<p>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.</p>

<p>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.</p>

<p>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.</p>

<p>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.</p>

<p>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.</p>

<p><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" /></p>

<p>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.</p>

<p>“Our target for this exceptional development is local and overseas buyers, including first-home buyers, downsizers and investors,” Choong said.</p>

<p>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.</p>

<p>“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.</p>

<p><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" /></p>

<p>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.</p>

<p>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.</p>

<p>The proposal also includes a commitment for 10 per cent of residential floor space to be allocated toward affordable housing through a monetary contribution.</p>

<p>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.</p>

<p><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" /></p>

<p>“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.</p>

<p>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.</p>

<p>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.</p>

<p>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>.</p>

<p><em>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></em></p>


Joel Robinson

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

<p><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.</p>

<p>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.</p>

<p>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.</p>

<p><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" /></p>

<p>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.</p>

<p>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.”</p>

<p>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.</p>

<p><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" /></p>

<p>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.</p>

<p>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.</p>

<p>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.</p>

<p><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" /></p>

<p>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.</p>

<p>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.</p>

<p>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.</p>


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

<p>Bottega House has completed settlement of a landmark riverfront site in Macquarie Street, St Lucia, representing its first major Brisbane development.&nbsp;</p>

<p>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;</p>

<p>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;</p>

<p>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;</p>

<p>Exclusive sales for the project will be led by Keenan &amp; Byrne, ahead of an anticipated launch later this year.&nbsp;</p>

<p>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;</p>

<p>“This is an incredibly rare riverfront opportunity and one we have approached with a long-term perspective,” Malloch said.&nbsp;</p>

<p>“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."</p>

<p>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;</p>

<p>"Demand is expected to be strong given the scarcity of premium riverfront opportunities of this nature within Brisbane’s inner-west."&nbsp;</p>


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">
<p data-end="157" data-start="0">The arrival of the first piling rig officially marks the commencement of construction at SIERA’s new beachside apartment development, Exhale, in Northcliffe.</p>

<p data-end="459" data-start="159"><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.</p>

<p data-end="459" data-start="159">[smartcode_project:default project_id=112661 project_image_fid=359603]</p>

<p data-end="651" data-start="461"><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.</p>

<p data-end="950" data-start="653">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.</p>

<p data-end="1081" data-start="952">“The façade was designed to maximise panoramic coastal views while creating a distinctive architectural identity,” Thompson said.</p>

<p data-end="1081" data-start="952">[smartcode_project:default project_id=112661 project_image_fid=355935]</p>

<p data-end="1307" data-start="1083">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.</p>

<p data-end="1522" data-start="1309">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.</p>

<p data-end="1522" data-start="1309">[smartcode_project:default project_id=112661 project_image_fid=361052]</p>

<p data-end="1714" data-start="1524">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.</p>

<p data-end="1945" data-start="1716">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.</p>

<p data-end="1945" data-start="1716">[smartcode_project:default project_id=112661 project_image_fid=359607]</p>

<p data-end="2220" data-is-last-node="" data-is-only-node="" data-start="1947">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.</p>
</section>
</section>

<p>[smartcode_project_cta:default project_id=112661]</p>


SIERA kicks off construction at Northcliffe tower Exhale

<p data-end="320" data-start="79">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>.</p>

<p data-end="638" data-start="322">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.</p>

<p data-end="864" data-start="640">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.</p>

<p>[smartcode_project:default project_id=112343 project_image_fid=352689]</p>

<p>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.</p>

<p><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."</p>

<p>“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.</p>

<p>[smartcode_project:default project_id=112343 project_image_fid=352687]</p>

<p><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.</p>

<p>“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.”</p>

<p>[smartcode_project:default project_id=112343 project_image_fid=352690]</p>

<p>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.</p>

<p>“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.</p>

<p><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.</p>

<p>[smartcode_project_cta:default project_id=112343]</p>


Eastern Suburbs buyers snap up ESTE Little Bay apartments

<p>National Australia Bank (NAB) has brought forward the timing of the first RBA cash rate cut by three months.</p>

<p>NAB is now expecting a cut in February, in line with ANZ and Westpac, having initially thought a cut wouldn't come until May.</p>

<p>Commonwealth Bank, the nation's largest lender, still thinks the first cut will come in December.</p>

<p>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.</p>

<p>"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.</p>

<p>They added that the cadence of the cuts may be faster than its central profile.</p>

<p>"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.</p>

<p>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;</p>

<p>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.</p>

<h2><strong>What would a rate cut in February look like for borrowers?</strong></h2>

