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There was unanimity in the market ahead of yesterday's Reserve Bank board meeting that there would be no change to official interest rates. The market was right, but there may not have been quite the same unanimity within the boardroom.
Going into the meeting it was probable that rates would be left unchanged, but not certain. One only has to read Glenn Stevens' statement after the meeting to understand why a change was possible. 
While the world is relatively stable, although Europe remains "a potential source of adverse shocks for some time", growth in China has (as it intended) moderated and commodity prices are "noticeably off their peaks". Australia’s terms of trade have also peaked, but remain high.
While growth in Australian domestic demand was at its fastest for four years last year, output growth was below trend over the year and ‘considerable’ structural change was occurring. Labour market conditions have also softened, credit growth remains modest, the housing market remains soft and the exchange rate remains high.
In fact, in the non-resource side of the economy conditions are tough. Retail sales are flat-lining, housing prices have weakened, non-mining construction has slumped and job losses in the manufacturing sector are swelling as businesses are being forced to restructure in response to weak demand and the exchange rate.
And, in prospect – if Wayne Swan actually delivers on his promise/threat – is the mother, and father, of all contractionary budgets. Oh, and the carbon tax.
Stevens said yesterday that in underlying terms inflation was around 2.5% last year, and currently expected it to be in the 2%to 3% range over the next one or two years, ‘abstracting’ from the effects of the carbon tax and including an assumption that productivity growth in the economy will increase "somewhat" as a result of the structural changes occurring.
"At its next meeting the board will have the opportunity to reassess the outlook for inflation, taking into account not only data on demand and output but also forthcoming information on prices.
"The board eased monetary policy late in 2011. Since then its judgement has been that, with growth expected to be close to trend, inflation close to target and lending rates close to average, the setting of monetary policy was appropriate.
"The board’s view was also that, were demand conditions to weaken materially, the inflation outlook would provide scope for easier monetary policy.
"At today’s meeting the board judged the pace of output growth to be somewhat lower than earlier estimated but also thought it prudent to see forthcoming key data in prices to reassess its outlook for inflation before considering a further step to ease monetary policy," he said.
In other words, if the economy continues to show weak growth and inflation remains dormant the RBA is now more inclined to cut rates than hold them.
That’s a very clear signal to the market, and perhaps the major banks.
The RBA’s execution of monetary policy has become slightly more complicated since the banks, led by ANZ, quite recently decided to move their rates independently of the central bank. That means the RBA needs to second-guess their response to its decisions to ensure it sets official rates at a level that will have the desired impact on the economy.
It may be that the RBA chose to sit on its hands yesterday in order to see what ANZ might do when it conducts its monthly review of its rates on Friday week. Alternatively, the clear signal that it is considering reducing official rates next month might be designed to encourage the majors to wait until then before deciding how much of a rate cut to pass through to customers.
The RBA would be well aware that while funding costs – both wholesale and deposit funding – have fallen back a little from their peaks relative to the cash rate, they are still higher than they were in the middle of last year and there has been a modest contraction in banking interest margins in recent months that the banks will be reluctant to see continue.
It is politically easier (although not easy or painless) for the banks to hold back a small portion of an official rate cut than to unilaterally make out-of-cycle rate rises so the RBA’s signalling might cause the majors to wait. If they were to move independently, of course, that would help the RBA judge how much of a rate movement was needed to ensure that the net outcome had its desired impact.
The other virtue in holding rates steady until next month’s meeting, of course, is that the RBA will by then have a clearer understanding of whether Swan’s horror budget is truly going to be horrible and will be in a better position to make a judgement of how much, if any, monetary policy easing will be required to try to blunt the effects of the politically-driven promised return to surplus on the already vulnerable non-resource sectors of the economy.
This article originally appeared on <a target="_blank" href="https://www.businessspectator.com.au/">Business Spectator</a>.
 
 
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The RBA's bank beacon: Stephen Bartholomeusz

