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>
Official interest rates are poised to hit a new historic low of 1.75 percent when the Reserve Bank Board meet later today following last week's shock consumer price index results.
Property website RateCity.com.au have suggested that deflation has sparked the May rate cut prospect.
Their analysis of the national and international economic indicators shows that the disappointing inflation figures could be enough to disrupt the RBA's year-long holding pattern.
RateCity.com.au money editor Sally Tindall said the chances of a budget-day cut were over 50 percent.
“Australians should get set for a rate cut, if not this month then within the following two months,” she said.
“The RBA has held an easing bias since October. Last week’s inflation figures should be the final straw.
“Inflation is now at 1.3 per cent and core inflation at 1.55 per cent, which is undeniably well below the RBA’s own target rate – a fact they will find hard to ignore.
“Despite a last-minute plunge, the relatively high dollar will also add to the RBA’s woes,” she said.
“If the RBA does deliver a cut, the big question for mortgage holders on Tuesday won’t be around the budget, but rather whether their bank will pass this savings on.”
“But with the cash rate decision set to be announced hours before Scott Morrison delivers his first Federal Budget and employment figures still holding up, the RBA may opt to wait and see if there’s a post-budget bounce in confidence.” 
<a href="/images/2016/05/02/RATECITY.jpg" target="_blank">Click here to enlarge RateCity.com.au's Rateulator</a>
<a href="/images/2016/05/02/RATECITY.jpg" target="_blank"><img src="/images/2016/05/02/RATECITY.jpg" alt="" width="280" height="197"></a>
Fellow mortgage website finder.com.au however have suggested that the cash rate will complete 12 months without movement as 96 percent of leading economists and experts have widely tipped the rate will hold at 2 percent.
The rate last moved in May when the Reserve Bank cut by 0.25 percent.
27 of 28 experts who took part in the finder.com.au Reserve Bank Survey believed the pause will continue due to a robust labour market, recovering Australian dollar and imminent Federal Budget.
CommSec's Savanth Sebastian is the only economist who has predicted a cut, suggesting the low inflation results opens the door for the Reserve Bank to cut rates if they deem it's necessary. 
As for prospects of a rate movement beyond May, 55 percent of the 22 experts who opted in to this question predict a fall is on the cards in 2016, with the most popular months indicated for a cut being August (four predictions) and November (3). 
Conversely, three experts – Steven Pambris from Bank of Sydney, Mark Crosby from Melbourne Business School and Stephen Koukoulas from Market Economics – predict a rate rise, or multiple rises, this year.  Ten experts (45 percent) predict no movement until 2017. All of this group agreed that a rate rise was the next likely move.  Half of the 24 experts surveyed on the rate cycle thought that the cash rate has already hit rock bottom, and would not drop below 2.00 percent in this period. Nine experts (38 percent) predict a drop to 1.75 percent before a rise, while only three experts (13 percent) predict a drop to 1.5 percent. Twenty-two experts weighed into whether recently reported oversupply of units in capital cities would have an effect on property prices. Eighty-two percent predict this would lead to a drop in unit prices in capital cities, with 36% (8) forecasting growth will slow across the whole capital city property market. Only four economists (18 percent) predict no effect on property prices.  Bessie Hassan, Money Expert at finder.com.au, says these findings, coupled with recent news that three of the big four banks – Westpac, ANZ and Commonwealth Bank – have ceased lending to foreign investors, could pave the way for first home buyers to enter the property market.  “Foreign investors account for nearly nine percent of housing sales, so this crackdown could take the heat out of the property market. If you’re a first home buyer and have a deposit saved up, now may be the best time to nab a bargain, especially if you’re eyeing an apartment.  “First home buyers have had an even tougher time of late, so this will be welcome news. Figures from the Australian Bureau of Statistics show that the number of first home buyers has been dropping consistency since September 2012, when it peaked at 19 percent. The latest figures show first home buyers now account for just 13.4 percent of all home loans financed.  “However, with the cash rate looking likely to remain stable for the foreseeable future, signs are pointing to a long-awaited first home buyer ‘comeback’," says Ms Hassan. “Interestingly, should the cash rate hold on Tuesday as widely expected, RBA figures show this would be only the third time in a decade that the official cash rate has held at the same level for 12 months or more. “That said, the average standard variable home loan rate – currently 5.21 percent – is not expected to hold for much longer with the big four banks having not moved their variable rates in five months.  “This reiterates that shopping around for the best home loan deal has never been more important. Do your homework, compare lenders, read the fine print and always factor in a buffer of 2-3 percent in case of future rate rises so you’re not left with a nasty shock soon after becoming a homeowner."
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jonathanchancellor-7SQnKwU6yx

