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EXPERT OBSERVER
The RBA cut the cash rate to 1% and signalled that they will continue to adjust monetary policy if needed.
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As we expected, the Reserve Bank Board lowered the cash rate by 25bps to 1.00% at its July meeting. The motivation for this move is very much focussed on the labour market as was clearly indicated by the Governor’s recent speech.
In the decision statement, he pointed out that employment growth has been strong, the labour force participation rate is at a record level, the vacancy rate remains high, and there are reports of skill shortages in some areas. On face value, this would not be consistent with a concern about the labour market. But the Governor is now clearly focussing on spare capacity in the labour market, and that is measured by the unemployment rate, the underemployment rate, and wages growth. He believes that the Australian economy should be making more progress in reducing spare capacity and therefore a lower cash rate is consistent with that belief.
As we highlighted in our report last week, it seems likely that the RBA growth and inflation forecasts for 2020 that will be released in the August Statement on Monetary Policy, which will follow the August Board meeting, will be unchanged from the May forecasts of 2.75% for GDP growth and 2% for underlying inflation. This further emphasises the importance of the labour market in driving the policy response in June and July.
The critical final paragraph in the Governor’s Decision Statement leaves open the possibility of further stimulus. He notes that the Board “will continue to monitor developments in the labour market closely and adjust monetary policy if needed”. However, the degree of urgency that was certainly detected in the Governor’s recent speech and the June Board minutes appears to have eased. Consequently we remain comfortable with our view that there will be no follow up move in August.
Readers will be aware that Westpac was the first forecaster in the Bloomberg survey to call the cash rate below 1% (May 24). We predicted a final cash rate move to 0.75% by November, but highlighted that there were downside risks to 0.75%. Last week, we also noted that with the likely decision to cut in July, these downside risks had intensified. For now, we remain comfortable with our forecast that the next rate cut will occur in November, by which time the growth, inflation and labour market environment will not have improved sufficiently to satisfy the RBA. Indeed, by the November Statement on Monetary Policy, we expect that the RBA will have to lower its growth and inflation forecasts and raise its unemployment forecast for 2020, requiring a further policy response.
Critical issues between now and November will be evidence around the path of the unemployment rate, and the impact of this recent movement in the cash rate on financial conditions and the profile of the Australian dollar. The task of lowering the Australian dollar has recently been impacted by headwinds associated with general rate cuts by other major central banks around the world. However, without the RBA cuts, the Australian dollar may well have unhelpfully lifted.
As we noted last week, the intense focus on the labour market - where monthly updates are available - changes the historic pattern of policy adjustments. This has been exemplified in the June and July movements, and means that every month, certainly out to the end of 2019, will be live for policy. Issues that will also provide the RBA with reasons for caution will be around fiscal policy developments, particularly implications for household disposable income; the response of the housing market to the two rate cuts; and whether the consumer responds to tax cuts and lower rates with a robust spending appetite over the course of the second half of 2019.
Conclusion
When Westpac originally forecast two rate cuts in 2019 back in February, markets were only positioned for one cut by March 2020 and most major forecasters were still calling rates higher or on hold. We are therefore pleased to see that the forecast has proved to be correct. We were also the first forecaster to nominate a terminal cash rate lower than 1% (May 24), and that outlook has now been embraced by the market and most other forecasters. However with policy now in play at every Board meeting between now and the end of the year, uncertainties around specific timing are inevitable.
Our current view of one more cut this year by November has downside risks for potentially two, and developments over the next few months will determine that outcome. If the RBA were to lower the cash rate to 0.5% and still be dissatisfied with the excess spare capacity in the labour market then we expect that they will consider putting pressure on governments to loosen fiscal policy, as well as exploring other alternative policies that the RBA itself can embrace.
BILL EVANS is the Chief Economist at Westpac
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July RBA cut was primarily for the labour market: Westpac's Bill Evans