<p>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;</p>

<table border="1" cellpadding="0" cellspacing="0">
	<tbody>
		<tr>
			<td colspan="3">
			<p><strong>Impact of 0.25% pt cut in February 2025</strong></p>
			</td>
		</tr>
		<tr>
			<td>
			<p><strong>Current loan size</strong></p>
			</td>
			<td>
			<p><strong>Drop in monthly repayment</strong></p>
			</td>
			<td>
			<p><strong>New monthly repayment</strong></p>
			</td>
		</tr>
		<tr>
			<td>
			<p>$600,000</p>
			</td>
			<td>
			<p>-$92</p>
			</td>
			<td>
			<p>$3,907</p>
			</td>
		</tr>
		<tr>
			<td>
			<p>$750,000</p>
			</td>
			<td>
			<p>-$114</p>
			</td>
			<td>
			<p>$4,884</p>
			</td>
		</tr>
		<tr>
			<td>
			<p>$1M</p>
			</td>
			<td>
			<p>-$153</p>
			</td>
			<td>
			<p>$6,512</p>
			</td>
		</tr>
		<tr>
			<td colspan="3">
			<p>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.</p>
			</td>
		</tr>
	</tbody>
</table>

<p>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.</p>

<p>“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.</p>

<p>“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."</p>

<p>&nbsp;</p>


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><div class="page" title="Page 1">
<div class="layoutArea">
<div class="column">
<p>GUEST OBSERVERS</p>
<p>The RBA minutes suggest a higher degree of uncertainty around the Bank’s outlook, with board members concerned about the labour market, potential negative feedback from the housing market into the CPI, and the effect of easy international monetary policy on the exchange rate.</p>
<p>While we still expect the RBA to keep the cash rate on hold at 1.5 percent as it assess the impact of the May and August rate cuts, we continue to see the risks as tilted firmly to the downside.</p>
<p>DETAILS</p>
<p>The RBA remains more than usually uncertain about the labour market. “Members noted that there continued to be considerably uncertainty about momentum in the domestic labour market and the extent to which domestic inflationary pressures would rise over the next few years.”</p>
<p>These concerns relate to the degree of slack currently in the labour market, with measures of underemployment suggesting that overall labour underutilisation remains high. Moreover, the Bank is concerned that while the expansion of LNG export capacity will make a significant contribution to growth over the coming years, its low labour intensity will not see a similar boost to employment.</p>
The Board is concerned about a negative feedback loop from housing into inflation. The minutes note that the risk of housing oversupply was “important for the inflation outlook because housing costs make up a significant share of the CPI basket”.</div>
<div class="column"> </div>
<div class="column">The pressure on housing costs as measured by the CPI is likely to come through in both rents, which are barely growing, as well as new house purchase costs. Together, rents and new house prices make up 16 percent of the inflation basket and are the two largest components of the CPI.</div>
<div class="column">
<br>The impact of international monetary policy on the exchange rate continues to be a bugbear. The Board noted that “changes to expectations about central banks’ policies continues to have an important influence on global exchange rate developments”, after acknowledging that a rate risk in the US was not priced in until late 2017 and further easing was likely in Europe and the UK.</div>
<div class="column"> </div>
<div class="column">They reiterated the comment that “an appreciating exchange rate could complicate the necessary economic adjustments”.</div>
<div class="column">
<br>OUTLOOK</div>
<div class="column">
<br>While the minutes did not include any explicit forward guidance, we think that the RBA retains a strong easing bias. With inflation set to remain below or at the bottom of the Bank’s 2-3 percent target band for the entire forecast period, we expect that the easing bias is quite strong, particularly when banks passed on only half the August rate cut to variable home loan customers.</div>
<div class="column">
<br>Our central case is that the cash rate will remain unchanged at 1.5 percent, but we see a clear risk of further easing given the low inflation outlook, where there is a lack of drivers for a meaningful pickup in prices.</div>
<div class="column">
<br>We think that the RBA will want to assess the impact of the May and August cuts on the labour market and housing market, while inflation data come into play when the Q3 CPI is published on 26 October. The exchange rate also will continue to be an important input into monetary policy deliberations given that it appreciated after the August rate cut and is near the high reached in April.<br><br>
</div>
<div class="column"><em>Felicity Emmett co-head of Australian economics, ANZ Research and can be contacted <a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/felicity-emmett/5a/3ba/256" target="_blank">here</a>.</em></div>
<div class="column"><em> </em></div>
<div class="column"><em><em>Kieran Davies is an economist for ANZ and can be contacted <a href="https://www.anz.com/personal/" target="_blank">here</a>.</em></em></div>
</div>
</div></body></html>

jchancellor-FAypfDUnLy

Uncertainty reigns in August RBA board minutes: ANZ 

<html><body>
<p>Consumers should not expect the recent variable rate cuts to last for long, a mortgage industry veteran, 1300 HomeLoan managing director John Kolenda says.</p>
<p>He expects many lenders to reprice sometime this year as the current margins are unsustainable with the additional costs banks are facing along with the pressures of return on equity for their shareholders, Kolenda said.</p>
<p>Kolenda said consumers can at least count on interest rates to stay low for the foreseeable future.</p>
<p>Some 17 more lenders have passed on the interest rate cut, according to finder.com.au.</p>
<p>This includes online banks who have cut interest rates from between 10 to 15 basis points.</p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.31%20AM.png" target="_blank">Click to enlarge</a></p>
<p><span><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.31%20AM.png" alt=""></span></p>
<p> </p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.41%20AM.png" target="_blank">Click to enlarge</a></p>
<p><span><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.41%20AM.png" alt=""> </span></p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.47%20AM.png" target="_blank">Click to enlarge</a></p>
<p><span><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.47%20AM.png" alt=""></span></p>
<p><span><span> </span></span></p>
</body></html>

