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 

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

SIERA kicks off construction at Northcliffe tower Exhale

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>
The RBA Shadow Board is preferring to keep the cash rate on hold ahead of today's monthly RBA meeting and has rated the chance of hold at 65%.
According to the Shadow Board, Australian headline inflation, benefiting from exceptionally low energy prices, equals 1.5% (year-on-year) for a second quarter in a row, well below the RBA’s target band of 2-3%, while economic growth and the unemployment rate continue to underwhelm.
"The global economy looks weak and financial markets are nervous. The RBA Board lowered the official cash rate from 2.25 % to 2.0 % in May. However, Australia’s four major banks have all increased interest rates in the past month due to tougher prudential standards, prompting markets to factor in a 60% chance of another official rate cut as early as this week," the Shadow Board recently noted.
"The CAMA RBA Shadow Board on balance prefers to keep the cash rate on hold, attaching a 65% probability to this being the appropriate policy setting. The confidence attached to a required rate cut equals 26%, up twelve percentage points from the previous month, while the confidence in a required rate hike has fallen to 9%. So, while the overall sentiment is one of holding rates steady, the balance of risks has shifted down.
"Australia’s unemployment rate remains at 6.2%, according to the Australian Bureau of Statistics. Worryingly, employment has fallen, in particular full time employment (-13,900 in September), and the participation rate, now equal to 64.86%, continues to decline.
"The Aussie dollar appears to have found a floor at the 70 US¢ mark, with the currency trading as high 72.5 US¢ in recent days. This likely reflects a reaction to the US Federal Reserve’s continued delay of lifting its federal funds rate target. This year’s depreciation of the Aussie dollar has not led to an improvement in the balance of trade. On the contrary, in August the balance of trade was $-3.095 billion, compared to $-1.277 billion at the beginning of this year, suggestive of a J-curve effect, whereby supply and demand elasticities respond to a currency depreciation with a delay. Yields on Australian 10-year government bonds have edged down further to 2.58%.
"The Australian property market looks like weakening, with the construction PMI, building permits and new home sales falling. The S&amp;P/ASX200 has rebounded from last month’s lows below 5000. With heightened uncertainty about the Australian and global economic outlook, the stock index may well trade sideways for some time.
"Considerable attention is given to the US Federal Reserve Bank’s global outlook and its policy decisions. An increase in the federal funds rate was highly anticipated until the middle of this year but then delayed in light of weak global economic data. This week’s Fed statement sounds more bullish again even though the latest US economic data is not as strong as expected. There remain divisions within the Federal Reserve Bank Board about when to lift rates. Europe’s problems are not lessening: the refugee crisis will strain government budgets while the Greek debt crisis is only enjoying a brief hiatus. China’s economy still looks shaky and growth is likely to be remain relatively soft, with most economists expecting a target growth rate of 6.5% for the newly adopted five-year economic plan.
"Consumer and producer sentiment measures continue to yoyo around without a clear trend. After successive drops, the Westpac/Melbourne Institute Consumer Sentiment Index rose to 97.8 in October from 93.9 in September. Business confidence, according to the NAB business survey slid further, rebounded from 1 to 5. The AIG manufacturing and services indices, both leading economic indicators, contradict each other.
"The Shadow Board’s confidence that the cash rate should remain at its current level dropped from 72% in October to 65%. The confidence that a rate cut is appropriate has increased substantially to 26%, from 14% in the previous month; conversely, the confidence that a rate increase, to 2.25% or higher, is necessary has fallen to 9% (14% in October).
"The probabilities at longer horizons are as follows: 6 months out, the estimated probability that the cash rate should remain at 2% is nearly unchanged at 24% (25% in October). The estimated need for an interest rate increase has dropped further, to 58% (62% in October), while the need for a rate decrease has risen to 19% (13% in October). A year out, the Shadow Board members’ confidence that the cash rate should be held steady is unchanged at 18%, while the confidence in a required cash rate increase equals 67% (68% in October) and in a required cash rate decrease 15% (14% in October)."
To see the report in full, <a href="https://cama.crawford.anu.edu.au/rba-shadow-board/outcome/2015-11" target="_blank">click here</a>.
</body></html>

