<html><body>
EXPERT OBSERVER
Events have been moving quickly in the Australian economy.
With the announcement of the Australian Government’s latest JobKeeper Payment (JKP) policy and further tightening of social distancing guidelines we have reviewed our employment, GDP, and Budget deficit forecasts.
Key forecasts had been: a peak in the unemployment rate of 11.1% in the June quarter; a GDP contraction of 3.5% in the June quarter; and the likely issuance of an additional $250bn in Australian government bonds over 2019/20 and 2020/21.
In reviewing those forecasts we have maintained the approach of assessing employment and output across industry sectors to arrive at a more granular estimate of the impact of the various government policies on the Australian economy.
We also maintain our core view that while the intensity of the policies to address the virus will peak near the end of the June quarter, most policies will be maintained through the September quarter and the recovery will be delayed until the December quarter. Conditions in the global economy will remain very weak until well into the December quarter.
With the shutdowns and social distancing policies being tightened we now expect a much more severe impact on the output of most industries.
As expected, the most seriously affected industries are likely to be: retail; accommodation; restaurants; transport; recreation; and real estate. However we also expect negative impacts for other industries including manufacturing; construction; and distribution. Other industries such as health, government, and telecommunications will see a lift in employment and output.
We expect GDP will now contract by 8.5% in the June quarter; to be followed by a 0.6% contraction in the September quarter; and a 5.2% lift in the December quarter.
Overall, the economy is expected to contract by 5% through the 2020 year.
BILL EVANS is the <a href="https://westpaciq.westpac.com.au/Article/42804/16785/" target="_blank">Chief Economist at Westpac</a>
</body></html>

bevans-rYk9SxEa4r

JobKeepers payment to reduce peak unemployment rate from 17% to 9%: Westpac's Bill Evans

<html><body>
EXPERT OBSERVER
The Governor of the Reserve Bank has announced a number of important initiatives to support the Australian economy and the financial system. Most of these initiatives come as no surprise. Westpac released a note on March 16 which set out its expectation for these initiatives.
<ol>
<li>The cash rate target has been reduced from 0.5% to 0.25%. Furthermore, it will not be increased until the Board believes that progress has been made towards full employment and inflation is sustainably within the 2–3% target band. Since exchange settlement balances are remunerated at the cash rate minus 0.25%, the Reserve Bank has committed to increase the remuneration to 0.10% in recognition that exchange settlement balances are likely to increase significantly as a result of this policy package. 
</li>
<li>The RBA has now adopted Quantitative Easing. However, instead of nominating a volume of bond purchases, it has nominated a target yield for the three year Australian government bond rate of “around 0.25%”. This is a bold move given that, in admittedly light trading, the yield on these bonds had been around 0.6% up until the announcement. Since the announcement, the rate has fallen to around 0.4%, and further adjustments to market rates may occur. Of considerable interest has been the reaction of the bond market in longer term securities, where the rate has increased to a volatile 1.6%, indicating a very steep yield curve. This yield objective is expected to be achieved through purchases of government bonds and semi government bonds, with the purchases to occur across the yield curve. These will commence tomorrow. 
</li>
<li>Westpac is particularly pleased to see that the RBA is offering a term funding facility for the banking system. This facility will be provided for three years to authorised deposit taking institutions (ADI’s) at a fixed rate of 0.25%. ADIs will be able to obtain funding for up to 3% of existing outstanding credit. The objective is to support small and medium sized business. ADIs will still be required to take on the credit risk associated with these facilities, but may consider switching more expensive facilities for existing borrowers into these facilities, providing a cash flow boost to small and medium sized businesses. 
</li>
<li>These initiatives will not affect the Bank’s ongoing provision of liquidity to Australian financial markets through repo operations which have recently been extended to six month maturities or longer.</li>
</ol>
In addition to these initiatives announced by the RBA, the Treasurer’s Office has announced that the Australian Office of Financial Management (AOFM) will be provided with an investment capacity of $15 billion to invest in wholesale funding markets used by small ADIs and non-ADI lenders. As signalled in Westpac’s note of March 16,  this initiative parallels a similar initiative by the AOFM  during the Global Financial Crisis. It will be of particular support to issuers of Mortgage Backed Securities.
Comment
The Bank is adopting a bold policy response to target the three year bond rate at well below current market pricing. This means that they are using their balance sheet to make a significant difference to the risk-free yield curve and therefore providing support to the financial system.
The market will no doubt take full advantage of this policy decision, and it will be interesting to see the volume of required purchases to achieve the interest rate target.
Westpac has been promoting the use of term funding facilities since around July last year, and we are particularly supportive of this initiative.
This article was <a href="https://westpaciq.westpac.com.au/Article/42641/14186/" target="_blank">first published on WestpacIQ</a>
<div>
BILL EVANS is the <a href="https://www.westpac.com.au/news/authors/bill-evans/" target="_blank">chief economist at Westpac</a>.
</div>
</body></html>