jonathanchancellor-7SQnKwU6yx

Variable rate cuts will not last long: John Kolenda

<html><body>
<p><span>Some 17 more lenders have passed on the interest rate cut, according to finder.com.au.</span></p>
<p><span>This includes online banks who have cut interest rates from between 10 to 15 basis points.</span></p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.31%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.31%20AM.png" alt=""></span></p>
<p> </p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.41%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.41%20AM.png" alt=""> </span></p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.47%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%2010.32.47%20AM.png" alt=""></span></p>
</body></html>

17 more lenders pass on cut following cash rate cut

<html><body>
<p><img src="https://counter.theconversation.edu.au/content/63706/count.gif" alt="The Conversation" width="1" height="1"></p>
<p>GUEST OBSERVER</p>
<p>On September 18 2016, Glenn Stevens will end his ten-year mandate as governor of the Reserve Bank of Australia (RBA). His experience in the top job provides a wealth of lessons for the next generation of policymakers; that’s arguably his most important legacy.</p>
<p>A graduate from the University of Sydney and the University of Western Ontario in Canada, Stevens worked in the RBA research department between 1980 and 1992. He then held positions as department head, assistant governor (economic) and deputy governor. In 2006, he was appointed governor.</p>
<p>Throughout his tenure as governor, Stevens has had to deal with a highly volatile and generally fragile global economic and financial landscape. Domestically, he has been confronted with the end of the mining boom and a prolonged contraction of gross domestic product (GDP) below its potential level.</p>
<p>It is probably not an exaggeration to say that the ten years from 2006 to 2016 have been some of the most difficult economic times in post-war history. But it is exactly this highly complicated environment that provides a valuable learning opportunity for policymakers and for the economics profession more generally.</p>
<h2>The monetary policy framework</h2>
<p>The first lesson concerns the need for a “risk management” approach to monetary policy in a time of crisis.</p>
<p>The RBA’s monetary policy framework centres on an inflation target of 2%-3% on average over the medium term.</p>
<p>This means that actual inflation may deviate from the target in the short term in response to the cyclical conditions of the economy. For instance, when a negative demand shock reduces GDP below potential and causes unemployment to increase, reduced inflationary pressures allow the RBA to stimulate the economy by reducing the cash rate moderately.</p>
<p>In September 2008, when the global financial crisis hit the world, Australian inflation had been above target and on the rise for three consecutive quarters. This should have made the RBA prudent in cutting interest rates.</p>
<p>Instead, conditions worldwide were such that a change in monetary policy thinking was needed. The risks were simply too large to be treated with a normal policy approach.</p>
<p>Accordingly, the RBA moved to a “risk management" approach that, while broadly consistent with the flexible inflation-targeting framework, allowed for a quick (and much-needed) response.</p>
<p>As a result, the cash rate was reduced from 7.25% to 4.25% in the period September to December 2008 and then to 3% in the course of the first half of 2009. Comparatively, only the Bank of England cut its interest rate by as much as Australia.</p>
<p>The cut in the cash rate largely passed through to commercial lending rates, resulting in an increase in disposable income for many individuals. This then contributed (together with other factors, including the fiscal stimulus) to maintaining the Australian economy out of a recession.</p>
<p>It is highly likely that without this risk-management approach to monetary policy, Australia would have been much more severely affected by the global financial crisis.</p>
<h2>The limits of monetary policy</h2>
<p>The second lesson is that policymakers ought to be realistic and pragmatic about what monetary policy can and cannot deliver.</p>
<p>Through changes to the cash rate, monetary policy can affect the pace of real economic activity in the short term. But, in the long term, growth and unemployment are driven primarily by supply-side factors and monetary policy only affects inflation.</p>
<p>Moreover, the extent to which monetary policy can affect growth in the short term decreases as interest rates get lower. During the GFC, monetary policy effectively contributed to shielding the Australian economy because higher interest rates gave the RBA more room to cut.</p>
<p>But when interest rates are already low, the monetary policy space is reduced and further cuts are unlikely to produce significant effects.</p>
<p>Understanding the limits of monetary policy is particularly important in the current economic context.</p>
<p>The Australian economy has been operating below potential for several years now, as data from the International Monetary Fund suggests.</p>
<p>In response to this prolonged contraction, the RBA has reduced the interest rate to record low levels. It has reached the point where further cuts would probably be more damaging than beneficial.</p>
<p>Now more than ever recovery becomes a matter of fiscal policy interventions.</p>
<h2>How to use monetary policy</h2>
<p>The third lesson is about the use of monetary policy.</p>
<p>The inflation-targeting framework requires the RBA to set the cash rate having consideration for a variety of factors and data, including qualitative information received from conversations with businesses, investors and stakeholders.</p>
<p>In making the best possible use of these data and information, the RBA follows two guiding principles.</p>
<p>First, policy should not be driven by conclusions drawn from short runs of data. This then implies that the cash rate should not be fine-tuned continuously in response to marginal developments occurring month by month.</p>
<p>In normal circumstances, the interest rate ought to move gradually and rather infrequently to provide individuals (businesses and households) with some certainty about the course of monetary policy.</p>
<p>Second, monetary policy in Australia ought to be both outward- and forward-looking. An outward look is required because, as a small and open economy, Australia’s inflationary dynamics are heavily affected by developments on international markets.</p>
<p>This does not mean that the RBA should passively mimic the behaviour of other central banks. However, it does mean that the importance of international factors for the Australian economy should be adequately taken into account.</p>
<p>Forward-looking refers to the fact that forecasts ought to play a central role in the monetary policymaking process. To express this in Stevens’ own words:</p>
<p><em>"After all, if monetary policy takes some time – several years – to have its full effect on the economy and inflation, forecasts have to be at the centre of things, don’t they?"</em></p>
<p><em><span class="fn author-name">Fabrizio Carmignani is p</span>rofessor, Griffith Business School, Griffith University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/fabrizio-carmignani-4375" target="_blank">here</a>.</em></p>
<p><em> </em></p>
</body></html>

