Malaysian developer <a href="https://www.apartments.com.au/developers/s-p-setia">SP Setia</a> is the latest to jump into St Leonards booming Transport Oriented Development precinct.

The developer, which has previously delivered Sapphire by the Gardens apartment development in Melbourne, identified the Atchison Street site in 2023. It filed a Scoping Report around 12 months ago, and now has revealed the designs for the new&nbsp;40-storey mixed-use tower.

The State Significant Development Application covers <a href="https://next-portal.urban.com.au/projects/14650/summary">20-22 Atchison Street</a>, a 1,374 sqm site positioned between St Leonards Station and the new Crows Nest Metro station.

Designed by <a href="https://www.apartments.com.au/architects/cox-architecture">COX Architecture</a>, the project would deliver 181 apartments, above a four-storey commercial podium, five basement levels, and new public domain works along Mitchell Street. The apartment mix comprises 35 one-bedroom apartments, 39 one-bedroom-plus-study apartments, 85 two-bedroom apartments, and 22 three-bedroom residences.

The proposal has been lodged as a shop-top housing development under the NSW Government’s TOD planning pathway, which allows increased density around key transport infrastructure. The site sits within the recently rezoned Crows Nest Accelerated TOD Precinct.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b799673d-48e2-46b0-801a-0e33a9330100" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20site.png?VersionId=dPh0UfwfaHpbFL1R7H1cbZNbIW0CHbCC" />

SP Setia acquired the Atchison Street site as part of its continued expansion into the Australian apartment market. In comments made to City &amp; Country (The Edge Malaysia) in 2023, SP Setia President and CEO Datuk Choong Kai Wai described the acquisition as “a strategic move” aligned with the group’s post-pandemic market recovery strategy.

“Our target for this exceptional development is local and overseas buyers, including first-home buyers, downsizers and investors,” Choong said.

The tower has been designed as a slender vertical form rising from a mixed-use podium, with COX Architecture positioning the development as a response to the evolving St Leonards and Crows Nest skyline.

“The purpose of the project is to facilitate the delivery of high-quality housing at a strategically located site and deliver a built tower outcome that is consistent with the desired future character of St Leonards and aligns with the TOD controls,” the design report stated.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b1a85eee-76f7-436c-a6da-73ba827b9b13" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20entry.png?VersionId=dA9jHGPMcm.dDbwk4QfxqWiY5bfh3UVt" />

The podium would incorporate retail uses fronting Atchison Street, commercial tenancies, landscaped communal areas, and pedestrian improvements along Mitchell Street. Vehicle access and loading would be consolidated via Atchison Lane.

Residents would have access to more than 665 sqm of communal indoor and outdoor spaces, while the development proposes 96 parking spaces across five basement levels.

The proposal also includes a commitment for 10 per cent of residential floor space to be allocated toward affordable housing through a monetary contribution.

COX said the tower form responds directly to the emerging high-density character of the precinct while seeking to maximise solar access, cross ventilation, and outlook from apartments.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="2163f85c-f63b-4be3-aafa-f8763976cec5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Article%20Feature%20Image%20%28Grid%29_5.png?VersionId=WiAmtIKJ6.ZQ41EtYEQ1fol7AeorKBlL" />

“The building is orientated towards north,” the Apartment Design Guide compliance report noted, adding that the tower’s slim form was driven by the constrained inner-urban site dimensions.

The design also incorporates landscaped setbacks and communal open space at podium level, intended to soften the interface with surrounding streets and improve pedestrian amenity.

The project adds to a growing wave of redevelopment proposals reshaping St Leonards and Crows Nest following the opening of the Sydney Metro City line and the NSW Government’s push for higher-density housing around major transport nodes.

Last week Stockland filed plans just down the road. They want to build a <a href="https://www.apartments.com.au/new-apartments/601-pacific-highway-st-leonards-nsw-2065">52-storey tower on Pacific Highway</a>.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">First look: Stockland plans 52-storey, 538-apartment St Leonards tower&nbsp;</a>

Joel Robinson

First look: SP Setia targets St Leonards skyline with 40-storey TOD tower

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> has revealed plans for a new mixed-use tower at 10 Dangar Street, Wickham, advancing a proposal that would reshape the southern gateway to Newcastle’s city centre with one of the city’s tallest residential buildings.

The State Significant Development proposal, now on exhibition, seeks approval for a <a href="https://www.apartments.com.au/new-apartments/bowline-10-dangar-street-wickham-nsw-2293">43-storey tower</a> immediately adjacent to the Newcastle Interchange. The project would deliver around 200 apartments, including 42 affordable housing dwellings, alongside 99 co-living units, a 171-room hotel, retail space, and new public domain integrated through the site.

The scheme marks a significant escalation of plans previously approved for the site. Urban Property Group took over the prominent 2,904 sqm parcel, where excavation and demolition had already commenced under an earlier consent for a 14-storey mixed-use development.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="58a96dd9-407f-4d20-86b4-94e4bfeef74b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20podium.png?VersionId=LGlf08pdFGAZDzvx_CXC4XakHNZRuEE0" />

Designed by <a href="https://www.apartments.com.au/architects/sjb-architects">SJB</a>, the tower has been conceived as a landmark transit-oriented development anchored to the Newcastle Interchange precinct. The proposal includes 245 build-to-sell apartments across a mix of one, two, and three-bedroom residences, as well as two penthouses. Fifteen apartments and one operational unit are earmarked for NDIS housing. The co-living component would add a further 99 units, while the podium would accommodate retail uses and hotel facilities.

SJB said the site presents “a valuable opportunity to anchor the precinct by setting the standard for design, active ground planes and character at the key southern gateway.”

The architecture responds directly to the site’s position beside major transport infrastructure and within one of Newcastle’s fastest-evolving urban renewal precincts. The tower form sits above a sculpted podium designed to frame new public spaces, including a through-site pedestrian link connecting Station Street to Hannell Street, landscaped plazas, and activated retail edges.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="a7bd6ff0-f7db-4ce8-a6dc-ea56e72c6149" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20lanne.png?VersionId=xzf39VADyhj7zBQY2I9fx9vI62u2tuSb" />

The design report describes the project as part of the broader transition of Wickham into “a vibrant, high-quality mixed-use urban precinct” that leverages proximity to the station, open space, and regional connectivity.