RBA and Commonwealth Treasury announce initiatives to support financial system: Bill Evans

<html><body>
EXPERT OBSERVER
On Monday, March 9, we forecast that the Australian economy would experience a recession in 2020 with the economy contracting by 0.6% in the first half although we expected growth in the second half of 2.2% as the economy recovered from the disruption associated with COVID-19.
Our central assumption was that the COVID-19 threat would peak in the June quarter and by quarter’s end confidence and activity would begin to recover.
We described 2020 as a severe disruption or technical recession to differentiate from the last two recessions in Australia when the unemployment rate spiralled from 6% to 11%.
Our figuring last week set the forecast peak in the unemployment rate at around 5.8%- 6%, up from the current level of 5.3%.
The relatively modest increase in the unemployment rate was particularly reflective of the expectation that the disruption would be relatively short when compared to earlier recessions and viewed as such by business that there would be a degree of labour hoarding.
Later in the week we analysed the Government’s $17.6 billion Stimulus Package and concluded that the Package would not be sufficiently stimulative to avert a recession in 2020.
Our key assumptions around the Package focussed on the likely impact on spending from the $4.76 billion payments to pensioners and social security recipients and the instant asset write off provisions.
We assessed that pensioners would save around 75% of payments and social security recipients would save around 60%.
Pensioners are likely to be cautious given the collapse in bank deposit rates and health concerns. In that regard the 13.8% collapse in confidence amongst the over 65 year olds in the latest Westpac MI Consumer Sentiment Survey signals caution. Social security recipients will be unnerved by the COVID -19 threats and discouraged by the “one off” nature of the income boost.
We differed with the Government’s figuring around the lift in business investment associated with the “instant asset write off” package assuming around $2 billion compared to the Government’s estimate of $5-6 billion. With business confidence fragile going into the COVID-19 shock and weakening further we expect businesses will be cautious around boosting spending.
Nevertheless, we noted that the Package was likely to boost activity in the June quarter by 0.4% of GDP largely offsetting the estimated contraction. However we noted that conditions had deteriorated over the week and the “pre-package” contraction was now likely to be larger than estimated early last week.
In that regard our revised estimates of GDP growth in the March and June quarters, after adjusting for the Stimulus Package, are minus 0.7% and minus 0.3% respectively - a total contraction of 1% of GDP.
Recall that our estimate early last week was a total contraction of 0.6%, before adjusting for the Stimulus Package.
So what has changed?
Most notably we have seen mandatory quarantine requirements for international travellers; restrictions on large public gatherings; a brutal sell off in the global equity markets; and reports of limited liquidity in government and corporate debt markets.
Not surprisingly, as these events have moved quickly, we have made some major changes to our estimates of the impact of COVID-19 in both the March quarter and the June quarter.
We have increased our estimate of the shock to the most exposed component of consumer spending (hotels; restaurants and cafes; recreational services; and air travel) to minus 40% over the two quarters from minus 25%.
We have increased the expected shock to consumer durables to minus 7% and revised up the negative impact on home renovations and additions.
We expect outbound and inbound tourism to contract by 80% over the two quarters.
Overall we now see consumer spending contracting by 0.1% (March quarter) and 2.8% (June quarter) before recovering by 1.9% in the September quarter and 1.0% in the December quarter.
We have also made adjustments to inventories; government spending (lifting health expenditure further).
Growth through 2020 is now estimated at 1.5% with minus 1% in the first half and 2.5% in the second half.
The unemployment rate is now forecast to reach 7% by October 2020 (up from the previous estimate of 5.8%-6.0%) due to the larger negative shocks to the labour intensive sectors such as recreation; tourism; education; renovations and additions; and dwelling construction. This lift in the unemployment rate is despite reducing the participation rate from 66.1% to 65.4% as a discouraged worker effect – that is, as workers respond to a deteriorating labour market the participation rate is likely to decline.
Please note that these forecasts are not based on Australia following a European style full lock down. Not surprisingly, the forecasts are subject to downward revision in the event of such an occurrence.
This article was <a href="https://www.propertyobserver.com.au/https://westpaciq.westpac.com.au/Article/42362" target="_blank">first published on WestpacIQ</a>
<div>
BILL EVANS is the <a href="https://www.westpac.com.au/news/authors/bill-evans/" target="_blank">chief economist at Westpac</a>.
</div>
</body></html>