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In recent months, senior Reserve Bank officials, including the governor Glenn Stevens, have gone out of their way to say that the central bank remains in control of monetary policy despite the increasingly independent setting of rates by the major banks. Today deputy governor Philip Lowe took that argument a significant step further.
There has been a sense of increasing frustration within the RBA at claims that it has lost control of monetary policy to the major banks as a consequence of their decision to make rate movements above and below the movements in official rates and, in ANZ’s case, to flag that its interest rate committee would meet monthly and review its rates independently of the RBA’s decisions. 
At a hearing of the economics committee last month Stevens said the bank had made it "repeatedly clear that the shifting relationship between the cash rate and other interest rates in the economy is a factor that the board takes into consideration in setting the cash rate and that will, of course, remain the case".
"Recent developments (the majors’ decision to raise their home loans despite the cash rate being left unchanged last month) do not in our view materially affect the capacity of monetary policy to achieve its goals."
At that same hearing, assistant governor Guy Debelle articulated the reason for much of the confusion about the relationship between the cash rate and bank interest rates.
He said bank spreads – the rates they pay for their funding relative to benchmark rates, including the cash rate – have gone up. "That is unambiguously the case," he said.
There was, however, some confusion between ’levels’ – the absolute level of rates – and spreads. The levels had in some cases come down, he said, but they just hadn’t fallen as much as the cash rate has fallen.
So, absolute rates – including mortgage rates – have fallen but not as much as the cash rate because the margins, or spreads, over the benchmark rates that the banks have been charged by investors for their own borrowings, including the cash rate, have widened.
Today Lowe, answering questions after giving a speech to the Australian Industry Group in Sydney, said banks’ decisions on rates weren’t a major concern for the RBA.
"The key question for us is, if the banks move independently of the Reserve Bank, whether than undermines the transmission mechanism of monetary policy," he said.
"I think the answer to that is that it does not. It certainly throws sand in the wheels of the transmission mechanism but there are other things that throw sand in the wheels as well."
He said the bank was confident that changes in monetary policy remained a very important influence over lending rates within the economy and that in setting monetary policy the bank took into account what was going on with lending rates.
To reinforce that point, which other senior RBA officials have been making, he said something that ought to give Treasurer Wayne Swan and other strident bank critics paused for very serious thought.
"The current cash rate is at least 100 basis points lower than it would be if this widening in the (bank) margins had not taken place."
In other words, if the banks had simply done as the Treasurer insists they should have and moved rates strictly in line with the RBA’s cash rate the official rate would be 5.25%, or more, rather than its current setting of 4.25%.
What that says very clearly is that, while the RBA might have to try to second-guess the banks’ responses to movements in the cash rates, and there might be occasions where it over-estimates those responses, it is very comfortable that it can factor their likely rate movements into its own decision-making and therefore ensure that it gets the monetary policy settings – and the lending rates – it is targeting.
That process might have been slightly easier when the banks simply passed on the movements in the cash rate but it is obvious from the RBA officials’ commentary that the bank both accepts and understands the funding cost pressures the banks have been experiencing and incorporates into its own rate decisions to ensure that it retains the most decisive influence over the absolute level of interest rates borrowers are being charged.
The way monetary policy is being implemented might have been tinkered with but it is obvious the RBA believes that its pragmatic approach to the position of the banks post-crisis has ensured it remains as effective as it has ever been.
Whether it were achieved by the banks not fully passing on reductions in official rates, or by the RBA not reducing official rates by as much as it has, today’s mortgage and other borrowing rates would therefore be more or less the same, or perhaps even a little higher. It is, of course, a more effective political strategy to accuse the big banks of profiteering rather than criticise the RBA for setting rates it believes are most appropriate for the economy.
This article originally appeared on <a href="https://www.businessspectator.com.au/" target="_blank">Business Spectator</a>.
 
 
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The RBA's pragmatic push-back: Stephen Bartholomeusz

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The Reserve Bank did as was predicted by most in the market and left official rates unchanged. Now there’ll be a still novel wait to see whether the major banks do the same.
Last month of course, long-standing practice was broken when the ANZ, acting on its new policy of determining its mortgage rate independently of the RBA, raised its home loan rate by a modest six basis points despite the RBA sitting on its hands and was promptly followed by 10 basis point increases by Westpac and Commonwealth and nine basis points by NAB. 
Friday week, ANZ’s interest rate committee will meet according to its new schedule of the second Friday of each month to decide whether or not to move again. Logically ANZ’s peers should wait to see whether or not it does. First movers tend to attract a disproportionate share of the odium.
While there might be a temptation to tinker with the rates and add a few basis points to play catch up with its peers – and reinforce the message to its customers that its rates may now move, in either direction, independently of the RBA’s decisions on official rates – ANZ would be reluctant to ignite another bout of bank-bashing.
The majors’ fiercest critic, Wayne Swan has been diverted into beating up on some hapless mining billionaires who had the temerity to criticise the world’s greatest treasurer publicly (their less wealthy and more timid peers sensibly tend to say similar things in private) so why re-direct his ire to the banks?
More to the point, while – as the RBA noted again today – bank funding costs remain higher, relative to benchmark rates, than they were in the middle of last year, they have fallen back somewhat from their levels earlier this year and the banks did have their little out-of-cycle rate rises last month to relieve some of the pressure on their net interest margins. They have also been finessing deposit rates and business loan rates.
With demand for credit remaining weak the banks will also be conscious that they wouldn’t want to drive down that demand any further by raising rates unnecessarily. The marginal home loan remains, however, very marginal from their perspective.
Perhaps more encouragingly for the banks, the RBA did note that having fallen (albeit in a gentle and orderly fashion) through 2011, there are some signs that housing prices are stabilising within a still-soft market.
The RBA was also relatively sanguine about the international environment – still a major determinant of their access to and cost of wholesale funds – and noted that capital markets were again supplying funding to companies and well-rated banks.
The RBA said recent information was consistent with the expectation that the world economy would grow at below-trend pace this year but did not suggest a deep downturn was occurring. It referred to a considerable easing of the acute pressure on European banks as a result of the actions taken by policymakers – presumably the massive infusions of extremely cheap liquidity from the European Central Bank.
It hasn’t, however, ruled out Europe as "a potential source of shocks for some time yet". If there’s another flare up in Europe, and funding markets seize up or wholesale funding costs spike again, the pressure on the banks to move in the opposite direction to the RBA – which referred today for the scope to further ease monetary policy given the benign outlook for inflation – would once again mount.
This article originally appeared on <a target="_blank" href="https://www.businessspectator.com.au/">Business Spectator.</a>
 
