and blown-glass lighting by Ruth Allen.

Sustainability has also been embedded throughout the project, with Yarraville Green targeting an average 7-star NatHERS energy rating through passive design principles, rooftop solar servicing common areas and rainwater harvesting for landscape irrigation.

[smartcode_project:default project_id=144913 project_image_fid=297735]

Construction continues to progress at Yarraville Green, with structural works well underway and framing works approaching completion under builder Balmain &amp; Co. The project remains on track for completion in mid-2027.

Apartments at Yarraville Green are currently priced from $625,000, while townhomes start from $1.4 million.

[smartcode_project_cta:default project_id=144913]

Joel Robinson

Garden-led design drives buyer demand at Yarraville Green

National diversified developer Fortis has officially launched Crest &amp; Walker, its latest Brisbane apartment development, with construction now underway on the 20-storey Newstead project.

Award-winning builder BINAH has commenced construction on the Bureau^Proberts-designed building, which will deliver a limited collection of 65 two and three-bedroom apartments on Kyabra Street.

[smartcode_project:default project_id=145922 project_image_fid=373556]

The project marks Fortis' fourth active residential development in Brisbane, following River House, which is nearing completion, alongside projects in New Farm and Hamilton as the national developer continues to expand its South East Queensland pipeline.

Fortis General Manager – Development Queensland Dan Boman said Crest &amp; Walker reflects the developer's long-term commitment to delivering design-led residential projects in Brisbane's established inner-city suburbs.

"We're proud to be strengthening our presence in Brisbane with Crest &amp; Walker, particularly in such a sought-after lifestyle destination as Newstead," Boman said.

"Every Fortis project is shaped by its context, and we approach each one with the respect and care it deserves.

"Our focus is always on creating places that feel connected to their neighbourhood and elevate the everyday experience for residents. Newstead continues to evolve as one of Brisbane's most sought-after urban communities, and Crest &amp; Walker reflects our ambition to contribute meaningfully to that story."

[smartcode_project:default project_id=145922 project_image_fid=373559]

Positioned between Gasworks Plaza and James Street, <a href="https://www.apartments.com.au/new-apartments/crest-walker-newstead-12-kyabra-street-newstead-qld-4006">Crest &amp; Walker</a> has been designed as a boutique residential address offering privacy and generous living spaces within one of Brisbane's most established lifestyle precincts.

The building features a contemporary brick podium softened by integrated landscaping, while the upper levels are characterised by restrained architecture and enduring materiality. Interiors have been designed to maximise natural light, acoustic performance and long-term liveability.

[smartcode_project:default project_id=145922 project_image_fid=373583]

Residences comprise spacious two and three-bedroom floorplans, with two-bedroom apartments priced from $1.55 million and three-bedroom, half-floor residences from $3.95 million.

Residents will have access to a wellness-focused rooftop featuring a swimming pool, sauna, steam room, landscaped dining spaces and outdoor lounge areas overlooking Newstead and the Brisbane CBD.

[smartcode_project:default project_id=145922 project_image_fid=373571]

Sales are being managed by Slaite Projects, with Fortis expecting strong demand from owner-occupiers seeking a high-quality, design-focused apartment in one of Brisbane's most tightly held inner-city suburbs.

Completion of Crest &amp; Walker is slated for late 2028.

[smartcode_project_cta:default project_id=145922]

Fortis expands Brisbane pipeline with launch of Crest & Walker in Newstead

The enormity of delivering a true skyscraper in Australia's new development market is often overlooked.

It has taken the best part of a decade since plans for Chevron One were first unveiled, but the 40-storey tower is now complete, with residents collecting their keys and moving into what has become one of the Gold Coast's most recognisable new landmarks.

Rising 127 metres above Chevron Island, Chevron One stands almost twice as high as any other building on the island. Its scale places it alongside the trio of towers at Jewel, arguably the last truly significant addition to the central Gold Coast skyline when they were completed around six years ago.

While there are several developments underway around a similar height to Chevron One, they are more concentrated within clusters of the highest towers in the city. The fact Chevron One sits within a developing precinct, looking back at the other high-rise developments in Surfers Paradise and Broadbeach, makes it a different proposition altogether. It will certainly become a reference point on the Gold Coast skyline.

[smartcode_project:default project_id=6515 project_image_fid=68833]

Developer Bensons Property Group is behind the 40-storey tower, which has just shy of 230 apartments, along with an exhaustive list of resident amenity spread across what is the largest development site ever assembled on Chevron Island.

The tower has been the talk of the town for years, says Ray White Projects Gold Coast agent Caitlin Rosenboom, who is selling the remaining apartments.

"People have been watching Chevron One go up for years," Rosenboom says, adding that many prospective buyers have been surprised by the scale of the views once they step inside.

"It's only when they walk through a completed apartment that they truly understand the position of the building," Rosenboom says.

"The views are jaw-dropping. Whether you're looking east over the ocean, across Surfers Paradise, along the river systems or out to the hinterland, every level offers something different but equally impressive."