Deflation sparks May rate cut propsect: ratecity.com.au

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GUEST OBSERVER
Whenever you buy a property for the purpose of taking advantage of capital growth, it's going to be a process that comes with an assortment of expenses.
You'll want to be prepared for the various costs you're going to have to cover and know how to get the most out of your investment.
First of all are the costs directly related to the purchase of the property. That means paying stamp duty on top of the property value, which depends on both the price of the home and on which state you're in. Note that you can reduce stamp duty on house and land packages - depending on if the land falls within your particular state's guidelines, you could end up paying it on the land and not the house. You may also have to pay for the services of a solicitor or conveyor, who will oversee the settlement process and ensure it goes smoothly.
If you require investment finance, which you almost certainly will, you'll also need to pay for the various costs involved in a loan application and have a deposit of at least 10 per cent of the value, whether through savings or home equity. Depending on how much of the value you're borrowing, you may also need to pay for lenders mortgage insurance.
<div class="columns small-10 large-5 vgrid-small-offset-bottom-1 vgrid-small-offset-top-0 large-push-1 right">You yourself will have to take out cover for the property, too. You might choose to take out landlords insurance if you're planning to rent the property out, which can protect your property from any damage, whether wilful or accidental. If you're constructing a new home, you'll need building insurance, too. </div>
Finally, don't forget the cost of building inspections and, for existing properties, pest inspections, which will give you peace of mind but can run into hundreds of dollars each. You'll also need to factor in any moving costs for furniture, plus council rates. 
With so many expenses, to take care of, it's a wise idea to do all you can to maximise your profit. This can involve a number of tax-reducing strategies:
<ul>
<li>Claim as many tax deductions as you can on the costs involved in running the property, from advertising for tenants to driving over to inspect the home.</li>
<li>Have a professional quantity surveyor carry out a depreciation schedule, so you can claim the depreciation of your investment property and its contents come tax time.</li>
<li>Consider structural factors like whose name the property is under. If your partner is not earning money, for example, they can't reduce their tax - so it's worth putting it mostly in your name.</li>
<li>Complete a tax variation form so you can receive tax off-sets with every pay cheque</li>
</ul>
Remember to speak to professional property experts like DPN to make sure you've got your bases covered. In some cases, we can access occupation specific benefits which may avoid the need for mortgage insurance.
SAM KHALIL is founder and director of <a href="https://www.dpn.com.au/" target="_blank">Direct Property Network</a>.
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jchancellor-FAypfDUnLy

Get the most out of your investment: DPN's Sam Khalil

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A majority of economists and experts say abolishing negative gearing would affect housing affordability in the future, according to a recent survey by leading comparison website finder.com.au.
The survey, released in the wake of Reserve Bank of Australia's recent decision to keep cash rates on hold at 2 percent, also revealed that the central bank's decision was expected. 
The cash rate has been on pause for almost a year with the last change – a cut – occurring in May 2015.
On the topic of negative gearing, 65 percent of respondents said there was a chance that eliminating negative gearing would result in a drop in property prices, with 23 percent predicting a "significant" drop of over 5 percent.
However, when looking at the effect of removing negative gearing on the market overall, a total of 30 percent thought that this had a some chance or a slight chance of increasing the likelihood of a significant market contraction, or triggering the collapse of a "housing bubble". The remaining 70% of economists said it would not trigger a market contraction. A third (33 percent) said there was no housing bubble in the Australian market.
On the brighter side, a softening of property prices combined with record low interest rates could encourage more first home buyers into the market, according to Bessie Hassan, money expert at finder.com.au.
In addition, the size of Australian mortgages continues to fall, hitting a low of $372,400 in January, dropping from an all-time high of $386,300 in November 2015, indicating uncertainty in the market – which could play out in first home buyers' favour. The average loan size for first time buyers has fallen from $355,500 in October 2015 to $338,800 in January.
"For those first home buyers who have been priced out of the property market to date, now may be their chance to get their foot on the ladder," Hassan said.
"A decline in average national mortgage size shows that borrowers are feeling less comfortable within the low rate environment than they were months ago, and are therefore borrowing less money to buy.
"All borrowers need to remember that these record low interest rate are not here to stay. If and when rates rise, this will lead to higher repayments – approximately $50 per month more for a $300,000 loan size, and thousands of dollars more over the life of your loan.
"Before jumping into the property market, do your research and factor in a buffer of 2-3 percent to accommodate for future rate rises, so you're not stung with a nasty shock months into becoming a homeowner."
The survey, the biggest of its kind, according to finder.com.au, revealed that 34 of 35 leading economists and experts (97 percent) had predicted that RBA would hold rates.
Hassan added that the majority of experts believed the economy was still tracking well and there would be no movement for the rest of the year.
"60 percent (21 experts) forecast the cash rate will hold at 2 percent for the rest of the year, while 20 experts are predicting a rate rise – but not until 2017 at earliest."
Just three experts (9 percent) expect a fall beyond 2016.
Of the economists (31) who weighed in on how low the cash rate would drop this cycle, 52% (16) said it would drop no lower than its current value. Twenty-nine percent (9 experts) predicted a low of 1.75 percent, and 19 percent (6) forecast the rate to drop to 1.50 percent or lower.
 