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EXPERT OBSERVER
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We have decided to bring forward the timing of the next RBA rate cut from August to July.
We are surprised that we have to do this, given that a pause between cuts might have allowed for a smoother transmission process but cannot deny the explicit signals provided in the Governor’s more recent speech.
This includes: that it would “… be unrealistic to expect that lowering interest rates by ¼ of a percentage point will materially shift the path we look to be on”; that “the possibility of lower rates remains on the table”; and that it “is not unrealistic to expect a further reduction in the cash rate.”
These are early days for interpreting this Governor’s language at a time when policy is active. However based on our experience with other central bankers, this language is direct. As such, we now expect a cut in July that will substitute for the move we had originally expected in August.
This will complete the two cuts we originally forecast on February 21 when markets were priced for only one cut by March 2020. The timing however is somewhat earlier than we anticipated back in February.
It was reasonable to expect that the Bank would lower its growth and inflation forecasts in the August Statement on Monetary Policy and acknowledge that decision by cutting in August. However it now appears that, based on the Governor’s speech, he may decide to hold steady on the May growth and inflation forecasts.
In particular, the Governor stressed that the decision to cut in June “was not in response to a deterioration in the economic outlook since the previous update was published in early May”. Note that the May forecasts were conditioned on market pricing which included two rate cuts by the end of 2019. With those cuts set to be delivered the August forecast update will also benefit from markets pricing in a further rate cut to 0.75% by the end of 2019. The wording in the Statement in August will probably include something along the lines of “having already cut rates twice”.
Readers will recall that on May 24 Westpac forecast a terminal rate in November of 0.75%. This was ahead of all major forecasters (Bloomberg survey May 24) and market pricing. Although the Bank may decide to hold its growth and inflation forecasts steady in the August Statement on Monetary Policy we do not expect it to be possible to sustain this view through to November.
Westpac expects growth of 2.2% in 2019 and underlying inflation of 1.4%. Official forecasts more in line with those estimates are likely by November meaning it will not be possible to credibly lower the Bank’s unemployment rate forecast, which currently stands at 5%, well above the 4.5% level now assessed as full employment. That combination means a further rate cut would be appropriate.
When we released the May 24 forecast we noted that the risk to the rate view was to the downside with a potential terminal rate of 0.5% possible. We remain comfortable with the 0.75% target but recognise that given the current official intense focus on lowering the unemployment rate these downside risks have increased.
The focus on the unemployment rate also raises prospects for less predictable timing of the rate cut decision. In previous cycles growth and inflation and changes to associated forecasts have dominated the timing of decisions with most rate cuts timed for February, May, August and November.
As we expect to see in July, that timing has changed because updates on the labour market are available monthly rather than quarterly. Accordingly it is possible that our November target date for the rate cut after July is more flexible than in previous cycles.
BILL EVANS is the Chief Economist at Westpac
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RBA's next rate cut will be July: Westpac's Bill Evans

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EXPERT OBSERVER
Developments since the RBA rate cut on Tuesday 4 June have provided us with further confidence that our forecast for three rate cuts in 2019 will prove accurate. Firstly, the Governor has pointed to an ambitious objective for the labour market, with an unemployment rate of 4.5% seen as necessary to bring inflation back to target. This is despite his own forecasts indicating a 5% result on the basis of two rate cuts. That challenge can certainly be interpreted as an expectation of the need to deliver more than just two rate cuts.
Our earlier discussion on 24 May around our target cash rate of 0.75% emphasised downside risks to the cash rate, but noted the difficulties in lowering the cash rate below 0.5% and providing some pass through to the general economy – except for the impact on the currency. We concluded that 0.5% could be the lower bound for the cash rate, although we are comfortable with our 0.75% target. The Governor considered international precedence and referred to the 0.25-0.50% seen in the US, UK and Canada, but did not indicate whether the same level would be effective for Australia.
The other significant development since the RBA meeting has been the disappointing GDP report for the March quarter. This again highlighted the key themes that have been most prominent in our consistent assessment that the Australian economy is likely to continue operating well below potential, namely weak household income growth, a cautious consumer and a turning point in the savings rate.
This report, showing that GDP growth was only 0.4% in the March quarter is likely to trigger a further downward revision to the RBA’s 2019 GDP forecast. Westpac has consistently forecast around 2.2% for GDP growth in 2019, while the RBA has recently lowered its forecast from 3% in February to 2.75% in May (2.6% to 1 decimal point), with a likely further downward revision in August.
We have also argued that it will be difficult to retain the 1.75% underlying inflation forecast for 2019 by August when, as we expect, the June quarter underlying CPI will print 0.4% for a total of 0.7% for the first half of the year. We think it will be important that when the RBA addresses these lower forecasts, it responds with a further rate cut in August and another one to follow in November.
There has been some speculation that the RBA may cut earlier in July. This is not our central view given the likely need to respond to these downward revisions in August.
Turning to the US, we have revised our federal funds rate profile to include two cuts of 25bps in September and December this year.
A key influence on this assessment is that a new variable has entered the US economic model – one labelled “political unpredictability”. This variable is certain to have a negative coefficient on any equation describing US investment decisions and general confidence. We believe that it is now so embedded in US business behaviour that even resolutions of the current trade controversies are unlikely to convince business that the coast is clear.
We expect the FOMC will be assessing current risks in a similar fashion, revising down central growth views, particularly around business investment and confidence, and widening the uncertainty bands around these views. Chair Powell has recently pivoted from his previous “patient” stance to one where he is prepared to act and it is likely that the FOMC are seeing this variable as part of their risk assessment.
At this stage, we are not franking market pricing by extending the rate cuts into 2020 as we expect some reasonable resolutions to the current crises to prevent a ‘worst case’ scenario, particularly for the US consumer. Failure to resolve these issues would lead to a considerable shock to household disposable income and household demand. That development, of course, would require further action from the FOMC than we are currently forecasting. In 2020, with the consumer remaining in reasonable shape, we would also expect the housing market, which has currently stabilised, to respond to this lower profile for interest rates.
With markets currently pricing in more extensive cuts than we are forecasting, we see little scope for further declines in US yields in 2019, and anticipate they will rise modestly through 2020.
Given that markets are still not fully pricing in our RBA view by the end of 2019 and are more aggressive on the profile for federal funds rate cuts, we are comfortable to retain our central forecast that the AUD drifts down to USD 0.66, albeit reaching that level in the first half of 2020 rather than late 2019.
BILL EVANS is the Chief Economist for Westpac
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RBA moves further towards two additional rate cuts: Bill Evans