The legacy of Glenn Stevens in three lessons

<html><body><div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
<div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
<p><span>GUEST OBSERVER</span></p>
<p><span>“Record low interest rates”. This seems to be the headline of the year, having been used so many times it is hard to remember any other kind of interest rate. Each time we see this, expectations for another rate cut decrease momentarily, only to return to the same, pre-cut probability-levels after a few weeks. </span></p>
</div>
</div>
</div>
</div>
<p><span>Figure 1 paints a clear picture of a similar short-term outlook, </span>yet weakening long-term expectations.</p>
<p><a href="/images/2016/08/12/Screen%20Shot%202016-08-12%20at%209.45.34%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/12/Screen%20Shot%202016-08-12%20at%209.45.34%20AM.png" alt=""></p>
<p>While this graph does not include data since the rate cut (yields on 10 year treasuries have lifted a whopping 0.03 percent since the July levels shown in Figure 2), we can see almost identical movements at each maturity date from May to June and from June to July.</p>
<p><a href="/images/2016/08/12/Screen%20Shot%202016-08-12%20at%209.47.22%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/12/Screen%20Shot%202016-08-12%20at%209.47.22%20AM.png" alt=""></p>
</div>
</div>
<div class="layoutArea">
<div class="column">
<p><span>Yields on 3 year bonds are down 0.05 percent, 5 year bonds are down 0.1 percent and 10 year bonds are down 0.2 percent. </span></p>
<p><span>This is almost a textbook example of yield curve inversion. In fact, yields on 90 day treasury bills in June were identical to those on 10 year bonds at 1.93 percent. </span></p>
<p><span>Other than perhaps transaction costs, there is no reason for an investor to take on the extra risk of longer term securities without any increase in expected return. </span></p>
<p><span>The RBA had little choice but to cut rates again. </span></p>
<p><span>Figure 2 shows a similar picture, with greater inversion in the short and medium-term (up until about 2022) and lower yields on long- term maturities. </span></p>
<p><span>This is a dangerous combination. </span></p>
<p><span>An interest rate cut effectively lowers the short-term cash rate </span>(i.e. 90 day yield), which normalises (steepens) the yield curve.</p>
<p><span>In theory, this stimulates the economy by making borrowing cheaper and incentivising banks to borrow at the short-term rate and lend out at the higher long-term rate. If the curve continues to flatten out (as it did since the last rate cut in May) then this impact is almost entirely negated. Like a see-saw, rates will continue to decrease until long-term expectations increase or at least stabilise. </span></p>
<p><span><em>For more information, <a href="https://secretagent.com.au/" target="_blank">click here</a>.</em></span></p>
</div>
</div>
</div>
</div></body></html>

Rates will continue to decrease: Secret Agent 

Outgoing Reserve Bank Governor Glenn Stevens highlights limitations and constraints of a super-low interest rate environment

<html><body>
<p>Aussie Home Loans executive chairman John Symond says low interest rates would ensure the property market stay robust. </p>
<p>"I am expecting low rates for a decade.</p>
<p>" I'm not saying it won't go up, but we won't see 6 to 7 percent interest rates for a decade plus," he told Fairfax Media.</p>
<p>"Mortgages are in a good shape," he said. </p>
<p>"People are still making the same repayment when interest rates were 8 percent.</p>
<p>"The average mortgage holder is two years in front. I'm not saying WA, but the eastern seaboard ... particularly those who have bought property five years ago."</p>
<p>"We took a survey and the net asset value of all the areas where we have loans ...there was a 40 percent equity. In NSW, 50 percent," he said. </p>
<p>Aussie Home Loans has opened its 200th store in Sydney.</p>
<p>He says there is the potential for a 10 to 15 percent price growth in some capital city markets during the next three years as long as employment remained steady.</p>
</body></html>

