The residential transformation of St Kilda Road is set to continue into with more new apartment plans for the sought-after boulevard.

Wing Tai Asia has lodged plans for a major residential tower at 464-466 St Kilda Road, replacing the former VACC House with an 18-storey mixed-use development designed around a retained heritage podium and a sculpted contemporary tower.

The proposal, prepared under Victoria’s Significant Residential Development with Affordable Housing pathway, would deliver 325 apartments and ground-floor retail across the prominent 4,653 sqm boulevard site in Melbourne’s St Kilda Road North Precinct.

The project centres on the adaptive reuse of the site’s heritage-listed VACC Building, an eight-storey office designed by Bernard Evans that has occupied the address for decades. Planning documents state the development would involve “carefully dismantling and conserving off-site the original metal fabric of the podium visible from St Kilda Road,” before reinstating it as the defining frontage of the new scheme.

Above the restored podium, Wing Tai is proposing a curvilinear residential tower. The scheme includes 172 one-bedroom apartments, 63 two-bedroom apartments, 66 three-bedroom apartments, and 24 four-bedroom apartments, alongside two ground-floor food and beverage tenancies fronting St Kilda Road.

The tower has been designed with substantial articulation and variable setbacks to minimise perceived bulk and maintain view corridors along the boulevard. Urbis, which prepared the planning report, said the design “has been significantly articulated through a curvilinear design” with “an interplay with materials, façade expression and depth” to create visual separation and visual interest.

The proposal also includes 254 basement car spaces, landscaped pedestrian links connecting St Kilda Road and Queens Lane, and a biophilic landscape strategy featuring canopy trees, raised planters, cascading greenery and a glass oculus pool overlooking the eastern frontage.

Planning documents confirm the $270.1 million development will contribute 3 per cent of project costs to the Social Housing Growth Fund as part of the application process.

Wing Tai acquired the St Kilda Road property in 2018 alongside Abacus Property Group for $95.38 million, before later consolidating ownership of the site. The property previously served as the Victorian Automobile Chamber of Commerce headquarters for around 60 years.

The transformation of the St Kilda Rd boulevard is already beginning to materialise, with a number of high-profile projects recently completed, launched, or approaching launch as developers continue to back the long-term appeal of the precinct.

Among the most notable recent completions is Louise by Samuel Property Group, just off the strip on Queens Lane, the same pocket Hirsch &amp; Faigen recently launched The Queensbury. Mirvac is too on the same street with The Albertine, which is approaching completion.

Dexus recently secured approval for its slice of St Kilda Road, while Gurner also has approved plans for the precinct.

Joel Robinson

Wing Tai unveils 325-apartment St Kilda Road tower on former VACC House site

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>

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 

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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