<a href="/images/2016/04/28/Screen%20Shot%202016-04-28%20at%202.33.27%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/28/Screen%20Shot%202016-04-28%20at%202.33.27%20PM.png" alt="">
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prateek24-ezbwHMbNAk

Eliminating negative gearing could shake, but not shatter property market: finder.com.au survey

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GUEST OBSERVER
Australian CPI numbers surprised significantly to the downside. The RBA’s preferred measures of underlying inflation both fell well short of market expectation and are tracking well below the RBA’s last set of forecasts. 
These core measures of inflation have also declined to be convincingly below the bottom edge of the RBA’s 2-3 percent target band. The average of these underlying measures was 1.55% y-o-y.
This puts the RBA in a tricky spot. Most of the demand indicators have held up recently, with the unemployment rate falling and business conditions improving.
Normally a lift in the activity generates a solid rate of inflation. However, although growth has been solid, it has not been strong enough to keep inflation on target.
Low inflation partly reflects that the end of the mining investment boom has brought an extended period of below-trend growth, which has weighed on wages and price pressures in the economy. Global inflation has also been very low. More recently, low global inflation and rates have seen the AUD climb, which is set to weigh further on the outlook for inflation and could also weigh on growth.
All of this adds up to suggesting that the RBA will need to cut its cash rate further. It now also seems likely that a 25bp cut may not be enough.
The RBA also faces a tricky timing issue. The government is due to hand down the federal budget on 3 May, which is the same day as the RBA meets next week and a federal election looks likely on 2 July. The RBA typically looks to stay out of the political process, so cutting rates around these events is less than ideal.
Weighing all of this up, there is no denying that inflation is too low, which means that the cash rate almost certainly needs to be cut. The usual rule of thumb is the sooner the better. We retain our view that the RBA is likely to cut by 25bp in Q2. We now expect that a cut in May is likely, despite the budget. We now also expect a follow-up 25bp cut in Q3 and for the cash rate to remain at 1.50% over the forecast horizon.
<a href="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.22.30%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.22.30%20AM.png" alt="">
Q1 CPI was very weak
Today’s CPI numbers showed that inflation was weak across the board. The headline CPI print showed a fall of -0.2% q-o-q, which was the first decline in seven years (Chart 1). The y-o-y rate of headline CPI inflation has now been below the RBA’s 2-3% target band for six quarters, which is the longest period of below-target headline inflation since 1999. The fall in the headline CPI rate reflected weakness in imported prices, but also, and more worryingly, a fall in domestic inflationary pressures (Chart 2).
Of course, the RBA focuses on its preferred underlying measures of inflation – the trimmed mean and weighted median – which strip out the volatile items. Here the news is even less promising. The average of the two preferred underlying measures fell to its lowest rate in the history of Australia’s inflation-targeting regime (since mid-1993) (Chart 3). The average of the two underlying measures was running at 0.15% q-o-q in Q1. In y-o-y terms, underlying inflation is well below the RBA’s 2-3% target band and also at its lowest level on record (Chart 4).
The challenge is that this has occurred at the same time that domestic demand indicators have been lifting. Surveyed business conditions also remained at high levels in Q1 and the unemployment rate has continued to edge lower. As we have pointed out recently though, the improvement in the labour market has not yet been enough to lift wages growth (see Downunder Digest: Looking for signs of rising wages, 15 April 2016). At the same time, the rising AUD is likely to weigh on growth and inflation (see Downunder Digest: Services exports and the AUD, 30 March 2016).
<a href="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.23.49%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.23.49%20AM.png" alt="">
 
The timing is tricky, given the budget and election
 
With the Prime Minister, Malcolm Turnbull, having pulled the budget forward by a week to 3 May in order to facilitate calling an early election on 2 July, the budget is now due to be handed down on the same day as the RBA board meeting. This is less than ideal for the RBA, if it is looking to cut rates on that day. Typically, the RBA would like to stay apolitical and the Governor, Glenn Stevens, has also spoken on a number of occasions about monetary policy reaching its limits and other arms of policy (fiscal policy) needing to be more supportive of growth. Ideally, we would be hoping this allows the government to announce its policies without a cash rate cut also being part of the message. The RBA may also be reluctant to cut in the lead-up to an election (likely on 2 July) as it typically seeks to remain apolitical.
 