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EXPERT OBSERVER
As expected, the Reserve Bank Board decided to lower the cash rate by 25bps to 1.25%. This action is very much in line with Westpac’s forecast first set out on February 21, although comes two months earlier than our original timeline. The basis for the RBA decision was “to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target”. The major dynamic in that regard is to push harder on the unemployment rate to try to reach that point where wages growth lifts markedly.
The Governor has left open the prospect of further action, noting that “the Board will continue to monitor developments in the labour market closely and adjust monetary policy to support sustainable growth in the economy and the achievement of the inflation target over time”.
Regular readers will be aware that Westpac expects that there will be further cuts in this cycle in August and November. It is possible that the Board might choose to bring forward the cut we expect in August to July in the event of a particularly disappointing employment report on June 13. However, we expect that given the limited policy flexibility available, the prudent approach will be to await more information and provide a full explanation of the next cut at the August meeting. A further benefit will be to provide updated forecasts for inflation and growth in the August Statement on Monetary Policy.
However, the key point from our perspective is the clear message that more work needs to be done and only one more cut will be seen as insufficient.
The description of the labour market still has vestiges of the consistent upbeat message that has been a key aspect of the Governor’s Statements in the last few years. However, he is clearly disappointed that recent progress on unemployment appears to have stalled at a level which is clearly not consistent with a healthy acceleration in wages growth. It is interesting that despite the tick-up in the unemployment rate in April to 5.2% being attributable to a record participation rate, he chooses not to qualify the rise in the unemployment rate in that manner.
The commentary on inflation seems largely unchanged with current pressures being described as subdued, although a pick-up is anticipated and the 1.75% forecast for underlying inflation in 2019 remains intact. We expect that the June and September quarter inflation reports will make it untenable to maintain that forecast as well as the associated lift in 2020 to 2%, indicating the clear need for further policy responses.
A key area of uncertainty is the outlook for the housing market given the recent surprising political developments and this rate cut. In that regard, the Governor provides no real guidance, pointing to “conditions remain soft”. He does recognise that price declines have slowed and growth in housing credit has stabilised recently.
Superimposed on this caution around the domestic economy is recognition of the damage that the trade disputes are having on the global economy. While the RBA’s outlook for global growth “remains reasonable”, quite rightly, he emphasises downside risks, including weak international trade and soft investment intentions.
Conclusion
In February, Westpac surprised markets by forecasting two rate cuts in 2019. Recently we revised that forecast to anticipate three cuts. Today’s decision confirms the validity of those forecasts and goes some way to justifying our decision to increase the number of forecast cuts from two to three.
The labour market will remain the key focus for the policy profile, and the two additional cuts that we anticipate in August and November are consistent with our more downbeat view on the labour market.
BILL EVANS is the Chief Economist for Westpac
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RBA cash rate cut leaves prospects open for further moves: Bill Evans