A detailed public art strategy has also been prepared for the development. The strategy positions the project as “a transit-oriented development of state significance at the gateway to Newcastle’s city centre” and outlines a series of integrated artworks responding to Newcastle’s industrial and transport heritage.

Creative Road’s curatorial framework for the project, titled Unveil, draws on “stratified surfaces, carved volumes, and light-filled apertures” while referencing Newcastle’s transformation from an industrial city into a contemporary education and technology hub.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="77a882bb-14b1-4d28-99ff-9438e39508c0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20site.png?VersionId=cevgo_vN0eKPK78P8YcEu3mKPLkpFqE7" />

The proposal is being advanced through the NSW Housing Delivery Authority pathway after being declared State Significant Development in June 2025. The accompanying scoping report states the development aims to “maximise the site’s proximity to the Newcastle Interchange by delivering transit-oriented development” while increasing housing supply and affordable housing provision within the Newcastle LGA.

Urban Property Group’s plans align with the long-term strategic vision established under the Wickham Master Plan, which identified the interchange precinct as suitable for substantial uplift in height and density. The current proposal would significantly intensify that vision, positioning the tower among the tallest developments proposed for Newcastle.

The site sits immediately north of the Newcastle Interchange, bounded by Dangar Street, Hannell Street, and Charles Street. It is surrounded by a rapidly growing cluster of residential towers and mixed-use projects that have emerged following the completion of the light rail and transport interchange.

First look: Urban Property Group unveils Newcastle’s latest tower at Wickham interchange

Bottega House has completed settlement of a landmark riverfront site in Macquarie Street, St Lucia, representing its first major Brisbane development.&nbsp;

Positioned on the banks of the Brisbane River, the <a href="https://www.apartments.com.au/new-apartments/180-macquarie-street-st-lucia-qld-4067">premium site at 180 Macquarie Street</a> features uninterrupted river frontage in one of Brisbane’s most tightly held residential precincts.&nbsp;

The proposed development, currently under assessment with Brisbane City Council, has been designed by <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a> with interiors by <a href="https://www.apartments.com.au/interior-designers/mim-design">Mim Design</a> and will deliver a boutique collection of premium residences positioned specifically for owner occupiers and downsizers.&nbsp;

The residences are set to redefine luxury apartment living in the area, with a focus on architectural quality, refined finishes, landscape integration and elevated amenities including curated wellness facilities, resort-style pools and recreation spaces rarely seen in the local market.&nbsp;

Exclusive sales for the project will be led by Keenan &amp; Byrne, ahead of an anticipated launch later this year.&nbsp;

Bottega House Managing Director Nick Malloch said the project reflects the group’s ambition to deliver a highly curated residential offering within one of Brisbane’s most tightly held precincts.&nbsp;

“This is an incredibly rare riverfront opportunity and one we have approached with a long-term perspective,” Malloch said.&nbsp;

“Our vision from the outset was to create a boutique collection of residences that feel more like private homes than traditional apartments, with generous proportions, refined finishes and exceptional amenity throughout."

Malloch says there is a&nbsp;lack of premium owner-occupier stock of this quality in the market, particularly for downsizers wanting space, privacy and a true lifestyle offering without compromise.&nbsp;

"Demand is expected to be strong given the scarcity of premium riverfront opportunities of this nature within Brisbane’s inner-west."&nbsp;

Bottega House secures landmark riverfront site in St Lucia 

<section data-scroll-anchor="false" data-testid="conversation-turn-6" data-turn="assistant" data-turn-id="request-WEB:84a2af5e-d7cf-4ddf-922a-f4d44d6c6caa-2" data-turn-id-container="request-WEB:84a2af5e-d7cf-4ddf-922a-f4d44d6c6caa-2" dir="auto">
<section data-scroll-anchor="false" data-testid="conversation-turn-2" data-turn="assistant" data-turn-id="request-WEB:5a5ab36c-8dd3-454c-b456-c501f22f0eb4-0" data-turn-id-container="request-WEB:5a5ab36c-8dd3-454c-b456-c501f22f0eb4-0" dir="auto">
The arrival of the first piling rig officially marks the commencement of construction at SIERA’s new beachside apartment development, Exhale, in Northcliffe.

<a href="https://www.apartments.com.au/new-apartments/exhale-surfers-paradise-8-enderley-avenue-surfers-paradise-qld-4217">Exhale</a>, a glass-encased tower featuring 54 large-scale apartments at 8 Enderley Avenue, is SIERA’s third Gold Coast development. It follows the recently completed PIPIS Bilinga beachfront project, which achieved suburb-record prices, and the soon-to-be-completed Chevron Island development, Tapestry.

[smartcode_project:default project_id=112661 project_image_fid=359603]

<a href="https://www.apartments.com.au/developers/siera">SIERA</a> Founder and Managing Director Brent Thompson said the arrival of the piling rig represented a significant milestone for the development, which is scheduled for completion in late 2028.

Over the next month, around 260 piles are expected to be installed as work progresses on the basement structure. The building is anticipated to rise above ground level early next year, before unveiling its sculptural glass curtain wall, developed in collaboration with specialist façade engineers.

“The façade was designed to maximise panoramic coastal views while creating a distinctive architectural identity,” Thompson said.

[smartcode_project:default project_id=112661 project_image_fid=355935]

Designed by BDA Architecture, Exhale will comprise just 54 two- and three-bedroom residences across 26 levels, a level of low-density living rarely delivered in this beachside pocket between Surfers Paradise and Broadbeach.

The project has been conceived as a resident-only building, with no short-stay accommodation permitted. SIERA says the model is intended to appeal to long-term owner-occupiers rather than transient holiday demand.

[smartcode_project:default project_id=112661 project_image_fid=361052]

Residences have been designed with large-format layouts and expansive glazing, with most apartments featuring more than 30 metres of glass frontage to maximise natural light and ocean views.

The amenity offering spans two levels and centres on wellness and lifestyle, including a heated magnesium pool, sauna, yoga and Pilates studio, gymnasium, private dining facilities, cinema lounge, and dedicated surfcraft storage.

[smartcode_project:default project_id=112661 project_image_fid=359607]

More than half of the apartments have already sold. SIERA has also opened a sales gallery for Exhale at its Chevron Island commercial premises, near its Tapestry tower and the site of its second Chevron Island apartment development, which is slated to launch in early 2027.
</section>
</section>

[smartcode_project_cta:default project_id=112661]

SIERA kicks off construction at Northcliffe tower Exhale

Local Little Bay residents, along with buyers from premium postcodes across Sydney’s affluent Eastern Suburbs, have dominated purchases in developer-builder Urban Property Group’s first Eastern Suburbs apartment development, <a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a>.