Low interest rates for a decade: John Symonds' forecast

<html><body><div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">GUEST OBSERVER</div>
<div class="column"> </div>
<div class="column">In his final speech as Reserve Bank Governor, Glenn Stevens highlighted the limitations and constraints of a super-low interest rate environment.</div>
<div class="column"> </div>
<div class="column">“I have serious reservations about the extent of reliance on monetary policy around the world. It isn't that the central banks were wrong to do what they could, it is that what they could do was not enough, and never could be enough, fully to restore demand after a period of recession associated with a very substantial debt build-up”.</div>
<div class="column">
<br>Home loans: The number of loans (commitments) for budding home owners (owner-occupiers) rose by 1.2 percent in June. Excluding the refinancing of dwellings, the number of loans was up by 2.1 percent.</div>
<div class="column">
<br>Consumer confidence: The Westpac/Melbourne Institute survey of consumer sentiment rose by 2 percent in August to 101.0. The confidence index is up 1.6 percent on a year ago. The survey was conducted August 1st-4th.</div>
<div class="column">
<br>The housing finance data has implications for banks, building material suppliers and retailers. The consumer confidence figures have implications for finance providers, retailers, and companies dependent on consumer and business spending.</div>
<div class="column"> </div>
<div class="column"><a href="/images/2016/08/11/Screen%20Shot%202016-08-11%20at%208.31.59%20AM.png" target="_blank">Click to enlarge</a></div>
<div class="column"><img src="/images/2016/08/11/Screen%20Shot%202016-08-11%20at%208.31.59%20AM.png" alt=""></div>
<div class="column">
<br>What does it all mean?</div>
<div class="column">
<br>The Reserve Bank Governor has used his last public forum as a seminal speech to discuss a number of wide ranging issues from inflation targeting, the effect super low interest rates, a review of the past decade and also what “normal” growth may be in the current environment. The Governor did ask a lot of questions but as is the case with the Reserve Bank left it up to the public for interpretation.</div>
<div class="column">
<br>However the section of the speech that focussed on looking ahead, discussed the constraints of monetary policy. The Governor highlighted that monetary policy on its own is not enough to boost growth significantly. In fact a combination of public and private investment would be needed to support growth over the medium term. Interestingly the Governor did suggest that the current inflation target is still the right methodology to support longer-term growth outcomes.</div>
<div class="column">
<br>When it comes to the outlook for rates the Governor suggested that Australia is not in isolation and the negative and super low interest rates on a global front has also pushed the Reserve Bank in that direction.</div>
<div class="column"> </div>
<div class="column"><a href="/images/2016/08/11/Screen%20Shot%202016-08-11%20at%208.33.05%20AM.png" target="_blank">Click to enlarge</a></div>
<div class="column"><img src="/images/2016/08/11/Screen%20Shot%202016-08-11%20at%208.33.05%20AM.png" alt=""></div>
<div class="column"> </div>
<div class="column">“We in Australia have done fewer such things, but we are connected to the world, and the effects of policies adopted elsewhere condition the policy choices available to us”.</div>
<div class="column">
<br>The latest data on the housing sector could be classified as somewhat old news given that it predates the Reserve Bank interest rate cut last week. What it does do is provide a useful barometer for housing activity earlier this year. And in that context housing activity remains solid. The value of loans to build new homes stood at a just under $3 billion – easing modestly from the record high of $3.45 billion in March. There is a healthy pipeline of work, with owner occupiers likely to dominate home building and buying.</div>
<div class="column"> </div>
<div class="column">Interestingly the proportion of fixed rate loans fell sharply<br><ul>
<li>over the past two months to just 13.4 per cent – a six month</li>
<li>low. In addition the number of home loan refinancing transactions fell for the past two months, although it remains well above decade averages. It may be the expectation of further rates cuts seems to have resulted in home owners holding off from fixing rates. No doubt with the latest rate cut and intense competition by lenders it is likely that more home owners will re-evaluate their home loans in coming months. The anticipated lift in refinancing will eventually provide additional savings to household budgets – injecting fresh spending power into the economy.</li>
</ul>