Westpac revise 2020 forecasts, deeper recession and 7% unemployment: Bill Evans

<html><body>
EXPERT OBSERVER
Today, the Reserve Bank released a Statement which was aimed at addressing liquidity issues in the Australian financial market.
The liquidity policies were aimed at both the government bond market and the bank funding markets.
Earlier in the day, we saw aggressive policy changes from both the US FOMC and the Reserve Bank of New Zealand.
The RBA Governor’s Statement noted that the Reserve Bank “stands ready to purchase Australian government bonds in the secondary market”.
The Statement indicated that the action was aimed at supporting the smooth functioning of the bond market.
At a recent Conference, on March 11, RBA Deputy Governor Debelle noted that “at the moment we don’t see material disruptions in financial markets. If that were to change we obviously have the capacity to act in the market like we did back in 2008 in terms of ensuring sufficient liquidity to the market. We don’t see the need for that now, but obviously if circumstances change, that might also need to change”.
Clearly from the RBA’s perspective the circumstances have changed. So this action in the bond market is targeted at boosting liquidity in a market that is seen as a “key pricing benchmark for the Australian financial system”.
Other liquidity based policies which were announced include one month; three month; and six month or longer repo operations to support liquidity in bank funding markets.
This action in the bond market is not the Quantitative Easing policy which we have been anticipating will be adopted when the overnight cash rate reaches 0.25% (defined by Governor Lowe as the zero lower bound at a speech on November 26).
In explaining its proposed approach to Quantitative Easing Deputy Governor Debelle pointed out at the same Conference, “So we would talk about the likely future path of interest rates – what is generally known as forward guidance – and to validate that we would be operating in the bond market as necessary to keep government bond rates, or the risk free curve, consistent with our outlook for interest rates".
It is interesting that the Bank’s first foray into the bond market is based on liquidity but we do not expect that the Quantitative Easing approach has been shelved.
The Governor's statement today also indicated that: "further policy measures to support the Australian economy" will be announced on Thursday March 19.
Those policy measures are expected to include a lowering of the overnight cash rate from 0.50% to 0.25%.
Quantitative Easing, along the lines described by the Deputy Governor, is also expected to be announced. This would involve the RBA targeting a particular outlook for the risk free curve.
The Governor’s Statement also noted that the RBA and the AOFM are in close liaison. Recall that during the Global Financial Crisis the AOFM purchased a range of mortgage backed securities. A repeat of that successful exercise is also likely to be announced.
Last year Westpac raised the issue of the RBA adopting a similar policy to the Bank of England to support small businesses and households while supporting banks’ funding at a time of excessively low interest rates.
Under the arrangement the RBA would lend long term funds to the commercial banks at a rate close to the overnight cash rate with the funds being tied to loans to business and households.
We understand that in this current crisis a key priority is about ensuring that good companies stay afloat until the crisis has passed and in turn that companies are able to retain their employees.
The Government’s Fiscal Stimulus Package addressed these issues but we think that the monetary authorities, in conjunction with our unquestionably strong banking system, can also play a role.
BILL EVANS is the <a href="https://westpaciq.westpac.com.au/Article/42581/14186/" target="_blank">chief economist for Westpac</a>.
This article was first published on <a href="https://westpaciq.westpac.com.au/Article/42581/14186/" target="_blank">Westpac IQ</a>.
</body></html>