[smartcode_project:default project_id=6515 project_image_fid=360215]

One of Chevron One's defining advantages is its location on the eastern side of Chevron Island on Stanhill Drive, a position which protects the views forever.

"There's only one row of houses between Chevron One and the water, and the height restrictions along the river means views from Chevron One can never be built out,"&nbsp;Rosenboom says.

While new apartment developments continue to emerge across the Gold Coast, Rosenboom says opportunities to secure a completed apartment with this level of outlook are becoming increasingly rare.

"The size of the site is something that would be incredibly difficult to replicate today," she says.

"That's allowed Chevron One to deliver the sort of amenity, open space and resident facilities that very few projects can offer. There are not many completed apartment buildings on the Gold Coast right now that can compete with the combination of scale, quality and amenity."

[smartcode_project:default project_id=6515 project_image_fid=68839]

There's around 2,000 sqm of amenity solely for the use of residents of Chevron One. Club One features a uniquely shaped swimming pool that mirrors the footprint of the building itself, set within a extensively landscaped gardens. There's also an indoor pool and spa, a fully equipped gym with a Pilates room, a yoga garden, a bookable private dining area and lounge that can host up to 30 people, and a 24-hour concierge service.

As for the buyers, Rosenboom is fielding enquiry from everywhere: Sydneysiders and Melburnians looking at the new and off-the-plan market following the changes in the Federal Budget, as well as those looking to relocate, through to South East Queenslanders seeking either a permanent home or a weekender bolthole.

"The Gold Coast lifestyle continues to resonate with people relocating from the southern states, and when they see the views and the quality of what's been delivered at Chevron One, it becomes very easy for them to understand the appeal," Rosenboom says.

A diverse mix of one, two and three-bedroom apartments remain available, with each offering "something a little different", be it the orientation and views, configuration, or level, to suit a wide variety of buyers.

The remaining apartments are ready to inspect in person, by appointment.

[smartcode_project_cta:default project_id=6515]

A decade in the making: Residents to move into Chevron One as construction wraps up

A general rule of thumb in new apartment developments is that the penthouses get the rooftop.

It's a formula that's become commonplace across Australia's apartment market. Residents might have access to a pool, gym or barbecue facilities on a dedicated lower level, but the most desirable outdoor spaces are typically reserved for the highest-priced homes at the top of the building.

<a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Property Group</a> has taken the opposite approach.

Rather than dedicating the rooftop to a handful of buyers, the Gold Coast developer has made it the centrepiece of its Flourish collection, creating expansive shared spaces from the best vantage point in the building.

The philosophy has reached its most ambitious expression at <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a> in Palm Beach, where two rooftop precincts connected by a skybridge will deliver one of the most extensive lifestyle offerings seen in a residential apartment project on the Gold Coast.

[smartcode_project:default project_id=150017 project_image_fid=374053]

"We're seeing a clear move toward developments that offer more than just an apartment," Sherpa Group founder Christie Leet said.

"People want spaces that support how they actually live, whether that's working from home, staying active, or spending time with family and friends.

"That's where amenity becomes critical. It's not just about what's included, but how those spaces are designed to be used every day."

[smartcode_project:default project_id=150017 project_image_fid=374052]

The breadth of amenity has already attracted buyers across multiple demographics. Younger first home buyers have been drawn to Soleira's one-bedroom apartments, a product rarely delivered in Palm Beach, while families have responded to practical inclusions such as the shallow children's pool adjoining the main lap pool and the extensive communal recreation areas.

Instead of a single rooftop, Soleira delivers two distinct lifestyle zones.

[smartcode_project:default project_id=150017 project_image_fid=372547]

The southern rooftop has been dedicated to wellness, featuring a gym, yoga and Pilates studio, work-from-home facilities, a wellness centre, spa, and hot and cold plunge pools.

The northern rooftop focuses on recreation and entertaining, incorporating a heated resort-style pool, private dining rooms, pizza ovens, barbecues, a golf simulator, children's recreation areas, and what is expected to be the Gold Coast's first rooftop basketball court, which will also double as a squash court.

[smartcode_project:default project_id=150017 project_image_fid=374054]

Beyond the rooftops, Soleira will introduce 1,500 sqm of curated retail beneath the towers, creating one of Palm Beach's first genuinely mixed-use lifestyle precincts where cafés, restaurants and convenience retail become part of residents' everyday lives.

Sherpa has also retained management rights across the development, allowing it to oversee the long-term operation of the building through a 24-hour concierge model. The developer is also exploring additional revenue streams within the precinct aimed at helping offset ongoing body corporate costs for residents.

[smartcode_project:default project_id=150017 project_image_fid=370962]

While Soleira is the largest project Sherpa has delivered, the rooftop-first philosophy has been evolving for several years.

It began with <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>, the first project released under the Flourish brand. Rather than competing at the ultra-luxury end of the market with oversized half-floor and full-floor residences, Sherpa focused on creating lifestyle-driven apartments supported by resort-style shared spaces.