The $250 million coastal project, one of the first new developments in the area in several years, has proven particularly popular with downsizers, especially those from Coogee and Bondi. One Double Bay downsizer paid $4.7 million for a four-bedroom penthouse, setting a new local apartment price record in the process.

Buyers have been attracted to the combination of coastal tranquillity, premium design and amenity-rich neighbourhood living. The walkable village setting, along with proximity to three of Sydney’s leading golf courses, New South Wales Golf Club, St Michael’s Golf Club and The Coast Golf Club, has also been a key drawcard.

[smartcode_project:default project_id=112343 project_image_fid=352689]

Built across two low-rise buildings designed by <a href="https://www.apartments.com.au/architects/hill-thalis-architecture-urban-projects-pty-ltd">Hill Thalis</a> and set along a lush, landscaped green spine, designed by leading landscape architect <a href="https://www.apartments.com.au/landscape-architect/arcadia-landscape-architecture">Arcadia</a>, ESTE Little Bay offers a collection of one, two, three and four-bedroom residences with interiors by Richards Stanisich.

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> Sales Director, Tom McIvor said the response to ESTE has been "nothing short of extraordinary."

“Buyers have been quick to recognise ESTE as a rare opportunity to invest in a coastal sanctuary that offers both seclusion and connectivity to the heart of Sydney,” McIvor said.

[smartcode_project:default project_id=112343 project_image_fid=352687]

<a href="https://www.apartments.com.au/project-marketer/srm-residential">SRM Residential</a> Senior Director, <a href="https://www.apartments.com.au/project-marketer/srm-residential">Clayton Ross</a> said the local market has responded incredibly well, driven by ESTE’s exceptional location and the rarity it offers.

“We’ve seen strong interest from a variety of buyer groups, all of whom are drawn to the exclusivity and quality of the build and construction by the 4.5-star iCIRT-rated builder / developer, Urban Property Group. There’s truly nothing else like it along Sydney’s coastline.”

[smartcode_project:default project_id=112343 project_image_fid=352690]

The project also includes robust buyer protections, including Resilience Insurance’s Latent Defects Insurance, providing 10 years of structural cover, and an independent iCIRT-rating of the developer.

“The iCIRT-rating adds another layer of confidence,” Ross added. “Buyers see it as a safeguard for their investment and their lifestyle.” A highlight of ESTE’s offering is its exclusive wellness amenities, including a heated rooftop infinity pool and outdoor heated spa, a state-of-the-art Technogym fitness centre, and a sauna.

<a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a> is topped out and is on track to complete towards the end of 2026, with residents moving in before Christmas.

[smartcode_project_cta:default project_id=112343]

Eastern Suburbs buyers snap up ESTE Little Bay apartments

National Australia Bank (NAB) has brought forward the timing of the first RBA cash rate cut by three months.

NAB is now expecting a cut in February, in line with ANZ and Westpac, having initially thought a cut wouldn't come until May.

Commonwealth Bank, the nation's largest lender, still thinks the first cut will come in December.

NAB changed its call following the August monthly inflation figures that were released at the end of September, showing it had dropped to 2.7 per cent.

"The risk has been skewed to a first cut earlier in 2025, and today’s change acknowledges the balance of risks has likely shifted sufficiently for the RBA to feel comfortable cutting a little sooner than we earlier expected," NAB noted in its latest update.

They added that the cadence of the cuts may be faster than its central profile.

"Domestic inflation pressures are cooling, but only gradually, and we continue to expect the conditions for a cut will not be in place this year.

NAB believes the easing cycle will end at 3.1 per cent by early 2026, which is five cuts from the current 4.35 per cent cash rate.&nbsp;

CBA also thinks 3.1 per cent will mark the end of the cutting cycle, while Westpac is forecasting 3.35 per cent, and ANZ is the most pessimistic at 3.6 per cent, which would be just three interest rate cuts.

<h2>What would a rate cut in February look like for borrowers?</h2>

According to&nbsp;<a data-saferedirecturl="https://www.google.com/url?q=https://link.mediaoutreach.meltwater.com/ls/click?upn%3Du001.IVvjJ-2BPT0A8C3VxtqKc6e3bj5hBuw27WFEYqovsYs7kPsgFulYrdOzeP8gI7CybJOya3_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20hPXdLlPP9yD7DvFFDBM5yrTqxvcCiMfAsW1onD-2FcriL628eYdhNQE7bwzYrxcOYnmaYfRhGl-2FEHQ6eK2uQcLxs6Cbu6Dx0bYvpi5A6enmxMWU5TkcRYrP6Z8GbXZYtc5qSoKu6eWFBQR9K7fsjXwHMmby3D3X6Yx-2BxcDcdRruTG&amp;source=gmail&amp;ust=1727774368149000&amp;usg=AOvVaw2vK2ujS77CHs9VRvSSXzLC" href="https://link.mediaoutreach.meltwater.com/ls/click?upn=u001.IVvjJ-2BPT0A8C3VxtqKc6e3bj5hBuw27WFEYqovsYs7kPsgFulYrdOzeP8gI7CybJOya3_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20hPXdLlPP9yD7DvFFDBM5yrTqxvcCiMfAsW1onD-2FcriL628eYdhNQE7bwzYrxcOYnmaYfRhGl-2FEHQ6eK2uQcLxs6Cbu6Dx0bYvpi5A6enmxMWU5TkcRYrP6Z8GbXZYtc5qSoKu6eWFBQR9K7fsjXwHMmby3D3X6Yx-2BxcDcdRruTG" target="_blank">Canstar</a>, if there is a cut in February, a borrower with a $600,000 loan today and 25 years remaining would see their monthly repayments drop by $92.&nbsp;