RBA to cut cash rate to record low 0.25% and announce QE: Westpac's Bill Evans

<html><body>
EXPERT OBSERVER
Westpac has revised its growth forecasts for the Australian economy in 2020 to take into account the expected impact from the Coronavirus. The numbers are based on a "no fiscal stimulus package" basis. The Government is set to announce its policy response later in the week and it will be necessary to adjust the numbers according to our assessment of the impact of the policies.
We expect the Australian economy will grow by 1.6% (in the year to the December quarter 2020) although growth momentum will be in two halves with the first half showing a contraction of 0.6% and the second half growing by 2.2%.
On a quarterly basis we expect the economy will contract in both the first and second quarters by 0.3% and 0.3% respectively to be followed by a rebound of 1.4% and 0.8% respectively in the third and fourth quarters.
That growth profile constitutes a technical recession but given the expected recovery in the second half of the year it is much more realistic to characterise the situation as a "major disruption" to growth rather than the style of recession that Australia has experienced in the past. Indeed, recall that in Australia’s last two recessions the unemployment rate lifted from 6% to around 11%.
We expect the unemployment rate to hold below 6% through this period.
Furthermore, there is much greater uncertainty around these forecasts due to the unpredictable course of the outbreak.
In discussing this profile it is probably best to consider the growth dynamics through each of the quarters in 2020.
The first point to note is that the economy will be dealing with the impact of the virus when it is in a relatively fragile state with growth in 2019 at 2.2% compared to potential of 2.75%.
In particular, consumer spending has been insipid with the annualised pace running at only 1% in the second half of 2020.This means that consumer spending is likely to be less resilient to shocks than if momentum had been robust.
Whereas exports (tourism; foreign students; agriculture; resources) and inventories (disrupted supply chains) will explain the major shocks in the March quarter given their exposure to the Chinese economy, the June quarter contraction will be dominated by Australia’s and the rest of the world’s exposure to the virus and the lagged effect of China’s recession in the March quarter. In particular the impact on the rest of the world has already been affecting financial markets which is likely to puncture confidence more widely.
BILL EVANS is <a href="https://www.westpac.com.au/news/authors/bill-evans/" target="_blank">chief economist of Westpac</a>. 
This article was <a href="https://westpaciq.westpac.com.au/Article/42476/14186/" target="_blank">first published on WestpacIQ</a>.
 
</body></html>

Westpac cuts growth forecasts for 2020

<html><body>
EXPERT OBSERVER
As Westpac predicted yesterday, the Reserve Bank Board decided to lower the cash rate by 25 basis points to 0.50 per cent at its March meeting.
In discussing the reasons behind the decision, the Governor highlighted three themes that are all linked to the coronavirus.
Firstly, “In most economies, including the United States, there is an expectation of further monetary stimulus over coming months”.
Secondly, “the Australian Government has also indicated that it will assist areas of the economy most affected by the coronavirus”.
And finally “The uncertainty that it is creating is also likely to affect domestic spending. As a result, GDP growth in the March quarter is likely to be noticeably weaker than earlier expected”.
In fact, around two thirds of the statement  are devoted to the theme of the coronavirus, while the “usual themes” around unemployment; wages; and the housing market attract only limited attention with no real change from previous statements.
The final sentences of the statement are important: “It (the Board) will continue to monitor developments closely and to assess the implications of the coronavirus for the economy. The Board is prepared to ease monetary policy further to support the Australian economy”.
With the virus impacting an economy that was already weak it was absolutely necessary to provide more support although the Reserve Bank does not recognise that risk in the Governor’s Statement.
Conclusion 
It has been Westpac’s forecast that the RBA will act again in April for much the same reasons that we have seen today – helping to assist the Australian economy to deal with the shocks associated with the virus; falling into line with other central banks’ stimulatory policies, particularly to ensure that the Australian dollar remains competitive and working in conjunction with the Australian Government to deal with the issues.
It seems that the coronavirus has brought the Government and the Reserve Bank together to address the risks with complementary policies. That “partnership” is unlikely to end with this single move by the RBA.
This article was <a href="https://www.propertyobserver.com.au/https://westpaciq.westpac.com.au/Article/42362" target="_blank">first published on WestpacIQ</a>
<div>
BILL EVANS is the <a href="https://www.westpac.com.au/news/authors/bill-evans/" target="_blank">chief economist at Westpac</a>.
</div>
</body></html>

RBA will cut again in April for the same reason as March cut: Westpac's Bill Evans