 
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Another round of bank bashing?: Stephen Bartholomeusz

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The Lowy family is remarkably pragmatic, prepared to make major changes to the structure of their sprawling property empire to suit the market circumstances and their own ambitions. 
In 2010, the family partially reversed the consolidation strategy they had put in place six years earlier in pursuit of more scale to pursue a global ambition by spinning off half of their core Australian portfolio of shopping centres into a new vehicle, Westfield Retail Trust. That was done in response to a flat-lining securities price and the lingering impact of the financial crisis on the cost and access to funding for property developments. 
The aim was to improve Westfield’s return on equity by maintaining development and management fees, but with a far smaller capital commitment to the portfolio, while releasing a big lump of capital to fund further developments. That strategy is working, with Westfield announcing a 37% increase in profit for the year to December, to $1.53 billion. 
Now it plans to take the concept of a "capital lighter" Westfield a step further. 
Today, it also announced the sale of a 45% interest in a portfolio of 12 centres in the US with Canada Pension Plan Investment Board. The transaction will release about $US1.8 billion of net cash to Westfield, which will continue to collect development, leasing and management fees from the $US4.7 billion partnership. 
Once that deal has been settled, about half Westfield’s US centres by value will be within joint venture structures, replicating its new Australian structure. 
Westfield also announced the sale of three non-core centres in the UK for $240 million. 
By joint venturing its core portfolio and becoming more aggressive in cashing out non-core properties – it says there will be more divestments and perhaps joint ventures this year – Westfield is releasing cash and capital, which gives it options in terms of how it funds its $11 billion development pipeline and any acquisitions it might make as well as the ability to return capital to security holders. 
It has exercised that latter option, planning to undertake an on-market buy-back of up to 10% of its capital – around $2 billion – which will again leverage its performance statistics and generate higher returns on capital. 
Underneath the strategic shifts, Westfield's portfolio is performing solidly, with growth in income and average rents in Australia, the US and the UK despite quite difficult conditions for its retail tenants. 
The Australian story is interesting, with Westfield generating 4.3% growth in net operating income despite the 2.2% decline in major retailers’ sales and the modest 1.4% and 1.5% sales gains by "mini majors" and speciality stores respectively. Department store sales were down 7.5% last year and discount department stores 2.7%, but that hasn’t stopped Westfield from collecting higher rents. 
Consumer conservatism, the strong dollar and the surging growth in online retailing are definitely impacting the big retailers and there is logic to the view that eventually that will flow through to rents and the value of retail property, although whether it will materially impact the kind of giant "destination" centres a Westfield controls is unclear. 
What’s particularly interesting about the Westfield strategy is that the group is effectively hedging its bets by selling down its ownership of the properties to third parties. It is both reducing and sharing the risk of a structural change in retailing that flows through to the value of its centres while continuing to collect layers of fees for managing them.
This article originally appeared on <a href="https://www.businessspectator.com.au/" target="_blank">Business Spectator.</a>
 
 
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Westfield's lucrative risk defence: Stephen Bartholomeusz