jonathanchancellor-7SQnKwU6yx

No need for Cup Day rate cut: Shadow RBA board

<html><body>
Suncorp Bank has announced it is increasing its variable interest rates for owner-occupier and investor loans.
The non-major bank announced its rates will increase by 16 basis points for new and existing loans from November 20.
Suncorp’s Standard Variable Owner Occupier rate will increase to 5.70%.
Its Investment Standard Variable Rate will increase to 5.97%.
It was partly attributed to an increase in the bank’s wholesale funding costs.
</body></html>

jchancellor-FAypfDUnLy

Suncorp raises home loan rates

<html><body><div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">GUEST OBSERVER</div>
<div class="column"> </div>
<div class="column">The RBA has been reluctant to consider cutting its cash rate further. </div>
<div class="column"> </div>
<div class="column">It has made this fairly clear in recent public commentary. Business conditions are improving, employment is picking up, the unemployment rate has stabilised, and GDP growth seems likely to have lifted in Q3, after a weak Q2 print. The lower AUD is providing support for the rebalancing act. The RBA is also concerned about exuberance in the property market.</div>
<div class="column">
 However, three key things have happened in the past month that mean the RBA may, nonetheless, be forced to cut. First, in response to higher regulatory capital requirements, Australia’s four major banks lifted their mortgage rates by an average of 17.5bp. This, alone, was unlikely to see the RBA consider cutting its cash rate, given concerns about exuberance in the housing market, but it has led to tighter local financial conditions, which may not be desirable at this point in the cycle. Second, the underlying inflation measures surprised to the downside, with the q-o-q rates falling to 0.3% and the y-o-y rate at 2.2% (market had 2.4%). The RBA was forecasting underlying inflation to lift to 2.5% y-o-y by Q4, which now seems unlikely. Third, the US numbers have been weaker recently, which has seen market pricing suggest that the Fed may not lift its policy rate this year, which is a possible upside risk for the AUD.
</div>
<div class="column">
 Together, these factors strengthen the case for the RBA to cut. The most powerful argument is that inflation is lower than had been expected. This tells us that there is more spare capacity in the economy than previously thought. Although the recent lift in the activity indicators should mean growth lifts and generates some inflation, the bigger risk is undershooting the inflation target, not overshooting. Although we remain optimistic about the rebalancing of growth and expect growth to pick up next year, we think the path of least regret is for the RBA to cut further to ensure than inflation remains on target. 
</div>
<div class="column"> </div>
<div class="column"><a href="/images/2015/11/Screen%20Shot%202015-11-02%20at%2010.30.38%20AM.png" target="_blank">Click to enlarge</a></div>
<div class="column"><img src="/images/2015/11/Screen%20Shot%202015-11-02%20at%2010.30.38%20AM.png" alt="" width="862" height="393"></div>
<div class="column"> </div>
<div class="column">
<div class="page" title="Page 2">
<div class="layoutArea">
<div class="column">
Inflation surprised to the downside 
The Q3 inflation print was surprisingly weak. Both of the RBA’s preferred underlying measures – the trimmed mean and weighted median – were 0.3% q-o-q, against a market expectation of 0.5% q-o-q (Chart 1). The y-o-y rate of underlying inflation fell to 2.2% and underlying inflation has been below the target band in annualised terms over the past six months (Chart 2). 
Weakness in inflation was fairly broad-based across the components. Although the lower AUD should start to lift imported inflation soon, there were few signs of this effect in the Q3 numbers (Chart 3). Tradables inflation rose by only 0.3% q-o-q and was still running at a negative rate over the year of -0.3%. Domestically produced (non-tradables) inflation was also steady, running at a below-average pace of 2.6% y-o-y. Headline CPI inflation has now been below the target band for four quarters on a y-o-y basis (Chart 4). 
The RBA’s last set of forecasts had underlying inflation lifting to 2.5% by Q4 2015, which now seems unlikely. The central bank is likely to revise down its inflation forecasts in next week’s official statement. 
<a href="/images/2015/11/Screen%20Shot%202015-11-02%20at%2010.32.09%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/11/Screen%20Shot%202015-11-02%20at%2010.32.09%20AM.png" alt="" width="663" height="303">
 
