Lewis Land's latest apartment release within its <a href="https://www.apartments.com.au/new-apartments/harbour-shores-biggera-waters-564-oxley-drive-biggera-waters-qld-4216">Harbour Shores</a> masterplan is targeting one of the Gold Coast's fastest-growing buyer groups, with almost a third of apartments at Solis priced below $1 million.

The seven-storey building at Biggera Waters will comprise 91 apartments, including 24 one-bedroom residences starting from $778,000, a price point Lewis Land says is aimed squarely at first home buyers struggling to enter the Gold Coast market.

<img alt="Harbour Shires" data-entity-type="file" data-entity-uuid="e7486e37-22f6-4c92-b212-9b0622070b8f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-08%20at%209.09.34%E2%80%AFAM.png?VersionId=W8MJwJUCf6HkIyl_EVSksnd.QI6MZryY" />

<a href="https://www.apartments.com.au/developers/lewis-land-group">Lewis Land</a> Head of Development Michael Long said the developer deliberately allocated a significant proportion of the project to more affordable apartment types.

"First home buyers have been priced out of many parts of the Gold Coast, and we saw a clear opportunity to address this and play our part in a longer-term housing solution," Long said.

"That's why 24 of the 91 apartments being delivered at Solis have been designed and priced for the city's next generation of homeowners, quality one-bedroom apartments, half of which include an additional multipurpose room to maximise space and flexibility.

"This approach places 30 per cent of apartments in Solis under $1 million, and with close proximity to Harbour Town's future light rail extension connecting residents to the city's major employment and knowledge hubs, it's a win for buyers looking to secure their first property."

<img alt="Sores" data-entity-type="file" data-entity-uuid="550526d3-73ba-4710-9739-c5f4294a30ef" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-08%20at%209.09.29%E2%80%AFAM.png?VersionId=cQQdXHt9wS0UXwZEm5Py5bH_3kAmzyhu" />

Designed by BDA Architecture, Solis will deliver a mix of one, two and three-bedroom apartments, with residences ranging up to 232 sqm. Apartments feature generous balconies and contemporary finishes, while residents will have access to Harbour Shores' lagoon pool, clubhouse, tennis court, gym, yoga studio and sauna.

The focus on first home buyers resonated with purchaser Holly Humphreys, who said she and her boyfriend spent more than a year searching for their first property before shifting their attention from houses to apartments.

"We fell in love with the first house we bid on and got our hopes up, but after repeated knockbacks we learned not to get too attached," Humphreys said.

"We offered at the high end of price guides, but sales kept going even higher. That's where we really struggled and we needed to re-evaluate our budget and our expectations. Standalone houses were off the table, and we pivoted to apartments and townhouses."

Humphreys said it was encouraging to see developers recognising the growing demand from first home buyers.

"There's a growing number of young buyers looking to enter the market earlier because they understand that getting in now can make a real difference as prices continue to rise," she said.

"It's fantastic to see a developer recognise this and then actively take measures to deliver an apartment with us in mind."

Solis is the first development planned within the second stage of the Harbour Shores masterplan, with early works expected to commence in September 2026.

[smartcode_project_cta:default project_id=113271]

Joel Robinson

Lewis Land targets first home buyers at latest Harbour Shores release, Solis

Luxury apartment developer Abadeen has recorded $19.25 million in apartment sales across two of its Lower North Shore developments in the lead-up to the end of the financial year, headlined by the sale of a $6.75 million penthouse at <a href="https://www.apartments.com.au/buildings/koyo-crows-nest-5-rodborough-avenue-crows-nest-nsw-2065">KOYO in Crows Nest.</a>

The transactions also included the sale of a newly completed three-bedroom apartment at <a href="https://www.apartments.com.au/buildings/park-residences-cremorne-2-sutherland-street-cremorne-nsw-2090">Park Residences in Cremorne</a> for $6.35 million, with the residence selling shortly after the project's first public inspections following completion.

The sales come as completed, owner-occupier-focused apartments continue to attract strong demand across Sydney's Lower North Shore, particularly from buyers looking for certainty and immediate occupancy.

The penthouse at KOYO spans 491 sqm across a single level and was designed by architect Koichi Takada. The development is one of Abadeen's flagship boutique projects in Crows Nest.

[smartcode_project:default project_id=108800 project_image_fid=370093]

Abadeen Executive Chairman and Founder Justin Brown said buyer activity lifted noticeably in the lead-up to the end of the financial year.

"We saw a clear increase in enquiry levels, inspection numbers and buyer engagement across our completed projects leading into the end of the financial year," Brown said.

"Buyers have become far more decisive over the past six months. The combination of improving confidence, limited supply and the ability to physically inspect completed residences is creating strong competition for premium apartments in the best locations."

Brown says the&nbsp;response to Park Residences following completion has been particularly strong.

"Buyers want certainty and are responding positively to the opportunity to walk through a finished product, inspect the quality firsthand and move in immediately," Brown suggested.

"Projects such as Park Residences and KOYO demonstrate that when the product is exceptional and the location is irreplaceable, buyers are prepared to act quickly."

[smartcode_project:default project_id=114246 project_image_fid=370116]

Abadeen CEO Joe Tack said quality continued to differentiate projects in the current market.

"Today's buyers are incredibly discerning," Tack said.

"They are seeking larger floorplans, premium finishes, walkability, lifestyle amenity and confidence in the developer delivering the project. Well-designed boutique developments continue to outperform because they offer something genuinely difficult to replace.