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EXPERT OBSERVER
Earlier this week Westpac moved forward its forecast for RBA cash rate cuts from the original forecast on February 21 of cuts in August and November to June and August.
The June cut remains almost certain; a second in August is our expectation and the November cut should also proceed.
Therefore, Westpac is now forecasting three cuts in 2019 in June; August and November to push the cash rate from 1.5% to 0.75% and to hold at that level through 2020.
Our forecasts for employment; wages growth; economic growth ; inflation and conditions in the housing market  are consistent with the need for  policy to ease  through the full course of 2019, not to go on hold as early as August.
We see the unemployment rate drifting up to 5.4% by year’s end; economic growth at 2.2% for 2019 ; underlying inflation at 1.4%; and the housing market still weak although approaching stability.
That means that the June and August cuts should be supported by a further cut in November.
An option which we considered was a move to some form of Quantitative Easing( QE) should the RBA see the need to ease policy further beyond the 1% level. However, consideration of the RBA’s own research on the deposit structure of major banks( see below) indicates that the RBA could be expected to anticipate that the policy transmission mechanism will still have some effect at a cash rate below 1%.
2019  also seems somewhat early to expect the RBA to embrace QE. Central banks have always favoured interest rate policy over QE until they believed that rate policy flexibility had passed or further lowering rates would be ineffective. Central banks have also mainly favoured QE to ease credit conditions rather than boosting demand.
Looking into 2020 we expect that the case for policy easing could still be apparent but as rates go lower and time passes the option to use QE will become more attractive. Arguably the RBA may see our current forecast of 0.75% as the base or possibly as low as 0.5%. Beyond 0.5% QE seems to be the more effective policy if further easing was required.
Consequently our central forecast for the terminal cash rate in this cycle is 0.75% with risks to the downside, although we would certainly see 0.5% as the floor for the cash rate, with QE a more effective policy tool thereafter.
Optimism that further easing in 2020 may not be necessary would be based on the stabilisation of the housing market; a sustained boost to confidence from a stable Federal government which would be in a position to embrace genuine reform; an improving fiscal position as the terms of trade hold up much better than assumed in the Budget estimates; and a more settled global environment as trade tensions are finally settled.
The revised terminal  cash rate has implications for our AUD and fixed rate forecasts. While back in February we expected the low in the AUD to be USD 0.68 we have now shaved that forecast back to USD 0.66 by end 2019. This forecast is also predicated on  our constructive view on commodity prices and a steady US federal funds rate over 2019.
Markets are currently pricing in a terminal cash rate of around 0.85% by June next year so we have marginally shaved back our bond and swap rate forecasts to reflect a lower and earlier bottom in the cash rate than priced into the market.
The Case for Further Rate Cuts.
Our decision to bring forward the forecasts of rate cuts that we released in  February  was in response to a speech delivered by Governor Lowe on May 21 when he  commented, “A lower cash rate would support employment growth and bring forward the time when inflation is consistent with the target. Given this assessment , at our meeting in two weeks’ time, we will consider the case for lower interest rates.”
However there was a fundamental change in the Governor’s approach . Whereas most of his time as Governor has been marked by an overriding concern with the risks posed to the economy around excessive household debt and frothy housing markets he has now turned his attention to the unemployment rate and labour markets.
Recall that the Bank has three objectives : stability of the currency; full employment; and economic prosperity and welfare of the Australian people. Of course “stability of the currency” relates to its objective to hold the inflation rate within the 2-3% band on average over the cycle.
The focus on household debt and asset markets emphasises “economic prosperity and welfare”.
In his speech the Governor turned to another part of his overall objective – the unemployment rate. He noted “ my judgement of the accumulating evidence is that the Australian economy can support an unemployment rate of below 5% without raising inflation concerns”. A lower unemployment rate is also supportive of the “welfare” objective , a possibility of boosting wages growth and assisting with the achievement of the inflation target.
He also noted that “ monetary policy has a role to play here.”
However the RBA’s current forecasts do not inspire confidence that the unemployment rate will fall much below 5%.  The current forecasts have the unemployment rate holding at 5% out to the end of 2020 . It is important to note that those forecasts are based on  market pricing at the time of the May Board meeting  which the Board ( May Board Minutes) notes as “Cash rate can be expected to be lowered by 25 basis points within the next three months and again by the end of 2019”. The forecast is also based on the AUD holding steady at USD 0.70.
With our forecast that the cash rate will be lowered by 25 basis points on June 4 and August 6 the boost to the economy from rate cuts can be expected to be somewhat stronger than if they are delayed as expected in the RBA’s forecast. Furthermore, the RBA forecast assumes that the AUD holds at USD 0.70 for the duration of the forecast period whereas the current trajectory ( spot already below USD0.69) can be expected to be lower.
Nevertheless it seems unlikely that the RBA would make any significant changes to its forecasts on the basis of those second order changes in the assumptions.
The Governor notes that other policies including fiscal support through infrastructure spending; and structural reform also have a role to play.
These are longer term , necessary initiatives but the point  arises as to whether the RBA should do even more than is currently factored into its forecasts.
There are three key issues here:
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<li>Westpac forecasts that even allowing for the stimulus from the rate cuts the trend in the unemployment rate is likely to edge up. We have a target of 5.4% by end 2019 , well above the RBA’s forecast of 5%.This would reflect clear below trend growth in the economy – we expect 2.2% for 2019 compared with the RBA’s forecast of 2.6%  supplemented by the weakening trend in the employment outlook – “some labour market indicators have softened a little” – RBA Governor , May 21.</li>
<li>The risk of overstimulating the housing market seems low. There is some evidence that the market may be stabilising but we expect that with affordability still stretched in Sydney and Melbourne and other capital city markets now turning down due to the tight credit environment any risk of an overshooting( as we saw in 2016) in response to lower rates seems low.</li>
<li>Will a lower cash rate fail to ease financial conditions due to its very low level ? The issue here revolves around the RBA’s expectation of the capacity of the banks to pass on lower rates . Of paramount importance is the structure of banks’ funding arrangements. The RBA has produced a graph in the May  Statement on Monetary Policy ( Graph 3.6). Our estimate of the numbers in  the graph is that  : 8% of banks’ deposits are held at 0% interest rate; 25% between 0% and 1%; 15% between 1% and 1.5%; 42% above 1.5% and 10% in offset accounts ( effectively earning the mortgage rate).On these numbers the RBA would assess that around 90% of banks’ deposits could cope with the 0.5% rate cut, already expected. Arguably , on these numbers, around 75% would  cope with a further cut. These numbers are approximate and , no doubt, do not  cover all issues.</li>
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Without doubt the option of QE would be on the radar screen for the RBA but, given the analysis of banks’ deposit structures, it is reasonable that they would look to lower rates in the first instance. At some level of the cash rate , perhaps 0.75% but certainly 0.5% , it is likely that the transmission mechanism from QE would be more effective in easing credit conditions and boosting demand.
The most likely forms of QE would include the RBA purchasing asset backed securities issued by the non- banks or providing attractive funding for the banks secured against their securitised portfolios of mortgages aimed at supporting existing borrowers and possibly tied to new lending targets.
These policies may well be needed to help the RBA move towards its key objectives but are more likely issues for 2020 rather than the immediate challenges which are faced in 2019.
BILL EVANS is the Chief Economist at Westpac
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RBA to halve the cash rate by November: Bill Evans