However, if the RBA deems that rates will need to be lowered at some point, the typical rule of thumb is: the sooner the better. Governor Stevens also has a track record of setting policy independent of the political cycle, having lifted the cash rate only a few weeks before the 2007 election. With this in mind, if the RBA does consider that the CPI print warrants it cutting further, as we think is likely, getting it done in May seems a little easier than waiting until June, given that it can more easily point to the lower-than-expected CPI as the trigger.
<a href="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.25.23%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.25.23%20AM.png" alt="">
 
<a href="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.26.08%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/27/Screen%20Shot%202016-04-28%20at%208.26.08%20AM.png" alt="" width="792" height="336">
 
<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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Tricky, but expect RBA rate cut next week: HSBC's Paul Bloxham

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GUEST OBSERVER
Today’s extraordinarily low annual headline and underlying inflation rates reflect not only lower petrol prices but widespread price discounting by retailers. Six of the eleven CPI categories had price falls in the quarter.
The QI CPI fell by 0.2 percent, sharply lower than the market expectation which centred on a rise of 0.2 percent (CBA (f) 0.3%). The AUD fell about US1 cent and interest rate futures are now pricing in a 55 percent chance of an RBA rate cut next Tuesday. While the headline inflation rate in annual terms is low, at 1.3 percent, it is the underlying inflation rate which is the big issue. It is running at 1.5 percent, the lowest rate on record. 
The 10% fall in petrol prices was largely expected. But the big expenditure categories also surprised with low results. Food prices (fruit, dairy, cakes and cereals) fell by 0.2% in the March quarter to be unchanged over the past year. It most probably reflects the competitive pressures between the big supermarkets and the new entrants. Housing costs, the largest expenditure category, rose by only 0.3 percent to be just 1.7 percent higher over the year. Even the highly regulated sectors, health and education, had relatively low QI rises (for them) of 1.9 percent and 3.1 percent. 
<a href="/images/2016/04/27/Screen%20Shot%202016-04-27%20at%202.58.12%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/27/Screen%20Shot%202016-04-27%20at%202.58.12%20PM.png" alt="">
The lower AUD over the past year has not, so far, produced the usual higher imported consumer goods and services prices. Tradables inflation fell by 1.4 percent in QI, reflecting the falls in petrol, furnishings, clothing, audio-visual equipment and international holiday travel. 
We are reviewing our RBA rate call in light of the lower than expected inflation trends. Clearly the chances of a rate cut next week have moved a lot higher. But today’s numbers may still not “demand” a rate cut. 
The RBA has tolerated below target inflation on a number of occasions. It is after all how the inflation targeting regime is supposed to work. The last time we saw inflation rates around the current figures was in 1997-98. Back then there were 6 out of 7 quarters where underlying inflation was below target. For most of that period the RBA left the cash rate at 5 percent.
There was a one-off 25bpt cut at the very end of 1998 (after 6 quarters of below target inflation). That cut was justified more on a deteriorating global outlook rather than low inflation. When thinking about what today’s CPI outcome will mean for RBA forecasts it is worth remembering that the Q4 GDP numbers were noticeably stronger than the RBA was expecting (2.5 percent expected versus 3 percent actual). Higher GDP and a lower unemployment rate, now 5.7 percent, mean the “if needed” components for a rate cut are not quite as pressing. With the release of today’s Australian CPI our replica of the RBA’s model suggests the Australian real TWI is less overvalued than previously estimated. In fact, the Australian real TWI is just inside the fair value band (+/- one standard deviation).
<a href="/images/2016/04/27/Screen%20Shot%202016-04-27%20at%203.02.05%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/27/Screen%20Shot%202016-04-27%20at%203.02.05%20PM.png" alt=""> 
The detail 
As anticipated, the volatile items had a major impact on the much lower than expected headline CPI outcome of a 0.2 percent fall. The QI CPI (excluding volatile items) rose by 0.2 percent (to be up 1.7 percent on a year ago). In other words, the volatile items sliced 0.4 percent from the headline QI CPI. 