"The enquiry we are seeing across our completed and recently completed Lower North Shore portfolio is very encouraging, and we expect this momentum to continue into spring."

The sales follow increased enquiry across Abadeen's Lower North Shore portfolio which also includes <a href="https://www.apartments.com.au/buildings/northcote-collective-naremburn-2-northcote-street-naremburn-nsw-2065">Northcote Collective in Naremburn</a> which also completed recently.

KOYO penthouse headlines Abadeen's $19.25 million EOFY sales flurry

The City of Sydney has approved plans for <a href="https://www.apartments.com.au/developers/billbergia">Billbergia Group</a> and Metrics Credit Partners’ $3.5 billion Castlereagh Place project in the heart of the Sydney CBD

The towers will be among the tallest in <a href="https://www.apartments.com.au/developments/sydney-nsw-2000">Sydney</a>'s CBD, with more floors than any other residential tower in the city.&nbsp;

The 6,000 sqm site was acquired by the joint venture partners in 2024. It is the largest amalgamated land parcel in the Sydney CBD and comprises eight individual sites fronting Castlereagh, Pitt and Liverpool Streets.&nbsp;

<a href="https://www.apartments.com.au/new-apartments/castlereagh-place-sydney-324-348-pitt-street-sydney-nsw-2000">Castlereagh Place</a> will transform an underutilised city block into a landmark mixed-use destination, anchored by two 82-storey towers comprising 607 luxury residences above an 8-level podium housing a 209-room luxury hotel. A 1,000 square metre civic park on ground level features a curated mix of food, beverage and retail.

The plans have been refined over the past year to rebalance the residential and hotel offering, and reconfigure the retail footprint to create a stronger, more dynamic dining experience.

A three-level flagship building on the prominent corner of Pitt and Liverpool Streets will be the gateway to the Castlereagh Place lifestyle precinct. Set to become a Sydney icon, the building is capable of housing multiple hospitality venues.

“Castlereagh Place is designed to be the City's next great urban oasis - an energetic mixed-use precinct that pulses with life, day and night,"&nbsp;said Joseph Kinsella, Group Director of Billbergia.

"It will bring the vibrancy of places like Barangaroo and Darling Quarter into a more accessible, central destination at the very heart of Sydney."

Kinsella said the project will build on&nbsp;Sydney’s growing laneway culture with the City’s largest network of new activated lanes - an expanded, next-generation take on precincts like Angel Place, Palings Lane and Ash Street in Wynyard.

[smartcode_project:default project_id=134477 project_image_fid=374401]

Castlereagh Place has been designed by architects <a href="https://www.apartments.com.au/architects/fjc-studio">fjcstudio</a> in collaboration with Trias Studio, Aileen Sage and Polly Harbison Design, joint winners of an international design competition in 2018.&nbsp;

Signature design elements from the original scheme remain unchanged, while the public domain has been significantly enhanced, delivering 60 per cent more open-to-sky space.

Pedestrian access will also be enhanced through new laneways linking Pitt, Liverpool and Castlereagh Streets, drawing people into a new civic park with outdoor seating, landscaping and integrated public art.

With activated laneways supported by strong hospitality offerings, Castlereagh Place is tipped to become a vibrant new dining destination in the heart of Sydney’s CBD.

It marks the largest undertaking to date for the Billbergia and Metrics Credit Partners partnership. Together they are developing other underutilised Sydney sites into mixed-use precincts, including the $2.2 billion Concord Central and the $1.3 billion Chatswood Grand Residences.

Metrics Managing Partner and Group CEO Andrew Lockhart said Castlereagh Place is a landmark project that will redefine Sydney’s skyline.

"As the tallest residential high-rise development, the revitalised site will offer panoramic views across the CBD and surrounds. We are excited to partner with Billbergia to reinvigorate an underutilised site and create a sophisticated and contemporary mixed-use offering situated in the heart of Sydney.”

Total apartments within the towers have increased to 607 dwellings, with a focus on larger floorplans. Aligned to growing market demand, Castlereagh Place now comprises 299 three-plus-bedroom apartments, 198 two-bedroom units and 110 one-bedroom configurations.

[smartcode_project:default project_id=134477 project_image_fid=374402]

Resident amenities will include an exclusive residents club containing a gym, rooftop pool, dining rooms, co-working spaces, library, golf simulator, games room, cinema room, and access to an exclusive concierge service. There will be around 500 basement car spaces below the towers.

The development will also include a state-of-the-art wellness centre, set to feature a bathhouse with magnesium pools, hot/cold plunge pools and premium amenities.

&nbsp;

According to fjcstudio, the towers will feature distinctive yet elegant architectural design reflecting Sydney’s geometry and urban character, with a network of through-site links and intimate public spaces activating the streetscape.

"Castlereagh Place is a city-making project of significant scale and ambition," said Richard Francis-Jones, Design Director at fjcstudio.

"It will create a rich urban complex of public open spaces, landscaped gardens, and vibrant laneways. Defining these new public spaces and the important streetscape of Castlereagh Street is a sequence of fine-grained, diverse retail and hotel architecture designed in collaboration with Aileen Sage, Polly Harbison Design and Trias.

“Rising above the tree-lined, human-scale streetscape are two slender residential towers that will transform the city skyline and look towards the Harbour, Hyde Park, and the Royal Botanic Garden.”