<div class="page" title="Page 3">
<div class="layoutArea">
<div class="column">
Growth is lifting but spare capacity remains 
At the same time that inflation has surprised to the downside, there are on-going signs that growth is continuing to rebalance towards the non-mining sectors. This has been supported by the ongoing effect of low interest rates and the lower AUD. This rebalancing of growth is creating jobs and lifting broader business conditions (Chart 5). Employment growth is running at 2.0% y-o-y, up from 0.5% a year ago and the NAB survey shows that business conditions are improving, led by the services sectors. The lift in jobs growth has been sufficient to get the unemployment rate to stabilise between 6.0-6.4% over the past 16 months (Chart 6). 
However, as yet, the pick-up in activity has not been sufficient to get the unemployment rate to fall. The spare capacity that remains in the labour market has kept wages pressures contained, which helps to explain why non-tradables inflation is yet to pick up. Although the RBA is no doubt pleased that the unemployment rate has stabilised, it needs to fall to start generating upward pressure on inflation. Although the timely indicators of the labour market have been lifting recently, the RBA’s last set of forecasts had the unemployment rate broadly steady over the forecast horizon and we doubt there is enough momentum as yet to see the RBA revise its unemployment rate forecast to a falling profile. 
Mortgage rates have been lifted by the major banks 
So inflation is lower than expected, suggesting that there is more spare capacity in the economy than previously anticipated and, although growth is improving, it has not been sufficient to push the unemployment lower and, thus, absorb the spare capacity. 
This month has also seen local financial conditions tighten. This occurred because Australia’s four major banks lifted their mortgage rates in response to higher regulatory capital requirements. The simple average of the increase in mortgage rates was 17.5bp. 
We see the RBA as unlikely to have been surprised by this move. After all, the authorities have been seeking to tighten prudential settings to slow activity in the housing market and holding more capital against the mortgage book has become a part of this story. In tandem, the government has been running its Financial System Inquiry, which has sought to make the banks ‘unquestionably strong’ by forcing them to hold more capital. 
<div class="page" title="Page 4">
<div class="layoutArea">
<div class="column">
To some degree, the RBA may also be quite content to see slightly tighter conditions in the new housing lending market, given the central bank’s concerns about exuberance in the housing market. However, it is worth keeping in mind that the lift in rates feeds through to the whole mortgage book (including existing loans) because about 90% of Australia’s mortgages are at variable rates. It is not clear that the RBA necessarily wants broadly tighter financial conditions at this point in the cycle. 
Adding the downside surprise to underlying inflation of around 20bp to the tightening in financial conditions delivered by the major banks (17.5bp on the mortgage book) means that real interest rates have been tightened by around 30bp (keeping in mind that mortgage lending is around two-thirds of the total). 
RBA tactics 
One option is for the RBA to do nothing. The central bank would thereby accept that inflation is as bit lower than it had expected, revise down the inflation forecast profile, and acknowledge that mortgage rates are a bit higher, but business lending rates are still low. The change in bank rates may actually have got the RBA closer to a more ideal policy setting (slightly tighter housing lending conditions, while business lending rates remain unchanged). 
However, the risk with this strategy is that the Q3 inflation numbers provide a warning that demand is not yet strong enough to lift inflation back to target. If the low Q3 underlying inflation print was followed by another weak print in Q4 (in February 2016), then underlying inflation could fall below the bottom of the target band in y-o-y terms. By then, cutting rates in response would risk getting behind the curve. 
On the flip side, there is little to stand in the way of cutting the cash rate further. The risk of undershooting the inflation target surely significantly outweighs the risks of overshooting at this point. Although the labour market is improving, the unemployment rate is not yet falling. Concerns about the housing market would remain, but the net effect of a 25bp cut would be largely offset by the recent lift in mortgage rates by the major banks, leaving financial conditions similar where they were a month ago. 
</div>
</div>
</div>
<a href="/images/2015/11/Screen%20Shot%202015-11-02%20at%208.08.04%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/11/Screen%20Shot%202015-11-02%20at%208.08.04%20AM.png" alt="" width="831" height="388">
 