The average loan size recorded a sizable 5.7 per cent in June. In fact the gain was the strongest percentage increase in nine months. The May rate cut may have been catalyst for the lift in home loan size, providing mortgages holders with the opportunity to comfortably service larger loans. It should be noted that the average home loan is also influenced by home prices, composition of borrowers and the geographic location of home purchases.<br><p>The monthly consumer confidence data is now merely useful as a check against the timelier weekly survey. The ANZ-Roy Morgan survey has the same number of survey respondents as the monthly series, has been running over the same number of years and covers the same questions but is conducted each week. And what is clear from both surveys is that confidence levels are a little higher than where they were a month ago. The consumer confidence reading on both fronts remains “ok”, with consumers modestly optimistic about life. </p>
<div class="page" title="Page 2">
<div class="layoutArea">
<div class="column">
<p>What do the figures show?</p>
<p>Housing finance - number</p>
<p>The number of loans (commitments) for budding home owners (owner-occupiers) rose by 1.2 per cent in June after falling by 0.8 per cent in June. Excluding the refinancing of dwellings, the number of loans was up by 2.1 per cent.</p>
The number of new home loans was up by 6.7 per cent on a year ago.<br>Loans by owner-occupiers for the construction of homes rose by 2.1 per cent in June.</div>
<div class="column">Loans to buy newly-erected dwellings rose by 2.7 per cent.</div>
<div class="column">Loans for the purchase of established dwellings (excluding refinancing) rose by 1 per cent.</div>
<div class="column">The number of refinancing transactions fell by 0.4 per cent. </div>
</div>
</div>
</div>
<div class="column">
<div class="page" title="Page 3">
<div class="layoutArea">
<div class="column">
<p><span>Housing finance - value</span></p>
<ul>
<li> The value of new housing commitments (owner occupier and investment) rose by 2.3 per cent in June after rising by 1.8 per cent in May.</li>
<li>Owner-occupier loans rose by 1.8 per cent while investment loans rose by 3.2 per cent.</li>
<li> The value of loans by owner-occupiers and investors to build new homes fell by 1.3 per cent in June after rising by 3.5 per cent in May.</li>
<li>The value of loans to build new homes eased further from the record highs of $3.45 billion in March to $2.99 billion in June.</li>
</ul>
Housing finance – other statistics<br><p><span></span><span>The proportion of first-time buyers </span><span>in the home loan market rose from a 12-year low of 14.2 percent in May to 14.3 percent in June. (However the figures take into account refinancing loans and as such the figures may misrepresent the true situation). </span></p>
<p><span>The proportion of fixed rate loans </span><span>fell from 14.7 percent to 13.4 percent in June. And the </span><span>average home loan </span><span>across Australia stood at $360,100 in June, up 3.5 percent on a year ago. </span></p>
<p><span>Westpac/Melbourne Institute consumer sentiment:</span></p>
<p>The Westpac/Melbourne Institute index of consumer confidence rose by 2 percent in August to 101.0. The confidence index is up 1.6 percent on a year ago.</p>
<p>The current conditions index rose by 1.3 percent while the expectations index rose by 2.4 percent.</p>
Four of the five components of the index rose in August:<br><p>The estimate of family finances compared with a year ago was up by 1 per cent;  The estimate of family finances over the next year was up by 4.3 per cent;</p>
<ul>
<li> Economic conditions over the next 12 months was up by 3.5 per cent;</li>
<li> Economic conditions over the next 5 years was down by 0.7 per cent;</li>
<li> The measure on whether it was a good time to buy a major household item was up by 1.6 per cent.</li>
</ul>
Gender &amp; demographics: Men (index reading of 104.1, up 1.5 per ent) were still more optimistic than Women 98.1, up 2.4 percent). The sentiment index for young people rose by 3.9 percent to 112.9 in August. Across the other demographics: 25-44 years (index 103.0, up by 1.1 percent); 45 years plus (index 96.9, up 2.1 per cent).<br><p>  Housing outlook: A good time to buy a dwelling? – Index up 10.1 per cent in the month and up 9.2 per cent on the year.</p>
<p>  Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.</p>
<p><a href="/images/2016/08/11/Screen%20Shot%202016-08-11%20at%208.34.05%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/11/Screen%20Shot%202016-08-11%20at%208.34.05%20AM.png" alt=""></p>
<p>  Westpac and the Melbourne Institute release the Index of Consumer Sentiment each month. According to Melbourne Institute: “The survey of consumer sentiment was first undertaken in 1973 and was conducted on a quarterly basis until 1976, a six-weekly basis from 1976 to 1986, and has been conducted monthly ever since.” Confident consumers may be more inclined to spend, especially on major items.</p>
<p>What are the implications for interest rates and investors?</p>
  The housing sector will continue to be a key driver of growth, given the amount of home building on the horizon. Home prices are lifting, but investors need to be more cautious about the outlook. Arguably we are near the point of maximum velocity. The plethora of cranes dotting skylines across the country indicate that plenty of sparkling new apartments will be coming onto the market over the next few years</div>
<div class="column"> </div>
<div class="column">CommSec expects a further interest rate cut in November. </div>
<div class="column"> </div>
<div class="column"><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a></em></div>
</div>
</div>
</div>
</div>
</div>
</div></body></html>