Demolition and early construction works have commenced onsite at Castlereagh Place.

[smartcode_project_cta:default project_id=134477]

Billbergia, Metrics, approved for $3.5 billion Sydney skyscrapers

International developer&nbsp;<a href="https://www.apartments.com.au/developers/spg-land">SPG Land</a> is preparing to re-launch its long-awaited $1.5 billion <a href="https://www.apartments.com.au/new-apartments/paradiso-place-surfers-paradise-103-ferny-avenue-surfers-paradise-qld-4217">Paradiso Place</a> development at Budds Beach, bringing a new price point to the Surfers Paradise apartment market.

The developer will release one-bedroom apartments from $825,000 and two-bedroom apartments from $1.24 million in the three-tower development.

According to Urbis, the starting price for the two-bedroom apartments is more than $400,000 below the weighted average sale price for comparable two-bedroom apartments in Surfers Paradise during 2025, which was pinned at $1.7 million.

&nbsp;

Urbis reported quarterly average sale prices for new two-bedroom, two-bathroom apartments ranged from around $1.2 million to $1.7 million throughout 2025, peaking in the December quarter.

[smartcode_project:default project_id=106566 project_image_fid=185853]

Paradiso Place is now moving into its formal sales campaign, with a limited early-release opportunity available ahead of the public launch.

The development will comprise 845 apartments across three towers rising 40, 41 and 44 storeys from a 1.15-hectare site spanning an entire city block. The towers will sit above a new retail precinct.

"Paradiso Place represents a rare opportunity in today's market, offering premium apartments at a price point that is significantly more competitive than anything else currently available," SPG Land Sales Director Brad McMahon said.

"When you look at comparable new developments across Surfers Paradise, Main Beach and the Southern Beaches precinct, buyers are typically paying hundreds of thousands more for a similar product.

"The scale of this project and the developer-builder construction model allows us to unlock efficiencies that smaller developments simply cannot achieve. We are passing those benefits directly to buyers, while still delivering a five-star residential experience with an unmatched lifestyle."

[smartcode_project:default project_id=106566 project_image_fid=374280]

Each of the three towers designed by Rothelowman will have its own podium, connected by an elevated skybridge network to create a beachside village for residents. The resident amenity has been designed to rival a five-star hotel, with private dining rooms, resident lounges and entertainment spaces.

McMahon said the pricing strategy was a deliberate response to the current market.

"What Paradiso Place offers is a unique balance, genuine value within a premium market. Buyers are not compromising on quality, design or amenity, they are gaining access to it at a more competitive price point at a time when prices across the Gold Coast continue to reach new highs."

[smartcode_project:default project_id=106566 project_image_fid=362498]

Located around 100 metres from the beach and within walking distance of the Surfers Paradise North light rail station, Paradiso Place occupies one of the Gold Coast's most tightly held beachfront precincts.

Construction is continuing to progress, with eight of the project's 112 foundation piles now complete. Excavation has also commenced on the first diaphragm wall panel, with the first concrete poured on 15 June, marking a key milestone in the project's early works program.

[smartcode_project_cta:default project_id=106566]

SPG Land launches $1.5 billion Paradiso Place at attractive price point

Luxury developer-builder <a href="https://www.apartments.com.au/developers/lowe-living">Lowe Living</a> has achieved a new Victorian benchmark for an off-the-plan apartment, with the sale of two penthouses at its ultra-exclusive Maison Savoy development in Brighton.

The two penthouses achieved a combined sale rate of $49,926 per sqm. Both transactions eclipsed the previous identified Victorian off-the-plan price-per-square-metre benchmark, set by the 449 sqm apartment at Como Toorak, which sold at $46,659 per sqm.

[smartcode_project:default project_id=140818 project_image_fid=366473]

<a href="https://www.apartments.com.au/new-apartments/maison-savoy-brighton-150-esplanade-brighton-vic-3186">Maison Savoy</a>, Lowe Living's redevelopment of the former Brighton Savoy Hotel on absolute beachfront land at 150 The Esplanade, Brighton, has gained significant momentum since launching just eight weeks ago. Around 30 per cent of the project's 19 residences have already been secured, generating approximately $45 million in sales.

"Securing two of the three penthouse sales at this stage, within eight weeks of launching to market speaks to the confidence our clients place in Lowe Living," Lowe Living co-founder Emma Lowe said.

"They know we'll be with them through every stage of the journey, and that assurance is something we've worked hard to earn and never take for granted."

[smartcode_project:default project_id=140818 project_image_fid=366474]

Lowe said Maison Savoy was conceived as a genuine alternative to a prestige Brighton home, combining house-scale proportions with the convenience, security and lock-up-and-leave appeal of apartment living.

Lowe Living co-founder Tim Lowe said the early sales success demonstrated the resilience of Melbourne's prestige market and highlighted the growing demand for house-sized apartments among ultra-high-net-worth buyers.

"The Melbourne market has definitely been tested in recent years, with interest rates and global economic factors all creating a period of uncertainty across the real estate sector. The sales success at Maison Savoy however demonstrates that confidence remains exceptionally strong at the top end of the market.

"The prestige market is being driven by long-term lifestyle decisions rather than short-term market sentiment, which continues to create a level of certainty that befits an absolute beachfront property in a blue-chip location like Brighton.

"Brighton's fundamentals remain among the strongest in Melbourne, with limited new supply, enduring demand from an overwhelmingly local owner-occupier market, and a rare combination of beachfront amenity and proximity to the CBD."