<html><body>
EXPERT OBSERVER
After the developments of the weekend we now expect the RBA to cut the cash rate by 0.25% at its meeting on March 3 and the FOMC to cut by 0.50% at its meeting on March 17/18.
On Friday we published our outlook for RBA and FOMC policy.
We confirmed our forecast for an April cut from the RBA and moved forward our first cut from the FOMC from June to March.
Over the weekend there have been major developments:
<ul>
<li>Following a further 900 point sell off in the US share market on Friday FED Chair Powell made a highly unusual unscheduled intervention, near the close of trading, noting that: “We will use our tools and act as appropriate to support the economy”.</li>
<li>This statement is likely to be seen as a “call to action” for other central banks around the world.</li>
<li>The Chinese PMI’s were released for February showing a plunge to 35.7 (from 50 in January) in the manufacturing PMI (even lower than the previous record low of 38.8 in November 2008 – during the GFC); the non-manufacturing PMI fell from 54.1 to 29.6. Both these levels were significantly below formal market expectations.</li>
<li>Reports of meetings over the weekend of Government and Financial Regulators to prepare Australia’s economic defences.</li>
<li>Market pricing for a 25 basis point cut from the RBA on March 2 has increased from 18% (Australia 5 pm Friday) to 120%.</li>
<li>Market pricing for a 50 basis point cut from the FOMC in March has moved from 50% (Australia 5pm Friday) to 75%.</li>
<li>There is reasonable speculation that the confidence hit to the share market and the overall economy we have seen over the last week may impact confidence in the housing market – particularly at the top end of the market.</li>
<li>Developments outside China around the Coronavirus continue to alarm. (Last five days we have seen cases reported in 20 new countries, with 20 countries now reporting local transmission).</li>
</ul>
All these developments in this very volatile time mean that we have reviewed our forecasts for the RBA and the FOMC.
We now expect the RBA to cut the cash rate by 0.25%  to 0.5% at tomorrow’s meeting.
That is likely to be followed up by a second cut to 0.25% at the April board meeting.
The Governor has previously indicated that he would consider quantitative easing once the cash rate reached 0.25%.
QE has always been part of Westpac’s forecasts but we envisaged the policy starting in the fourth quarter of 2020. These developments are likely to bring that timetable forward to mid year.
We have long argued that the FOMC would cut by 75 basis points over 2020. That reflected our view about a slowing economy coupled with consistent under shoot on inflation.
We now see that 75 basis points being made up of 50 in March and 25 in April.
We expect that given the FOMC's focus on market liquidity these rate cuts will be supplemented by specific liquidity policies. 
A key driver of the more aggressive stance from the RBA will be to ensure the AUD remains competitive. Since the advent of the Corona Virus the AUD has fallen from USD 0.69 to USD 0.65. With the RBA now likely to be more aggressive and the recovery in China likely to be delayed (and coming from an even weaker position, based on the recent PMI’s) we have also lowered our near term (March) forecast for the AUD from USD0.65 to USD 0.63.
I am primarily responsible for the content of this research report and I certify that:
<ol class="d">
<li>to the best of my knowledge, I am not in receipt of inside information and the research does not contain inside information; and</li>
<li>no other part of the licensee has made any attempt to influence the research.</li>
</ol>
This article was <a href="https://www.propertyobserver.com.au/https://westpaciq.westpac.com.au/Article/42362" target="_blank">first published on WestpacIQ</a>
<div>
BILL EVANS is the <a href="https://www.westpac.com.au/news/authors/bill-evans/" target="_blank">chief economist at Westpac</a>.
 
</div>
<div data-fuse="21821171146" data-fuse-code="fuse-slot-21821171146-3" data-fuse-slot="/71161633/PO_propertyobserver/article_incontent_mrec"> </div>
<div>
<div id="cpgAdsenseContainerId"><ins id="aswift_0_expand" data-ad-slot="3195360564"></ins></div>
</div>
.
</body></html>