Leading the volatiles deflationary impact were petrol prices which dived by 10 percent over QI, to be 6.4 percent lower over the year. The QI petrol prices drop sliced 0.31ppts from the QI CPI outcome. The other key volatile item, namely fruit and vegetable prices sliced 0.11pts from the headline QI CPI. The key driver was an 11.1percent drop in fruit prices (down 6.9 percent pa) which made a 0.13ppt negative contribution to headline inflation. This impact was partially offset by a 1.5 percent rise in vegetable prices in QI (but which were down 4.3 percent in annual terms). 
These volatile items account for most of the gap between underlying and headline inflation forecasts. 
Price falls 
Six of the eleven components of the headline CPI registered price falls in QI. As mentioned above and as expected, the sharp decline in automotive fuel prices was the most prominent factor deflating the quarterly headline CPI result. 
Other CPI items weighing down on the headline outcome were clothing and footwear prices which dropped by 2.6 percent in QI and made a negative 0.1ppt contribution. The main contributor to the decline in this component was accessories prices which declined by 4.3 percent in QI. 
The other CPI categories posting falls in QI were the recreation and culture group, (-1.0 percent), the communications group (-1.5 percent), and furnishings household equipment and services (-0.4 percent). The main contributors to the fall in the recreation and culture group prices were international holiday travel and accommodation (-2.0 percent) and domestic holiday travel and accommodation (-1.9 percent). 
Elsewhere, a 1.7 percent drop in telecommunications equipment and services was the key driver of the 1.5 percent fall in communications group prices. Meanwhile, a 4.1 percent fall in household textiles prices and a 1.6 percent decline in furniture prices contributed to the 0.4 percent decrease in furnishings and household equipment and services prices. 
Price rises 
The largest offsetting price rises in QI were secondary education (+4.6percent), medical and hospital services (+1.6percent) and pharmaceutical products prices (+ 4.8percent). These outcomes are largely due to seasonal factors but were smaller than usual. Overall, these health and education groups contributed 0.2ppts to the QI CPI. 
Also contributing in a positive way to the quarterly headline CPI outcome were increases in household fuels (+3.0percent) and new dwelling purchasing by owner occupiers (+0.2percent) suggesting housing activity may well be cooling but it certainly isn’t crashing. 
<a href="/images/2016/04/27/Screen%20Shot%202016-04-27%20at%203.14.22%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/27/Screen%20Shot%202016-04-27%20at%203.14.22%20PM.png" alt="">
Imported or “tradables” inflation 
Tradables prices fell by 1.4percent in QI and were up by a modest 0.6percent over the year to March. The quarterly fall in tradables prices was due to a combination of the higher AUD in QI, falling fuel prices, and falling international holiday travel and accommodation prices. Tradable prices make up 40percent of the CPI basket and are a reflection of imported prices. 
Domestic or “non-tradables” inflation 
Domestic inflation or non-tradables inflation rose by a modest 0.4percent over QI and lifted by a tame 1.7percent on a year ago. This category accounts for around 60percent of the total CPI basket. The most significant contributors to the QI rise in non-tradables inflation were increases in gas and other household fuels and beer prices. Also, the non tradables services of secondary education and medical and hospital services prices helped the quarterly rise in this component. The key offsetting declines in 
non tradables inflation were electricity prices and domestic holiday and accommodation and telecommunication equipment prices. 
Plenty of spare capacity in the economy and softer wages growth has helped cap non-tradables inflation in recent quarters. 
States 
It is very unusual to see uniformly low inflation across all the capital cities. Prices rose in Canberra by 0.2percent in QI, were flat in Brisbane and fell in the other capitals. 
The price falls were in Sydney, -0.2percent, Melbourne -0.1percent, Adelaide -0.3percent, Perth -0.6percent, Hobart -0.2percent and Darwin -0.9percent. Perth and Darwin had the largest QI price falls. 
In annual terms, inflation was running highest in Melbourne and Brisbane at 1.7percent, then 1.3percent in Sydney and Hobart, 1.0percent in Canberra, 0.7percent in Perth and Adelaide, and -0.3percent in Darwin. 
The capital cities with the weakest retail activity, like Perth, Adelaide and Darwin have the weakest inflation outcomes, indicating the widespread retail discounting pressure. But there are other issues underway. Perth’s residential rents have fallen 4.4percent over the past year. 
Wages trends and inflation 
Wages trends provide a major input to structural inflation in the Australian economy. The trend around private sector wages over the past few years is towards consistently lower than expected outcomes. There are also clear compressions in wages outcomes across industry sectors and regions which are relatively new phenomenon and have been a feature of the post-mining investment and construction boom landscape. 