<table border="1" cellpadding="0" cellspacing="0">
	<tbody>
		<tr>
			<td colspan="3">
			Impact of 0.25% pt cut in February 2025
			</td>
		</tr>
		<tr>
			<td>
			Current loan size
			</td>
			<td>
			Drop in monthly repayment
			</td>
			<td>
			New monthly repayment
			</td>
		</tr>
		<tr>
			<td>
			$600,000
			</td>
			<td>
			-$92
			</td>
			<td>
			$3,907
			</td>
		</tr>
		<tr>
			<td>
			$750,000
			</td>
			<td>
			-$114
			</td>
			<td>
			$4,884
			</td>
		</tr>
		<tr>
			<td>
			$1M
			</td>
			<td>
			-$153
			</td>
			<td>
			$6,512
			</td>
		</tr>
		<tr>
			<td colspan="3">
			Source:&nbsp;<a data-saferedirecturl="https://www.google.com/url?q=https://link.mediaoutreach.meltwater.com/ls/click?upn%3Du001.xWMOP9hChsvn-2BC9O-2FebBihXIZ4cEzbiuENdxm-2Bx3-2FYEEgYMhZlKWNj5Zzy1YZ56RuASD_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20v2akwr6-2BqLyRrlEgkJ4J-2BCCyY0x189xEHZA4Ylf8c7ChBqNIkhmftZzoFuZKFn43pw3oJVg2o1gumrpdA-2B7MB-2FBtmL2rFCI-2FXORATQHySCLVOMg7Vywv-2BqnnQUAtDz6XkvpwxdHFXh70VwKazzhJsICilEYOvP4ju0sIfi5g6TL&amp;source=gmail&amp;ust=1727774368149000&amp;usg=AOvVaw2qVnp6oqATgqDUi2Frm22q" href="https://link.mediaoutreach.meltwater.com/ls/click?upn=u001.xWMOP9hChsvn-2BC9O-2FebBihXIZ4cEzbiuENdxm-2Bx3-2FYEEgYMhZlKWNj5Zzy1YZ56RuASD_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20v2akwr6-2BqLyRrlEgkJ4J-2BCCyY0x189xEHZA4Ylf8c7ChBqNIkhmftZzoFuZKFn43pw3oJVg2o1gumrpdA-2B7MB-2FBtmL2rFCI-2FXORATQHySCLVOMg7Vywv-2BqnnQUAtDz6XkvpwxdHFXh70VwKazzhJsICilEYOvP4ju0sIfi5g6TL" target="_blank">www.canstar.com.au</a>. Starting rate is the RBA existing average owner-occupier variable rate of 6.36%. Assumes banks pass the cash rate cut on in full the month after the meeting.
			</td>
		</tr>
	</tbody>
</table>

Canstar Data Insights Director, Sally Tindall, says if core inflation continues to track in the right direction, or unemployment starts to accelerate significantly, we could well see a cash rate cut as early as February of next year.

“All four big banks now believe the RBA will be ready to cut the cash rate in just over four months’ time, if not before, in the case of CBA.

“However, the outlook for both inflation and unemployment is still highly uncertain. A couple of wobbly sets of inflation data could see the RBA holding for longer, particularly if unemployment remains relatively steady."

&nbsp;

Commonwealth Bank, the nation's largest lender, still thinks the first cut will come in December.