RBA to cut rates at March and April meetings: Westpac's Bill Evans

<html><body>
EXPERT OBSERVER
As expected, the Reserve Bank Board decided to keep the cash rate unchanged at 0.75%.
It is noteworthy that the Board has also not adjusted its growth forecasts for 2020 and 2021 holding them at 2.75% and 3% respectively. The discussion around the two recent shocks to growth – bushfires and coronavirus – emphasises the likely temporary impact of both although the statement does appropriately point out that “it is too early to determine how long lasting the impact [of the coronavirus] will be”.
Further emphasising this tentative approach to coronavirus developments, the description around the world economy has changed: “global growth is expected to be a little stronger this year and next than it was last year.” That compares to the December statement which only referred to: “the outlook for the global economy remains reasonable” – a surprising modest lift in confidence around the world economy given the current recent market developments.
On the other hand the fall in the unemployment rate since the last Board meeting, from 5.3% to 5.1% has been taken on board and the new forecast for the unemployment rate in 2020 appears to be 5.1% down from 5.25% at the December Board meeting. For 2021 the expectation that the unemployment rate will fall slightly below 5% is maintained.
It is of some interest that the statement does not repeat the description “gentle turning point” although the arguments pointing to an improving growth outlook – the low level of interest rates; tax refunds; ongoing spending on infrastructure; a brighter outlook for resources – is now supplemented by a more confident outlook for the residential construction cycle where the statement points to an expected recovery later this year.
It is important that the sentiment in the December statement that “the Australian economy can sustain lower rates of unemployment and underemployment” has been repeated. This emphasises the desirability, from the Board’s perspective, of further falls in the unemployment rate.
The recent weakness in the Australian dollar is recognised with the AUD being described as “around its lowest level over recent times”. That compares with the previous description of “at the lower end of its range in recent times”. There may be some inconsistency in this observation given that if, as the growth forecasts imply, the economy bounces back from the short term shocks, a recovery in the AUD is almost certainly going to be an outcome.
In the final paragraph, the statement repeats the sentiment of the December statement emphasising: 1) the long and variable lags in the transmission of monetary policy; and 2) the Board is prepared to ease policy further if needed. The third point used in December, that “[the Board] continues to monitor developments, including in the labour market” has been modified to “The Board will continue to monitor developments carefully, including in the labour market”. Arguably this final difference can be interpreted as the Board being more uncertain about future developments and therefore wanting to emphasise its strong duty of care.
Conclusion
We have been surprised that the Board has retained its growth forecast for 2020 at 2.75% (around trend) given the weaker momentum which was apparent from the September quarter national accounts and developing questions around the global economy. It is also somewhat brave, given a range of leading indicators around the labour market, to assume that the recent surprise fall in the unemployment rate over the last two months, from 5.3% to 5.1%, will be sustained. Westpac’s forecast is for the unemployment rate to drift upwards over the first half of 2020.
The uncertainty around the coronavirus poses substantial risks to economic forecasts but certainly the impact of the virus over the course of the first quarter both globally and domestically has to be quite damaging. It seems unlikely that subsequent stimulus policies will be able to fully offset the short term damage done to confidence and activity implying a realistic downward revision to growth forecasts, both globally and domestically.
Westpac continues to expect that a combination of a more moderate growth outlook and an unexpected (by the RBA) deterioration in the labour market will require a further policy response. Our forecast is that the next rate cut will occur in April followed by a further cut in August.
BILL EVANS is the Chief Economist at Westpac
</body></html>