<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. 
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div></body></html>

A cut is likely, but it’s a close call: HSBC's Paul Bloxham 

<html><body>
Industry super fund-owned bank ME will increase interest rates by 0.20% across its variable home loan portfolio, with changes coming into play 20 November 2015.
ME will also increase its Online Savings Account variable interest rate by 0.45% to 3.55% p.a. from 28 October, which includes a 1.55% p.a. variable bonus rate to eligible customers.
ME chief executive officer Jamie McPhee, said the Bank had moved rates to provide a balance between offering competitive home loan rates to customers on the one hand, and delivering acceptable rates of return for its industry super fund shareholders and their members on the other.
“Up until the Financial System Inquiry recently addressed the unfair capital advantages of the larger banks, smaller banks like ME have been achieving below-market shareholder returns in order to remain competitive with the majors," he said.
“The rate increase we have announced today puts us on a path where we can continue to grow the Bank while offering some of the best home loan rates available for working Australians."
According to the bank revenue and cost pressures increased over the last 12 months due to regulatory changes around liquidity, greater economic uncertainty, and stronger competition in the owner occupied market.
 
</body></html>

mick.cee-iDmgDDAmu8

ME to increase interest rates by 0.20% across variable home loan portfolio

<html><body><div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
Moves by the Big Four banks to lift standard variable mortgage rates across owner occupier and investor mortgages may give the Reserve Bank enough reach to cut official interest rates in the near future, according to CoreLogic RP Data.
CoreLogic RP Data's latest Property Pulse said the latest CPI data also provides the RBA with the scope to cut official interest rates if they feel that it is necessary. 
"The ASX cash rate futures market is currently pricing in a 31% chance of an interest rate cut in November with an expectation that the cash rate will fall by 25 basis points by February next year," the report noted.
"Moves (by the Big Four banks) will act as a further disincentive to buyer demand across the housing market and will provide the RBA with scope to cut official interest rates further if required over the coming months."
"The RBA also likes to look at underlying inflation which strips out some of the more volatile items. The two measures of underlying inflation, the trimmed mean and weighted median, were both recorded at 0.3% over the quarter. Over the past year, the trimmed mean was recorded at 2.1% and the weighted median at 2.2% both of which are at the lower end of the RBA’s target range for inflation. Given this the latest CPI data provides the RBA with the scope to cut official interest rates if they feel that it is necessary."
 