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EXPERT OBSERVATION 
Westpac has revised the forecast it released on February 21 that the RBA would cut the cash rate in August and November to June and August.
On February 21, Westpac forecast that the Reserve Bank would cut the cash rate by 50 basis points in two tranches – August and November. Since then markets and forecasters have largely moved in that direction.
We have not changed that forecast since that date.
However, we are announcing an adjustment to the forecast to bring forward the first cut to the June Board meeting with the second cut to follow in August.
We then expect the cash rate to remain on hold through 2020.
This change in forecast reflects the lift in the unemployment rate for April from 5.1% to 5.2% and the confirmation from the Governor that the Board would be closely following developments in the labour market with the primary focus on the unemployment rate.
The Governor’s thinking has evolved over the year to accept that, as we have observed in other countries, upside inflation risks are consistent with a lower unemployment rate than had previously been assessed. For Australia the Bank had believed that the key unemployment rate was 5% - he now accepts that he can drive the economy harder with an associated lower unemployment rate without risking any inflation overshoot.
Recall that the current forecast for the unemployment rate is 5% to end 2020, (falling to 4.75% by June 2021), based on market pricing, which in the May Board Minutes is assessed as “the cash rate was expected to be lowered by 25 basis points within the next three months and again by the end of 2019”.
In his speech “the Economic Outlook and Monetary Policy”, released today, he gives the strong guidance that “at our meeting in two weeks’ time, we will consider the case for lower rates".
Recall that other aspects of the Bank’s current forecasts are underwhelming despite the assumption around lower rates – 2.6% growth in 2019; 1.75% trimmed mean inflation in 2019; and 5% unemployment rate by end 2019.
With the June rate cut virtually locked in, the issue is why we expect a follow up move in August.
Firstly, that timing is a little more aggressive than was used in the May SOMP and therefore could reasonably be associated with somewhat more optimistic forecasts.
Secondly, we expect that the June quarter trimmed mean inflation print (released on July 31) will be 0.4% indicating that underlying inflation will print 0.7% for the first half of 2019, making it difficult to persist with a 1.75% forecast for underlying inflation in 2019 – downgrading the underlying inflation forecast to 1.5% in 2019 will make it difficult for the RBA to credibly forecast a return to 2% inflation in 2020.
The Bank may choose to persist with overly optimistic forecasts but will need to ease again to emphasise its inflation targeting credentials.
This second cut would also be consistent with the assumptions that have underpinned the May forecasts .
Key to Westpac’s rate cut forecast on February 21 was the expectation that the unemployment rate was likely to reach 5.4% by end 2019. Our work around the weakness in the cyclical parts of the labour market (around 60% of employment) which is already apparent and recent trends in the business surveys signal that the softening in the labour market can be expected to become more apparent in the next few months.
We also expect that the March quarter GDP report (released June 5) will confirm the Bank’s recent downbeat assessment of the consumer (consumer spending growth in 2019 revised down from 2.5% in February to 2.0% in May) and note that the May Minutes see downside risks to the consumption forecasts.
Note also that the May Minutes point to downside risks for the global economy and confirmed in today’s speech.
Looking further out it is important that the Governor stressed the importance of the exchange rate in the monetary policy transmission mechanism. Accordingly, in order to extract ongoing “dividend” from the rate cut cycle it seems likely that the August RBA decision will not preclude further action.
However, our current assessment is that with the housing market stabilising in 2020 and the RBA uncertain about the impact of sub 1% cash rate on the economy the eventual low point in the cycle will prove to be 1%. This view is consistent with our original call back in February this year.
Our forecast low point of USD0.68 for the AUD which printed in our report on February 21 was predicated on the two cuts – the change in the timing of the cuts does not materially affect that call.
BILL EVANS is Chief Economist for Westpac.
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Westpac tips interest rate cuts in both June and August: Bill Evans