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
Not surprisingly, the focus of the minutes was around the Bank’s downgraded inflation forecasts.
The minutes highlight the Bank’s uncertainty over the inflation outlook, and its concerns about the second-round impact of lower inflation on wages growth.
Don’t read too much into the lack of an explicit easing bias in the minutes. This is normally the case in the press release and minutes following a rate cut. We continue to expect another cut at the August meeting.
INFLATION THE KEY           
With the sharp downgrade to the RBA’s inflation forecasts in the Statement on Monetary Policy (SoMP) the focus in today’s minutes was always going to be on the inflation discussion. The minutes highlight the heightened level of uncertainty around the Bank’s outlook for inflation. As the SoMP suggested, the Bank was clearly disconcerted by the broad-based nature of the weakness in non-tradables inflation.
Interestingly, the minutes highlight the potential for the weakness in inflation to become entrenched, noting that “if inflation was to be persistently lower than previously forecast, it was possible that, in time, this could be reflected in lower wage growth”.
While the minutes note that there is a possibility that labour costs could pick up sooner than expected, they also highlight that heightened job insecurity is likely to be a factor in the global weakness in wage growth. Given the experience of the US, where unemployment has fallen from 10% to 5%, and wage growth has picked up only marginally, it’s difficult to see this factor dissipating any time soon.
The comments on growth were consistent with those in the SoMP, with the RBA noting no material changes to their forecasts for either activity or unemployment, while again noting that the outlook for China “had continued to be a key issue”.
On housing, the minutes reiterated that “supervisory measures were strengthening lending standards and that the potential risks of lowering interest rates therefore were less than they had been a year earlier”. The Bank will be closely watching developments in the housing market; while auction clearance rates have been broadly unchanged at the national level since the rate cut, house prices have been rising solidly through April and May. Moreover, with the recent Financial Stability Review noting heightened competition for investor lending, the RBA and APRA are likely to be watching this closely. 
The RBA’s comments on the currency remained largely unchanged, noting again that “an appreciating exchange rate could complicate [the outlook]”.
OUTLOOK
While there was no explicit bias in the minutes, this is normal practice in the press release and minutes released immediately post a rate cut. In our view, this does not imply that the rate cut was of the ‘one-and-done’ variety. The extent of the downgrade to the inflation forecasts in the SoMP strongly suggest that further easing is likely. That said, the discussion around the possibility of waiting for further data suggests a lack of urgency and counts against the possibility of a back-to-back cut in June. 
We continue to expect further monetary policy easing given the soft inflation outlook, and look for another 25bp cut in the cash rate to 1.5% at the August meeting.
 
Felicity Emmett co-head of Australian economics, ANZ Research and can be contacted <a href="https://www.anz.com/corporate/research/" target="_blank">here</a>.
 
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RBA minutes highlight inflation worries: ANZ's Felicity Emmett

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GUEST OBSERVER
Today's RBA minutes, which record the deliberations that led to the 3 May cut in the cash rate, showed that the central bank had discussed both the possibility of cutting rates at that meeting or 'awaiting further information before acting'. 