NAB bring forward first RBA cut to February 2025

<html><body>
GUEST OBSERVER
The title of this conference is long. Ten words: ‘Financial Cycles, Systemic Risk, Interconnectedness, and Policy Options for Resilience’.
It is also challenging. I say this because just below the surface of these 10 words lies a host of complex and difficult issues. The proper functioning of our modern economies depends on us understanding and addressing these issues as best we can.
If we get things wrong here, the outcomes can be really bad: our economies will be more volatile, job security will be less and people's hard-earned savings will be at greater risk. The global financial crisis was a powerful reminder of this. So the issues that we will discuss at this conference really matter.
It is appropriate that the discussion is taking place at an international conference, which features distinguished speakers from the region and elsewhere. After all, financial stability is a global issue: instability in one country can ripple right around the world. And many of the reforms to address instability are best accomplished internationally. We can also learn a lot from one another's experiences.
In my remarks this morning I would like to highlight three specific questions that are suggested to me by the conference title and papers. These questions are:
How can we make our financial systems more resilient, particularly in a world in which capital flows easily across borders?
How should we characterise and respond to episodes of financial boom and bust – the financial cycle?
What determines the amount of systemic risk we are exposed to, and how can we identify and analyse it?
The positive news is that in each of these three areas much has been learnt since the crisis. The not-so-positive news is that our answers to these questions are still incomplete and, just as one issue is resolved, too often another seems to emerge. I would like to reflect on each of these three questions, highlighting the progress that has been made and offering a few thoughts on some of the work that remains.
Resilience
First, to the issue of resilience.
Looking back at the experience of the past 20 years, I am struck by the fact that large financial disturbances are repeatedly caused by the same factors. Three stand out:
<ol>
<li>poor asset quality, particularly in the area of commercial property development</li>
<li>inadequate attention to liquidity management</li>
<li>the build-up of unhedged foreign currency exposures.</li>
</ol>
Not surprisingly then, it is these areas that have received the most attention from the international regulatory community. Over recent years, the most extensive of the global reforms has been the Basel III package.
This package means that, globally, banks now have more and better-quality capital, so they are better placed to absorb losses. In addition, minimum standards for banks' liquidity management are now more rigorous and transparent.
The stronger liquidity standards also help reduce vulnerabilities from foreign currency exposures, by giving supervisors new ways of monitoring liquidity requirements on a per-currency basis. Other reforms have helped increase resilience in other parts of the financial system, including derivative markets and shadow banking.
But the reforms remain incomplete and challenges remain. The last chapter of the Basel III package is being finalised this year. While some of the reforms have helped address the too-big-to-fail problem, there are still considerable challenges in developing recovery and resolution plans for the largest global financial institutions. And, in the area of over-the-counter (OTC) derivatives market reform, legal restrictions sometimes still make it difficult to share information across borders.
The Basel Committee and the Financial Stability Board are both reviewing the overall calibration of the reforms. This is essential because with so many new metrics and requirements, we need to ensure they do not interact in unintended ways. Of course, some of the effects that market participants comment on are intended. Maturity transformation has become more expensive.
So too, has providing market making services in some financial instruments, generating concerns about a lack of liquidity in bond markets. More broadly, the cost of many forms of financial intermediation across banks' balance sheets has become more expensive. The promised benefit of this additional expense is that the system is now more stable. But we need to keep an eye on this trade-off, because a well-functioning system needs to be able to take risk at a reasonable price.
A well-functioning system also needs to be resilient to the shifting flows of capital across borders. Collectively, global investors can deploy funds on a much larger scale than many markets can absorb without large price movements. In some countries this has led to discomfort with the free flow of capital. But at the same time, access to foreign capital can help drive prosperity and economic development, and allows people to hold more diversified portfolios.
The challenge we face then is to design arrangements that allow us to all capture the considerable benefits that open capital markets can deliver, while minimising the attendant risks. The work on the global financial safety net being undertaken in international policy circles is an important contribution here. One of the questions still to be resolved is how extensive that safety net should be and what form it should take.
The Financial Cycle
An important theme of this conference is that of ‘financial cycles’. Identifying and understanding these cycles has become an active area both for academic research and policy development.
As a concept, the financial cycle has considerable intuitive appeal. It has long been observed that financial systems seem to be subject to boom–bust dynamics. We have repeatedly seen credit and leverage build up over time in response to some initial impetus, only to generate excesses that ultimately unwind, sometimes painfully.
One question we face is how to define and measure these cycles. It has become common practice to start by looking at cycles in credit growth. But there are limitations here. Not all credit cycles end in a financial crisis; indeed in industrialised economies, only a minority have done so. And in some cases a period of fast credit growth, followed by a period of slower growth, might be exactly what is required, and so should not be viewed as problematic.
This means that we need to move beyond a focus on credit only. In my view, it is probably more useful to start with the question: are balance sheets in the economy being strengthened or weakened? If credit is growing quickly, we need to think about whether the credit is being used to create new productive assets or simply to finance current consumption. The implications are quite different. A protracted period of balance sheet weakening might reasonably be viewed as problematic, particularly if it increases the probability of future balance sheet strains and weak economic growth.
So a research challenge here is to find ways of systematically measuring the quality of balance sheets across the economy, taking into account the myriad influences that are at work. Close analysis and good judgement are both needed to do this.
A related research question is how policy should respond to a systematic weakening of balance sheets. This question is the subject of a lot of research at present, much of it prompted by work at the Bank for International Settlements (BIS). The work at the BIS, though it has focused heavily on aggregate credit as the indicator, has advanced the hypothesis that, in some circumstances, the build-up of financial imbalances may be a better guide to the sustainability of growth in the economy than is the current rate of inflation.
Clearly, this hypothesis needs to be tested. If it were found to be valid, it would have implications for policymakers in a number of spheres, including monetary policy, prudential policy and even fiscal policy.
Systemic risk: interconnections and spillovers
Systemic risk is another theme of the conference, and again, a topic inspiring a great deal of academic research, some of which is being presented at this conference. Systemic risk cannot be seen, nor can it be easily measured. So we need to explore a range of indicators. Academic research is helping ensure that we are looking at the right ones.
The aspect of systemic risk that I would like to highlight is the interconnections between banks, firms and countries that lie at the heart of the contagion that can turn a small disruption into something much bigger. In the global financial crisis, when one entity became distressed their counterparties incurred mark-to-market losses on the value of securities issued by that entity. Investors also often started refusing to deal with those counterparties that had – or merely were thought to have – significant exposures to that entity.
So, contagion could and did occur because of both direct and supposed interconnections. It can occur even as a reputational effect when two entities or economies are perceived to be similar: once investors have reassessed the risks in one institution or country, they often start to probe similar vulnerabilities elsewhere. We cannot escape the conclusion that greater interconnection is a prominent marker of increased systemic risk.
The global policy response to the financial crisis has recognised the importance of interconnections and built that into the design of regulatory reforms. Some of the design details are quite technical, but their essence is to create incentives against excessive interconnected exposures between banks, or between banks and other parts of the financial system such as so-called ‘shadow banking’.
Contagion is most likely to occur when information is not equally available to all parties. Opacity and a lack of information about exposures were endemic to OTC derivative markets during the crisis, making these markets an important locus of contagion. Following the post-crisis reforms, derivative markets have functioned more effectively. Regulatory mandates and supervisory incentives are resulting in a larger share of derivatives transactions being cleared through central counterparties and more are being collateralised and are therefore safer.
Policymakers also have more visibility about financial market infrastructures now that they play a more central role in financial markets. There are, though, some information-sharing issues in this area that still need to be worked out.
One other outstanding issue is how the multiplicity of indicators of systemic risk can inform policymaking, and how one might use the signal provided by an indicator to develop a particular policy response. This is no easy task. The insights of research such as the work presented at this conference will certainly be welcome.
Conclusion: the role of supervision
In all three areas I have spoken about – namely, resilience, the financial cycle and systemic risk – it is easy to focus mainly on the regulatory initiatives. Regulation can be printed, measured and enforced. But history teaches that regulation cannot solve all problems. The financial system evolves, so no set of rules can deal with all risks and problems.
This is an important reason why there needs to be a parallel focus on strong and effective supervision. My view is that a strengthening of supervision is at least as important as are the post-crisis regulatory reforms. Rigorous, inquiring supervision that takes a holistic view of the environment is essential to maintaining financial stability and good outcomes for consumers. I encourage you to consider how the research agenda can be expanded to consider how to best balance regulation and supervision.
Philip Lowe is deputy governor, RBA and was addressing the <a href="https://www.rba.gov.au/speeches/2016/sp-dg-2016-09-08" target="_blank">Institute of Global Finance International Conference</a>. 
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jchancellor-FAypfDUnLy

History teaches that regulation cannot solve all problems: RBA's Philip Lowe

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The thinking behind yesterday's RBA cash rate is illustrated by today's RBA chart pack.
<a href="https://www.propertyobserver.com.au/images/2016/09/07/Screen%20Shot%202016-09-07%20at%2011.33.09%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2016/09/07/Screen%20Shot%202016-09-07%20at%2011.33.09%20AM.png" alt="">
 
<a href="https://www.propertyobserver.com.au/images/2016/09/07/Screen%20Shot%202016-09-07%20at%2011.34.38%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2016/09/07/Screen%20Shot%202016-09-07%20at%2011.34.38%20AM.png" alt="">
<a href="https://www.propertyobserver.com.au/images/2016/09/07/Screen%20Shot%202016-09-07%20at%2011.35.39%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2016/09/07/Screen%20Shot%202016-09-07%20at%2011.35.39%20AM.png" alt="">
<a href="https://www.propertyobserver.com.au/images/2016/09/07/Screen%20Shot%202016-09-07%20at%2011.36.42%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2016/09/07/Screen%20Shot%202016-09-07%20at%2011.36.42%20AM.png" alt="">
<a href="https://www.propertyobserver.com.au/images/2016/09/07/Screen%20Shot%202016-09-07%20at%2011.37.36%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2016/09/07/Screen%20Shot%202016-09-07%20at%2011.37.36%20AM.png" alt="">
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jonathanchancellor-7SQnKwU6yx