[smartcode_project:default project_id=140818 project_image_fid=374378]

According to Cotality, Brighton remains one of Melbourne's most tightly held prestige suburbs, with an average ownership tenure of 15.3 years for houses and 12.3 years for units, while more than 73 per cent of homes are owner-occupied.

Tim Lowe said selling two of the project's three penthouses so early in the campaign was an uncommon result.

"This sales result is a reflection of quality and understanding the local market. It's incredibly rare to transact the penthouses so early in a sales campaign in any project so to have sold two of the three penthouses at Maison Savoy so soon after launch, all in-house without any external sales agency appointed, is reflective of our careful consideration of our buyers' needs and lifestyle.

"This is knowledge that is accumulated not just from data and demographic analysis, but via a deeply embedded understanding of how this type of buyer wants to live and feel in their home. We pride ourselves on getting to know our clients personally, and over the last 10 years we have been able to refine our product offering by talking one-on-one with our clients about their design and floorplan preferences.

"Being a fully integrated developer-builder with an in-house design and sales team allows us to lead every part of the process and ensure the highest quality of product and service at every touchpoint. It's a really important part of our DNA and the recent sales success at Maison Savoy indicates that our clients and purchasers are resonating with this point of difference.

"It reinforces that demand remains strong for thoughtfully designed residences that offer rarity, lifestyle and long-term value in tightly held locations, which ultimately validates Maison Savoy's positioning as creating a new benchmark for house-scale, wellness-led apartment living on Brighton's beachfront."

&nbsp;

[smartcode_project:default project_id=140818 project_image_fid=366480]

The residences at Maison Savoy start from 295 sqm, with most enjoying uninterrupted views across Port Phillip Bay. The project sits moments from the Brighton Bathing Boxes, Royal Brighton Yacht Club, Middle Brighton Baths and Church Street's retail and dining precinct.

A key feature of the development is its private residents-only bathhouse, curated by the founder of Aurora Spa &amp; Bathhouse and modelled on traditional European bathing rituals and the award-winning Sorrento bathhouse.

The wellness offering includes a hydrotherapy pool, salt room, sauna, steam room, cold plunge pool, foot activation zone and a Vichy rainfall bed, one of only a handful in Australia. Residents will also have access to a Technogym studio, lounge spaces and a dedicated concierge service offering everything from morning coffee delivery and restaurant bookings to dry cleaning and home coordination.

"Wellness-led design has become a defining factor for luxury buyers," Emma Lowe said.

"Purchasers increasingly value homes that enhance wellbeing through thoughtful design, private amenity, privacy and liveability."

The penthouse purchasers are now undertaking a bespoke customisation process curated personally by architect Pete Kennon and the Lowe Living team, one of the developer's signature service offerings.

Construction on the $160 million transformation of the former Brighton Savoy Hotel site commenced last month, with completion expected in early 2028. The project has secured funding from NAB alongside development partner Monark.

Just one penthouse remains available, along with a limited number of two and three-bedroom residences starting from $3.75 million.

Lowe Living currently has eight projects on the market across Melbourne and recently celebrated its 10th anniversary, having grown a $1 billion development pipeline alongside a $350 million construction pipeline.

&nbsp;

[smartcode_project_cta:default project_id=140818]

Lowe Living set new Melbourne off the plan apartment record

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

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Commonwealth Bank are the first of the big four to cut interest rates following the emergency rate cut by the RBA.
They are now offering fixed rates at 2.29 per cent, their lowest rates in their history. They've cut 70 basis points off their one, two and three year fixed home loans to make them the lowest on the market.
They haven't cut variable rates.
CBA, who passed on the cut minutes after the RBA's announcement, still haven't passed on their full rate cut to variable home loan customers from the early March RBA cut, which is scheduled for March 24.
"These are unprecedented times, and they call for unprecedented measures," Commonwealth Bank chief executive Matt Comyn said.
Sally Tindall, research director at RateCity.com.au, said CBA's decision will frustrate its variable home loan customers.
She added however that it is a win for small business borrowers who are struggling to make ends meet and keep their businesses afloat.
“This move from CBA is designed to put money back into the pockets of small businesses, but its existing home loan customers have all missed out,” Tindall said.
“CBA has cut some of its fixed rates to a new market low of 2.29 per cent, but this is little comfort to customers wanting to stay on a variable rate loan.
“Banks are between a rock and a hard place when it comes to passing on rate cuts to their mortgage holders, particularly as many savings rates are already so close to zero," Tindall noted.
The RBA cut rates to a historic low 0.25 per cent earlier today.
They announced a money printing program for the first time in history.
It will buy government bonds as its first ever quantitative easing.
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jrobinson-rf4aSBido9

