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For months the Reserve Bank of Australia has said it would patiently wait for the consumer price data to confirm that the door was open to rate cuts. It got unambiguous affirmation of that reality from the ABS at 11.30am today.
In the best possible news for Australia’s economy, core inflation printed at just 0.35% in the March quarter. Despite some small upward revisions to last year’s fourth-quarter data, core inflation in Australia is sitting near the bottom of the RBA’s target 2% to 3% per annum band at around 2.2%.
But there is possibly more good news to come. Next quarter the annual inflation numbers will lose the very high underlying inflation print from way back in June 2011. This implies that the annual inflation figures could slide further in the second quarter of 2012.
What does this mean for interest rates? In my last column <a target="_blank" href="https://www.propertyobserver.com.au/economy/what-inflation-means-for-rba-interest-rates-in-may-christopher-joye/2012042354399">I provided a “cheat sheet” based on a range of different outcomes today</a>, which I have enclosed below. We ended up getting a result that arrived somewhere between the top two rows of my table. As you can see from the right-hand-side column, this connotes a minimum 25-basis-point cut in the RBA’s official target cash rate come May.
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Speculation will mount that the RBA could go even further with a 50-basis-point cut. One of the most persuasive arguments for this action is additional margin expansion by the banking community.
Assuming the RBA cuts by 25 basis points in May, we will have had a total of three cuts, or 75 basis points worth, since November. If the other banks follow ANZ’s six-basis-point hike by a similar margin, the net benefit to Aussie borrowers would have been 55 basis points, or two rate reductions (taking May as given).
Yet the RBA will probably choose to wait until it has the benefit of seeing the Gillard government’s budget after its May meeting. If it does so, its view of the world remains unchanged, and, finally, the banks do not pass on the May cut in its entirety, then the probability of follow-up relief in June would rise materially.
The low inflation numbers deliver the best of all possible worlds for Australia’s torpid housing market. Mortgage rates are currently around their average levels. However, long-term interest rates, as measured by 10 year government bond yields, are at all-time lows. This should allow banks to further cut the cost of fixed-rate home loans, all things being equal.
In addition to lower fixed-rate loans, the 4 million-plus Australian borrowers on variable-rate loans will get a third rate reduction in May with the prospect of a fourth bout of accommodation in June. Given the news on prices today, the RBA will be comfortable pushing lending rates into “stimulatory” territory—that is, levels that are lower than their long-term averages.
The latest auction clearance rate data in the two biggest auction markets, Sydney and Melbourne, suggest that the overall market is travelling okay. Last weekend auction clearance rates in both cities hit circa 60%, according to RP Data. This followed a noticeable slump in clearance rates, and housing conditions more generally, during the traditionally weak Easter period (see chart below).
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In 2012, the Aussie housing market has displayed some signs of stability after the consistent declines experienced during 2011. We forecast this result on the basis of the RBA’s two rate cuts in 2011, although the banks have chiselled away at this relief. The market’s 2012 base is evident in the chart below, which illustrates the 30-day moving average attributable to RP Data-Rismark Eight Capital City Dwellings Index.
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Finally, there are tentative signs of life in zombie-like, ultra-premium part of the market. <a target="_blank" href="https://www.propertyobserver.com.au/residential/laurie-sutton-the-kingpin-of-sydney-property-as-he-swaps-mosman-for-kalua-in-palm-beach-in-record-setting-sales/2012042354412">It was reported today that a holiday home in Palm Beach sold for a record price well in excess of $20 million</a>, which, if correct, smashes the previous Palm Beach record of around $14 million. This home had only been listed for seven months before it was snapped up. (Disclosure: a related party was involved in the transaction.)
Christopher Joye is a leading financial economist and a director of <a href="https://www.ybr.com.au/savings/index.cfm">Yellow Brick Road Funds Management</a> and Rismark. The above article is not investment advice.
 
 
 
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Interest rate relief now certain for Aussie borrowers: Christopher Joye

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With so much talk about today's ABS inflation data and the potential ramifications this will have for the RBA's rates decision at its May board meeting, I thought I would pull together my own "cheat sheet".  In brief, this guide combines the March quarter "core" inflation numbers with the inflation measured over the preceding three quarters to give a March 2012 year-on-year result. The RBA has become increasingly wary of historical revisions to the ABS's underlying inflation data (known as the "trimmed mean" and "weighted median"), and it is likely to place significant emphasis on the broader results over the last six and 12 months.  By way of background, the RBA has worked hard to prepare the public and financial markets for a cut in May subject to the outcome of the March price data. Predicting a cut if inflation prints low is easy. The much more difficult challenge was anticipating the RBA's decision to hold rates steady in February, March, and April, which caught some experts unawares.  Of the 22 economists polled by Bloomberg (I have also added in the ALP's Stephen Koukoulas), none are predicting an especially high core ("trimmed mean") inflation print: the maximum quarterly estimate is 0.7% from Credit Suisse, JP Morgan, and Nomura (see first chart below). At least seven economists are expecting a relatively low core inflation number of 0.5%. Given the currency appreciation, declining import prices, weak producer prices, and various surveys pointing to benign retail prices, it's possible that inflation is assessed to be even lower than 0.5%.
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Of course, the flipside of this coin would be an upside surprise. Nobody is projecting inflation breaching the top of the RBA's target 2% to 3% per annum band in the March quarter. A positive "surprise" would be anything greater than 0.7%. It is also interesting to observe that the economists' year-on-year expectations are all universally anodyne. Only two houses (Credit Suisse and Nomura) are predicting that the 12 monthly result with hit the mid-point of the RBA's target band at 2.5%, which is where the RBA believes inflation currently stands. Every other forecaster has a year-on-year number below the mid-point of the target band, which opens the door to RBA rate cuts. A curve-ball here are substantial revisions to the third- and fourth-quarter data from last year, which could mean that even with a soft first-quarter number year-on-year inflation stays at or above the mid-point of the RBA's band.
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 The question is then what all of this means for what the RBA (or, more precisely, its board) decide to do in May. I've taken the RBA's latest estimates of core inflation in Australia over 2011 and combined these with a range of hypothetical outcomes in March. I've then offered up my own opinion of what the RBA might do – subject to global events, revisions to past data, and changes to bank lending rates – in the far right-hand-side column.
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Christopher Joye is a leading financial economist and a director of <a href="https://www.ybr.com.au/savings/index.cfm">Yellow Brick Road Funds Management</a> and Rismark. The above article is not investment advice.
 