RBA Governor questions benefit of lower rates: CommSec's Savanth Sebastian

<html><body><div class="page" title="Page 1">
<div class="section">
<p>GUEST OBSERVER </p>
<p>The Westpac Melbourne Institute Index of Consumer Sentiment increased by 2.0 percent in August from 99.1 in July to 101.0 in August. </p>
<p>The survey was conducted over the first four days of August, covering the Reserve Bank’s August 2 announcement of a 0.25 percent cut in the overnight cash rate from 1.75 percent to 1.5 percent.</p>
<p>The response to this development has been much more muted than we saw in May when the Bank last cut the rate, from 2.0 percent to 1.75 percent.</p>
</div>
<div class="section">
<div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
<p><a href="/images/2016/08/10/Screen%20Shot%202016-08-10%20at%2011.14.23%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2016/08/10/Screen%20Shot%202016-08-10%20at%2011.14.23%20AM.png" alt=""></span></p>
<p> </p>
<p><span>On that earlier occasion the Index lifted by an impressive 8.5 percent from 95.1 to 103.2. That was an exceptionally large positive response and much stronger than the average rise following rate cuts historically. </span></p>
<p><span>That can be explained by a number of factors. Firstly, there was a larger surprise element to the May decision with, arguably, significantly less intense media speculation than we saw in August. Secondly the standard variable mortgage rate offered by most banks was reduced by the full 0.25 percent, whereas in August the four major banks only reduced variable rates by 0.10- 0.14 percent. Finally, the Index was coming from a significantly lower starting point in May (95.1) than in August (99.1). </span></p>
<p><span>Another development that may have unnerved respondents in August has been political unease. With the government having been returned with a wafer thin one seat majority in the House of Representatives and considerable change in the Senate, respondents might also be somewhat uncertain about future prospects around potential political stability. </span></p>
<p><span>Finally we have to accept that as interest rates go progressively lower some respondents, particularly those who may not have a mortgage, may become more unnerved about the signal that record low rates is sending about the economy. For example, in today’s result, while respondents with a mortgage responded strongly, there was a 1.3% fall in the confidence of those respondents who wholly own their properties. </span></p>
<p><span>That negative might have been expected to be even bigger for respondents that have low debt and rely on interest income. However, the decision by banks to raise some term deposit rates following the RBA rate cut has instead given a notable boost – sentiment amongst retirees in particular posted a strong 7% rise. </span></p>
<p><span>Notably, consumers do not expect to see more interest rate relief. In our special question around the outlook for mortgage rates, 37% of respondents expect mortgage rates to rise over the next 12 months; 36 percent expect rates to be steady; and just 27 percent expect further rate cuts. </span></p>
<p><span>Overall the lift in the Index is still consistent with an improved outlook for the Australian economy. We are now back in the range where optimists outnumber pessimists. Over the last thirty months there have only been eight when optimists have been in the ascendency with three of those months figuring in the last four. </span></p>
<div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
<p><span>In particular, prospects for the housing market appear to have been boosted by the rate cut. The confidence of those respondents who hold a mortgage lifted by 7 percent. </span></p>
<p><span>Westpac’s Index of ‘time to buy a dwelling’ rose by 10.1 percent to be up by 9.2 percent over the last year. In particular, the key states of NSW and Victoria showed strong improvements. The Index lifted by 19 percent in NSW and by 12.8 percent in Victoria. This is particularly significant for the key Sydney market where the Index is now 61 percent above the average of the second half of 2015 when confidence collapsed in the Sydney housing market. </span></p>
<p><span>The Westpac Melbourne Institute House Price Expectations Index was basically flat for the month but, consistent with the ‘time to buy’ index is signalling considerably more confidence than we saw at the start of the year. This Index has increased by 28 percent since the end of 2015. </span></p>
<p><span>Despite the lift in overall confidence prospects in the labour market deteriorated somewhat. The Westpac Melbourne Institute Unemployment Expectations Index increased by 1.7 percent from 138.8 to 141.2 (recall that higher reads indicate higher expectations for unemployment and a worsening outlook for labour market conditions). The Index is still 4.4 percent below its level from a year ago. However the promising improvement we saw in the Index near the end of last appears to have stalled over the course of this year. </span></p>
<p><span>Both of the components of the Index that assess family finances increased in the month. The ‘family finances vs a year ago’ sub- index lifted by 1.0 percent and the ‘family finances over the next 12 months’ sub-index was up by 4.3 percent. This is the second highest read on the outlook for finances since October 2013 although there has been no comparable outperformance for the backward- looking component, which is 9.6 percent below its level from a year ago. Note that in its Statement on Monetary Policy the Reserve Bank gives most attention to this component of the Index. </span></p>
<div class="page" title="Page 2">
<div class="section">
<div class="layoutArea">
<div class="column">
<p><span>Short term confidence in the economy improved. The ‘economic conditions over the next 12 months’ sub-index lifted by 3.5 percent to be up by 10.5 percent over the year. While there was little movement in the ‘economic conditions over the next 5 years’ sub-index (down 0.7 percent) that Index is also up by an encouraging 11.5 percent over the year. </span></p>
<p><span>Retail prospects improved marginally with the ‘time to buy a major item’ sub-index up 1.6 percent (although still down 2.7 percent on a year ago).</span></p>
<p><a href="/images/2016/08/10/Screen%20Shot%202016-08-10%20at%2011.15.31%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2016/08/10/Screen%20Shot%202016-08-10%20at%2011.15.31%20AM.png" alt=""></span></p>
<p> </p>
<p><span>The Reserve Bank Board next meets on September 6. Having cut rates at its last meeting the Board is almost certain to keep rates on hold in September. However it is clear from the Bank’s recent Statement on Monetary Policy that it holds an easing bias. That sentiment has encouraged markets to expect a further cut in November following the release of the next inflation report. The case for a cut is based on Australia’s ongoing low inflation environment. </span></p>
<p><span>However, by November, consistent with some of the messages in this survey we expect that economic conditions will have firmed sufficiently for the Bank to be more patient with its inflation objective. It may recognise that rigid adherence to the current inflation target of 2–3 percent might not be the best way to run policy in this current low inflation world. </span></p>
<p><span>Accordingly we expect that the Bank will decide to hold rates steady in November</span></p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
<p><span><span><em>BILL EVANS</em></span><em> is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>. <em>Justin Smirk is ‎senior economist, Westpac Group and can be contacted <a href="https://www.westpac.com.au/about-westpac/westpac-group/" target="_blank">here</a>.</em></em></span></p>
</div>
</div>
</div>
</div>
</div>
</div></body></html>