The minutes note that the board had an extensive discussion about the Q1 CPI figures and the outlook for inflation given the dynamics of the labour market and current weak wages growth. The apparent hesitancy to cut, relayed in the minutes, supports our view that the RBA will probably choose to wait for the Q2 CPI print, due on 27 July, before cutting further. Our central case sees the RBA cutting to 1.50% in August and holding steady at that level over the subsequent quarters.
Facts
The RBA published the minutes for its 3 May board meeting at which the central bank decided to cut its cash rate by 25bp to 1.75%. A cut was only 45:55 priced going into the meeting and 12 of 27 economists in the Bloomberg survey expected a cut (HSBC expected a cut).
Implications
Today's minutes revealed that the 3 May board meeting, in which the RBA cut its cash rate by 25bp to 1.75%, was a fairly close call. As the minutes noted, the board had 'discussed the merits of adjusting policy at [that] meeting or awaiting further information before acting'.
The minutes report that the board spent a considerable amount of time discussing the Q1 CPI numbers and the outlook for inflation. The key question was the extent to which the new CPI numbers, which had surprised significantly to the downside, provided a signal about the on-going trend in inflation and to what extent the weaker inflation print was temporary or due to measurement error.
In the end, the board determined that the new information did materially change the inflation outlook and they delivered a 25bp cut in the cash rate to 1.75% (as we had expected).
However, the degree of hesitancy revealed in the minutes suggests that the RBA is likely to be reluctant to follow-up with a further cut without further clear information on the disinflationary trend. To us, this suggests that the RBA is unlikely to cut further until after the next CPI print, which is due to be published on 27 July.
Despite making no changes to the RBA's growth forecasts, the central bank did make a significant downward revision to its inflation forecasts. Underlying inflation had previously been expected to run near the bottom edge of the 2-3% target band, but the new forecasts showed that it was expected to remain around 1-2% over 2016 and to pick up to 1.5-2.5% by mid-2018.
This adjustment to the forecasts seemingly reflects much more than just the downside surprise to the Q1 CPI print. Rather, it is significant shift in the way the RBA sees the interaction of growth, the labour market, wages growth and inflation.
We also see a significant part of the downward adjustment to the underlying inflation forecasts as tactical. In our view, the RBA now wanted a set of inflation forecasts where the chances of a downside surprise are very low. Further downside surprises to the inflation numbers could put the credibility of the inflation targeting regime at risk. They also wanted the inflation forecasts to bolster the easing bias, despite the cut that was delivered, and in doing so, put further downward pressure on the AUD. The sharp fall in the AUD since the board meeting suggests that this tactic has worked.
We see the RBA as likely to cut further. Our central case has another 25bp cut in the cash rate to 1.50%, delivered in August, just after the Q2 CPI print. We then expect that, over time, underlying inflation may very well be a touch stronger than the RBA is forecasting, allowing the central bank to hold steady and point out that, although underlying inflation is below target, it is moving in the right direction and ahead of the forecasts. In doing this, the RBA would make use of the flexibility that is explicit in its inflation targeting regime. We see the forecasts themselves as a device that the RBA is using to loosen financial conditions.
<a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">PAUL BLOXHAM</a> IS CHIEF ECONOMIST (AUSTRALIA AND NEW ZEALAND) FOR HSBC.
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RBA likely to wait until August to cut again: HSBC's Paul Bloxham