Annual private sector wages growth was running at a paltry 2percent in the year to December 2015, the weakest growth rate since the series began in 1997, and well below the 3percent to 4percent annual growth that has been the norm from the late 1990s until after the mining boom started to dissipate. Ongoing spare capacity in the labour market and job security anxieties are likely to continue to cap wages growth by workers limiting wage claims. 
Nationally, QIV wages growth continued to track lower in a range of industries and all industries have experienced wages growth well below their decade averages. On an industry basis across all sectors (i.e. public and private) the strongest annual wages growth was posted in financial and insurance services at 2.8percentpa, and weakest in mining at 1.5percentpa. 
The industry sector wages outcomes show that about 80 percent of industries are paying less than 2.5percent wage increases and the remaining 20percent are between 2.5percent and 3.0percent. The regional trends are also similar, with a trend towards State wage growth below 2.5percent. WA, the State with the highest wages growth for the decade up to 2013, now has growth of just 2percent. The end of the mining boom is having similar effects on wages trends in Queensland and NT. 
The sectors with the strongest jobs growth over the past few years are health, accommodation, cafes and retail. They also tend to be ones where part-time employment is significantly higher than in other sectors. The sectors with mainly full-time employment, like mining, utilities and construction, are losing jobs. So the pressures in the labour market that favour more part-time employment are producing a period of distinctly lower wages outcomes. 
A key reason behind ongoing tepid wages growth recently could be that a much more flexible labour market in recent years has enabled companies’ greater capacity to cap wages growth in a lacklustre labour market. In a period of labour market slack employees tend to be more satisfied to accept lower wages growth in return for more job security. 
The resultant ongoing tame wages growth seems to have contributed to more jobs growth than normally would have been the case. Indeed, the latest employment data showed annual jobs growth of 2.0percentpa. (I.e. +235.3k or an average +19.6k a month) in March. The unemployment rate stood at 5.7percent in March.
Ongoing soft wages growth and labour costs have helped wind back non-tradables (or domestic) inflation in recent quarters. This is especially the case for services inflation (with its very high labour component). Thus modest wages growth is a very handy tool in maintaining the current low inflation environment. 
Inflation expectations 
Central banks and policy makers care about inflation rates and where they may be headed. But they also care about the inflation expectations held by businesses and consumers. These expectations influence how economic agents act, with a flow on to economic activity. And these expectations influence the support or restraint that a given level of interest rates provides. 
The extended period of weak inflation in many countries has seen inflation expectations move lower. Some central banks have become concerned about the impact of low expectations. And certainly some recent policy easings in Europe, Japan and New Zealand reflect these concerns. Even in the US, where interest rates have been nudged higher, Fed Chair Yellen has recently expressed concerns about low inflation expectations. They are yet another reason for a caution approach to rate changes by the Fed. 
Our thoughts on global inflation expectation trends and what they mean for policy directions can be found here. 
The RBA monitors inflation expectations. But they are of less concern than for other central banks. They are rarely mentioned in post RBA meeting Statements. And comments are generally limited to a summary paragraph in the quarterly Statement on Monetary Policy (SMP). 
More importantly, inflation expectations in Australia are low but look well anchored. They have not been influenced by low headline inflation rates and the general lack of business pricing power. 
Policy makers are actually probably quite happy with aspects of the inflation expectations story. The decline in house price expectations as views on the housing market have softened will be seen as a desirable outcome. Especially given the concerns evident about rapid price growth and elevated expectations in 2015. The restraint in wage expectations is seen as a positive through the support it gives to labour demand.
Michael Workman is senior economist, <a href="https://www.commbank.com.au/corporate/research?ei=mv_research" target="_blank">Commonwealth Bank</a>.
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Low inflation raises the chances of an RBA rate cut next week: CBA's Michael Workman