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So, ANZ has gone and done it, raising its standard variable home loan rate independently of the Reserve Bank. It is a significant development in banking, albeit a very small and tentative one.
ANZ had been expected, after the second rate review under its new policy of considering rate movements on the second Friday of every month, to either do nothing or add 10 to 15 basis points to its key home loan rate. Instead it added a modest six basis points to, deliberately one assumes, line its rate up with Westpac, which has had the most expensive standard variable home loan rate of the majors. 
That may help defuse or at least reduce the intensity of criticism that would have been harsher if ANZ had set a new benchmark. The bank could be accused of wimping it, given how noisy it has been about the funding pressures that have been intensifying for the major banks. Tactically, however, it was in an awkward position. This month was one of the handful where the RBA board meeting falls in the second week of the month – in the same week as the ANZ review. Most of the time ANZ would have 10 days to consider the RBA’s decision and probably at least a week to see how its main competitors had responded before it made its own decision. Instead, to the delight of the other majors, with the RBA sitting on its hands, ANZ not only had to make an independent decision but one that could leave it alone and exposed for nearly a month, drawing the ire of the federal treasurer and other bank critics in the meantime. It has tried to make itself as small a target as possible. It shouldn’t have had to. This morning, well before ANZ took its baby step into its brave new world of independent rate-setting, the RBA released its latest statement on monetary policy. In it it makes an unequivocal case for bank rate rises. It says the spreads on bank debt are now "significantly higher than they were in the middle of last year" and that there has been a "step-up in the banks’ overall cost of funding relative to the cash rate." In its more detailed commentary it noted increases in the spreads on term deposits, on wholesale funding and in the cost of the foreign exchange hedging the banks undertake when they borrow offshore – all the banks’ sources of funding have become more expensive relative to its own cash rate. ANZ should have cut and pasted those comments into its own announcement, just in case Wayne Swan et al missed them. The reality is that the spreads on their borrowings, whether term deposits or wholesale funds, have been blowing out and exerting pressure on their margins. The National Australia Bank quarterly update this week showed it had lost about nine basis points of margin relative to the second half of last year. As noted previously, the majors are almost certainly writing new home loans at an initial loss relative to their incremental cost of funds. ANZ and NAB are the two majors that have been growing their home loans books at rates above the overall system growth, with ANZ growing its share at a greater rate than NAB. That would be intensifying the funding pressure. ANZ could therefore have easily made the case for a rate increase of at least 10 basis points or more, although its new policy does give it the flexibility to move the rate, in either direction, regularly at its own discretion and therefore it has the ability to lift it with a series of movements, each small enough not to ignite real fury among its customers and the politicians. Today’s move was a small one for the customers concerned but a major leap for the bank and potential for the system as the banks try to signal and explain to customers that the RBA’s cash rate influences only a part of its funding rather than determining its actual cost relative to benchmark rates.
This article originally appeared on <a href="https://www.businessspectator.com.au/" target="_blank">Business Spectator</a>.
 
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ANZ's cautious pioneering rate hike a significant development

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The timing of the Reserve Bank’s reduction in official rates couldn’t have fallen more awkwardly for the major banks, sandwiched as it was between last week’s modest downgrading of their credit ratings and the looming European Union summit at the weekend. The S&amp;P move highlighted the now well-understood vulnerability of the banks to the freezing of offshore wholesale funding markets, while the summit may well represent the last chance for those teetering markets and the wider European financial system. As the clock kept ticking today none of the banks was prepared to be the first to respond to the RBA rate cut, knowing than anything less than a full 25 basis point pass-through would cause them to be vilified. Indeed, even before they have actually done anything, they’ve already been vilified. Bank bashing is a populists’ sport. The uncomfortable silence of the banks would suggest that they don’t want to pass on the full 25 basis points and are hoping that one of their peers will lose patience first and wear the brunt of the storm that will ensue – much as NAB did last month when it kept a mere five basis points and retained its status as the major with the lowest headline mortgage rate. The pre-emptive belting they have already received from those who regard them as soft targets would also suggest that the banks have failed, despite a lot of effort by them, and some support from the RBA, to convince the politicians, media and public that there is no material direct linkage between the official cash rate and their own cost of funds. Treasurer Wayne Swan, who should know better, was urging the banks to pass the RBA cut on in full today and warning them that they would face the wrath of their customers if they didn’t, in effect making a direct and misleading linkage between the cash rate and their funding costs. Given that households are in an anxiety-induced savings mode, the better argument might have been that the banks would get the resultant savings back in the form of increased deposits and, to the extent that they didn’t, some lift in consumer confidence and spending would ultimately be good for their customers and ultimately their own businesses. Unemployment and business failures are the traditional key threats to bank profitability. At present, however, the majors are pre-occupied with unconventional threats – the prospect of a Eurozone, and perhaps global meltdown. Funding markets are highly volatile and, at times, effectively closed. Even when they have been functioning the cost of funding on offer would, if accepted, signal desperation – which no banks would want to risk, unless it were desperate. Privately the majors are talking quite freely about how long they could survive without access to any wholesale funding despite having significantly reduced their reliance on those markets since 2008. February appears to be the point where they’d have to start asking the RBA for emergency liquidity support. Unless and until the Eurozone is stabilised and debt markets normalised, the majors will remain nervous and defensive and very protective of their status, as a group, as among the handful of the world’s most stable and highly-rated banks. To retain that status, which protects their access to funds when markets are functioning, they have to protect their profitability. Passing on a 25 basis point cut might appear a relatively painless decision to make, given the customer backlash that will develop if they don’t.  With owner-occupied housing loans totalling more than $600 billion on their books, however, the four majors would transfer about $1.5 billion of profits from their shareholders to borrowers if they did. If the rate cut were also passed onto customers that have borrowed for investment housing, the annualised cost would be around $2.2 billion, or nearly seven per cent of their combined profits last financial year Given their critical need to maintain their elevated levels of deposit funding, which have reduced their reliance on wholesale money, they can’t necessarily offset some of that impact by reducing deposit rates. With the RBA deemed likely to cut rates further and more heavily if the Eurozone continues to teeter, the stakes for the majors are potentially very significant. All the banks experienced a significant squeeze on margins as the last financial year progressed, as funding costs inched up and lending volumes fell away. The accelerated response to the Basel III reforms being imposed by the Australian Prudential Regulation Authority, and their own existing big post-2008 holdings of excess capital and liquidity, will also put a rising floor under their funding costs over the next few years. Whereas in 2009-10 it was Westpac and CBA, which had gorged on the surge in home lending sparked by the Rudd Government stimulus packages, that were under real pressure from their funding costs, this time it is NAB that has the most difficult decision to make. Its peers essentially kept the growth in their asset bases in line with the growth in their holdings of deposits last financial year, but NAB, thanks to the success of the Breaking Up campaign, grew its lending at multiples of the system’s growth and beyond the rate of growth in its deposits. The retention of those five basis points last month was an indicator of margin pressure and an increased exposure to wholesale markets. Tactically, its peers may wait for NAB to blink first and move so that they can end its boast of having the lowest headline mortgage rate and devalue the big investment it made in the Breaking Up campaign. NAB would be very aware of that risk and presumably will either pass on the full 25 basis points or wait for them to show their hands before it moves.
This article originally appeared on <a href="https://www.businessspectator.com.au/" target="_blank">Business Spectator</a>.
 