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Stabilising house prices: May monetary Reserve Bank board minutes

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Greater Bank has cut fixed home loan rates (owner occupier and investment) by up to 0.25 percent and announced a 5 year fixed home loan rate under 4 percent.
The 5 year Ultimate Home Loan will be 3.99 percent from Monday May 16.  
The rate applies to owner occupier loans worth more than $150,000 where the loan to value ratio does not exceed 85 percent. 
The comparison rate is 4.48 percent. The three and four year rates are also 3.99 percent (comparison rates 4.51 percent and 4.49 percent respectively).
Greater Bank also cut all variable home loan rates by 0.25 percent this month.
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Greater Bank cuts 5 year fixed rate to 3.99 percent

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GUEST OBSERVER
Lending: Total new loans (personal, business, housing &amp; lease) rose by 0.7 percent in March after a 3 percent rise in February. Lending was just 3.9 percent shy of the 7½-year high recorded in November 2015.
Total lending is up 1.6 percent on a year ago.
Within personal fixed finance commitments, loans for new cars were up by 20.4 percent on a year earlier while loans for used cars were up 15.5 percent. Loans for residential blocks of land were up by 9.1 percent on a year ago.
<a href="/images/2016/05/13/Screen%20Shot%202016-05-13%20at%2012.53.10%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/13/Screen%20Shot%202016-05-13%20at%2012.53.10%20PM.png" alt=""> 
The lending figures have implications for finance providers, retailers, and companies dependent on consumer and business spending.
What does it all mean?
Similar to the housing finance data early this week, the lending statistics is essentially old news – pre Reserve Bank interest rate cut. In fact the shift in Reserve Bank commentary to a lower inflation profile suggests that further interest rate cuts are on the cards. And in that context very likely to support further lending not just in housing but across the business sector as well.
The lift in borrowing across the economy in March is encouraging coming of the back of solid gains in February.
Overall, total lending is just shy of 7½-year highs recorded in late 2015. While lending remains healthy the hope would be that business borrowings lift from here - driving investment and supporting medium term growth.
The generational low interest rates will be supportive of further borrowing – but there is no guarantee. While Reserve Bank policymakers would be hoping that the latest rate cut spurs another round of activity, they would be well aware that borrowers are cautious about taking on more debt. And lower interest rates compress bank margins, affecting profits and potentially investment, employment and shareholder returns.
Unfortunately elections cause consumers and businesses to hold back on spending, employment and investment plans, and that is the risk to the positive momentum that has built up in recent months. CommSec expects that the low inflation outlook will result in further cuts to the cash rate. Rate cuts have been pencilled in for August and November.
What do the figures show?
Lending Finance
Total new loans  (personal, business, housing &amp; lease) rose by 0.7 percent in March after a 3 percent rise in February. Lending was just 3.9 percent shy of the 7½-year high recorded in November. Total lending is up 1.6 percent on a year ago.
Housing finance:  The seasonally adjusted measure of construction and new purchases fell by 1.2 percent in March while alterations &amp; additions rose by 0.4 per cent. Home loans are up 11.9 percent on a year.
Commercial finance : The seasonally adjusted series for the value of total commercial finance commitments rose by 0.9 percent in March after rising by 4.8 per cent in February. Revolving credit commitments rose by 2.3 percent. Fixed lending commitments rose by 0.4 percent. Business loans are down 2.2 percent over the year.
Personal finance : The seasonally adjusted series for the value of total personal finance commitments rose by 6.3 percent in March after falling by 2.9 percent in February. Revolving credit commitments rose by 11.9 percent and fixed lending commitments rose by 3 per cent. Personal loans are down 1.9 percent over the year.
Within personal fixed finance commitments, loans for new cars were up by 20.4 percent on a year earlier while loans for used cars were up 15.5 percent. Loans for residential blocks of land were up by 9.1 percent on a year ago.
Lease finance : Lending fell by 7.7 percent in March and was up 0.8 percent over the year.
What is the importance of the economic data?
Lending Finance  is released monthly by the Bureau of Statistics and contains figures on new housing, personal, commercial and lease finance commitments. The importance of the data lies in what it reveals about the appropriateness of interest rate settings, confidence and spending levels in the economy.
What are the implications for interest rates and investors?
At present the national economy is tracking ok. Economic growth is healthy and more encouragingly unemployment is at a 2½-year low. However the concern for policymakers is that the deflationary environment becomes more firmly entrenched in coming quarters. A sustained super low inflation landscape will lead to low inflationary expectations over time and in turn a shift in asset allocation.
The bottom line is that underlying inflation is undershooting the 2-3 percent target band and that suggests little risk in cutting rates a little further. CommSec believes there is a strong chance the Reserve Bank will cut interest rates twice more this year, taking the cash rate to a historical low of 1.25 percent by in November.
<a href="/images/2016/05/13/Screen%20Shot%202016-05-13%20at%2012.56.43%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/13/Screen%20Shot%202016-05-13%20at%2012.56.43%20PM.png" alt="">
Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>.
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Personal loans drive lift in lending: CommSec's Savanth Sebastian