September RBA chart pack gives interest rate insights

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With the beginning of spring property season, the Reserve Bank has elected to leave the cash rate unchanged at 1.5 percent. 
Mozo's Kirsty Lamont has shared the five numbers you need to know after September’s rate decision:                     
<img src="/images/2016/09/07/10.png" alt="">
Just 10 percent, or eight out of 83 lenders in the Mozo database, passed on the full 25 bps August rate cut to home loan customers. The average cut was a miserly 11 bps.
<img src="/images/2016/09/07/3.66.png" alt="">
Fixed rate competition continues to grow, with new record low 2 year fixed rates hitting the market in recent weeks. The most competitive 2-year fixed rate is now 3.66 percent. 
<img src="/images/2016/09/07/60283.png" alt="">
Borrowers can make the most of low rates by boosting mortgage repayments to build equity faster. Mozo’s calculations show that the average borrower could save $60,283 in interest and knock almost 7 years off their mortgage simply by putting an extra $50 each week towards paying it off. 
 <img src="/images/2016/09/07/numbers.png" alt="">
In another blow to at-call savings accounts, which were already delivering seriously lacklustre returns even before the August rate cut, 57 providers cut rates last month by an average of 23 basis points.
<img src="/images/2016/09/07/3.11.png" alt="">
The good news for savers is that term deposit rates are up for terms of 1 year and over. The best 1-year rate on the market is now 3.11 percent. Given the RBA is not likely to raise rates any time soon, savers can benefit by moving cash from at-call accounts into a competitive 1 year term deposit.
For more information, <a href="https://mozo.com.au/" target="_blank">click here</a>.
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Mozo's five need to know numbers after the Reserve Bank's September rate decision

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GUEST OBSERVER
<div>
As expected the Board of the Reserve Bank decided to leave the cash rate unchanged at 1.50 percent.
We were most interested in how the Governor assessed the housing market in the light of strong auction clearance rates and some evidence of higher price growth in Sydney and Melbourne.
Recall that the key assertion in the statement following the August cut was that “the likelihood of lower interest rates exacerbating risks in the housing market has diminished”. It is not surprising that this sentence was not repeated in the September statement. Arguably if we had not seen the evidence in the Sydney and Melbourne markets the Governor would have been sufficiently emboldened to repeat that assertion.
The other key theme around housing in the August statement was that “dwelling prices have been rising only moderately over the course of this year”. This statement repeats that assertion with an important qualification: “dwelling prices OVERALL have risen moderately over the past year”. That would appear to be recognition that the term “moderate” no longer applies to some parts of the country, specifically Sydney and Melbourne.
There have been some other subtle changes of language in this statement. In August, overall growth was described as continuing “at a moderate pace”. In this statement growth is described as: “overall growth is continuing”, arguably leaving out the word moderate indicates that he is not prepared to commit until tomorrow’s release of the GDP report. Equally, in August, areas of domestic demand were described as “expanding at a pace at or above trend”. In this statement areas of domestic demand are merely described as growing.
There is no change in the assessment of the key policy variables – inflation and employment. Inflation continues to be described as “quite low” and is expected to remain so for some time. Labour market indicators are still described as “somewhat mixed”.
The global outlook remains the same. The global economy is expected to grow at a lower than average pace and “China’s growth appears to be moderating”.
The final paragraph in the statement is a replica of the statement used in June following the May rate cut with a very clear neutral bias being signalled. While this is an accurate assessment of current thinking it seems highly unlikely that the outgoing Governor would have left the new Governor with any particular commitment. Better to allow total flexibility over the next few months.
Conclusion
Since the beginning of 2013 when interest rates had dropped to 3.00% the Bank has cut rates on six occasions and all of them have been in the months February, May, August and November. These dates are significant in that they coincide with an update on the inflation outlook and also the release of the Bank’s quarterly Statement on Monetary Policy when the Bank’s forecasts are reviewed. This means that the next possible time of a rate cut would be November this year.
We expect that rates will remain on hold in November. Our forecast for underlying inflation in the September quarter is 0.5% which, following a 0.5% for the June quarter, allays concerns that the Bank may have had( following the 0.2% print for the March quarter) that inflation was tumbling out of control.
We would also like to think that the new Governor might adopt a slightly wider target band (1-3%) when he reaches agreement with the Government on the new Inflation Target. A decision like that would take further pressure off a  pursuit of a 2.50% inflation print given current global conditions. It would not be a good policy approach to pursue an unrealistic inflation target at the possible expense of destabilising asset markets and a further increase in in household debt ratios.
This expectation is not contingent on our forecast of steady rates in November given that we have to reluctantly recognise that a change in target is not likely.
Other factors that might prompt a rate cut in November would be a rampant AUD in response to further evidence that the Fed will remain on hold in December. However, whilst we think that decision by the Fed is unlikely we also expect that commodity prices will be weighing on the fair value of the AUD by that time.
Today’s statement really only provides a reasonable signal that the confidence around housing we saw in August has been shaken a little, slightly lowering the chances of that November cut.
Developments in the real economy will also be important. We expect tomorrow’s GDP report to print 0.5% for the quarter and 3.3% through the year. That will be the most up to date real sector information for the November meeting and of course represents around half a percent faster growth than the RBA’s current trend assessment.
While the Governor continues to describe labour market indicators as “somewhat mixed” our own research is more encouraging with employment growth likely to hold in the 1.5-2 percent range.
Overall we do not expect any change at the October meeting and are also anticipating steady rates in November.
 