 
 
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Bashing banks for a rate cut: Stephen Bartholomeusz

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Steven Lowy is well-pleased with the performance of Westfield Group, which yesterday confirmed its full-year earnings <a target="_blank" href="https://www.businessspectator.com.au/bs.nsf/Article/Westfield-confirms-full-year-guidance-NDTQZ?OpenDocument">guidance</a>. Westfield’s Australian tenants, however, probably aren’t quite as happy with their experience over that period. 
Westfield’s Australasian centres are virtually fully leased and the average specialty store rent in those centres for the nine months to the end of September was up 3.8%. 
The tenant experience, however, wasn’t as positive. Sales generated by Westfield’s major retailers are down 2% on the same nine months last year and are deteriorating – they were down 3.8% in the September quarter. 
The ‘mini majors’ in the group’s centres fared somewhat better, with sales down one per cent against the nine months to end-September last year but up 3.2 per cent in the latest quarter. Specialty stores are up 1.1% for the year to date but down 1.4 per cent in the September quarter.
Overall, the turnover in its centres is down 0.5% on the same nine months last year and 1.7% in the latest quarter.
That’s with the broader picture of a volatile and deteriorating retail sector where the department stores – full service in particular but discount department stores as well – are being hit hardest and where specialist fashion, footwear and homewares stores are being impacted by the deep conservatism of consumers who have savings but won’t spend them.
With sales falling and occupancy costs continuing to edge up it is little wonder the retailers are squealing, although they will all be hoping and praying that the Reserve Bank’s reduction in official rates and the consequent cuts to home loan rates provides some stimulus. It is an open question as to whether households will spend or save the reductions in their borrowing costs.
The disconnect between Westfield’s experience and that of its tenants isn’t a new phenomenon. The appeal, and concentrated ownership, of the major retail centres has given the centre owners pricing power and they use it to raise rents year in and year out regardless of the external circumstances.
In the longer term that power might be undermined to some extent by the rise and rise of online shopping, which can only be made more competitive if the core of the cost base of bricks and mortar retailers (Australia retail centre rents are among the most expensive in the world) continues to be forced up.
In the near term, for every specialty retailer who quits a centre there is a queue of hopefuls wanting to enter it. Westfield’s Australasian centres are more than 99.5% leased. In the longer term, online retailing might be a viable alternative to the prospect of ever-rising rents.
This article originally appeared on <a href="https://www.businessspectator.com.au/bs.nsf/Article/Lowy-Westfield-sales-retail-rent-interest-rates-sh-pd20111108-NE3JF?OpenDocument&amp;src=sph" target="_blank">Business Spectator</a>.
 
 
 
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Tenant blues won't hurt Westfield

One of Brisbane's last major riverfront redevelopment opportunities has taken a significant step forward, with Lendlease selected as the Queensland Government's preferred development partner for the former Visy site in South Brisbane.

The seven-hectare industrial site, positioned between South Bank and West End and 1.3 kilometres from the Brisbane CBD, will be transformed into a mixed-use precinct expected to deliver more than 4,000 new homes alongside extensive public open space and riverfront parkland.

The project is one of the largest urban renewal opportunities currently planned in Brisbane and is expected to play a key role in accommodating the city's growing population ahead of the 2032 Olympic and Paralympic Games.

Plans for the precinct include a network of riverfront promenades and boardwalks, new public plazas, parkland, amphitheatre-style gathering spaces and shared pedestrian and cycling links designed to reconnect the long-isolated site with the Brisbane River.