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EXPERT OBSERVER
The Reserve Bank’s May Statement on Monetary Policy (SMP) shows substantial reductions in the growth and inflation forecasts. GDP growth (to one decimal point) is now forecast at 2.6% for 2019 and 2.7% for 2020. That compares with 3.0% and 2.7% in the February Statement on Monetary Policy. The main explanations for the growth reductions for 2019 are consumption (2% down from 2.5%) and dwelling investment (–6.7% down from –4.5%).
As revealed in the Governor’s decision statement following the May Board meeting, the underlying inflation forecasts (trimmed mean) have been reduced from 2.0% for 2019 in the February SMP to 1.75% in May and the 2020 forecast reduced from 2.25% to 2.0%. 
The forecast for the unemployment rate has been slightly increased, with the 5% unemployment rate still expected to hold through 2019 but the fall to 4.75% pushed back from December 2020 to June 2021.
It is very important to note that these forecasts are based on market pricing for the profile for the RBA cash rate and the current spot AUD. In February, markets had one cut priced-in for February 2020, whereas in May, one full cut is priced-in for August 2019 and a second priced-in for May 2020. The AUD trade weighted index is 2% lower than in February.
Consequently, despite a significantly lower cash rate profile, the growth and inflation forecasts have been lowered. These current forecasts are what we should call absolute ‘bare-essentials’ – growth slightly below trend (trend at 2.75%) and inflation only holding at the bottom of the 2–3% target band out to the end of the forecast horizon. It seems clear therefore that the RBA now believes that it needs to cut rates to barely achieve an acceptable outcome.
The timing of market pricing is slightly more cautious than Westpac’s forecasts (announced on February 21) of cash rate cuts in August and November 2019.
The reasonable issue therefore arises as to whether these cuts should not occur immediately. In that regard, we need to point to the lingering theme which the RBA has promoted for most of 2019. That theme relates to the “tension” between the labour market data and economic growth as depicted through the national accounts and partial indicators particularly around retail sales and the housing market.
In the introduction to this SMP, the RBA notes “in contrast to the signal coming from the national accounts, a number of labour market indicators remain positive. Employment growth was strong in the March quarter… the vacancy rate remains high and there are ongoing reports of skilled shortages”. However, the RBA’s own forecasts do not envisage the unemployment rate falling further until 2021, even with the rate cuts embedded in the forecasts.
Consequently, there remains  a suspicion that their labour market forecasts might prove to be pessimistic and, if so, the favourable dynamics that would be associated with a much stronger labour market could be expected to develop. Those dynamics would be associated with faster wages growth, faster employment growth, faster growth in household incomes, faster consumption growth;  a narrowing in the output gap, and therefore a more favourable profile for inflation. Given that the Bank must realise that it is nearing the floor of the cash rate a time to assess this prospect is reasonable.
The issue therefore becomes one of what data around the labour market will be required for the RBA to delay its rate cuts. That theme is fully emphasised in the final sentence in the introduction to the May SMP, “the Board will be paying close attention to developments in the labour market at its upcoming meetings”.
It has been Westpac’s view for some time that the unemployment rate has already bottomed out at 4.9% and we expect that it will gradually drift up through the second half of 2019 to around 5.4%. We expect that trend to become clearly apparent by the June employment report (released in late July), making the first cut an obvious decision for the August meeting. There is always a risk that such a trend could emerge more quickly, but, given the volatility of the monthly employment reports, and the “strong employment growth in the March quarter”, we would be surprised if the RBA was prepared to abandon that hope at an earlier Board meeting.
We are not surprised that the RBA has now adopted our own view of the consumer with its big reduction in forecast consumer spending growth to 2% in 2019 now broadly in line with our own. The RBA is also moving towards our forecast for the contraction for dwelling investment in 2019 of 9%, having now forecast -6.7% from -4.5%, and an overall reduction in the GNE forecast from 2.6% to 1.9% (Westpac’s forecast is 1.6%).
Conclusion:
Today’s SMP emphasises that the RBA thinks it’s highly likely that it will need to follow market pricing with two rate cuts. Westpac concurs with the market’s August timing for the first cut but expects that the second cut will occur in November – well before the timing implied by market pricing of a full cut by May 2020.
The risk remains that the RBA may choose to move earlier than August, although given the strong first quarter for employment growth and the notorious volatility of the monthly employment reports, it seems likely that a prudent central bank would wait until August for its first move - when of course it will be able to fully explain the move and support it with its revised forecasts in the next Statement on Monetary Policy.
BILL EVANS is the Chief Economist for Westpac
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Suspicion RBA labour market forecasts might prove to be pessimistic: Westpac's Bill Evans