CBA first to cut rates after emergency RBA cut

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The RBA's emergency March meeting saw the official cash rate dropped to deal with the ongoing economic threat of COVID-19.
The governor Philp Lowe published a monetary policy announcement, today, after it meet on Wednesday.
The coronavirus is first and foremost a public health issue, but it is also having a very major impact on the economy and the financial system. As the virus has spread, countries have restricted the movement of people across borders and have implemented social distancing measures, including restricting movements within countries and within cities. The result has been major disruptions to economic activity across the world. This is likely to remain the case for some time yet as efforts continue to contain the virus.
Financial market volatility has been very high. Equity prices have experienced large declines. Government bond yields have declined to historic lows. However, the functioning of major government bond markets has been impaired, which has disrupted other markets given their important role as a financial benchmark. Funding markets are open to only the highest quality borrowers.
The primary response to the virus is to manage the health of the population, but other arms of policy, including monetary and fiscal policy, play an important role in reducing the economic and financial disruption resulting from the virus.
At some point, the virus will be contained and the Australian economy will recover. In the interim, a priority for the Reserve Bank is to support jobs, incomes and businesses, so that when the health crisis recedes, the country is well placed to recover strongly.
At a meeting yesterday, the Reserve Bank Board agreed to the following comprehensive package to support the Australian economy through this challenging period:
<ol>
<li>
A reduction in the cash rate target to 0.25 per cent.
The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.
</li>
<li>
A target for the yield on 3-year Australian Government bonds of around 0.25 per cent.
This will be achieved through purchases of Government bonds in the secondary market. Purchases of Government bonds and semi-government securities across the yield curve will be conducted to help achieve this target as well as to address market dislocations. These purchases will commence tomorrow. The Bank will work closely with the Australian Office of Financial Management (AOFM) and state government borrowing authorities to ensure the efficacy of its actions. Further details about the implementation of this are provided in the accompanying notice.
</li>
<li>
A term funding facility for the banking system, with particular support for credit to small and medium-sized businesses.
The Reserve Bank will provide a three-year funding facility to authorised deposit-taking institutions (ADIs) at a fixed rate of 0.25 per cent. ADIs will be able to obtain initial funding of up to 3 per cent of their existing outstanding credit. They will have access to additional funding if they increase lending to business, especially to small and medium-sized businesses. This facility is for at least $90 billion. Further details are available in the accompanying notice.
The Australian Government has also developed a complementary program of support for the non-bank financial sector, small lenders and the securitisation market, which will be implemented by the AOFM.
</li>
<li>
Exchange settlement balances at the Reserve Bank will be remunerated at 10 basis points, rather than zero as would have been the case under the previous arrangements.
This will mitigate the cost to the banking system associated with the large increase in banks' settlement balances at the Reserve Bank that will occur following these policy actions.
</li>
</ol>
The Reserve Bank will also continue to provide liquidity to Australian financial markets by conducting one-month and three-month repo operations in its daily market operations until further notice. In addition, the Bank will conduct longer-term repo operations of six-month maturity or longer at least weekly, as long as market conditions warrant.
The various elements of this package reinforce one another and will help to lower funding costs across the economy and support the provision of credit, especially to small and medium-sized businesses.
Australia's financial system is resilient and well placed to deal with the effects of the coronavirus. The banking system is well capitalised and is in a strong liquidity position. Substantial financial buffers are available to be drawn down if required to support the economy. The Reserve Bank is working closely with the other financial regulators and the Australian Government to help ensure that Australia's financial markets continue to operate effectively and that credit is available to households and businesses.
Today's policy package from the Reserve Bank complements the welcome fiscal response from governments in Australia. Together, these measures will support jobs, incomes and businesses through this difficult period and they will also assist the Australian economy in the recovery.
There will be a press conference with further details at 4.00pm AEDT today.
 
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RBA cuts again in March: governor Philip Lowe's emergency March meeting statement

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The RBA have officially cut the cash rate to a record low 0.25 per cent at its emergency March meeting amid the economic downturn, as COVID-19 continues to dominate financial markets. 
It's the lowest the interest rate is set to given, as the RBA has already said 0.25 per cent is its lower bound.
The board met on Wednesday with the announcement made this afternoon.
"The RBA will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band RBA Governor Philip Lowe said.
They want to hit 4.5 per cent unemployment rate. Today's ABS figures were at 5.1 per cent, although Westpac's Bill Evans says the unemployment rate could rise to seven per cent.
The Reserve Bank will provide a three-year funding facility to authorised deposit-taking institutions (ADIs) at a fixed rate of 0.25 per cent. 
They will have access to additional funding if they increase lending to business, especially to small and medium-sized businesses. 
This facility is for at least $90 billion.
Lowe opened with the coronavirus implications.
"The coronavirus is first and foremost a public health issue, but it is also having a very major impact on the economy and the financial system" Lowe said.
"As the virus has spread, countries have restricted the movement of people across borders and have implemented social distancing measures, including restricting movements within countries and within cities", Lowe added.
"The result has been major disruptions to economic activity across the world. This is likely to remain the case for some time yet as efforts continue to contain the virus."
They Reserve Bank also have said they will also continue to provide liquidity to Australian financial markets by conducting one-month and three-month repo operations in its daily market operations until further notice.
The RBA closely watch the US Federal Reserve, who cut their rates out-of-cycle earlier this month, cut again on Sunday night, slashing 100 basis points to a near zero cash rate.
In 2009 following the GFC, Labor's second stimulus package was around four per cent of GDP, which saved a recession.
In today's economy, that's around $80 billion.
 