Case for rate cuts based on Australia’s ongoing low inflation: Westpac's Bill Evans

<html><body>
<div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
<p>GUEST OBSERVER</p>
<p>As expected, the statement fell short of providing explicit forward guidance, but we interpret the larger number of risks to the outlook and the RBA’s forecast that average underlying inflation would be stuck at the bottom of the 2-3 percent target band by the end of 2018 as a strong easing bias.</p>
<p>Our base case is that rates remain on hold at 1.5 percent, but we see a clear risk of further cuts given the RBA expects persistently low inflation and with banks passing on only half of this week’s rate cut to home loan customers. The AUD is also important given the RBA thinks it still poses a “significant source of uncertainty” around the outlook.</p>
<p>In our view, today’s statement reinforces this risk. With the cash rate now close to the 1 percent floor for the cash rate, we think the RBA would be looking more closely at unconventional options if downside risks to the outlook materialise.</p>
<p>Persistently low inflation points to an easing bias. As expected, the RBA’s forecast profile for underlying inflation was unchanged, showing inflation at or below the bottom of the 2-3 percent target band for the entire forecast period.</p>
<p>Importantly, in our opinion, the RBA’s initial forecast for Q4 2018 showed average inflation remaining at the bottom of the target band rather than returning to the 2.5 percent midpoint. We think this is a dovish signal, given that the RBA cut rates this week and the forecasts are based on market pricing, which was for another rate cut.</p>
<p>Near-term growth was revised higher, but the RBA is more uncertain about the outlook. The RBA revised near-term growth higher given Q1 GDP was significantly higher than it had expected, but left the rest of its forecast profile for modest growth unchanged. Unemployment was expected to “move only a little lower”, with a degree of spare capacity in the labour market for some time. The statement highlighted the uncertainty about the outlook, citing China, the labour market, the housing market, and the exchange rate.</p>
</div>
</div>
</div>
</div>
<div class="page" title="Page 2">
<div class="layoutArea">
<div class="column">
<p><a href="/images/2016/08/08/Screen%20Shot%202016-08-08%20at%208.27.50%20AM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2016/08/08/Screen%20Shot%202016-08-08%20at%208.27.50%20AM.png" alt=""></span></p>
</div>
</div>
<div class="layoutArea">
<div class="column">
<p>We think the RBA would be looking more closely at unconventional options if downside risks to the economy materialise. We think the RBA would have to look more closely at unconventional policies if, say, the economy takes a turn for the worse, the exchange rate unexpectedly strengthened, and/or low inflation expectations kept actual inflation below the target band. The RBA thought the likelihood of using such options was “very remote”, but we are much less sure given the cash rate is close to the RBA’s 1 percent floor.</p>
<p>Governor Stevens may talk about the limits to monetary policy next week.</p>
<p>The Governor is speaking on 10 August at what might be his last speaking engagement before his term finishes on 17 September. We think he may cover familiar ground, emphasising that central banks are having to shoulder too much of the burden of supporting growth and argue that there are limits to what can be achieved with monetary policy. He may also repeat his support for the RBA’s inflation targeting framework and argue that tougher regulations have put the banks in a better place. </p>
<p><span><em>Kieran Davies is an economist for ANZ and can be contacted <a href="https://www.anz.com/personal/" target="_blank">here</a>.</em></span></p>
</div>
</div>
</div>
</body></html>

Latest Finance Insights

NAB bring forward first RBA cut to February 2025

Editor's Picks

Developments

New apartments

New townhouses

News

Latest Finance Insights

NAB bring forward first RBA cut to February 2025

Editor's Picks

Receive the latest news stories to your inbox

Developments

New apartments

New townhouses

News