</div>
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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RBA sees housing risks more apparent than expected: Westpac's Bill Evans

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The RBA cash rate decision came out at 2.30 today with the decision to hold rates at 1.5 percent.
Taking account of the available information, and having eased monetary policy at its May and August meetings, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.
"Separately, a number of lenders are also taking a more cautious attitude to lending in certain segments.
"The best available information suggests that dwelling prices overall have risen moderately over the past year and growth in lending for housing purposes has slowed.
"Considerable supply of apartments is scheduled to come on stream over the next couple of years, particularly in the eastern capital cities," it advised.
After two rates cuts already this year the hold decision was widely anticipated as the RBA monitors the effects of the record low cash rate on the economy and currency according to Tim Lawless, CoreLogic head of research.
"The RBA is likely to be keeping a keen eye on the housing market; since the May rate cut and subsequent cut in August, many of the key housing market indicators have bounced higher," he said.
"Auction clearance rates have returned to the highest reading in more than a year, albeit on lower volumes.  
"CoreLogic’s hedonic index has seen some acceleration in the rate of capital gain across the already hot Sydney and Melbourne markets and the value of investor housing finance commitments have recently rebounded to the highest levels since August last year.  In contrast, there has been a consistent wind down in transaction numbers which implies market demand may be getting exhausted. 
"While affordability barriers and tighter lending conditions are likely to be contributing to the slowdown in transactional activity, another factor is simply that there are historically low numbers of homes being advertised for sale in Sydney and Melbourne which is contributing to the upwards pressure in the market and limiting transaction activity due to low stock levels. 
"With monthly indicators of inflation remaining low and the Australian dollar remaining relatively high, there remains a strong chance of another rate cut later this year. The most likely timing will be the November RBA meeting when September quarter inflation data is available. 
"Another low inflation reading combined with a stubbornly high dollar could result in the cash rate moving lower."
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RBA holds at Governor Stevens' last board meeting

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RBA Governor Glenn Stevens' September 2016 statement
At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
The global economy is continuing to grow, at a lower than average pace. Several advanced economies have recorded improved conditions over the past year, but conditions have become more difficult for a number of emerging market economies. Actions by Chinese policymakers have been supporting growth, but the underlying pace of China's growth appears to be moderating.
Commodity prices are above recent lows, but this follows very substantial declines over the past couple of years. Australia's terms of trade remain much lower than they had been in recent years.
Financial markets have continued to function effectively. Funding costs for high-quality borrowers remain low and, globally, monetary policy remains remarkably accommodative.
In Australia, recent data suggest that overall growth is continuing, despite a very large decline in business investment, helped by growth in other areas of domestic demand and exports. Labour market indicators continue to be somewhat mixed, but suggest continued expansion in employment in the near term.
Inflation remains quite low. Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time.
Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 is helping the traded sector. Financial institutions are in a position to lend for worthwhile purposes. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.
Supervisory measures have strengthened lending standards in the housing market. Separately, a number of lenders are also taking a more cautious attitude to lending in certain segments. The best available information suggests that dwelling prices overall have risen moderately over the past year and growth in lending for housing purposes has slowed. Considerable supply of apartments is scheduled to come on stream over the next couple of years, particularly in the eastern capital cities.
Taking account of the available information, and having eased monetary policy at its May and August meetings, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.
 
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po-LsXgBTHBmX

Moderate house price growth so hold decision in RBA Governor Glenn Stevens' September 2016 statement

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Analysis from RateCity.com.au predicts the cash rate will hold at 1.50 percent at today's Reserve Bank meeting, stating the Board will likely to sit on its hands until the August cut has had a chance to flow through the economy. 
According to <a href="https://www.ratecity.com.au/" target="_blank">RateCity.com.au</a> analysis of over 30 key economic indicators, the RBA will continue its wait-and-see approach in September in the lead up to the busy Spring housing period. 
<a href="/images/2016/09/06/Screen%20Shot%202016-09-06%20at%2010.55.57%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/09/06/Screen%20Shot%202016-09-06%20at%2010.55.57%20AM.png" alt="">
Peter Arnold, data insights director at RateCity.com.au, said a hot housing market, high household debt levels and subdued investor lending has steadied the RBA’s hand. 
“After two rate cuts this year the housing market is heating up, with house prices holding strong and auction clearance rates and building approvals both rising,” he said.   
“Australian households have more debt compared to the size of the country’s economy than any other in the world, partially fuelled by record low rates.
“The higher our debt levels, and the closer we get to a zero cash rate, the less effective each cut becomes and the RBA will be keenly aware of that fact having seen the impact of negative rates around the world. 
“Evidently, consumer confidence took a dive, despite rate cuts in May and August, driven by households' views of the economic outlook.
“In theory, a rate cut gives consumers some more spending money which helps to kick along the economy. But the banks withheld almost half of the last cut, so the Board is unlikely to pull the trigger again this year. 
“On top of that, APRA and the banks are happy with the caps put on investor lending, which gives the RBA further breathing room.” 
“The Federal Reserve is getting closer to lifting US interest rates, while Chinese iron ore futures tumbled late last month putting further pressure on our export prices – both of which have ramifications for our domestic economy."
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Rates to hold at 1.5 percent until 2017: RateCity.com.au