The Queensland Government is targeting delivery of the first homes and key public spaces before the 2032 Games, allowing the precinct to begin contributing new housing and public amenity well before the broader masterplan is complete.

The redevelopment is also expected to support more than 3,000 jobs across planning, construction and ongoing operations.

For Lendlease, the appointment adds another major urban regeneration project to its Queensland portfolio. The developer has operated in the state for more than 70 years and has delivered a number of large-scale mixed-use precincts in partnership with government.

Lendlease Development CEO Claire Johnston said the project represented one of Brisbane's most significant redevelopment opportunities.

"The transformation of the former Visy site represents a rare opportunity to reimagine one of Brisbane's most significant riverfront locations, deliver thousands of much-needed homes, and create long-term legacy," Johnston said.

"In partnership with the Queensland Government, we have the opportunity to create a new riverside destination that will help shape Brisbane's growth and how people experience the city for decades to come.

"This is exactly the type of large-scale, city-shaping development that will provide lasting benefits for Queensland, bringing together housing, jobs and world-class public spaces."

Deputy Premier and Minister for State Development, Infrastructure and Planning Jarrod Bleijie said the riverfront transformation would deliver a thriving new community precinct.

“The Crisafulli Government is delivering this golden opportunity to unlock a riverfront jewel for all Queenslanders,” Deputy Premier Bleijie said.

“This is a once-in-a-generation moment to reshape a significant slice of Brisbane and deliver lasting benefits – thousands of new homes, and public spaces for all Queenslanders to enjoy well beyond the 2032 Olympic and Paralympic Games – unlike Labor’s plan which would have delivered zero benefits and zero new homes.

“Queensland is well and truly open for business and through partnership with the private sector, we are accelerating delivery while ensuring strong housing, community and economic outcomes."

Early works on the precinct are expected to commence in April 2027.

Joel Robinson

Lendlease selected to deliver transformative South Brisbane riverfront precinct

Eddy Haddad's <a href="https://www.apartments.com.au/developers/level-33">Level 33</a> is levelling up its approved Wollongong development, as the coastal city south of Sydney continues to prove popular in the high-density development space.

Level 33, a longtime developer in the Wollongong area, has gone through the NSW Government's Housing Delivery Authority to upsize its approved two-tower development on the corner of Crown Street and Gladstone Avenue, just 100 metres from Wollongong Station.

The developer currently has approval for 252 apartments across two buildings rising to 19 storeys. It is now seeking approval for 33 and 38-storey towers that would deliver 467 apartments, including 67 affordable homes.

Designed by <a href="https://www.apartments.com.au/architects/bka-architecture">BKA Architecture</a>, the development would comprise apartments above a three-level podium with around 1,100 sqm of retail space, along with basement parking for 448 vehicles.

According to the Urban Design Report by BKA, the proposal has the capacity to "reinforce the precinct's identity by strengthening links between health, education, and transport services, while also contributing to Wollongong's ongoing evolution as a key regional centre."

Wollongong is somewhat in vogue. Between Level 33 and Urban Property Group, the two developers have several thousand apartments planned across the city.

Level 33 is currently delivering Easterly Wollongong, one of its most boutique projects to date with just 21 high-end apartments, as well as Atchison &amp; Kenny, a 329-apartment development due for completion later this year.

The developer plans to redevelop the 13,088 sqm WIN Grand megasite into <a href="https://www.apartments.com.au/new-apartments/crown-square-216-238-keira-street-wollongong-nsw-2500">Crown Square</a>, a new $500 million precinct with nearly 600 apartments. It also has more than 900 apartments planned for the former Bunnings Warehouse site at the intersection of Gipps and Flinders streets.

Urban Property Group is also playing a major role in the city's transformation. Its five-tower Keira Place precinct will deliver more than 800 homes, and it has recently lodged plans for a further 300 apartments near Wollongong Station.

First look: Level 33 upsizes Wollongong apartment towers

Just a week after filing plans for the final stage of its major Keira Place masterplan, <a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> has unveiled another significant housing proposal in Wollongong, this time targeting a prominent site opposite North Wollongong Station.

The developer has lodged a State Significant Development Application for a 38-storey mixed-use tower at <a href="https://www.apartments.com.au/new-apartments/4-4a-flinders-street-north-wollongong-nsw-2500">4-4A Flinders Street</a>, around one kilometre north of the <a href="https://www.apartments.com.au/new-apartments/keira-place-wollongong-120-122-smith-street-wollongong-nsw-2500">Keira Place precinct</a> currently taking shape on the edge of the CBD.

<img alt="First look: Urban Property Group plans 38-storey North Wollongong tower as Keira Place expansion gathers pace" data-entity-type="file" data-entity-uuid="2b6428f1-6405-4038-8476-897de440e90d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/flinders%20podium.png?VersionId=QLqEvK0OuCEwRC47oHNftrw2B1YqaHF8" />

Designed by Studio.SC, the proposal comprises a 38-storey mixed-use development containing 303 apartments, including 45 affordable housing units, alongside 174 co-living residences. The scheme also includes ground-floor retail space, extensive landscaping and public domain improvements.