</div>
</div>
</div>
</div></body></html>

Big Four moves may spur interest rate cut: CoreLogic RP Data

<html><body><div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
GUEST OBSERVER
The Reserve Bank board meets next week on November 3. We expect the board will decide to keep rates on hold. 
Markets have lifted the probability of a cut from 25% to around 65% following the release of the September quarter Inflation Report. In the Report core inflation for the September quarter printed 0.3% (both Trimmed Mean and Weighted Median). That compared with market expectations of 0.5%.Annual core inflation is now printing 2.1% (Trimmed Mean) and 2.2% (Weighted Median). 
Note that in the August Statement on Monetary Policy the Bank forecast core inflation at 2.5% for the year to December 2015. At that time the six months to June 2015 had printed 1.6% for both Trimmed median and Weighted Median. That forecast implied that the Bank was expecting core inflation over the second half of 2015 to print 1.2% – around 0.6% per quarter. That is around twice the print for the September quarter. 
As such the September quarter read will come as a significant surprise. There is a precedent for this shock result. The Trimmed Mean measure for the September quarter last year also surprised on the low side at 0.3% (Weighted Median at 0.5%). We expect that the Trimmed Mean is given a greater weight in the eyes of the authorities than the Weighted Median – recall that other countries (e.g. US) only talk of Trimmed Means when they use sophisticated measures for core inflation. That measure pushed annual Trimmed Mean down from 2.8% to 2.4%. This measure has pushed it down from 2.2% to 2.1%.
Despite that “shock” on the Trimmed Mean in September last year the Bank held rates steady at the November board meeting and even maintained the call that the most appropriate approach to policy was a “period of stability”. At that time the Bank was forecasting underlying inflation to print 2.25% for the year to December 2014 but anticipated that lifting to 2.5% in the year to June 2015 and to 2.75% in the year to December 2015. So in the near term the Bank took notice of the low print but because of the fall in the AUD expected inflation to lift one year out. With the AUD having fallen even further it will still be mindful of some eventual upward pressure as demand conditions firm. 
The Bank will now revise down its forecast for core inflation to December 2015 from 2.5% to 2.25% (just as it had in November last year) but that will not be sufficient to change policy. We expect it will still hold its forecast for 2.5% through 2016 due to a combination of an expected lift in demand and a lagged impact from the fall in the AUD. Note that its growth forecasts in the August SOMP imply growth momentum in the second half of 2016 of around 3.75% (annualised). 
Last year the surprise low print for the Trimmed Mean did not prompt the Bank to move from “period of stability” to cutting rates in February. It was the growth outlook. 
The drop in core inflation was known at both the November and December meetings but it was the surprise slump in growth that was recorded in the September quarter GDP report that printed the day after the December board meeting that prompted the rate cut. 
In February when it cut rates it revised down its growth forecasts for 2015 from 3% to 2.75% and noted:” growth overall is now forecast to remain at a below-trend pace somewhat longer than had earlier been expected. 
<div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
Accordingly, the economy is expected to be operating with a degree of spare capacity for some time yet, and domestic cost pressures are likely to remain subdued and inflation well contained”. 
The emphasis here was clearly on a deteriorating growth profile rather than a low inflation print. In fact the December quarter Trimmed Mean showed a rebound to 0.6% (Double the September print). Recall that the forecasts at the February board meeting were for growth at 2.75% in 2015 – below trend despite a rate cut and an assumption of a follow up rate cut by May. 
Could the Board be confronted by another below trend growth forecast in 2016 which would trigger another rate cut? 
It seems unlikely. 
Firstly the starting point is higher than we saw in February. The November growth forecast for 2015 was 3% – bang on trend whereas the August forecast for growth in 2016 is 3% (now 0.25% above trend, since trend has been revised down). 
To forecast below trend growth in 2016 which would be associated with a rate cut the Bank would have to forecast growth in 2016 of 2.5% down from 3%. 
The major “growth negative” development since the August SOMP has been the soft GDP print for the June quarter. We do not think the Bank was particularly surprised by the weak 0.2% print for GDP growth in the June quarter (largely driven by seasonally weak exports). Certainly the rhetoric in the October minutes was, on balance, more positive than we have seen, particularly around the labour market. The view has shifted over the last six months from unemployment rate rising through 2016 (May SOMP); to now having peaked (August SOMP); to possibly falling (October minutes). 
The one big change which may prompt a major downward revision to growth would be an anticipated impact from the recent independent increase in bank mortgage rates. Because most borrowers (Westpac has reported around 70% of its borrowers) are ahead on repayments the cash flow effect of the banks’ increase will be muted. 
The major impact would be through confidence. The weekly Morgan/ ANZ Consumer Sentiment Index , which printed after all majors had raised rates hardly moved this week. This is a volatile measure (as would be expected with weekly series) but it is the only one available in the window before the Board meeting. It’s result would be inconclusive from the Bank’s perspective and certainly not sufficient to justify a large mark down in the growth outlook. 
Conclusion 
We still expect the RBA to be on hold at its meeting next week. The surprise drop in the inflation measure is not unique and, in the past, the Bank has looked through a one off number. 
The motivation for cutting next week would be a significant downward revision to the growth outlook. The data flow and the RBA’s recent commentary does not point to such an event. 
Consequently we expect rates to stay around the current record lows. 
 