 
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RBA cut rates to 0.25 at emergency March meeting

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RBA STAFF DISCUSSION PAPER
Most of the cumulative 75 basis points of cash rate reductions in 2019 has flowed through to mortgage rates paid by households.
Interest rates on outstanding variable-rate housing loans have declined by almost 70 basis points (Graph 11). Following the reductions in the cash rate in 2019, lenders lowered their SVRs on housing loans by an average of 60 basis points, which automatically flowed through to all variable-rate loans.
The average rate paid on outstanding variable-rate loans declined by more than this, reflecting strong competition for new high-quality borrowers as well as households switching away from interest-only loans (which generally have higher interest rates). Following the 25 basis point reduction in the cash rate in March 2020, the major banks have lowered their SVRs on housing loans by 25 basis points.
Rates for fixed-rate housing loans have also declined. Over the past year, the major banks reduced their advertised 3-year fixed lending rates by around 100 basis points for owner-occupiers. This decline was consistent with a similar decline in interest rate swap rates, which are often used as a benchmark for pricing fixed-rate loans (given that they reflect expectations about the future path of the cash rate). 
<div><img src="https://www.rba.gov.au/publications/bulletin/2020/mar/images/graph-0320-4-11.svg" alt="Graph 11: Variable
					Housing Interest Rates" width="620" height="482" data-imagetype="External"></div>
Interest rates on loans to large businesses – which tend to move with BBSW rates – are estimated to have declined over recent months and are at very low levels (Graph 12). Lending rates for medium and, to a lesser extent, small businesses have also decreased over recent months. 
<div><img src="https://www.rba.gov.au/publications/bulletin/2020/mar/images/graph-0320-4-12.svg" alt="Graph 12: Business
					Lending Rates" width="620" height="482" data-imagetype="External"></div>
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j.ballantyne1990-6AQqhLzZaK

Housing and business lending rates both reach historic lows: RBA discussion paper

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EXPERT OBSERVER
The coronavirus has pushed economies and interest rates into downward spirals.
New Zealand’s Reserve Bank pushed its cash rate from 1.00% to 0.25% on Monday, and the US Federal Reserve cut its benchmark rate to zero on Sunday, making Australia’s cut of 0.25 points from 0.75% to 0.50% earlier this month seem tame by comparison.
Australia’s Reserve Bank is highly likely to cut again on Thursday as part of a promised series of “<a href="https://theconversation.com/reserve-bank-and-government-prepare-fresh-emergency-measures-as-markets-tumble-133780" target="_blank">policy measures</a>”, but it has already said that 0.25% will be the <a href="https://www.rba.gov.au/speeches/2019/sp-gov-2019-11-26" target="_blank">effective lower bound</a> for the cash rate (meaning the point at which there’s no benefit to further cuts) leaving it staring into the abyss of so-called unconventional monetary policy.
It will outline what it will do after 0.25% is reached on <a href="https://theconversation.com/reserve-bank-and-government-prepare-fresh-emergency-measures-as-markets-tumble-133780" target="_blank">Thursday</a>, but in the meantime a series of clues suggest its thoughts are changing.
In <a href="https://theconversation.com/now-we-know-the-reserve-bank-has-spelled-out-what-it-will-do-when-rates-approach-zero-127697" target="_blank">November</a> Governor Philip Lowe indicated that after the bank’s short term cash rate had reached the effective lower bound, the bank would buy longer-term government bonds. That would force money into the hands of the investors who owned them in a process known as “<a href="https://theconversation.com/now-we-know-the-reserve-bank-has-spelled-out-what-it-will-do-when-rates-approach-zero-127697" target="_blank">quantitative easing</a>”.
But more recently it is talking about borrowing an idea from the Bank of Japan’s book called “<a href="https://www.bloomberg.com/news/articles/2016-09-21/quicktake-q-a-what-s-a-yield-curve-and-why-s-boj-targeting-it" target="_blank">yield curve control</a>”.
What is yield curve control? And how does it differ from quantitative easing?
<h2>It isn’t simply buying bonds</h2>
Yield curve control would involve the bank announcing targets for long-term yields on government debt instruments such as the 5 or 10-year bond, and then intervening in debt markets to buy until the target rates are achieved.
This would control the yield on government bonds, hence the name “<a href="https://www.bloomberg.com/news/articles/2016-09-21/quicktake-q-a-what-s-a-yield-curve-and-why-s-boj-targeting-it" target="_blank">yield curve control</a>”.
Both quantitative easing and yield curve control involve the same basic tactic (pushing out or creating money in order to buy bonds) but to different ends: yield curve control focuses on achieving a targeted level for interest rates, while quantitative easing is aimed at increasing the stock of money in the economy.
Why might the bank prefer yield curve control over the traditional approach to quantitative easing that has been used in much of the world during and since the global financial crisis?
<h2>It’s more like what we are used to</h2>
First, yield curve control’s approach of targeting specific interest rate is more similar to conventional monetary policy.
The bank has plenty of experience in setting and publishing the cash rate and measuring the impact on the economy. There is less risk of it either over or under shooting its target.
Previous work by the bank has calculated that adjusting the 10-year nominal interest rate is 40 times as effective at lowering firms’ cost of capital as a similarly sized cut in the cash rate.
This leaves the bank with plenty of ammunition after short-term rates hit the effective lower bound and can no longer be adjusted.
<h2>And it lets others do the work</h2>
The second reason to prefer yield curve control is that if the bank’s stated target for long-term interest rates is seen as credible, it will need to buy less than it would have to achieve lower interest rates.
So credible have its short-term cash rate announcements become that it now needs to do little more than make them and watch the market trade at changed rates, although it stands ready to trade itself in order to change the rates if needed.
It’s instructive to compare recent cash rate announcements with the early ones in the 1990s.
These days the bank simply says it has “decided to lower the cash rate”.
<a href="https://images.theconversation.com/files/320963/original/file-20200317-60932-1t5xr77.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/320963/original/file-20200317-60932-1t5xr77.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
It used to say it “will be operating in the domestic money market” to reduce the cash rate.
<a href="https://images.theconversation.com/files/320961/original/file-20200317-60906-6nqvbm.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/320961/original/file-20200317-60906-6nqvbm.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
Government bonds are the lifeblood of the financial system and right now Australia has relatively low levels of government debt.
An approach which requires fewer bonds to held by the Reserve Bank and more held privately will keep down government debt and help steady financial markets.
<h2>It’s good, but it mightn’t be enough</h2>
As it happens, yield curve control might not be sufficient on its own.
The interest rate on 10-year bonds are already low - at about 1% - and so even there there isn’t much room to cut.
While negative interest rates are possible and exist in several other countries (yes, investors really are prepared to invest their money with the government for a negative return) the bank is unlikely to want to is unlikely to want to introduce them here.
Ultimately, if it needs to do more than get bond rates to near zero per cent, it’ll need to come up with something new, but yield curve control will buy it time.
We’ll know more on <a href="https://theconversation.com/reserve-bank-and-government-prepare-fresh-emergency-measures-as-markets-tumble-133780" target="_blank">Thursday</a>.<img src="https://counter.theconversation.com/content/133223/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
<a href="https://theconversation.com/profiles/isaac-gross-737430" target="_blank">Isaac Gross</a>, Lecturer, <a href="https://theconversation.com/institutions/monash-university-1065" target="_blank">Monash University</a>
This article is republished from <a href="https://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/yield-curve-control-the-reserve-banks-plan-for-when-cash-rate-cuts-no-longer-work-133223" target="_blank">original article</a>.
Main image: Shutterstock
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'Yield curve control': the Reserve Bank's plan for when cash rate cuts no longer work