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Westpac has decided to stop lending to offshore customers who are not citizens or residents of Australia with an eligible visa.
“It continues to be Westpac's priority to support Australian citizens and permanent residents (including applicable visa classes) living outside of Australia on their journey to own a home or investment property in Australia,” the bank said.
Effective immediately, changes to applicants earning foreign income policy will also occur.
For non-residents, no lending is permitted even if the applicant income is not relied on to meet serviceability, a letter to brokers obtained by Mortgage Business advised.
Local applications that include foreign income will be given a lower loan-to-value ratio of 70 per cent, down from 80 per cent. 
<div>
The new policy from April 26 will apply to all loans that were pre-approved but have not been issued. 
</div>
<div>
Last week developers said any withdrawal of bank lending could lead to a possible self-fulfilling fear of "apartment collapse". 
</div>
"The problem is they [Chinese buyers] don't know how much the banks will give till the end," the Meriton boss Harry Triguboff said. 
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Westpac tightens residential lending to foreign buyers

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<img src="/images/2016/04/27/Holdencapital_banner.jpg" alt="" width="631" height="133">
SPONSORED POST
Post the GFC we saw the major banks consolidate their stranglehold on the Australian construction finance sector however, there are changes afoot which will likely see a major restructuring of the status quo.
As we have previously commented on, the additional capital requirements recently imposed on the Australia’s big 4 Banks in order to ensure their compliance with the ongoing BASEL standards is having a significant effect on the construction finance sector and we believe it’s the beginning of a permanent change in how funding will be both obtained but also who provides it.
These overriding regulatory requirements are not temporary responses to a specific event; they actually represent a permanent constraint on the banks which is impacting both their pricing and the terms and conditions being applied.
We have previously discussed how the need to rebalance their capital allocations has resulted in a need for the banks to reduce their exposure to the sector as construction finance requires a significant level of capital reserve allocation and as such is no longer an overly profitable product from their perspective, hence their reduced appetite.
While there is no doubt that as loans run off their book they will look to replenish, the reduced loan to value ratio’s and other more conservative terms and conditions are permanent changes to bank lending policies which will now fluctuate within certain lower risk parameters. we expect that there will be pricing increases albeit competition will keep that to a reasonable level.
So there is likely to be pressure on the banks to satisfy their client base but remain competitive with the competition which will rise from the second tier banks, specialist funds, private lenders and the like.
This represents a new world order in construction finance and has been clearly demonstrated with all four banks being currently either closed for “new to bank” business or operating with significantly reduced appetite and drastically reduced lending parameters.
Having said this, we don’t expect them to give up their market share without something of a fight once their capital positions allow. One major area they can attack is operational costs and there are two fundamental options open to them.
The first is systems and the second is staffing. With the risk assessment process rapidly becoming automated, we are seeing the banks become more and more reliant on data being input into models using cheaper offshore labour for overnight spread sheeting of financials and with loan approval itself becoming more automated utilising more and more specialised risk models, it is only a matter of time before most transactions are approved based on a simple process of relevant data being entered into the model and then “computer says” Approved! If this sounds like an oversimplification, think about how quickly we all adapted to the home loan process undergoing a similar revolution.
Staff are the single largest cost in this process and there is no doubt the banks are looking to manage those costs to their advantage. The other change we are seeing is a greater reliance on brokers to source deals. Again, if look at the housing mortgage market, current estimates are projecting that 60 percent of all new business will be sourced from brokers by the end of this year following the UK trend where it is estimated to be 75 percent.
In the construction finance sector, it is estimated that 16% of new business is broker generated and this is growing rapidly. We are seeing banks reduce their business development teams and actively courting brokers, effectively reducing staff overheads.
As we recently commented, developers can no longer expect their house bank to provide the necessary funding just because “they have always done it in the past”. They may well have had a sound 30+ year relationship with their bank but this does not guarantee their ability to borrow funds on the same terms that they have been used to.
The risk model will determine this as will their brokers ability to ensure that all the facts, good and less so are properly spelled out become key to a good outcome. For this reason, a professional broker who understands the bank requirements as much as those of his client is a key element in the process.
Today’s developer is now seeing an ever increasing number of options as competitors look to move into competition with the banks and other existing funders. The challenge is identifying which ones best fit both their specific project needs and a readjustment of expectations as to what constitutes an appropriate finance cost when assessing project viability as the cost of these funds is generally between 2-3 percent higher.
The challenge for brokers is that to be successful they need to deliver on both sides of the equation. That is, they need to deliver the best possible outcome for their client while ensuring they deliver a professional presentation to the bank/lender which meets their expectations in terms of detail and accuracy. The trust of both parties is key!
So, just as the housing mortgage market completely restructured with the coming of the wholesale funds and brokerage structures, so we expect to see the construction finance industry undergo a similar metamorphosis, ultimately with similar positive results for the end user. We are already seeing the re-emergence of various second tier banks, investment funds, managed trusts and various private lenders all vying for a share of what will continue to be a growingly sophisticated market.
Brokers now provide Australians with the best way to source cheap and competitive housing loans, so your construction finance broker also holds the key to successfully securing competitive construction funding for your next successful property development.
This article was written by Dan Holden of HoldenCAPITAL, who are a bespoke construction finance firm, they arrange construction finance and invest in projects through their equity fund, Queen Street INVEST. To discuss your project finance requirement please call (07) 3171 4200 or visit HoldenCAPITAL <a href="https://www.holdencapital.com.au/" target="_blank">here</a>.
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The changing face of brokerage and construction finance: HoldenCAPITAL

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The <a href="https://www.greater.com.au/" target="_blank">Greater Building Society</a> has confirmed it will change its name to Greater Bank in May after receiving approval from the regulator, APRA, to better explain what it does.
Chairman Wayne Russell said the new name would help The Greater position it for further growth and stressed there is no change to ownership structure.
He said research shows an increasing number of people don’t understand the term ‘building society’ so they don’t know all the financial products and services The Greater offers. 
“Using ‘bank’ takes the work out of explaining what we do as it is well understood and makes sense to customers of all generations,” Russell said. 
The name change was approved at the Greater’s AGM last November. The Greater has changed its name a number of times in its 90-year history.
Unlike the major banks, Greater Bank will still be customer-owned and not by shareholders.
“The name change is part of continuing changes we’re making to our products and services to remain a viable challenger to the big banks for local people,” added CEO Scott Morgan.
“As a customer-owned bank our focus on customers and community will remain the same.” 
“We will still be offering the same great rates, low fees and outstanding service.”  
The Greater currently provides banking services to around a quarter of a million customers in NSW and South East Queensland.
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Greater Building Society to become Greater Bank in May