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EXPERT OBSERVATION
Westpac correctly forecast that the RBA would remain on hold at the May Board meeting. The Bank was clearly less concerned about the March quarter Inflation report and emphasised the importance of developments in the labour market. Westpac continues to expect rate cuts at the August and November Board meetings.
The Reserve Bank Board decided to leave the cash rate unchanged at 1.50%.
This was Westpac’s forecast, although markets were uncertain, with around a 50% probability priced in for a rate cut and 14/26 market economists forecasting a cut (Bloomberg survey 3 May). There are two main reasons behind this decision. Firstly, the RBA’s response to the recent March quarter inflation report was not as negative as had been expected. In its preview, Westpac pointed out that the RBA had moved from forecasting underlying inflation as the average of the weighted median and the trimmed mean to  forecasting just the trimmed mean.
In the March inflation report, the trimmed mean printed an increase of 0.3% for the quarter, compared to the RBA’s likely forecast of 0.4% - only a 0.1ppt miss. Today, the RBA lowered its trimmed mean forecast for 2019 from 2% to 1.75%, and for 2020 from 2.25% to 2%. That is only a 0.25 ppt reduction in the forecast. As we pointed out in our preview, that reduction compares to a 1 ppt reduction in the forecast from 2.5% to 1.5% in May 2016 (in response to a similarly low inflation report for the March quarter). Governor Stevens cut rates in response to that forecast change at the May 2016 Board meeting.
The second issue of importance was the Board’s noting in the April meeting minutes that “members also discussed the scenario where inflation did not move any higher and unemployment trended up, noting that a decrease in the cash rate would likely be appropriate in these circumstances”.
Today’s Governor’s Statement strongly emphasised the importance of the labour market, “it [the Board] recognised that there was still spare capacity in the economy and a further improvement in the labour market was likely to be needed for inflation to be consistent with the target. Given this assessment, the Board will be paying close attention to developments in the labour market at its upcoming meetings”.
As this comment emphasises, the second condition nominated in the April minutes is yet to be fulfilled. It is also important from a timing perspective to note the term “upcoming meetings”. That suggests to us that a common view held by some economists of a move in June  can be ruled out. This condition around the labour market will need more than one employment report to establish a trend.
We feel that this statement fits well with our view that the next move will be a cut in August. Firstly, we expect that the June quarter inflation report will print trimmed mean growth of around 0.4%. With the first six months of the year contributing 0.7ppts to the annual rate for 2019, it is unlikely it will be possible to persist with the 1.75%( 2019) - 2%( 2020) scenario and a 1.5%( 2019) – 1.75% (2020) scenario will be adopted by the RBA  for its August meeting. Recognition that inflation will hold below the bottom of the 2-3% target band for 2019 and 2020 will signal the need for further policy easing.
We also expect that developments in the labour market over the next three months will disappoint the RBA. It is not entirely clear whether they will be satisfied with a stable 5% unemployment rate which the Governor notes is their forecast for the next year, or they require a sustained lower unemployment rate, as noted in the concluding paragraph stating that a further improvement in the labour market is needed. Either way Westpac expects to see a deterioration in the labour market over the next six months.
We expect that this sequence of weak inflation and softening labour market data will persist throughout 2019, which is consistent with our growth forecast of 2.2% compared to trend of 2.75%. That profile remains consistent with the need for further stimulus at the November meeting following the August cut
Supporting our outlook for the labour market is our research showing that the cyclical sectors of the economy are already in jobs decline although this is being supported by ongoing jobs growth in the non- cyclical sectors.
Westpac forecast that rates would remain steady at today’s meeting. However we anticipate that developments around domestic demand; the labour market; and underlying inflation will establish a clear case for cuts in both August and November. This view has been held since February 21.
BILL EVANS is Chief Economist for Westpac.
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RBA holds rates steady in line with Westpac's forecast: Bill Evans 