Amargo introduced more than 800 sqm of rooftop amenity, combining wellness facilities, heated pools, entertaining areas, cabanas, pizza ovens and private dining spaces into what was designed as an extension of residents' homes rather than a facility used only occasionally.

[smartcode_project:default project_id=146527 project_image_fid=366550]

That approach continued with Flourish Oasis, where the same amenity-led philosophy was refined into a more boutique development. Strong demand from Sherpa's growing VIP database saw much of the project sold before it reached the broader market, reinforcing buyer appetite for apartment communities centred around shared lifestyle experiences.

Flourish Amargo is slated for completion mid-way-through next year, with Oasis to be delivered by late 2027. Flourish Soleira is expected to complete in 2030.

[smartcode_project_cta:default project_id=150017]

Sherpa takes amenity to the sky as Flourish Soleira captures booming Palm Beach demand

As apartment living continues to evolve across Sydney's growth corridors, the quality and distribution of shared spaces is increasingly shaping how residents experience home. Rather than functioning as add-ons, amenities are being embedded into the daily rhythm of a building, supporting everything from quiet retreat to social interaction, often within a single vertical community.

At <a href="https://www.apartments.com.au/new-apartments/aeris-melrose-park-nursery-street-melrose-park-nsw-2114">Aeris</a> in Melrose Park, this approach is resolved through a layered amenity offering that unfolds from ground level through to its upper podium. Developed by <a href="https://www.apartments.com.au/developers/sekisui-house-australia">Sekisui House Australia</a> in partnership with Hankyu Hanshin Properties, the project introduces 468 apartments across two towers and a mid-rise building, positioned at the highest point of the broader masterplan.

[smartcode_project:default project_id=426 project_image_fid=359199]

The amenity experience begins at street level, where two courtyards sit within a landscaped setting that connects residents to the wider network of parks and green spaces. These green spaces are not isolated pockets but part of a wider pedestrian network that links Aeris to the surrounding <a href="https://www.apartments.com.au/developments/melrose-park-nsw-2114">Melrose Park</a> precinct, including Central Park, future schools, and the Town Centre opening in July 2026. The result is a transition that moves from public to private without abrupt boundaries, allowing residents to pass through shaded, tree-lined environments before reaching the building itself.

Moving upward, the focus shifts to the level five podium, where the primary communal facilities are concentrated. This space brings together a 16-metre swimming pool, outdoor seating areas, and a communal BBQ zone arranged to take advantage of elevated outlooks. Seating is positioned beneath pergolas, creating pockets of shade that extend the usability of the space throughout the day. The pool edge aligns with views toward the wider district, reinforcing the sense of elevation that defines the project’s positioning.

In the adjacent building, this is complemented by quieter, more contemplative spaces, including an outdoor cinema set within the same level. Positioned to operate primarily in the evening, it introduces a different tempo to the shared environment, shifting from daytime activity to after-hours use without requiring separate zones.

[smartcode_project:default project_id=426 project_image_fid=360299]

The podium also accommodates an intimate private resident gym. Located on the lower levels, it gives residents convenient access to fitness facilities without leaving the building.

Above, the elevated podium sky deck extends the amenity offering, providing additional open-air spaces with elevated outlooks across the surrounding landscape. While more restrained in program, this upper level reinforces the project’s vertical progression, from ground-level greenery to elevated outlook, allowing residents to move between distinct spatial conditions within a single address.

This distribution of amenities reflects a deliberate response to how residents use space across the day. Sekisui House Australia Sales and Marketing Director Peter Kalaf points to the role these shared areas play in shaping buyer demand. Aeris has been conceived as more than a collection of apartments, with the podium pool, gym and outdoor cinema forming part of a broader lifestyle offering that extends the home beyond each individual residence.

[smartcode_project:default project_id=426 project_image_fid=360300]

What distinguishes Aeris is not the inclusion of these elements individually, but how they are arranged in relation to one another. Active, social, and passive spaces are layered vertically rather than separated, allowing residents to choose between them without leaving the building or moving far from their apartment. This proximity supports both routine use, such as a morning swim or evening workout, and more occasional gatherings, whether around the BBQ area or within the cinema setting.

The amenity design also sits within a broader framework of connectivity across Melrose Park. The Melrose Park Town Centre, anchored by Coles and Dan Murphys, features a mix of retail, dining, health and lifestyle offerings, bringing everyday convenience closer to residents. By the end of the year, more than five hectares of parks and open space, equivalent to around seven football fields of green space on residents' doorstep, will further enhance the precinct, allowing the internal facilities at Aeris to operate as an extension of the wider neighbourhood rather than a substitute for it.

Construction at Aeris continues to gather momentum, with ground floor slabs expected to be completed in late 2026 before the first sections of the buildings begin to rise above ground.

[smartcode_project_cta:default project_id=426]

Bill Evans

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