Bill Evans is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
</div>
</div>
</div>
</div>
 
</div>
</div>
</div>
</div></body></html>

bevans-rYk9SxEa4r

RBA still on hold next week: Westpac's Bill Evans

<html><body>
Macquarie has joined the big four and St George Bank in increasing their variable rates for owner-occupiers and investors.
With a 20 basis points rise, Macquarie’s standard variable rate will be 5.70% for home owners, and 5.97% for investors.
St George opted for a 15bp rise, which will bring their owner-occupied variable rate to 5.69% and investment rate to 5.94%.
Their rate increases come into effect November 20.
Macquarie operates on the same APRA controlled internal risk-weighting model as Australia’s four major banks.
</body></html>

Macquarie to raise rates by 20 bps

<html><body><div class="cq-article-content-paras section">
A new Deloitte report says that while negative gearing gets the blame, it is the 50% capital gains tax discount that has been mostly under-appreciated for frenetic property speculation.
Doubling the length of time an asset has to be held before it is eligible for a capital gains tax break - from 12 months to 24 months - was an option that needed consideration, the report suggested. 
Another options suggested for reform included reducing the size of the discount to 33.3 %. 
"The current . . . discount is too generous, to the extent that it undermines the very principles of this nation's progressive income tax system," the Deloitte report says.
It suggests 33.3% as this is what super funds are eligible to receive. 
Currently capital gains on an asset sold within 12 months are not eligible for any CGT discount.
It is the second "myth-busting" report released by Deloitte as part of its contribution to the tax reform debate.
While overused, negative gearing was not the "evil" force many believe it to be, the report advised. Shares and other assets can also be negatively geared.
Another "skeleton in the closet" for the Australian taxation system are the carried-forward capital losses, the report suggested.
The ATO calculates carried forward losses as at 2012-13 at $8 billion for individuals, $35 billion for companies and $33 billion for super funds.
</div></body></html>

Capital gains tax discount more to blame for property bubble than negative gearing