Studio.SC noted in the proposal it "outlines a vision for a landmark transit-oriented mixed-use development centred around North Wollongong Station, designed to support the city’s future growth while responding to the NSW Government’s housing and planning reforms."

The architecture firm said the proposal responds to the opportunities and constraints shaping future growth within the 400-metre catchment of the station and represents "a coordinated and future-focused approach to urban intensification, contributing to the long-term evolution of North Wollongong as a connected, walkable and high-density station precinct."

The site occupies a strategic corner bounded by Flinders Street, Station Street, Stafford Street and the Princes Highway, directly opposite North Wollongong Station.

<img alt="First look: Urban Property Group plans 38-storey North Wollongong tower as Keira Place expansion gathers pace" data-entity-type="file" data-entity-uuid="7863adad-1f71-4022-b850-f44b252738fd" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/flinders%20podium%20a.png?VersionId=WsU7av0g8_8R2tGHWxgHeFSlhu7yeY1V" />

The proposal follows Urban Property Group's recent submission for the second and final stage of Keira Place, which would deliver a further three buildings comprising 657 homes opposite Beaton Park. It builds on the first stage, which features 150 apartments across two towers and recently commenced construction.

Urban Property Group CEO Patrick Elias said breaking ground on the first stage marked a significant milestone for Wollongong and reflected the developer's long-term commitment to regional cities.

"Today's groundbreaking is about turning approvals into homes and moving quickly to deliver much-needed housing in Wollongong's city centre," Elias said.

"Keira Place will provide a diverse mix of homes close to jobs, transport and services, while setting a high benchmark for quality, durability and consumer protection."

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/urban-property-group-unveils-trio-of-towers-for-next-stage-of-new-wollongong-precinct-keira-place">Urban Property Group unveils trio of towers for next stage of new Wollongong precinct, Keira Place</a>

First look: Urban Property Group plans next major Wollongong tower

<a href="https://www.apartments.com.au/developers/arada">Arada</a> has wasted little time expanding its ambitions in Campsie, lodging plans for a second major project in the rapidly transforming town centre just months after unveiling its three-tower One Campsie proposal on Beamish Street.

The UAE-backed developer has now taken aim at one of the suburb’s most strategically positioned sites, filing a State Significant Development Application for a <a href="https://www.apartments.com.au/new-apartments/10-north-parade-campsie-nsw-2194">33-storey mixed-use tower</a> at 10 London Street and 43 North Parade, directly opposite the future Campsie Metro Station. The proposal is currently on public exhibition and represents another significant vote of confidence in Campsie's emergence as one of Sydney’s key transit-oriented growth centres.

Designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a>, the development would deliver 156 apartments above a podium containing retail and commercial space, creating a new residential and commercial gateway to the town centre. The scheme also includes a four-level above-ground parking podium and a dedicated residential amenity floor featuring wellness and recreation facilities. At least 10 per cent of the apartments would be allocated as affordable housing for a period of 10 years.

The proposal occupies a 1,631 sqm site bounded by London Street, North Parade and Dispensary Lane, immediately adjoining the future Metro station precinct and just metres from Beamish Street’s retail and dining strip. According to the Urban Design Report, the project seeks to deliver "a great place that prioritises human-scaled experience and provides spatial improvements to the area."

<img alt="First look: Arada doubles down in Campsie with 33-storey Metro-front tower plans" data-entity-type="file" data-entity-uuid="175a8324-015b-4856-abe3-ce6f23199fa7" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/podium%20campsie.png?VersionId=742UGwXFhFBX4GEl6wX4PYIWREAgn6il" />

Woods Bagot describes the tower as a key marker within Campsie's next phase of growth.

"Located directly opposite the new Campsie Metro Station on North Parade, 10 London Street is a thoughtfully composed 33-storey mixed-use tower that contributes to the ongoing transformation of the town centre," the Architectural Design Report states. The report says the project is intended to provide "high-quality homes within a vibrant, connected urban environment, while helping define Campsie's future skyline."

A strong emphasis has been placed on the public realm. The ground floor incorporates over 500 sqm of retail space and active frontages along both London Street and North Parade, while the podium is wrapped by extensive landscaped planting intended to soften the building's scale and strengthen the pedestrian experience. The development would also widen surrounding footpaths and improve connections between the Metro station and the broader town centre.

Above the podium, residents would have access to more than 1,400 sqm of communal amenities, including a pool, gym and landscaped recreation spaces. A distinctive green-wall treatment extending across four podium levels forms a major architectural feature, helping differentiate the project within the emerging high-density precinct.

The tower's design is closely tied to the broader Campsie Town Centre Master Plan and the arrival of Sydney Metro. The Urban Design Report notes the proposal "directly supports the Campsie Town Centre Master Plan by delivering new homes in a location explicitly identified for growth, improved accessibility, and high-quality urban renewal." It adds that the project contributes to the master plan's vision for a strengthened town centre supported by thousands of new homes around the future Metro station.