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What inflation means for RBA interest rates in May: Christopher Joye

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In a not surprising (for readers of this column) attempt to politically pressure Australia's central bank, <a href="https://afr.com/p/national/pm_surplus_can_drive_down_rates_fjKXptC6sJlyBIDEPgt7YI" target="_blank">a major media outlet</a> reports today that the Prime Minister has broken with historical convention – for an incumbent government – and called on the RBA to lower interest rates given the government's mooted fiscal promises. This is after the current Labor government controversially took away the RBA board's pay-setting powers because it was too generous with the governor's salary package, replaced one independent (and hawkish) director with a manufacturing industry lobbyist who describes herself as a "growth girl" and an inflation "dove", and broke with long-term convention by replacing the board's standing independent academic expert (another hawk, Professor Warwick McKibbin, who had offered himself up for re-election) with a former advisor to a Labor prime minister, Paul Keating.  Some have also observed that while the current RBA governor contentiously hiked rates in the final month of the 2007 election campaign as the global financial crisis was brewing – an election that the Liberal Party lost that month – he did not touch rates during the subsequent 2010 campaign despite possessing a hawkish bias, waiting until November to raise them pointedly after Labor had scraped home with a hung parliament. In a panel interview with Bloomberg yesterday, the former RBA board member, McKibbin, described the government’s recent elections to the RBA board as "disconcerting". McKibbin advocated a board structure comprising of three RBA staffers (currently there are only two), three independent economics experts (currently there is one), and three "community representatives" with no politically appointed treasury secretary.  The <a href="https://afr.com/p/national/pm_surplus_can_drive_down_rates_fjKXptC6sJlyBIDEPgt7YI" target="_blank">Australian Financial Review</a> reports that today: “Prime Minister Julia Gillard will aggressively link her budget ­surplus goal directly to lower interest rates, saying that the Reserve Bank of Australia has “plenty of room” to cut its 4.25% cash rate... Her speech to business leaders in Perth will also make the case for a reweighting of monetary policy which could help push down the ­Australian dollar and provide relief to manufacturers, exporters and the tourist industry. In effect putting the political success of next month’s budget into the hands of the Reserve Bank board, Ms Gillard will say that the large ­interest rate differential between ­Australia and offshore markets gives the RBA “plenty of room to move ­further if need be”. The Prime Minister is quoted apparently calling on Australia's central bank to re-focus on its antediluvian 1959 mandate, which requires it to give equal weight to employment, growth and price stability. Since that time, however, the treasurer of the day and the governor of the RBA have signed a total five "<a href="https://www.rba.gov.au/monetary-policy/framework/stmt-conduct-mp-5-30092010" target="_blank">Statements on the Conduct of Monetary Policy</a>" documents that explicitly subordinate the employment and growth goals in the 1959 Act to allow the RBA to focus mainly on one medium-term objective: price stability. Specifically, the latest statement signed by Wayne Swan and Glenn Stevens says (emphasis added): "Since the early 1990s, inflation targeting has formed the basis of Australia's monetary policy framework. Since 1996, this framework has been formalised in a Statement on the Conduct of Monetary Policy. The inflation targeting framework has served Australia well and is reaffirmed in the current statement...  [The three objectives outlined by the 1959 Act] allow the Reserve Bank board to focus on price (currency) stability while taking account of the implications of monetary policy for activity and, therefore, employment in the short term. Price stability is a crucial precondition for sustained growth in economic activity and employment. Both the Reserve Bank and the government agree on the importance of low inflation and low inflation expectations...[and] on the objective of keeping consumer price inflation between 2 and 3%, on average, over the cycle." In today's speech the Prime Minister seems to confuse these priorities. Without having the benefit of the first-quarter inflation results, which are expected to be benign, or revisions to the 2011 inflation numbers, the Prime Minister advocates the employment and growth benefits of lower rates with inflation-targeting added as an after-thought:  “In the current economic environment, should the RBA consider it appropriate to change the cash rate, this could deliver widespread benefits for households and business – noting that a number of sectors of the economy most under strain are arguably more sensitive to interest rates...This is fully consistent with the Reserve Bank’s charter obligations to best contribute to economic prosperity and full employment, as well as containing inflation.” One problem for the RBA is, as McKibbin explained yesterday, that the current government's forecasts and commitments to fiscal contraction are already accounted for in the central bank's analysis (since Treasury have always projected a steep fiscal consolidation following a fiscal stimulus that McKibbin believes was twice as large as it needed to be) and are, in any event, merely political promises. At the invitation-only Bloomberg conference, McKibbin argued that the RBA would be far more focused on what policies the government actually delivers given its history of missing commitments. He also suggested that it was unreasonable to ask the RBA to make decisions today on the basis of assumed budget outcomes before it had the benefit of both seeing what is promised on the May 8 and what the government ultimately delivers.
Christopher Joye is a leading financial economist and a director of <a href="https://www.ybr.com.au/savings/index.cfm">Yellow Brick Road Funds Management</a> and Rismark. The above article is not investment advice.
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Australian Prime Minister politicises the RBA – again: Christopher Joye

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Last Tuesday I predicted ANZ would hike rates by between five basis points and 7.5 basis points, and noted that this could be a bit of a game-changer for the RBA’s May meeting. 
On Friday the bank lifted them by six. While this is bad news for ANZ borrowers, it was a commercially astute decision for the bank and its shareholders for a variety of reasons. 
First, Friday’s hike will improve the bank’s profit margins, which is important for banks in an environment in which revenues are growing slowly and the historical returns on shareholder equity will be difficult to maintain.
Second, it starkly reinforces ANZ’s (superficial) argument that there is a big conceptual disconnect between the lending rates banks set and the cash rate that the RBA targets. 
As I have shown before, this is more fiction than fact and confuses changes in profit margins with the actual level of lending rates. To be sure, changes in funding costs will directly affect profit margins, unless product prices are varied accordingly. The question then turns to what “reasonable” and “competitive market” profit margins should look like. That is a debate I’ve tried to stimulate for years, but it remains largely unresolved. 
In terms of the actual level of borrowing rates, the RBA is, on average, the ultimate arbiter of the price of money in the Australian economy. 
The third factor that makes ANZ’s decision smart is that it amplifies the pressure on the RBA to cut rates in May. To be clear, a rate cut is by no means certain. If we get a high “core” or “underlying” quarterly inflation print on April 24 of 0.8% or more, and the historical inflation data does not revise down (or revises up), then the chances are that the RBA will leave rates unchanged. 
Upping the ante on the RBA to drop rates further in May is important to the banks for two reasons. First, it gives them another bite at the profit expansion cherry: they can choose not to pass on the full 25-basis-point RBA cut and internalise this as margin. 
In 2012 ANZ has taken back about 60% of the RBA’s second, December rate cut. But actual lending rates are still lower than they were at the end of November, and will be lower again should the RBA be convinced that it can justify pulling its trigger finger a third time. 
A second reason why the banks want a rate cut in May is because, all things being equal, banks do better in lower interest rate environments. Credit growth and revenues accelerate, default rates and impairments typically decline, and asset prices and hence collateral values rise. 
A final point to recognise is that wider bank margins will probably help encourage more competition in the long run. It will give nimbler players with lower cost bases (but higher absolute funding charges) a better chance of competing with the major bank oligopoly, which has numerous institutionalised advantages.
Christopher Joye is a leading financial economist and a director of <a href="https://www.ybr.com.au/savings/index.cfm">Yellow Brick Road Funds Management</a> and Rismark. The above article is not investment advice.
 