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At the March meeting, RBA governor Philip Lowe said the benefits from lower interest rates outweighed the risk of cutting rates.
When deciding to cut to a historic low 0.5 per cent, Lowe said members discussed that a further reduction in interest rates could encourage additional borrowing at a time when there was already a strong upswing in the housing market.
He said that risk, in the current context of heightened uncertainty, was not viewed as particularly high, relative to the benefits from lower interest rates.
The RBA board's first point of call at the March meeting was to discuss financial markets.
They tend to open with international economic conditions, but given the financial ramifications on COVID-19, which was mentioned 24 times in the minutes, financial markets came first.
Financial markets also began the December minutes, although this was well before any notion of COVID-19 was even discussed as having such an imprint on the Australian economy.
RBA Governor Philip Lowe's opening statement stated that it had become increasingly clear that the spread of the novel coronavirus disease (COVID-19) beyond China would cause a major disruption to economic activity around the world.
There was no great concern on the housing market front from Lowe, who described the February housing market as "robust."
"National housing price growth had remained robust in February and most capital cities had experienced at least moderate price increases," Lowe said.
"The strong growth in housing prices had also encouraged more new residential listings, albeit from very low levels. 
"Turnover had increased, which, by itself, was expected to help support other types of spending."
Lowe said indicators of activity at the earlier stages of residential building had remained consistent with a turnaround in activity in the second half of 2020, especially for detached dwellings.
He noted however the December quarter data on residential building work done indicated dwelling investment had decreased again, driven by a further decline in the construction of new dwellings.
Over the previous six months, growth in housing credit for owner-occupiers had increased a little, members observed, but housing credit was growing more slowly than housing loan commitments, consistent with a rise in mortgage payments over the previous six months.
Loan commitments to investors had increased modestly over the same period, while housing credit for investors had stopped declining recently.
 
 
 
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RBA consider cutting interest rates as not high risk at March meeting