<img alt="First look: Arada doubles down in Campsie with 33-storey Metro-front tower plans" data-entity-type="file" data-entity-uuid="bfd17654-253e-489a-bade-6278d63db412" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/base%20campsie.png?VersionId=3roJPMQGs36dazpkhvpvbDDP73Ld.Ica" />

The application follows Arada's recently lodged One Campsie project at 124–142 Beamish Street and 16–18 Ninth Avenue, where the developer is seeking approval for 346 apartments across three towers rising 24, 32 and 39 storeys. Together, the two proposals would cement Arada as one of the most influential developers shaping Campsie's future urban form.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-arada-files-for-trio-of-apartment-towers-in-campsie-town-centre">First Look: Arada files for trio of apartment towers in Campsie town centre</a>

Arada entered the Australian market in 2024 and has rapidly assembled a significant development pipeline across Sydney. Alongside its Campsie holdings, the developer is soon to launch <a href="https://www.apartments.com.au/new-apartments/wattle-green-2-fishburn-crescent-castle-hill-nsw-2154">Wattle Green</a> in Castle Hill, and has expanded its local operations following its acquisition of construction firm Roberts &amp; Co.

Located around 14 kilometres south-west of the Sydney CBD, the site sits at the centre of one of Sydney's fastest-changing middle-ring precincts. The Metro conversion of Campsie Station, combined with Canterbury-Bankstown Council's master planning framework, is driving significant residential intensification around Beamish Street and North Parade, with thousands of new homes expected over coming decades.

First look: Arada doubles down in Campsie with 33-storey Metro-front tower plans

For the first time in a long time, Australia's inflation story is starting to look more like a landing than a fight.

The latest Consumer Price Index figures from the Australian Bureau of Statistics showed annual inflation eased to four per cent in May, down from 4.2 per cent in April. On the surface, that might not seem like a major move. Inflation remains above the Reserve Bank's target range and some categories continue to record stubborn price growth.

But the significance of this result lies less in where inflation sits today and more in what it means for where interest rates are likely heading next.

The biggest takeaway is that inflation continues to move in the right direction.

Markets had been bracing for another sticky result after a period where progress appeared to stall. Instead, headline inflation came in softer than expected, helped by falling fuel prices and easing transport costs. Annual transport inflation halved from 6.6 per cent in April to 3.3 per cent in May, while automotive fuel prices fell 11.9 per cent during the month following lower oil prices and the impact of reduced fuel excise measures.

While petrol prices don't solve Australia's affordability challenges, they are one of the most visible and immediate costs for consumers. Falling fuel costs feed through the economy quickly, helping ease pressure on household budgets and business operating expenses.

The ABS data also showed headline inflation is now sitting at its lowest annual level in several months, reinforcing the broader trend that price growth is gradually moderating.

That trend is important because it aligns with what many economists and lenders have been saying for the last month.

Prior to this week's inflation data, ANZ, NAB and Commonwealth Bank had all shifted their forecasts, now believing the Reserve Bank had likely reached the peak of the interest rate cycle. Following the May inflation release, ANZ reaffirmed that view.

In its latest economic update, ANZ said it expects quarterly trimmed mean inflation to come in at 3.7 per cent for the June quarter, slightly below the Reserve Bank's forecast of 3.8 per cent. Importantly, the bank said that outcome, when combined with slowing economic activity, "supports our view that the cash rate has peaked".

The Reserve Bank has spent the better part of three years attempting to bring inflation under control through higher interest rates. If Australia's major banks are correct and rates have now peaked, the conversation shifts from how much higher rates could go to when they might begin coming down.

Westpac's caution comes from underlying inflation. The trimmed mean, the measure most closely watched by the Reserve Bank, increased from 3.4 per cent to 3.6 per cent annually. Housing inflation remains elevated at 6.5 per cent, reflecting ongoing increases in rents, electricity costs and new dwelling construction.

Electricity prices remain particularly problematic, rising 21.1 per cent over the past year following the removal of government rebates.

Housing construction costs are also showing signs of renewed pressure. ANZ noted new dwelling costs rose 0.9 per cent in May and are now running at an annualised pace of 8.6 per cent over the past three months. Builders continue to face higher labour, fuel and material costs, a reminder that inflationary pressures have not completely disappeared.

Housing affordability has deteriorated largely because of higher interest rates rather than higher property prices alone. Even modest reductions in mortgage rates would improve borrowing capacity, increase buyer confidence and reduce repayment pressure on existing homeowners.

While August is far from a certainty, the latest inflation result has strengthened the view that the next move in rates is more likely to be down than up. For borrowers, buyers and the development sector, that alone represents a significant shift from the conversation that dominated much of the past two years.

Stephen Bartholomeusz

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