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GUEST OBSERVER
Home loans: The number of loans (commitments) for people who are buying or building homes to live in (owner-occupiers) fell by 0.9 per cent in March after rising by 0.9 per cent in February. The number of refinancing transactions rose by 8 per cent.
The value of loans by owner-occupiers and investors to build new homes rose by 1.7 percent in March after a rise of 2.7 per cent in February. The value of loans to build new homes stood at a record high $3.59 billion.
The average home loan cross Australia stood at $357,500 in March, up 5.9 per cent on a year ago, but down 7.4 per cent in the past four months.
Consumer sentiment:The Westpac/Melbourne Institute index of consumer confidence rose by 8.5 per cent in May to 103.2 after sliding by 4 per cent in April. The confidence index is up 0.8 per cent on a year ago. A reading of 100 is the dividing line separating optimism from pessimism.
The housing finance data has implications for banks, building material suppliers and retailers. The consumer confidence data is important for retailers and consumer-facing businesses. Building &amp; building material companies are affected by dwelling starts including Boral, James Hardie, Adelaide Brighton, Brickworks, AV Jennings Limited, Devine Limited and Beacon Lighting.
What does it all mean?
The latest data onthe 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 record high $3.59 billion. There is a healthy pipeline of work, with owner occupiers likely to dominate home building and buying.
Interestingly the number of home loan refinancing transactions lifted sharply up by 8 per cent in March. And the proportion of fixed rate loans jumped to 14.9 per cent - the highest reading in 16 months. The intense competition by lenders has resulted in home owners shopping around for the best rates on offer and more are locking in those cheaper rates. The lift in refinancing will provide additional savings to household budgets – injecting fresh spending power into the economy. No doubt the latest interest rate cut will spur another round of refinancing although the increasing likelihood of further cuts to the cash rate may result in less fixed rates being taken up.
<a href="/images/2016/05/12/Screen%20Shot%202016-05-12%20at%2010.43.09%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/12/Screen%20Shot%202016-05-12%20at%2010.43.09%20AM.png" alt="">
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.
Importantly the weekly consumer confidence survey provides a better picture of the shifting landscape in regards to the Federal budget, latest interest rate cut and movement in the Australian dollar. And in that regard confidence levels are healthy although it is unlikely to translate through a substantial lift in spending. The weekly confidence data will be analysed more closely given the Federal Election campaign currently underway.
What do the figures show?
Housing finance - number
The number of new owner-occupier housing loans (commitments) fell by 0.9 percent in March after rising by 0.9 percent in February. Excluding therefinancing of dwellings, the number of loans was up by 6.7 percent.
Loans by owner-occupiers for the construction of homes fell by 2 percent in March; loans to buy newly-erected dwellings fell by 5.2 percent; and loans for the purchase of established dwellings (excluding refinancing) fell by 0.5 percent. The number of refinancing transactions rose by 8 percent.
Housing finance - value
The value of new housing commitments (owner occupier and investment) fell by 0.2 percent in March after a 2.2 percent increase in February. Owner-occupier loans fell by 1.2 percent while investment loans rose by 1.5 percent.
The value of loans by owner-occupiers and investors to build new homes rose by 1.7 percent in March after a rise of 2.7 percent in February. The value of loans to build new homes stood at a record high $3.59 billion.
Housing finance – other statistics
The proportion of first-time buyers in the home loan market fell from 14.6 percent to 14.2 percent in March – a 12 year low. (However the figures take into account refinancing loans and as such the figures may misrepresent the true situation). The proportion of fixed rate loans rose from 13.2 percent to 14.9 percent in March. And the average home loan across Australia stood at $357,500 in March, up 5.9 percent on a year ago, but down 7.4 percent in the past four months.
Consumer sentiment:
The Westpac/Melbourne Institute index of consumer confidence rose by 8.5 percent in May to 103.2 after sliding by 4 percent in April. The confidence index is up 0.8 percent on a year ago.
The current conditions index rose by 4.2 percent while the expectations index rose by 11.6 percent.
All five components of the index rose in May:
The estimate of family finances compared with a year ago was up by 3.2 percent;
The estimate of family finances over the next year was up by 7.2 percent;
Economic conditions over the next 12 months was up by 13.2 percent;
Economic conditions over the next 5 years was up by 14.8 percent;
The measure on whether it was a good time to buy a major household item was up by 4.9 percent.
<a href="/images/2016/05/12/Screen%20Shot%202016-05-12%20at%2010.48.23%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/12/Screen%20Shot%202016-05-12%20at%2010.48.23%20AM.png" alt="">
Gender &amp; demographics: Men (index reading of 107.8, up 8.6 percent) were more optimistic than Women 98.8, up 8.3 percent). The sentiment index for young people fell by 3.4 percent to 105.9 in May. Across the other demographics: 25-44 years (index 110.4, up by 11.1 percent); 45 years plus (index 97.5, up 9.9 per cent).
Housing outlook: A good time to buy a dwelling? – Index up 12.1 percent in the month but down 6.4 per cent on the year.
What is the importance of the economic data?
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 onthe housing market.
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.
What are the implications for interest rates and investors?
It’s important not to ‘over-think’ consumer confidence. For most punters, the Aussie dollar, interest rates, petrol prices, home prices and the job market are the key factors determining whether someone is positive or negative on supposedly ‘economic’ issues
The Reserve Bank will look to next week’s jobs data to gauge how the labour market is tracking. CommSec expects a further rate cut in coming months.
Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>
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Refinancing on the rise, confidence “Ok”: CommSec's Savanth Sebastian