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GUEST OBSERVER
After the RBA’s decision in August to cut the cash rate to a historic low of 1.5 percent, there is good reason to pause.
Unemployment fell slightly, but only because of a large increase in part-time employment. With consumer price inflation equalling 1.0 percent year-on-year, well below the RBA’s 2-3 percent target band, and wage growth a modest 2.1 percent year-on-year, there exist little immediate inflationary pressures.
The CAMA RBA Shadow Board clearly believes that the cash rate should not be cut any further. The Shadow Board attaches a 57 percent probability to a rate hold being the appropriate policy setting. The confidence attached to a required rate cut equals a mere 5 percent, while the confidence in a required rate hike equals 38 percent.
Australia’s unemployment rate fell ever so slightly, to 5.7 percent, according to the Australian Bureau of Statistics, as did the participation rate, which stands at 64.88 percent. June’s (revised) increase in full time employment of 44,000, was completely reversed in July.
Furthermore, part-time employment, after falling by 33,200 in June, increased by a whopping 71,590 in July. The overall increase in part-time employment, relative to full-time employment, may be cause for concern. While it may reflect a flexible, nimble labour market, it could also be a sign that the labour market is softening, capturing a degree of underemployment. The seasonally adjusted wage price index increased by 2.1 percent year-on-year in the second quarter of 2016, unchanged from the previous quarter.
For the last month the Aussie dollar, relative to the US dollar, has been range-bound, trading between 75 US¢ and 77 US¢. Yields on Australian 10-year government bonds rarely budged, remaining at their historic lows below 2 percent.
Domestic share prices peaked on 1 August and have retreated slightly since then. Worldwide, after the three-week rally in July, most stocks have been going sideways, confirming the old adage that August is a slow month for the share market.
Absent any major surprises in the world economy, prospects for economic growth in the major economic regions continue to be modest. Jobs growth in the US has been solid in June (292,000) and July (255,000), but predictions for the August statistic, to be announced on 2 September, are smaller. US investment numbers continue to be relatively weak and these are unlikely to improve significantly prior to the US election in November.
Brazil’s economic fortunes, after the recent deposition of its President, Dilma Rousseff, remain highly uncertain. Germany’s fiscal surplus of 1.2 percent of GDP for the first half of 2016 is not matched by the periphery’s economies. The imbalances between Germany and its Eurozone partners will generate further pressure for Germany to increase spending and provide stimulus for the region.
Consumer confidence, as measured by the Westpac-Melbourne Institute Consumer Sentiment Index, rose slightly. The manufacturing PMI, which measures the performance of the manufacturing sector based on surveys of 200 industrial companies, fell dramatically last month, from 56.40 to 46.90, the lowest reading since June 2015. Numbers for this month’s Services PMI have yet to be released. Capacity utilization remains just above 81 percent; after a big gain in June, the AIG Construction Performance Index receded slightly, from 53.2 to 51.6 in July.
The Shadow Board attaches a 57 percent probability (54 percent last month) that “no change” is the appropriate policy, a 5 percent probability (28 v last month) that a rate cut is appropriate and a 38 percent probability (18 percent in the previous month) that a rate rise, to 1.75 percent or higher, is appropriate. The substantial increase in the confidence attached to a rate rise (and the corresponding fall in the probability confidence attached to a rate cut) reflect the Shadow Board’s mild disagreement with the RBA’s decision to cut the cash rate in August.
The probabilities at longer horizons are as follows: 6 months out, the estimated probability that the cash rate should remain at 1.50 percent is virtually unchanged at 24 percent, one percentage point up from the previous month. The estimated need for an interest rate decrease equals 11 percent (29 percent in August), while the need for a rate increase equals 65 percent (48 percent in August).
A year out, the Shadow Board members’ confidence that the cash rate should be held steady equals 18 percent (16 percent in August), while the confidence in a required cash rate decrease equals 10 percent (26 percent in August) and in a required cash rate increase 72 percent (58 percent in August).
<a href="/images/2016/09/06/Screen%20Shot%202016-09-06%20at%2010.31.20%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/09/06/Screen%20Shot%202016-09-06%20at%2010.31.20%20AM.png" alt="">
For more information, <a href="https://cama.crawford.anu.edu.au/rba-shadow-board" target="_blank">click here</a>.
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No need for rates to go lower after last month’s cut: RBA Shadow Board

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The incoming Governor, Philip Lowe, has welcomed the appointment by the Treasurer of Dr Guy Debelle to the position of Deputy Governor of the Reserve Bank of Australia and as a member of the Reserve Bank Board. Dr Lowe said:
‘I warmly congratulate Dr Debelle on a well-deserved appointment as Deputy Governor of the Reserve Bank of Australia. Over many years, he has made major contributions to the Bank’s economic and financial policies. He has also led some of the important international work aimed at improving the functioning of financial markets. I am confident that over the coming years the Reserve Bank Board will benefit greatly from his wealth of experience and expertise.’
Dr Debelle will take up his new role on 18 September. An Assistant Governor role will be advertised shortly.
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Guy Debelle appointed Deputy Governor of the Reserve Bank of Australia

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<img src="https://counter.theconversation.edu.au/content/64539/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Last week saw a slew of economic data released in the US, Australia, and China.
Perhaps the most carefully watched was the US employment report, showing that the US economy added 151,000 jobs last month, leaving the unemployment rate unchanged at 4.9 percent.
This was a solid, not stellar result. But interestingly, the August report is notorious for being revised upward in later months. So the final number could come in higher if recent history is a guide.
The reason the jobs number was so closely watched was because many people – including yours truly – thought that another 250,000-ish gain would lead the Fed to a 25 basis point rate hike at their next meeting. That move by the Fed is still definitely possible, but the news lowered the odds a bit.
In another positive signal about the US economic recovery, the Conference Board’s consumer-confidence index rose to 101.1 in August, up from 96.7 in July.
Also positive was the Australian business investment plans for 2016-17. It beat expectations at $105 billion, although still down nearly 10% on the prior year.
ABS figures revealed a sharp jump in apartment approvals, with the July figure coming in at 11,393 – more than 15% higher than the previous year. This helped offset the 3% year-on-year decline in housing approvals. Still, apartment approvals in particular are lumpy, so it’s dangerous to read too much in to one month’s number.
On the less positive side, Australian retail trade figures were flat in July, putting the year-on-year increase at a modest 2.7%. This is on the back of just a 0.1% rise in June.
There was good news out of China, with the manufacturing Purchasing Managers' Index (PMI) up to 50.4, the best result since October 2014, and up from 50.0 the months before, also beating market expectations.
All in all this was a fairly positive week for global economies (especially if you forget about the basket case which is Europe).
There will be a good deal of central-bank watching over coming weeks, though. Philip Lowe takes over as governor of the RBA, and Guy Debelle was announced as his deputy – an excellent choice.
September 20-21 is the Fed’s Open Market Committee’s (FOMC) next meeting, which will be telling about the future path of interest rates – both in the US and Australia.
If the Fed hikes that will put downward pressure on the Australian dollar. The RBA seems uncomfortable with the current level of the local unit, and they would probably welcome a weakening, which would give them more wiggle room on their own cash rate.
And although it wasn’t “data” exactly, Prime Minister Malcolm Turbull recently reminded us of the benefits of free trade, in the leadup to the G20 Summit in Hangkhou. His admonition that “One important way in which the G20 summit can promote open trade policies is by assisting members to do a better job of measuring and communicating the benefits,” is well taken as populism seems increasingly the political order of the day around the world.
At least one piece of positive news surrounded the event, with China and the US ratifying the Paris climate deal on the eve of the summit.
Action on climate change and a boost for free trade would make for a very successful summit. Let’s hope our PM supports the former, not just the latter.
Richard Holden is professor of Economics and PLuS Alliance Fellow, UNSW Australia and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">here</a>.
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