<html><body>
EXPERT OBSERVATION 
The minutes of the April monetary policy meeting of the Reserve Bank Board have provided the clearest signal yet that the Bank would be prepared to cut the cash rate.
Firstly, the final section “Considerations for Monetary Policy” states “a lower level of interest rates could still be expected to support the economy through a depreciation of the exchange rate and via reducing required interest payments on borrowing, freeing up cash for other expenditure”.
The Board even sets out the conditions for a rate cut, “members also discussed the scenario where inflation did not move any higher and unemployment trended up, noting that a decrease in the cash rate would likely be appropriate in these circumstances”.
Recently the latest quarterly breakdown of employment by industry printed for the year to February.
We have considered this industry breakdown to try to find some insights into the RBA’s “tension” between the GDP and Employment Reports.
For a start it is reasonable to separate out the employment data into “cyclical” and “non-cyclical” sectors.
We have looked at “non-cyclical” covering: public administration; education and training; health care; and utilities.
Cyclical sectors are considered to be the other thirteen including: construction; manufacturing; retail and wholesale trade; accommodation; transport; finance; mining; real estate; recreation; and media.
The “non-cyclical “group has increased as a proportion of total employment from 27.9% in February 2008 to 31.9% in February 2019. That 4% increase in share represents 510,000 jobs in today’s workforce.
The cyclical group has fallen as a proportion of the workforce from 64.6% in February 2008 to 59.4% in February 2019.
It is important to note that “public administration” has increased by 18% over the last year but we assess that a considerable part of that increase has been due to reclassification of health and education workers from “private” to “public”.
Because we are including public; education; and health in the noncyclical category the reclassification does not distort the results.
Finally we have one remaining category – “professional services”.
This group represents 8.7% of total employment covering: management consulting; computer system design; accounting services; legal services; and engineers.
This category represents 8.7% of total employment having increased from 7.4% in February 2008.
Consider Table 1 to assess whether there has been any evidence of the impact of the slowdown in growth in the economy on employment.
The table uses the six month annualised growth rate for jobs in the three categories (using a two quarter average to smooth the series).
<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/2019/4/19/New%20Project%207.jpg" alt="">
The following observations are relevant:
<ul>
<li>As noted by the RBA, overall momentum in the jobs market has held fairly steady over the last 18 months despite the slowdown in economic growth (2.6% in the six months to February 2018 to 2.2% in the last six months).</li>
<li>However, momentum in the “cyclical” sectors has slowed markedly from 2.9% in the six months to February 2018 to –0.4% in the six months to February 2019.</li>
<li>Momentum in the “non-cyclical” sectors has lifted considerably from 1.5% to 5.6% over the same period.</li>
<li>The professional services sector has been booming. So the “puzzle” about the labour market is not as opaque as might be expected.</li>
</ul>
Non-cyclical jobs (dominated by government) have been strong and this sector is increasing as a proportion of total employment.
Cyclical sectors are slowing markedly and are falling as a proportion of total employment.
Given the lags and the cautious outlook for growth, employment in these sectors is likely to continue to slow.
It is not clear whether the “professional services” sector best fits in the cyclical or the non-cyclical categories.
Certainly, strong government spending in the infrastructure space is likely to explain a considerable part of the success of this category; the sharp lift in government regulations is also supporting this sector.
Furthermore, there is also likely to be a structural element to the success of this sector as companies embrace technology to boost productivity and substitute labour.
Conclusion
The Board of the RBA has nominated the labour market as the key for the policy outlook.
We are disappointed that ongoing low inflation and the persistent need to lower growth forecasts seems to be out-weighed by the employment “story”.
Our analysis points to a marked slowdown in jobs growth already being well underway in the cyclical sectors of the economy.
We expect that eventual recognition of these facts will keep the RBA on track for our expected first rate cut in August.
Bill Evans is Chief Economist at Westpac.
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Cyclical jobs are slowing, complicating the RBA’s employment puzzle: Bill Evans

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EXPERT OBSERVER
Despite this recent lift the Index has still registered four consecutive months in which the growth rate has been negative. This continues to support the signal that growth through the first two to three quarters of 2019 is likely to be below trend.
Moreover the lift in the growth rate was entirely due (0.44ppts of the 0.45ppt lift) to one component – dwelling approvals – which printed a 19.1% lift reflecting a boost in the volatile high rise sector in NSW and Victoria. Note that approvals for the stable ‘private detached houses’ sector were actually down by 3.6%.
It is reasonable to expect a substantial reversal in the dwelling approvals series next month.
The signal from the Index has been consistent with the weak momentum in the second half of 2018 revealed in the print of the December quarter national accounts. In the second half of 2018 growth momentum slowed to an annualised pace of 1% from a 4% pace in the first half of the year.
Westpac expects growth in the Australian economy in 2019 to be around 2.2% – significantly below trend which is generally assessed as 2.75%.
Key to the ongoing slow growth will be a challenged consumer as households adjust to slower than expected wages growth and falling house prices. That will be compounded by a continuation of the contraction in residential house building activity that appears to have begun in the September quarter of 2018.
We have consistently highlighted these risks which are coinciding with a slowdown in jobs growth and investment spending as both political uncertainty and global volatility weigh on firms’ employment and investment decisions.
The Index growth rate has deteriorated over the last six months, declining from +0.18% in October to –0.09% in March. Four components have contributed to this deterioration: the yield spread (–0.33ppts); commodity prices (–0.19ppts); US industrial production (–0.11ppts); and the Westpac-MI Unemployment Expectations index (–0.07ppts).
On the other hand, dwelling approvals (+0.28ppts); aggregate monthly hours worked (+0.10ppts); and the ASX 200 (+0.07ppts) lifted the growth rate. The contribution from the Westpac –MI CSI expectations index was unchanged.
The Reserve Bank Board next meets on May 7. The minutes of the April Board meeting have come close to setting out an easing bias. The minutes clarify that the Board believes that lower rates will assist the Australian economy through a lower currency and a boost to disposable income. It also sets out the case for lower rates around ongoing flat inflation and an uptrend in the unemployment rate.
Conditions for lower rates are given much more consideration than the case for a rate increase. Surprisingly, there seems to be little discussion about the Bank’s ongoing poor performance around its inflation target or the likelihood that it will once again be lowering its growth forecasts when it releases its revised forecasts in its May Statement on Monetary Policy on May 10.
Westpac sees no reason to change its forecast that the RBA will make its first cut to the cash rate at the August meeting to be followed by a second cut in November.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
 
 
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Building approvals lift the Leading Index, but negative growth rate continues: Bill Evans

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

Joel Robinson

Spacious Group completes Voyage Altona in Altona's beachside precinct

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

Homecorp approved for Budds Beach apartment tower, Lýon Residences

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

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

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

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

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

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

Bill Evans

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