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Australia's largest online lender loans.com.au have announced they will pass on the official rate cut in full. 
Almost half of Australia’s lenders stall on announcing their response to the RBA’s 0.25 percent cut to the official cash rate.
According to a survey from comparison site finder.com.au, 49 percent of the 74 lenders on its database have still not announced their rate changes.
Only 26 have passed on the cut in full and 12 have kept some of the cut for themselves.
Marie Mortimer, loans.com.au managing director was happy to be in the minority of lenders that had quickly let customers know it would be passing on the full cut.
“It is unfortunate that two out of three Australian lenders have either given their customers bad news that they won’t be passing on the full cut or, even worse, are still dragging their heels on revealing their response,” Ms Mortimer said.
“Loans.com.au is very pleased to be able to extend the full rate cut to our customers so they will save money every month on interest and own their home sooner.”
Loans.com.au offers an already low “Move Fast Special” rate which will now drop to a record low 3.63 per cent (comparison rate 4.03 percent).
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j.ballantyne1990-6AQqhLzZaK

Loans.com.au will pass on the cut in full

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Australia's largest non-bank mortgage lender Firstmac will pass the full cut to its customers following the RBA's 0.25 percent cut to the official cash rate.
Almost half of Australia's lenders are continuing to stall on revealing their response, but Firstmac have announced their cut will be effective from May 23.
The cut will apply to all variable rate loans including owner occupier and investment loans.
Firstmac Managing Director Kim Cannon said Firstmac was pleased to be in the minority of lenders who had promptly committed to pass on the full benefit to borrowers.
“It is disappointing that nearly two thirds of Australian lenders have either failed to pass on last week’s RBA rate cut in full, or have not yet announced their response, leaving mortgage brokers in an awkward situation with their customers,” he said.
“There is plenty of competition in the home loan market, and bank customers can see they could be saving money on interest if they chose another lender as well as getting straight answers about how much they will be paying.”
“Bank customers who switch to a Firstmac home loan can save themselves tens of thousands of dollars, and years off their home loan.”
Comparison site finder.com.au found that 49 percent of the 74 lenders on its database have still not announced their rate changes, a full week after the RBA announcement.
Only 26 lenders have passed on the cut in full, while 12 lenders have kept some of the cut for themselves.
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Firstmac to pass on May rate cut in full

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With the RBA cutting its cash rate to a historical low of 1.75 percent, fixed rate home loans look more attractive than ever, although the a majority of lenders are yet to say if they will pass on the rate cut to borrowers.
Property Observer went looking for the cheapest fixed home loans and came up a its five lowest from <a href="https://mozo.com.au/home-loans/fixed-rate" target="_blank">mozo.com.au</a>, listed as lowest rate first:
At the top was Illawarra Credit Union with an interest rate of 3.5% for the first year of mortgage, followed by Greater Bank at 3.79 percent, again Illawarra Credit Union with 3.85 percent (for two years), loans.com.au at 3.99 percent and last Hunter United Credit Union at 3.98 percent. Each had an upfront fee ranging from $350 to $600 except Greater Bank, which did not have any for its fixed one-year product.
<a href="/images/2016/05/12/Screen%20Shot%202016-05-11%20at%2010.58.51%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/12/Screen%20Shot%202016-05-11%20at%2010.58.51%20AM.png" alt="">
<div class="story-intro">
None of the Big Four banks are offering loan rates lower than any of these.
However, on the popular three-year period for fixed home loans, NAB figured at no. 3 with 4.24 percent, behind loans.com.au and UBank UHomeLoan, according to <a href="https://www.finder.com.au/home-loans/fixed-rate-home-loans/3-year" target="_blank">www.finder.com.au</a> for a sample loan amount of $150,000 for a period of 30 years. 
 