RBA remain optimistic but cash rate cuts ahead

<html><body>
EXPERT OBSERVER
As discussed in our last weekly Westpac now expects the Reserve Bank to delay its next cut in the cash rate to April with the final cut to 0.25% occurring in August. Prior to the release of the surprisingly strong December employment report we had expected the cuts to be timed for February and June.
The inflation report, which printed on January 29, confirmed that inflation remains 'stuck' well below the Board’s 2–3% target band with the trimmed mean (the key measure of underlying inflation used by the RBA) printing 0.43% for an annual rate of 1.6%. The annual rate of increase of the trimmed mean has been within a 1.5%–1.8% range for the past four years. The RBA’s latest forecasts envisage the annual rate of the trimmed mean holding at 1.8% in 2020 and 1.9% in 2021. When the Bank releases its revised forecasts on February 7 we expect it will reaffirm that inflation outlook.
These are not the forecasts of a central bank (with a 2–3% inflation target range) that expects it has come to the end of its easing cycle.
Such a decision would only be appropriate if the Bank assessed that further easing in policy would be ineffectual or counter productive.
However, in its December minutes, the Board made the case for the effectiveness of monetary policy.
"Members discussed the transmission to the economy of the interest rate reductions since the middle of the year. They noted in particular that the available evidence suggested that more stimulatory monetary policy had been working through the usual channels of lower bond yields, a depreciation of the exchange rate and lower interest rates on mortgages. There had also been an effect on housing prices, increased housing turnover in the established market and some early signs of a stabilisation in housing construction activity ...
... While members recognised the negative confidence effects for some parts of the community arising from lower interest rates, they judged that the impact of these effects was unlikely to outweigh the stimulus to the economy from lower interest rates".
It is also important not to confuse monetary and fiscal policy. There has been some speculation that fiscal policy is the only answer. We accept that a more stimulatory fiscal policy is necessary and have strongly advocated the bringing forward of the Stage 2 personal tax cuts in two tranches beginning in July 2020 and followed by the second tranche in July 2021.
Based on the most recent fiscal update – the Mid-Year Economic and Fiscal Outlook, released December 16 – that policy would risk pushing the 2020/21 and 2021/22 fiscal positions back into modest deficits. We believe that such a 'price' is worth paying if we are to provide a sizeable boost to household incomes and an associated lift in business expectations for stronger demand growth.
Now, of course, it is necessary to superimpose on this discussion the recent exogenous shocks of the bushfires and coronavirus.
Westpac has adjusted its GDP forecasts for the bushfire effect, lowering GDP growth in both the December and March quarters by 0.1%, reflecting the impact on tourism; agriculture; and regional retail of the bushfire crisis.
The other likely effect was always going to be the overriding impact on consumer confidence. The Westpac-MI Index of Consumer Sentiment fell by 1.8% in January to 93.4 – a fairly modest fall compared to the 5.8% fall during the Queensland floods of 2011. However the survey was taken during the first week of rain in January, and the starting point for the Index was much lower than in 2011 (a reading of 111 for Sentiment).
The –0.2% growth impact is seen to be on the conservative side with estimates ranging from –0.1% to –0.5%.
We have also pencilled in a lift in demand of 0.1% of GDP later in 2020 to reflect the rebuild that will follow.
The second risk to the growth outlook is the coronavirus outbreak.
This virus is likely to largely affect Australia through its impact on services exports. This sector has been an important source of growth for the Australian economy. In a year (to the September quarter 2019) where the Australian economy grew by 'only' 2.0%, net service exports contributed 0.4ppts.
Services exports are about $100bn a year. This includes $64bn, 3.2% of GDP, in travel and education – of which Chinese students and tourists represent 27% of those exports, or 0.85% of GDP.
Consequently the direct effect of a complete shutdown of Chinese tourism and student travel for a year would reduce GDP by almost 1ppt with significant additional multiplier effects. However such an outcome is extreme – well beyond the experience during the SARS outbreak of 2003 – and we can only await a clearer picture of developments over the next few months.
Issues of importance in estimating the impact on Australia’s services exports include: the resilience of the virus; the impact on student travel and the impact on tourism.
Westpac has not imputed this effect in its current growth forecasts given the high degree of uncertainty.
The Reserve Bank will also be pondering the impact of the bushfires and coronavirus on its growth forecasts.
We will receive an update on the Bank’s growth forecasts on February 7, while the Governor is giving a speech "The Year Ahead" on February 5.
We expect that the RBA will lower its 2020 growth forecast from 2.8% to 2.6% (rounded down to 2.5% in the main forecast table in the 'Economic Outlook' section). That compares with Westpac’s forecast of 2.1% (no coronavirus effect included) and will be justified by the weaker than expected momentum in 2019 (September quarter GDP was not available for the November forecast) plus some allowance for the bushfires/coronavirus.
However these latter effects will be considered transitory and the 'bold' forecast of 3.1% growth in 2021 will likely be retained.
Markets should not feel that a lowering of the near-term growth forecast to below trend growth should automatically require a rate cut. The assessment of monetary policy involving 'long and variable lags' and an above-trend growth forecast in 2021 is sufficient to justify a 'pause' until the impact of exogenous shocks becomes clear and the sustainability of the recent downtrend in the unemployment rate can be tested.
Such an approach is entirely consistent with Westpac’s expectation that the next rate cut will be in April following the December quarter national accounts and the next 'snapshot' of Australia’s growth momentum.
BILL EVANS is the Chief Economist at Westpac
</body></html>

RBA to hold until April and cut 2020 economic growth forecast: Bill Evans

<html><body>
EXPERT OBSERVER
Despite the lift, the Leading Index growth rate remains below zero, indicating momentum tracking well below trend.
<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/2020/1/29/10_NEWS_BILL%20EVANS.jpg" alt="" width="536" height="359">
In fact the December print represents the thirteenth straight month where the Index growth rate has been negative.
This has been consistent with the persistent below trend growth we have seen for the Australian economy.
The latest update points to weak economic momentum continuing in the first half of 2020 and is consistent with Westpac’s view that growth will remain around a two per cent pace in the first half of 2020.
The Leading Index growth rate deteriorated over the second half of 2019, moving from –0.03 per cent in July to –0.32 per cent in December.
The main components driving the 0.28ppt shift have been a sell-off in commodity prices (–0.61ppts) and a more mixed performance on the Australian share market (–0.42ppts).
This has been partially offset by a stabilisation in the Westpac-MI Unemployment Expectations Index (+0.25ppts) a reduced drag from declining US industrial production (+0.21ppts), a modest lift in aggregate hours worked (+0.13ppts) and a widening yield spread as the RBA’s cuts in the cash rate have lowered short term rates (+0.10ppts).
The Reserve Bank Board next meets on February 4. Westpac expects that the Board will decide to hold the cash rate steady at its February meeting. That decision will be in response to the surprise fall in the unemployment rate from 5.3 per cent to 5.1 per cent since the last Board meeting in December.
However, we expect that decision to be a temporary pause in the rate cut cycle. The recent falls in the unemployment rate are expected to be unsustainable with this becoming apparent by the April meeting when we expect the next cut.
It is clear that the Board is confident that lower rates will boost the economy through a more competitive exchange rate; improved cash flows to households; and rising asset prices. However, the policy debate should not be around ‘either monetary policy or fiscal policy’.
The policies are not mutually exclusive and while Westpac expects a second rate cut in August we also support the use of fiscal policy to boost demand.
Our preference is to lift household incomes through bringing forward the stage two tax cuts phased over two years. A rise in expected demand should be more effective in boosting business investment than tax incentives.
BILL EVANS is the Chief Economist at Westpac
</body></html>