 
 
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Banks seeking RBA interest rate cut too: Christopher Joye

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Following on from ANZ raising its interest rates on Friday, I've summarised the results of Bloomberg's RBA cash rate survey into the chart below. Bloomberg has polled 24 economists after ANZ's decision, and I've shown the high/low forecast for each period in addition to the "median" (middle observation) and "average".
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The "median" (red line) economist expects a 0.25 percentage point (or "basis point") rate cut in May followed by interest rate stability until the first quarter of next year. The median then forecasts one hike back to 4.25% in 2013. My own May forecast is currently a "more likely than not" 25-basis-point cut subject to the inflation results on the 24th, which could stay the RBA's hand. 
The "average" economist prediction (orange line) is very similar: the average thinks there is a chance the RBA does not cut in May, albeit this is a slim prospect given the average expectation is 4.03% by May. The average then thinks there is a non-zero chance of a total of two rate cuts this year, and prices in a cash rate of 3.92% until the fourth quarter.  The average subsequently starts pricing in rate hikes in 2013. 
The dotted lines in the chart show the highest and lowest forecasts. The lowest any of the 24 economists surveyed see the cash rate going is 3.75%, which implies two more cuts. In contrast, the highest see no cuts at all this year, and a first hike by Q1 next year. 
It is always good to condition one's analysis to extreme "outliers" (i.e., a Steve Keen-style scenario). One such outlier, who was not included in the Bloomberg poll, is the ALP-aligned economist Stephen Koukoulas. Prior to ANZ's decision to hike on Friday, and the strong labour market result last week that the unemployment rate was unchanged at 5.2%, Koukoulas forecast the RBA would cut by a massive 50 basis points in May (he admittedly also forecast rate cuts in February and in April). 
Koukoulas has naturally reaffirmed his 50-basis-point cut call for May following ANZ's small rate hike on Friday, although, technically, the RBA would have to cut by more than 50 basis points to satisfy his pre-ANZ views (i.e., by 56 basis points). Koukoulas thinks we will have lots of cuts going forward – many more than any of the 24 economists polled by Bloomberg. Specifically, he declares: "Get set for a 50 cut in May and probably more cuts in the second half of 2012." If this comes to pass, it will be great news for housing investors.
Christopher Joye is a leading financial economist and a director of <a href="https://www.ybr.com.au/savings/index.cfm">Yellow Brick Road Funds Management</a> and Rismark. The above article is not investment advice.
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Economists expect one more interest rate cut in 2012: Christopher Joye