<html><body>
GUEST OBSERVER
When Australia’s Reserve Bank board meets on Melbourne Cup day next week, the question at hand is whether the RBA will seek to offset recent bank rate raises with a cut to the cash rate. With a cut, the hope is banks will then reverse their decision and get mortgage rates back to where we were before.
First Westpac, then Commonwealth Bank, now all of the big four have raised their variable home loan rates, purportedly in response to more stringent capital requirements being imposed upon them.
In the wake of the 2008 financial crisis regulators around the world concluded banks didn’t hold enough capital as a buffer against potential losses.
The Murray report wisely suggested banks should hold more capital, but it doesn’t come free. The investors who provide it need to get paid – which raises the question: “by whom?”
It could be bank shareholders who might accept a lower rate of return on their investment. Indeed, since the extra capital requirements make banks safer this might not be unreasonable: the risk-return tradeoff has changed.
But the big four have decided their customers should pay. Costs have gone up, and those costs (or perhaps a bit more) are being passed on to home loan customers. Kudos to Malcolm Turnbull for pointing this out last week.
<h2>Time to cut</h2>
I’m on record as suggesting the RBA should and probably will cut rates at least once in the coming months. That comes from my view that Australia is suffering from <a href="https://theconversation.com/have-australian-bankers-bought-the-secular-stagnation-theory-29765">“secular stagnation”</a> – the idea that the speed limit of the economy (or more technically, the equilibrium real interest rate) has changed because, globally, there are too many savings chasing too few productive investment opportunities. This is enough of a reason to cut rates in and of itself, but the big four rate hike makes it all the more likely, and important.
That’s all simple enough, but it raises two important questions: (i) what are the implications for the RBA; and (ii) what does this say about our banking system and the regulation of it. The common thread in the answer to those questions is the B-word: “bubble”.
For the RBA, cutting rates by 25 basis points would offset the big four’s recent hikes (not quite exactly, but close enough). But, of course, the big four’s variable mortgage rates are not the only things affected by the cash rate. A 25bp cut should flow into commercial lending and it should also allow cuts by other mortgage providers. That would stimulate the economy.
Still, the RBA is clearly balancing the desire to stimulate the economy through lower rates, and concerns about asset price bubbles – especially in residential property. In that regard, the big four move is good and bad. It should cool the potentially overheated property market, but it also forces the RBA’s hand. And it takes away the stimulatory effect a cut would have had, absent the big four’s preemptive move.
The second, and deeper question, is what all this says about the competitiveness of our banking system. The fact that customers, not shareholders, are on the receiving end of the cost of holding more buffer capital shows how much market power the big four have.
That’s not necessarily a terrible thing – spreads on home loans are a little, but not particularly high by international standards. It’s not easy to make the case that the Australian public is getting ripped off by the big four.
They have, however, been willing to lend people a great deal of money, relative to their incomes, to purchase residential property. Go to any of the big four’s online calculators and see how much you can borrow with your income, and then try the same thing at a large American bank (like Bank of America). Australian banks will lend you a lot.
And therein lies the rub. It’s one thing to raise prices a bit, and then have those offset by an RBA rate cut. That will have little or no effect on borrowing behaviour. It’s quite another to reform lending practices and stop letting people borrow staggering sums against frothy assets.
And it is the latter practice that we should be focused on.
 
Richard Holden is professor of economics, UNSW Australia and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">here</a>.
</body></html>

The RBA should cut rates, but not because the banks are upping them

<html><body>
The moves by the CBA, NAB and ANZ to hike their variable mortgage rates, following Westpac, add further pressure on the RBA to cut its official cash rate to offset the flow on to households with mortgages, according to Shane Oliver, the chief economist at AMP Capital.
"While the RBA looks like it doesn’t want to have to cut rates again, it won’t want to see households with a mortgage paying higher rates just now either, given the risk this will pose to consumer spending at a time when economic growth is still weak.
"So we remain of the view the RBA should, and ultimately will, cut rates again to ensure that this does not happen.
'We have pencilled in a 0.25% rate cut at the November meeting, but the RBA may need more convincing and so there is a risk it could be delayed into early next year. 
The AMP Capital chart shows the relationship between variable mortgage rates and the RBA’s official cash rate.
"Clearly the gap between the two has been expanding since the GFC supposedly due to “rising bank funding costs” as banks first had to rely more on bank deposits and now have to run higher capital ratios."
The widening gap applies for standard or discount variable rates.
"Because it’s borrowing rates that ultimately count for the economy rather than the cash rate, the RBA has had to compensate by cutting the cash rate more than would normally be the case in both the 2008-09 easing cycle and since 2011," Shane Oliver suggested.
"Although the chart doesn’t show it, we expect the RBA to do the same this time around as well."
<a href="/images/2015/10/26/20151025-mortgagerates_normal.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2015/10/26/20151025-mortgagerates_normal.jpg" alt="">
 
Source: RBA, AMP Capital. For illustration chart assumes cash rate stays at 2% in Nov.
Shane Oliver said the minutes from the RBA’s last meeting added nothing new and confirmed that the RBA was content with current interest rate settings.
"However, with the big banks hiking their variable mortgage rates, resulting in a de facto monetary tightening, the minutes are now a bit dated," he said.
</body></html>

Latest Finance Insights

NAB bring forward first RBA cut to February 2025

Editor's Picks

Developments

New apartments

New townhouses

News

Latest Finance Insights

NAB bring forward first RBA cut to February 2025

Editor's Picks

Receive the latest news stories to your inbox

Developments

New apartments

New townhouses

News