Westpac leading index remains negative for over a year: Bill Evans 

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

Joel Robinson

The Eveleigh brings house-like apartments to Broadbeach

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

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

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

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

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

<main data-perf-region="main">
Castle Hill, the longtime hub of the Hills District, has been one of the major beneficiaries of Sydney's Metro expansion, with improved connectivity helping drive continued population growth, development and buyer demand across the Hills District.

But despite that growth, the suburb has seen relatively few major new apartment projects brought to market over the past 18 months.

Hills District developer Reve Group is looking to fill that gap with <a href="https://www.apartments.com.au/new-apartments/nova-r-ve-castle-hill-2-garthowen-crescent-castle-hill-nsw-2154">Nova Rêve</a>, a major new mixed-use precinct on the corner of Garthowen Crescent and Old Castle Hill Road, a short walk from Castle Hill Metro Station and Castle Towers.

[smartcode_project:default project_id=152737 project_image_fid=377679]

The project will comprise three residential towers alongside a hotel, restaurants, cafes and a skybar, more than 1,600 sqm of ground-floor retail and almost an acre of landscaped gardens.

It represents the largest project undertaken by Reve Group, the development arm of the Kassis family, which has been building across the Hills District for more than 30 years through Kassis Homes.

[smartcode_project:default project_id=152737 project_image_fid=377675]

Nova Rêve also represents a significant step up from the family's first apartment development, Grand Rêve, which was delivered nearby on Garthowen Crescent.

Grand Rêve introduced larger, house-like apartment layouts and premium inclusions including Wolf and Sub-Zero appliances to the Castle Hill market.

Nova Rêve takes that approach to a precinct scale, combining the residential component with hospitality, retail and substantial public and resident landscaping.

[smartcode_project:default project_id=152737 project_image_fid=377685]

Reve Group Managing Director Sam Kassis said the project reflected the family's three decades of building in the Hills, which has evolved from trophy homes on quarter-acre blocks to larger-scale apartment development.

"Grand Rêve was our first apartment project here and it showed us what this pocket of Castle Hill could be. Nova Rêve is the refinement of that idea: not just apartments, but a place the whole suburb can use," Kassis said.

A key part of that approach is the hotel, which has been designed to operate as an amenity for the wider Castle Hill community rather than solely hotel guests.

It will include restaurants, cafes, skybars and all-day dining, alongside conference and event facilities catering to business functions, community groups and private events.

At ground level, more than 1,600 sqm of shops and cafes will open onto the surrounding streets and landscaped areas.

Almost an acre of gardens designed by Land and Form Studios will run through the precinct, incorporating pathways, seating, barbecue areas and children's play spaces.

[smartcode_project:default project_id=152737 project_image_fid=377680]

Reve Group's Romio Georges said creating an active ground plane had been central to the planning of Nova Rêve.

"There are gardens with pathways, barbecues, seating and play areas, shops and cafes opening onto the street, and a hotel with restaurants and a skybar that anyone in Castle Hill can walk into," Georges said.

The project's elevated position on one of Sydney's highest ridgelines will also provide apartments with outlooks toward the Sydney skyline, surrounding parkland and the Blue Mountains.

More than 80 per cent of the apartments will occupy corner positions, with Turner responsible for both the architecture and interiors.

&nbsp;

[smartcode_project_cta:default project_id=152737]

<h3 data-end="3697" data-section-id="q3n5ak" data-start="3672">&nbsp;</h3>
</main>

Bill Evans

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News