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So let’s get a few things crystal-clear upfront – I don’t want there to be any confusion. First, contrary to what you will read in the newspaper, the RBA has no idea what it is going to do with rates in May right now. 
Second, nor do the economists and commentators that like to fill the informational void with their subjective opinions on this stuff. 
Third, I would personally be over-the-moon if the first quarter inflation data printed very low, and gave our central bank room to cut rates and stimulate growth. That is, to push the unemployment rate down even lower than its current 5.2% level without risking the RBA’s inflation target. 
With that prologue out of the way, let me say that the certainty with which some analysts and commentators purport to be able to predict the RBA’s decisions weeks and months in advance of determinative data never ceases to amaze me. 
A few days ago almost everyone was predicting an RBA rate cut in May. The market had, as usual, over-egged it, with a 100% probability priced. One analyst even announced this week that the RBA would cut not once in May, but twice, or by 50 basis points in total. 
I’ve been more circumspect for the basic reason that I have listened to what the RBA has repeatedly told us: all else being equal, it is, quite reasonably, not touching rates until it gets the next batch of quarterly inflation data on the 24th of April. This is why I was relatively confident that--barring any unexpected disasters--the RBA would leave rates unchanged in February, March, and April. 
One is left to surmise that the pundits predicting a rate cut(s) in May and/or June must have a very high degree of faith in their quantitative forecasts for Australia’s underlying inflation rate during the first three months of 2012, and, just as importantly, the revisions the ABS makes to the 2011 results. 
In this context, I reckon I know one of the country’s best inflation forecasters. And I also know what his standard errors look like. The bottom line is that once you account for a bit of chance, anything could happen on the 24th. (Now don’t forget my riders upfront!) 
I would implore those proclaiming most loudly what the RBA will do in May, June and months thereafter to reflect on what the boss of the central bank, Glenn Stevens, recently described as his “first rule of forecasting”: don’t forecast! 
My current RBA logic is pretty straightforward. First, the RBA has more or less declared that it has given up on “pre-emptive” policy-setting, and certainly so in respect of rate hikes. 
As I’ve said before, lifting rates is hard yakka when the community has got used to 20-plus years of uninterrupted economic growth and mostly low and steady inflation. The problem is that generations of Australians have forgotten that the average mortgage rate between 1980 and 1995 was 12.6%. Imagine paying that much for a home loan today! You would have conniptions. In January 1990 mortgage rates soared as high as 17%. But since 1995 the average variable rate has only been 7.4%. And that’s mainly because the RBA has kept the pace of consumer price inflation to between 2% and 3% per annum (give or take). 
For the last year or so I’ve expressed my concerns about the RBA’s political independence, and the fact that the bank itself is worried about the integrity of its price stability mandate in the wider community.
These anxieties appear increasingly justified given mounting criticisms of RBA decisions and calls from leading stakeholders for the government to change the way the RBA acts. Of course, this government has already controversially taken the RBA board’s pay-setting powers away from it (because Swannie felt the governor was getting too much), and has stacked the board with appointees it believes will be less zealous about inflation-fighting. 
And all of this has occurred at a time when the labour market is near fully employed, borrowing rates are around their 15-year averages, private investment is at record highs, and the economy continues to expand. 
The RBA has shifted away from “forecasting” towards what the governor calls “<a target="_blank" href="https://en.wikipedia.org/wiki/Nowcasting_(economics)">nowcasting</a>”. That is, sitting back and watching the hard empirical data flow through, and trying, to the best of its ability, to work out what the pulse of growth and inflation look like in the present (or recent past). When it comes to forecasting inflation, past outcomes are, in fact, one of your best guides. 
Politically, the powerful thing about “nowcasting” is that it is externally explicable. The RBA knows it is never going to convince the community or, nowadays, its own board, about the reliability of its long-term inflation guesses. The second-best alternative, therefore, is to set policy based on the highest-quality information it has about what is happening right now. 
So how, then, should one think about the probabilities around May? Well, the RBA tells us (if we listen) that it has one main policy goal, which is its 2% to 3% per annum, through-the-cycle, "inflation target". 
By the RBA's own logic, it can cut rates in May if the first-quarter inflation data suggests the underlying pulse of consumer price pressures is advancing at less than the mid-point of its target band. 
In principle, if core inflation prints at 0.7% or higher, and the six- and 12-month core measures are also above 2.5%, the RBA should not be cutting rates in May. Clearly, the converse is also true. 
Here it is useful to remember that the deputy governor of the RBA told parliamentarians in February that “our central forecast has unemployment drifting up to around 5.5%”. And this was said after two rate cuts and a bit of currency depreciation. 
Instead, the unemployment rate has remained stubbornly steady at around 5.2% with leading indicators, such as job advertisements and the various business surveys, implying that employment growth will improve a bit. Indeed, ANZ have published an analysis of the latest labour force data and concluded that the unemployment rate may have peaked. 
The chart from ANZ below shows the 12-month change in the unemployment rate (orange line) plotted against the 12-month change in GDP (blue line). You can see what the RBA and many analysts have long suspected: the unemployment rate is a far less volatile indicator of economic growth than the point estimate that is outputted by the ABS via its National Accounts calculations.
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ANZ argues (as I have) that the fact that Australia’s unemployment rate has remained basically unchanged since the middle of 2011 suggests that the economy is probably tracking close to its trend rate of growth. It just so happens that another key proxy for growth, NAB’s business conditions index, is also close to trend. 
Given it takes one to two years for rate changes today to have their full impact on activity, and given what the sweep of data tell us about current activity, the only credible basis for a rate cut in May is an unambiguous sign that inflation is lower than it needs to be. But until we get the hard data on the 24th of April, all the guesses as to what the RBA may or may not do (excuse the pun) are pure noise. That is, irrelevant speculation. 
There are two risks to this analysis. One possibility is that the RBA is politically pressured into cutting even with a high inflation print because of the numerical dominance of the six doves and a politically appointed treasury secretary on its board. I think this is a low probability risk, but a risk nonetheless. Now is as good a time as any to make a statement about your independence for the benefit of folks like Paul Howes. 
Another is that ANZ and the other banks lift lending rates in the interim, which gives the RBA an “excuse” to cut rates in May even with a high inflation print if only to neutralise the change in lending rates. I think it is entirely possible that ANZ will indeed nudge up its rates today, which makes tactical and strategic sense for reasons I have discussed previously. This would tilt my rate probabilities further towards a cut, subject to what the 24th tells us.
Christopher Joye is a leading financial economist and a director of <a href="https://www.ybr.com.au/savings/index.cfm">Yellow Brick Road Funds Management</a> and Rismark. The above article is not investment advice.
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The RBA has no idea what it will do with rates in May as it focuses on ‘nowcasting’: Christopher Joye

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Economist Christopher Joye gives his take on today's employment data, which he says was a surprise to many economists. 
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Christopher Joye's video take on today's unemployment data: RBA rate decision countdown

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Looking at RP Data-Rismark’s daily hedonic home value index, which is also published by the Australian Stock Exchange, we can see that the “stabilisation” evident in Australia’s housing market in 2012 has galvanized further during the month of April.
Australian home values are now in the black for the first time in 2012, having fully recovered from the drop recorded during the seasonally-weak month of January.
At 10 April 2012 home values across the eight capital cities had risen by 0.3% above their end 2011 levels (see first chart below).
<img src="/images/stories/joyebanks4101.jpg">
The improvement in housing conditions can also be viewed through the rolling one-month, six-month and 12-month returns, which simply reflect the raw capital growth, exclusive of any rents, realised over the period in question.
My second chart illustrates that analysis.
While year-on-year returns (blue line) have flat-lined at around -4% we can see more clearly the effect of the recent house price growth on the six-monthly (red line) and monthly returns (green line), which are heading towards or are above the horizontal x-axis that denotes zero growth.
<img src="/images/stories/joyebanks4102.jpg">
One key takeaway from the chart above is that the month-on-month change in Aussie home values has been positive since February and remains in the black as we head into the second half of April. The crucial question is what will happen in the remainder of the year. In late 2011 I forecast that Australian home values would stop falling in the first quarter of 2012 and we would possibly see a return to capital growth, which is the way it has panned out. The good news for housing investors is that the financial markets are putting a near certain (or close to 100%) probability on a third RBA rate cut in May – and some think we might get another in June. As regular readers would know, I did not expect the bank to cut rates last month – or in the preceding two months – given that I deduced that they would want to wait until they got the all-important ABS inflation data at the end of April. The RBA is fond of establishing subtle decision-rules or offering guidance on the future direction of policy if inflation, employment and growth behave in certain ways. After its uneventful April meeting the RBA clearly communicated that it would trim rates in May if it got a weak inflation read for the first quarter of 2012. Analysts have subsequently inferred that to mean the RBA will cut rates if core or underlying inflation prints at less than or equal to 0.6% -- or under 2.5% annualised. Yet the market seems to be overlooking the fact that the RBA will want to “look through” the volatile, and frequently revised, quarterly information, towards the six-monthly and yearly prints. So in that context a May rate cut will likely rely on the six- and 12-monthly outcomes being somewhere between 2.0% and 2.5% on an annualised basis. If they somehow come out in the top half of the RBA’s target 2-3% band it is hard to see how the central bank will relax rates barring further offshore disasters or a big jump in the jobless rate. With the bank estimating that core inflation is right in the middle of its target band - albeit before the full effect of the November and December rate cuts - the core numbers would have to print very high in the first quarter of 2012, and/or the ABS would have to upwardly revise the remaining 2011 data in order for us to see an adverse result (given the advantage of being able to discard the high March 2011 number from the annual time-series).
With the above in mind I would not attach a 100% or even 90% probability to a rate cut in May. It is more than likely but will depend on the pulse of price pressures during the past 12 months. Another thorny question for the RBA is what it would do if the year-on-year inflation data prints just below the mid-point of its target band but the six-monthly average is above it. The RBA might be swayed by the argument that with the Aussie dollar off 4-5% from its recent peaks the economy is already getting the benefit of some extra stimulation that is tantamount to half a rate cut. The flipside of that currency depreciation is imported inflation as opposed to imported deflation, where the latter had been influential in keeping overall price pressures in check via low tradeables and goods price growth. A final curveball is what the banks do with their margins. We have ANZ’s decision on Friday this week. If I was the CEO of a major bank I would definitely bump up lending rates by a good 5.0 to 7.5 basis points. Why? First, because you will boost your net interest margins in an environment in which profits are going to be hard to come by due to structurally low credit growth – funding costs have been falling since January. A second reason to widen margins is to amplify pressure on the RBA to neutralise that change in lending rates in May. All else being equal banks do better in low interest rate climates. Asset prices rise, credit growth accelerates and impairments decline. So the banks will want to see the RBA cutting in May and bumping up margins in April will increase the probability of that happening. Borrowers are still better off because the RBA ordinarily moves in 25 basis point increments. A final reason to expand margins is simply because, as an oligopolist, you can! From a margin extraction point of view the banks need to break the back of the purported link between the RBA’s target cash rate and actual, economy-wide lending rates. While the link will always exist in practice (ie, notwithstanding what people may want you to believe), the banks should rationally want to improve their ability to freely profit maximize without annoying politicians and commentators interfering with their decision-making processes, as has been the case of late.
Christopher Joye is a leading financial economist and a director of <a href="https://www.ybr.com.au/savings/index.cfm">Yellow Brick Road Funds Management</a> and Rismark. The above article is not investment advice.
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Banks on track to bump house rates: Christopher Joye