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jonathanchancellor-7SQnKwU6yx

Thinking of a fixed home loan? Check out the top 5

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<div class="section">GUEST OBSERVER</div>
<div class="section"> </div>
<div class="section">
The Westpac Melbourne Institute Index of Consumer Sentiment jumped by 8.5 percent in May from 95.1 in April to 103.2 in May. <div class="layoutArea">
<div class="column">
The Index has now reached its highest level since January 2014. 
This result would have been affected by two very significant events: the Commonwealth Budget and the Reserve Bank’s decision to cut the overnight cash rate from 2 percent to 1.75 percent. 
Our analysis indicates that the dominant driver of the boost to confidence has been the rate cut.
<a href="/images/2016/05/11/Screen%20Shot%202016-05-11%20at%203.52.03%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/11/Screen%20Shot%202016-05-11%20at%203.52.03%20PM.png" alt="">
 
Sharp increases in the Index in response to rate cuts are fairly common, although they depend somewhat on other events at the time and whether moves were expected. The last four rate cuts have seen the Index rise on average 6.6%, with gains ranging from 3.5% to 8.5%. 
Supporting this view has been a stunning 15% increase in the confidence of those respondents in the survey who currently have a mortgage. 
On the other hand we were able to gauge respondents’ specific assessments of the Budget by asking the special question: “What impact do you expect the Federal Budget to have on your family finances over the next 12 months?” The net percentage was -22.4% compared with -22.5% in 2015 and -56.1% in 2014 (a negative means respondents saying ‘deteriorate’ outnumber those saying ‘improve’). 
Since we started asking this question in 2010 all net responses have been negative and the 2016 response is the second highest over that period (the highest being –17.1% in 2010). But this result is hardly the sort of glowing response that would explain an 8.5% jump in the Sentiment Index. 
Other aspects of the survey were also encouraging. Both Westpac and the Government are forecasting the unemployment rate to fall further to 5.5% by mid- 2017. Consistent with this view was a 5.8% fall in the Westpac Melbourne Institute Index of Unemployment Expectations to its second lowest level since January 2012. If sustained, this fall in the Index will be consistent with our expected steady improvement in labour market conditions. 
All components of the Index improved in May. The sub-index tracking respondents’ assessments of their family finances compared to a year ago increased by 3.2% while the sub-index tracking the one year outlook for family finances lifted by 7.2%. 
The economic outlook also improved. The sub-index tracking the one year outlook jumped by 13.2% and the sub-index tracking the 5 year outlook rose by 14.8%. 
</div>
<div class="column">
The ‘time to buy a major household item’ sub-index increased by 4.9%. 
A word of caution is appropriate at this juncture. The Reserve Bank strongly favours the ‘family finances vs a year ago’ sub- index as an indicator of future spending patterns. This component increased the least in the survey and is still below its level of two months ago. 
Consumers’ assessments of housing conditions improved, although there was a fall in confidence around the outlook for house prices. The ‘time to buy a dwelling’ lifted by 12.1%, although it is still 6.4% below its level a year ago. The strongest gains were in the most volatile state – New South Wales. 
On the other hand, we saw a more subdued outlook for house prices with a 2.6% fall in the Westpac Melbourne Institute Index of House Price Expectations. This Index is now 15.9% below its level of a year ago. 
The Reserve Bank board next meets on June 7. We expect the Board to keep rates on hold at that meeting although we are expecting a further rate cut at the August meeting. 
The Reserve Bank targets inflation and its latest forecasts point to the underlying inflation rate holding at 1.5% in 2016 – below the bottom of the 2-3% target band. That is uncomfortable but nevertheless acceptable if the forecast is for inflation to move back comfortably within the band in 2017. Current forecasts are for underlying inflation to only move to the bottom of the band in 2017, despite the Bank including a follow up rate cut in its forecast assumptions (due to its practice of adopting market pricing for its interest rate assumptions for the forecast). 
It seems likely that it will have to deliver that cut in August after it has had time to further analyse the inflation trends in the June quarter and the March quarter national accounts.
<a href="/images/2016/05/11/Screen%20Shot%202016-05-11%20at%203.53.57%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/11/Screen%20Shot%202016-05-11%20at%203.53.57%20PM.png" alt="" width="834" height="273">
 
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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