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GUEST OBSERVER
Today’s RBA Minutes are similar in most respects to the Statement following the April meeting. But the wording around the considerations for monetary policy implies to us that the easing bias is stronger.
Mainly because the higher Australian dollar (AUD) will “complicate” the economy’s adjustment to different growth drivers.
It may be that the RBA has decided that the fundamental drivers of the AUD, like global bulk commodity prices, are now more likely to be higher over the rest of the 2016.
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The minutes have a comment that the terms of trade is set to rise modestly because of the pick-up in bulk commodity prices. It means the risks on the AUD may be rebalancing to the upside, and away from the more comfortable (for the economy) levels under USD0.75. A higher AUD complicates lots of things, especially the inflation outlook. Lower inflation outcomes could justify lower cash rate settings than current. Especially if some more downside growth risks, like significant global financial market volatility, become reality.
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<img src="/images/2016/04/19/Screen%20Shot%202016-04-19%20at%203.21.40%20PM.png" alt="">
The minutes indicate a number of positive developments in the domestic economy. Established house price growth has continued to ease, reducing the risks around the property sector. The strong lift in supply of new apartments has also resulted in an easing of their prices. But demand conditions across the country vary considerably. Surveys of national business conditions have been more favourable recently, with signs of a pick-up in non-mining profits. But non-mining investment intentions remain broadly unchanged even though business credit growth has lifted over the past six months.
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Employment growth in the non-mining sectors has been strong. While the recent jobs data was weak, the RBA said it needed to be compared to the unusual strength of activity through late 2015. The unemployment rate looks to have peaked in mid-2015 and leading indicators of the jobs market are mixed. Wages growth remains subdued despite firm jobs growth. Unit labour costs growth has been negligible for the past four years.
There was no RBA commentary on the AUD that indicated that it was out of line with fundamentals. The minutes list the reasons for the AUD moving higher since late 2015. Namely, higher bulk commodity prices and above-trend GDP growth for 2015 of 3% and easy US monetary policy.
We expect the RBA to keep the cash rate at 2 percent over coming months. The domestic economy is rebalancing towards different growth drivers and employment growth is firm. The major issue is the trend to lower inflation outcomes. The higher AUD complicates the picture. So a very low underlying inflation result, say near 0.3%q/q and 1.7%pa, next Wednesday could support a rate cut.
<a href="/images/2016/04/19/Screen%20Shot%202016-04-19%20at%203.25.07%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/19/Screen%20Shot%202016-04-19%20at%203.25.07%20PM.png" alt="" width="1021" height="460">
 
Michael Workman is senior economist, <a href="https://www.commbank.com.au/corporate/research?ei=mv_research" target="_blank">Commonwealth Bank</a>.
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RBA adopts stronger easing bias as higher AUD complicates economic adjustment

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The average size of the home loan is falling across Australia, the most dramatic slide since 2000, reveals a report by a leading comparison website using ABS data.
<a href="https://www.finder.com.au/">A</a>n analysis of data from the Australian Bureau of Statistics shows the national average home loan size now sitting at $357,200, a slide of 4.08% in February from the previous month, according to <a href="https://www.finder.com.au/">finder.com.au</a>.
In fact, the national home loan size has declined by 7.71% in total in the past three months to February, or $29,100 – which is the biggest three-month drop since May-July 2000, when the national average declined 7.74%. 
It is also the first time the average loan size has dropped by more than 1% in three consecutive months.
South Australia was the only state where the size of home loans increased, with a hike of 0.62% in February.
The sharpest decline was in New South Wales, where the average home loan size dropped by 5.75% in February. It dropped 10.15%, or $45,500, in the last quarter – the biggest decline on record.
On this three-month timescale, home loan sizes are down in every state in Australia. Victoria and Queensland are down around 6%, while South Australia, Western Australia and Tasmania are down 2-3%.
The impact of tougher bank lending policies introduced during mid-2015 is finally being felt, says Bessie Hassan, money expert at <a href="https://www.finder.com.au/" target="_blank">finder.com.au</a>.
“A cooling property market has led to shrinking maximum loan sizes following the Australian Prudential Regulatory Authority’s changes to investment lending,” she said.   “Banks are scrutinising new loan applications more closely, taking a tougher line when assessing borrowers income.” This is thought to be a key reason the housing market has been decelerating. Latest figures from CoreLogic show the rate of house price growth is slowing year-on-year – March data reveals that median capital city prices rose just 0.2%.
Data from credit reporting bureau Veda also shows that the demand for mortgages slowed significantly in the last quarter of 2015, with growth in mortgage applications decreasing by 2.9% compared to December quarter 2014. This is the second quarterly decline in a row. “The upshot of this is that the home loan market will be under pressure, and banks will be eager to secure new customers,” says Hassan. “This could lead to an increase in housing affordability with interest rates declining even further.” “We’re seeing variable home loan rates as low as 3.69% being offered by Mortgage House for 12 months – the lowest rates we’ve seen in years.  “This could be a great time for first time buyers to flex their muscles as low interest rates and cooling property prices boost their purchasing power.”
 
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