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Since the average Australian family’s debt-to-income ratio has risen from 55% in the early 1990s to around 150% today, they’ve become vastly more sensitive to changes in interest rates. Combine that with the fact that most Australian borrowers are on fully adjustable-rate loans that usually price off the RBA’s target rate, and you start to realise that Australia’s central bank is facing significant, and perhaps uniquely acute, community resistance to higher rates. (Never mind that numerically speaking there are actually more savers than borrowers.)

This situation is exacerbated by the highly telescoped nature of Australian economic growth. The newly-appointed and self-described “dove” on the RBA board, Heather Ridout, highlighted this on radio during week: around 80% of the Aussie economy is expanding at an insipid 1% pace while the remaining 20% races along at a spectacular 15% rate. Framed differently, four out of five Australian businesses want rate cuts while one-fifth don’t really care. It’s like the awesome-foursome have one guy rowing at top speed while the remaining three have been given lead oars.
And then we have the government of the day in periodic conflict with Australia’s embattled central bank. For decades the convention was that the independent members of the RBA’s board set staff pay. While the RBA is part-regulator of, and explicit lender of last resort to, the entire banking system, and many of its alumni have held high office in the private sector, top staff are still paid only a fraction of what they could earn elsewhere.
Possibly because of well-documented clashes between the RBA and the government during the GFC (over the 2008 rate hikes and the deposit guarantees), and the subsequent spectre of an overly hawkish RBA eager to raise rates during 2010-2011, Treasurer Wayne Swan broke with his predecessors’ convention and took away the RBA board’s pay-setting powers. At the same time, he promised that future governors would not receive Glenn Stevens’s ‘out-of-step’ $1 million pay packet (ignoring the fact that the average top=10 major bank executive gets about four to five times as much).
Some believe that a parallel assault on the RBA’s independence and credibility was the replacement of the two main “hawks”, or inflation-fighters, on the bank’s board—Professor Warwick McKibbin and Donald McGauchie—with a manufacturing industry lobbyist, Heather Ridout, who says she prioritises growth over inflation, and a former Labor economic advisor, John Edwards. The appointment of Edwards broke the multi-decade tradition of having at least one politically-independent academic expert sitting on the bank’s board.
Professor McKibbin’s regular criticisms of the government’s general policy initiatives doubtless helped convince them that the political costs of elevating academics to the RBA board outweighed the clear governance benefits.
Indeed, it would not be a complete surprise to see Julia Gillard’s recently departed staffer and noted RBA critic, Stephen Koukoulas, one day join Edwards (or replace him), assuming Labor still have the power to make this change.
Koukoulas notably characterised this month’s RBA decision as “candy-arsed”, and has been vociferous in his condemnation of the RBA for not cutting in February.
In light of the dynamics described, it should be no surprise that the community has been baying for cuts. The Australian and The Australian Financial Review collectively published four opinion pieces immediately before this week’s RBA meeting calling on the bank to ease its policy position.
News Limited’s Terry McCrann also chimed in declaring that the odds of an April cut were better than 50%, and, more remarkably, that if the RBA governor recommended another pause, which he did, the doves on the board would roll him. In doing so, McCrann acknowledged for the first time that there had been occasional battles on the RBA board when the numerically-dominant doves had knocked-back staff recommendations to hike rates, which is something I argued occurred in 2011.
Following the RBA’s decision to wait for the first quarter inflation data, we have been overwhelmed with columnists from The Australian and The AFR confidently calling a cut in May, and lambasting the bank for misjudging the pulse of growth.
Of course, much of this is predicated on one unusually low GDP print in the fourth quarter of last year. People seem to forget that these numbers can be revised by stunning margins. For example, in the first quarter of 2011 the ABS told us that the economy had contracted by a horrific -1.2% as a consequence of the east coast floods. The latest estimate is a radically more benign -0.3%. It is not inconceivable that the fourth quarter GDP will revise up to signal healthier growth at the end of last year.
As UBS’s Matt Johnson argues, the growth data tends to revise towards the unemployment rate, which at its current 5.2% level seems to paint a more positive picture.
Those that want lower rates overlook a few other key points.  Namely that:
<ul>
<li>The RBA cut twice only months ago, a move most assess takes 1-2 years to have its full effect; </li>
<li>The currency is now 5% below its level at the beginning of March, and, if it keeps falling, will become a source of inflation rather than deflation; </li>
<li>Australia has high “services” (as opposed to “goods”) and non-tradeables (as opposed to “tradeables”) inflation, with tradeables and goods inflation having been depressed only by the appreciation in the currency; </li>
<li>The unemployment rate remains just a touch above the Treasury’s estimate of its ‘full-employment’ level, and has been bobbing around this mark for a year; </li>
<li>Mortgage rates are actually at or below their long-term averages; </li>
<li>Core inflation is still smack-bang in the middle of the RBA’s target band (not below it), and that this is partly a result of the RBA’s historic rate settings; </li>
<li>We have a carbon tax being implemented this year that many experts think will be more inflationary than the government and RBA forecasts imply; </li>
<li>Productivity looks low and threatens to boost inflation above the RBA’s target band unless it improves; </li>
<li>The two largest economies in the world, the US and China, are currently growing around their trend pace; </li>
<li>The global environment is materially better than the RBA had banked on back in December; and </li>
<li>Central banks around the world have printed over US$8 trillion of new money to underwrite government deficits and bail-out private banks, which history suggests, can be inflationary.</li>
</ul>
I think one under-appreciated problem for the RBA is that it is discovering just how hard it is to raise rates beyond their neutral level following the regime-change in the economy’s interest rate elasticity during the 1990s and 2000s. After more than 20 years of relatively low inflation (care of China flooding global product markets with cheap goods), there are entire generations of Australians who cannot remember what it was like to have high inflation and double digit rates. And these people vote. In 2011 the RBA executive learnt that it no longer controlled its own board, as Ian MacFarlane had done during his easier and more stable reign. Following the governance revolution implemented by a much more open-minded Glenn Stevens, the RBA has unwittingly empowered the vested interests that dominate its board.
With six private sector representatives and a politically-appointed treasury secretary, the RBA has arguably the most inflation-friendly monetary policy committee of any central bank in the developed world. It also just happens to have one of the highest inflation targets in the world, and, just coincidentally, has failed to meet this target during Glenn Stevens’ term (core inflation has average 3.2% per annum since the December quarter of 2006).
Given the decision-making constraints the RBA faces, and the fact that it believes it has one main policy goal (price stability), which is spun into a “dual mandate” in the long-run (by arguing that if it keeps inflation low it will help maximize employment growth), logic would suggest that it should cautiously, and only when persuaded with reliable empirical evidence, lower the price of money to stimulatory levels. To be clear, this is because normalising it again, and pushing rates into restrictive territory, is a vastly more difficult undertaking.
Years ago I argued that given the RBA’s questionable inflation-fighting track-record since Stevens’ term began, and the abovementioned limitations, it should potentially have an asymmetric response function: all things being equal, the RBA should prefer to slightly undershoot rather than slightly overshoot its inflation target. In practice, the opposite has proven to be the case.
Don’t get me wrong: if year-on-year core inflation prints near the bottom of the RBA’s target band in a few weeks time, and the labour market deteriorates further, this central bank will be almost certainly cutting rates in May.
While the lay fans in the stands may not embrace the decision-making fortitude I advocate here, RBA officials can draw strength from the fact that history tends to be a more impartial judge.
Christopher Joye is a leading financial economist and a director of <a href="https://www.ybr.com.au/savings/index.cfm">Yellow Brick Road Funds Management</a> and Rismark. The above article is not investment advice.
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The RBA has unwittingly empowered the vested interests that dominate its board

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Christopher Joye's video take on the April RBA decision

Buyers considering a residence at boutique Gordon townhouse development <a href="https://www.apartments.com.au/new-townhouses/lume-gordon-43-47-dumaresq-street-gordon-nsw-2072">Lume</a>&nbsp;now have another reason to bring forward their decision.

For a limited time, purchasers of a residence at Lume will receive a BMW iX3 50 electric SUV, valued at more than $120,000, as part of their purchase. The offer is designed to add value for buyers while complementing the lifestyle envisioned for the architecturally designed Upper North Shore development.

Scott Timmins, Development Manager at <a href="https://www.apartments.com.au/developers/winim">WINIM</a>, said the partnership was created to provide buyers with a compelling reason to act.

"In today's market, buyers need a compelling reason to act now, and the BMW partnership was designed to create that catalyst. We wanted to add genuine value for our future purchasers. Choosing the all-electric BMW iX3 50 also reflects the values behind LUME, forward-thinking design, innovation and a more sustainable way of living. It's a premium incentive that complements the lifestyle our buyers aspire to and rewards those who commit early."

[smartcode_project:default project_id=7354 project_image_fid=374893]

Delivered by WINIM in partnership with Burtonwood Investment Partners, Lume comprises 14 architecturally designed two, three and four-bedroom townhomes created for families seeking the space of a freestanding house with the ease of modern, low-maintenance living.

The three-storey residences, designed by award-winning architecture practice <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a>, have been tailored for families and multi-generational living, featuring private internal lifts, flexible lower-level spaces, generous open-plan living and entertaining areas, media rooms, and landscaped outdoor spaces with custom outdoor kitchens.&nbsp;

Inside, engineered oak flooring, bespoke dining joinery with integrated wine fridges and backlit bars, sculptural porcelain bathrooms, Parisi freestanding baths and Astra Walker tapware create interiors that balance functionality with refined finishes.

Each townhome has been designed to combine generous internal spaces with sustainability initiatives such as EV charging infrastructure, while <a href="https://www.apartments.com.au/landscape-architect/arcadia-landscape-architecture">Arcadia</a>'s landscaped communal areas, centred around a restored creek line and native planting, encourage residents to connect with nature and spend more time outdoors.

[smartcode_project:default project_id=7354 project_image_fid=269527]

Rothelowman's Gary Tsui said the architecture was conceived to respond carefully to its Upper North Shore setting.

"Our vision was to create elegant, uplifting homes that draw on and positively contribute to the local character through meticulously considered design and an interaction with the surroundings."

The communal landscape has been designed as more than an open space between homes. Arcadia's Ben Newell and Kate Phillips said the adjoining reserve provided an opportunity to create a distinctive natural retreat for residents.

"Just as waterways carve their way through Ku-ring-gai's landscape, a raised boardwalk weaves through the reserve, connecting the homes to this tranquil oasis."

[smartcode_project:default project_id=7354 project_image_fid=374892]

Located just 300 metres from <a href="https://www.apartments.com.au/developments/gordon-nsw-2072">Gordon</a> Village and Gordon railway station, Lume offers convenient access to Sydney's CBD while placing residents close to some of the North Shore's leading schools, including Ravenswood, Pymble Ladies' College and Knox Grammar. Lane Cove National Park, Gordon Golf Club and a range of cafés and restaurants further reinforce the family-focused lifestyle on offer, with the BMW iX3 50 complementing everything from local trips around Gordon to weekend drives and city commutes.

Construction is underway with completion expected in mid-2027.

[smartcode_project_cta:default project_id=7354]

Joel Robinson

Boutique Gordon townhomes now come with a BMW iX3 50

Two apartments have sold for more than $10 million at EADE Byron Bay, setting some of the highest apartment prices ever achieved in the coastal town and underlining the growing appetite for luxury beachfront apartments in Australia's most popular coastal locations.

The $210 million project by Vitale Property Group has now secured more than $70 million in sales, led by residences that changed hands for $12.75 million and $11.75 million.

The record-breaking transactions reinforce the shift occurring in Byron Bay's premium property market, where affluent downsizers and lifestyle buyers are increasingly opting for high-end apartments over large beachfront homes.

<a href="https://www.apartments.com.au/new-apartments/eade-byron-bay-29-shirley-street-byron-bay-nsw-2481">EADE Byron Bay</a> occupies a rare 6,000 sqm absolute beachfront site on the corner of Shirley and Milton Streets overlooking Main Beach and The Wreck surf break, just 350 metres from Byron Bay's town centre.

The 25-residence development is the first beachfront apartment project approved in Byron Bay in more than a decade and is currently under construction, with completion expected in May 2027.

[smartcode_project:default project_id=145590 project_image_fid=359521]

The project has attracted a mix of local Byron Shire residents downsizing from larger homes, alongside interstate buyers from Sydney, Melbourne and Brisbane seeking a permanent coastal lifestyle without compromising on space.

Designed by <a href="https://www.apartments.com.au/architects/hayball">Hayball</a> and with interiors by <a href="https://www.apartments.com.au/interior-designers/alexander-co">Alexander &amp; Co</a>, EADE comprises&nbsp;10 garden apartments ranging from 284 sqm to 622 sqm, nine with private pools, five full-floor apartments and 10 rooftop residences with private plunge pools, expansive outdoor entertaining areas and uninterrupted ocean views.

[smartcode_project:default project_id=145590 project_image_fid=359527]

<a href="https://www.apartments.com.au/developers/vitale-property-group">Vitale Property Group</a> Managing Partner Chris Vitale said the project's combination of scale, location and limited future supply was driving buyer demand.

"There isn't another beachfront holding in Byron Bay of this size and position that could be developed again," Vitale said.

"Buyers are responding to the scarcity and the irreplaceability of a site of this calibre and to floorplans they can't find elsewhere in the market.

"We are seeing buyers place significant value on quality, space, design, resort-style amenities and the rarity of the location. The sales achieved to date demonstrate that discerning purchasers recognise the long-term significance of what is being created at EADE Byron Bay.

"Many are coming from larger homes in the Byron region, or from Sydney, Melbourne and Brisbane, and are after the space, security and convenience, without the upkeep of a house."

&nbsp;

[smartcode_project:default project_id=145590 project_image_fid=359523]

The Byron Bay project follows Vitale Property Group's delivery of the Mondrian Hotel and Private Residences at Burleigh Heads, with EADE continuing the developer's focus on luxury coastal developments.

Residents will have access to a resort-style swimming pool, gymnasium, sauna, cold plunge pool, concierge services and dedicated workspaces, while the project is targeting an 8-Star Green Star rating.

EADE Byron Bay is being exclusively marketed by Projx Australia in conjunction with WHITEFOX Projects.

WHITEFOX National Projects Director Phillip Rand said demand had been driven predominantly by owner-occupiers.

"We are seeing buyers at EADE place significant value on quality, space, design, resort-style amenities and the rarity of this location," Rand says.

"The sales achieved to date demonstrate that purchasers at this level recognise the long-term significance of what is being created at EADE Byron Bay."

Residences at EADE Byron Bay are currently priced between $4.75 million and $15.95 million.

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[smartcode_project_cta:default project_id=145590]

Vitale breaks Byron Bay records with EADE sales flurry 

When buying an apartment, most people compare the big-ticket items first. Floorplans. Kitchens. Balcony size. Natural light. The view.

But there's one everyday consideration that often doesn't come up until after moving in: how parcels are delivered.

As online shopping has become part of everyday life, parcel deliveries have shifted from an occasional event to a regular occurrence. Australians spent a record $82.6 billion shopping online in 2025, with almost one in every four retail dollars now spent digitally.

For apartment residents, that can present a challenge.

If nobody is home to accept a delivery, parcels may be redirected to a nearby Post Office, left in a building lobby or common area, or require building management to step in. In higher-density buildings, where dozens or even hundreds of residents may receive deliveries each day, parcel management has become an increasingly important part of everyday living.

That can create a range of frustrations. A missed delivery often means making time to collect a parcel elsewhere, while packages left unattended in foyers or mail areas can create clutter and increase the risk of theft. What seems like a minor inconvenience can quickly become a recurring issue for residents who shop online regularly.

It's one of those details that rarely features in a display suite but can have a noticeable impact once residents move in.

As a result, buyers are beginning to look beyond traditional apartment features and consider how a building supports day-to-day convenience, including whether there are secure options for receiving deliveries.

Australia Post's Parcel Lockers provide one solution.

<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/CkF2oKmlACg?si=C50sDaoUUn2nuLmq" title="YouTube video player" width="560"></iframe>

Rather than having a parcel delivered directly to an apartment, eligible deliveries can be sent to a nominated Parcel Locker. Once the parcel arrives, residents receive a notification through the AusPost app or SMS and can collect it using a QR code or one-time PIN at a time that suits them.

The Parcel Locker network now includes more than 1,500 locations nationwide, with installations at Post Offices, shopping centres, transport hubs and an increasing number of residential developments. By providing a secure collection point, Parcel Lockers help reduce missed deliveries and avoid parcels being left unattended in common areas.

For developers, parcel infrastructure is becoming another way to improve the resident experience. Rather than relying on concierge staff or leaving parcels in communal spaces, secure collection points help streamline deliveries while preserving the presentation and functionality of shared areas.

For buyers, it's a reminder that the best apartment features aren't always the most obvious.

A generous floorplan or quality finishes might help narrow the shortlist, but the conveniences that simplify everyday life, whether that's EV charging, secure bike storage or reliable parcel delivery, often become the features residents appreciate most once they're living there.

The apartment feature many buyers don't think about, until their first missed delivery

<a href="https://www.apartments.com.au/developers/hg-developments">HG Developments</a> is doubling down on Maud Street in Newstead, filing plans for a new apartment tower just a few doors down from its under-construction Aire Newstead development.

Recently submitted to Brisbane City Council, the proposal is for an 18-storey building designed by bureau^proberts, which has drawn heavily on Brisbane's subtropical design principles while referencing the suburb's industrial heritage.

A total of 64 apartments are planned for the amalgamated 1,518 sqm site at <a href="https://www.apartments.com.au/new-apartments/17-21-maud-street-newstead-qld-4006">17–21 Maud Street</a>, a short walk from the Brisbane River and Newstead Riverwalk.

<img alt="First look: HG Developments plans 18-storey subtropical apartment tower for Newstead" data-entity-type="file" data-entity-uuid="a400c7fd-bd15-48f8-a63b-10ede92efe00" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Maud%20st%20bldg.png?VersionId=.0vPmjpbC7CNP7kqGWa6L7rGIwsNExaw" />

"The building is defined by a series of vaulted motifs that reinterpret the arches, colonnades and layered facades evident throughout Newstead's historic built fabric," the Urban Design Report states.

"Combined with recessed glazing and generous balconies, these elements create a layered building envelope that provides shade, weather protection and opportunities for natural ventilation whilst establishing a distinctive architectural identity."

The proposal comprises 64 two, three and four-bedroom apartments across 18 residential levels, positioning it alongside a growing number of taller residential projects transforming Newstead's northern precinct. The tower incorporates extensive subtropical landscaping, with cascading planter boxes, deep planting at street level and a landscaped rooftop recreation area.

<img alt="First look: HG Developments plans 18-storey subtropical apartment tower for Newstead" data-entity-type="file" data-entity-uuid="1d8140f4-8b98-45cd-b1b8-1efe8c8e266b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Maud%20st%20podium.png?VersionId=VAZtbCoD44YCJ57N99fQCAKeSJx7ldZs" />

Bureau Proberts has prioritised passive environmental design throughout the project, with generous balconies, recessed glazing and operable façades helping reduce solar heat gain while maximising natural ventilation. River views become available from the upper levels, while the building has been orientated to capture prevailing breezes from both the Brisbane River and the west.

The architects say landscape is intended to be integral to the building rather than an applied element.

"Vertical greenery, cascading planter boxes and elevated gardens are woven throughout the architecture, softening the built form and strengthening the connection between residents and the subtropical environment."

"Through the integration of landscape, high-quality materials and passive design principles, the development delivers a refined residential address that celebrates Newstead's heritage character while contributing positively to Brisbane's evolving subtropical identity."

Newstead has remained one of Brisbane's most active apartment markets in recent years, with a number of developers continuing to back the inner-city suburb.

HG Developments is currently delivering the 40-apartment Aire Newstead at 25 Maud Street. Fortis recently launched the 65-apartment <a href="https://www.apartments.com.au/new-apartments/crest-walker-newstead-12-kyabra-street-newstead-qld-4006">Crest &amp; Walker</a> on Kyabra Street, while builder-developer BPG and Don O'Rorke's Consolidated Properties are both expected to launch their respective Newstead projects before the end of the year.

HG Developments doubles down in Newstead with second Maud Street apartment development

Walk past a new apartment development promoting its sustainability credentials and it's easy to picture rooftop gardens, mature trees, landscaped courtyards and residents surrounded by nature.

But in many cases, that's not actually what those sustainability ratings guarantee.

Australia's leading environmental rating tools have played a significant role in improving the energy efficiency and environmental performance of buildings. Yet despite their focus on reducing emissions, many don't require developers to include trees, biodiversity or meaningful green space.

In other words, a building can achieve one of the country's highest sustainability ratings while containing little more than concrete, glass and hard landscaping.

That disconnect has led to the emergence of a new movement across Australia's property industry: nature-based cities.

The concept goes beyond designing buildings that consume less energy. Instead, it encourages developers to treat nature as essential infrastructure, integrating biodiversity, tree canopy, living landscapes and green spaces into projects from the earliest stages of planning.

Research has consistently linked access to nature with better physical and mental health, cooler neighbourhoods, improved biodiversity, stronger climate resilience and more connected communities. As Australia's cities continue to become denser, advocates say those outcomes should be considered just as important as energy efficiency.

Nature Based Cities (NBC) was established in 2022 to help accelerate that shift.

Founded by Hamton Executive Chairman Paul Hameister OAM, the not-for-profit was created after research highlighted a significant gap in Australia's sustainability framework. While existing environmental rating tools rewarded energy performance and emissions reductions, they placed little emphasis on the inclusion of living landscapes.

"We've always wanted to do more, and we know other developers who want to do more, but the ESD rating tools just aren't there," Hameister says.

"In Australia, you can have a five-green-star rated building that's concrete and glass with not a blade of grass.

"The focus is on reducing emissions, which is laudable, but there hasn't been enough attention paid to protecting and re-establishing nature. We need both for the health of the environment and for communities."

Since its launch, NBC has developed independent design guidelines and accreditation frameworks that encourage developers to prioritise ecology, biodiversity, tree canopy, walkability and living landscapes alongside traditional sustainability measures. The organisation first focused on medium and high-density residential developments before recently expanding into precinct-scale communities and masterplanned neighbourhoods.

Jan Talacko, founder of sustainability consultancy Ark Resources and a member of the Nature Based Cities Advisory Council, says the initiative addresses an area that has largely been overlooked by the property industry.

"Throughout my 25 years of working collaboratively with all stakeholders in the property sector, I've always favoured a pragmatic approach to sustainable design which encourages initiatives that not only meet environmental expectations but also improve amenity," Talacko says.

"Whilst we are making steady progress in relation to energy and carbon emissions from buildings, there has been much less emphasis on encouraging biodiversity and tackling the urban heat island effect.

"The Nature Based Cities initiative responds to a gap in the suite of tools currently used by the property development sector, which don't provide sufficient incentive, or recognition, for the integration of landscaping and greenery."

For apartment buyers, the shift is also changing the questions worth asking.

Rather than assuming a sustainable building will naturally include abundant green space, buyers are increasingly being encouraged to look beyond environmental ratings and ask what nature is actually being delivered. How much tree canopy will the development create? Has biodiversity been considered? Are landscaped spaces designed for people as well as appearance?

As Australia's cities continue to grow upwards and outwards, the next generation of sustainability may not simply be measured by lower emissions, but by how successfully developments bring nature back into everyday urban life.

Christopher Joye

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