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MARCH RBA MINUTES
<h2 id="financial-markets">Financial Markets</h2>
Members commenced their discussion by noting that, since the previous meeting, it had become increasingly clear that the spread of the novel coronavirus disease (COVID-19) beyond China would cause a major disruption to economic activity around the world. Many countries were imposing travel restrictions and businesses and individuals were electing not to travel. COVID-19 had also been creating considerable uncertainty worldwide, leading to a significant reduction in risk appetites. This uncertainty meant that there was an increasing probability that people would seek to avoid gatherings, including public transport and perhaps workplaces.
These developments were evident in the significant changes in global financial markets outside of China in recent weeks. There had been sharp falls in the prices of risky assets and markets were finding it difficult to price the risks, given their unprecedented nature.
In the advanced economies, equity markets had declined sharply from recent highs, with sectors most exposed to COVID-19 disruptions experiencing particularly large falls. Spreads in corporate bond and money markets had widened, including in Australia, and issuance of corporate debt had slowed in late February after a strong start to the year. However, members noted that while spreads had widened, corporate borrowing costs had not risen much, if at all, because sovereign bond yields had declined to very low levels. In a number of countries, including Australia, sovereign bond yields were at record lows. On the whole, international financial markets were functioning effectively despite the sharp rise in volatility.
Members then turned to a discussion of international policy responses. Following the sharp adjustment to Chinese asset prices after the extended Lunar New Year break, the authorities in China had introduced a range of measures to forestall a tightening in financial conditions. This included monetary and fiscal easing targeted at supporting smaller firms in particular, with policymakers also indicating a willingness to ease policies. These measures had underpinned a stabilisation of onshore equity and credit markets. Elsewhere in the region, some central banks had also eased monetary policy, and modest fiscal measures were being deployed in some countries. Financial market volatility in the region had increased, but conditions had remained orderly.
Central banks in the major advanced economies had acknowledged the uncertainty created by the outbreak of COVID-19. Some had signalled a preparedness to provide further monetary policy accommodation if conditions warranted. Market pricing had moved substantially, suggesting that central banks in the advanced economies were expected to ease monetary policy at upcoming policy meetings. The expectation that central banks in the advanced economies would soon respond with easier policy had contributed to yields on long-term sovereign debt declining to historic lows in many markets.
In foreign exchange markets, the Japanese yen had appreciated as concerns about COVID-19 intensified. Members also noted that the US dollar had appreciated in recent months against most currencies. Regionally, the renminbi had been little changed and exchange rates in emerging Asia had depreciated somewhat, but in the context of broader US dollar strength. Members observed that the Australian dollar was at its lowest level in more than a decade.
Domestically, members noted that issuance of bank debt had slowed recently, but this partly reflected the substantial volume of funding already to hand and the modest growth in bank credit. Bank funding costs had declined a little over the prior month, with a modest widening in spreads more than offset by sharp declines in risk-free rates. The reductions in the cash rate in the previous year had brought bank funding costs to historic lows, with retail deposit rates having fallen further in recent months.
Lending rates were also at historic lows. While standard variable mortgage rates had declined by around 60 basis points since mid 2019, the average rate paid on outstanding variable-rate mortgages had drifted down by an additional 10 basis points beyond that. Members noted that, if the downward drift in average rates paid continued at its recent pace, there would be full pass-through of the previous year's reductions in the cash rate to the average mortgage rate by mid 2020.
Members discussed the factors contributing to this downward drift in average mortgage rates. In particular, ongoing strong competition for new high-quality borrowers had seen new and refinancing borrowers receive lower interest rates than those paid by existing borrowers. Improving transparency would help address this. Some borrowers were also switching from interest-only loans to principal-and-interest loans, which had lower interest rates.
Members observed that the growth in housing credit for owner-occupiers had increased a little over the previous six months or so, but housing credit was growing more slowly than housing loan commitments, consistent with a rise in mortgage payments over this period. Loan commitments to investors had increased modestly over the same period, while housing credit for investors had stopped declining recently.
Market pricing suggested that market participants expected the cash rate target to be cut by 25 basis points at the present meeting, and again by June.
<h2 id="international-economic-conditions">International Economic Conditions</h2>
Members commenced their discussion of the global economy by noting that the spread of COVID-19 was expected to affect global growth in 2020 by more than had been factored into the forecasts presented at the previous meeting.
Actions taken by Chinese authorities to limit the spread of COVID-19 had severely restricted economic activity in China in the March quarter and there continued to be significant uncertainty about the size and persistence of this disruption. While industrial output was typically lower in the March quarter because of the Lunar New Year holiday period, production had remained at holiday levels for much longer than usual. Coal consumption by power plants had also remained around the low levels typical of the Lunar New Year period. Members noted that this had not reduced demand for coal imports, which suggested that there had been a significant decline in China's domestic coal production. Iron ore imports also had not been significantly affected. Business conditions in China in February had deteriorated by much more than expected and supplier delivery times had increased sharply, indicating that there had also been disruptions to supply chains. Retail activity and residential property sales had been subdued.
Chinese GDP was expected to rebound later in 2020 as businesses seek to make up lost production and a range of stimulus and tax relief measures from the Chinese Government take effect. Some government measures, including direct support for manufacturers of medical equipment, were intended to support containment efforts, while others, such as assistance to affected small businesses, were designed to reduce the adverse economic spillovers from COVID-19.
Given the disruptions to logistics and other transportation in China, forecasts for global oil demand had been scaled back considerably and oil prices had fallen. This would lead to a decline in headline inflation globally. The prices of other commodities that tend to be responsive to changes in the outlook for global demand, including base metals, had also fallen since the start of 2020. Prices for liquefied natural gas had also declined. Prices of other bulk commodities had been little changed in net terms; iron ore prices had reversed an earlier fall, even as Chinese steel inventories had increased, possibly in anticipation of a pick-up in demand as economic activity rebounded.
Growth in other Asian economies was also expected to be lower in the March quarter than previously thought, reflecting a combination of lower Chinese domestic demand, less Chinese outbound travel and supply chain disruptions. Early indicators of trade activity in the Asian region in February had declined, following a period where trade, industrial production and manufacturing indicators in the more export-oriented economies had stabilised, amid signs of stabilisation in the global electronics cycle. Overall, growth in Australia's major trading partners was expected to be around ½ percentage point lower in 2020 as a result of COVID-19.
In the major advanced economies, GDP data for the December quarter had been weaker than expected for Japan and the euro area, while GDP growth in the United States had been relatively resilient. Even though employment growth had eased over 2019 in the major advanced economies, unemployment rates had continued to edge lower. Prior to any supply disruptions related to COVID-19, industrial production in the euro area had continued to decline, particularly in the auto sector. Members noted that, to date, there had been no reports that supply disruptions were contributing to these declines. Some survey measures of business conditions in the United States and Japan had deteriorated sharply in February, but investment intentions and business sentiment in the United States had been more positive.
<h2 id="domestic-economic-conditions">Domestic Economic Conditions</h2>
Members noted that the December quarter national accounts would be released the day after the meeting. Quarterly GDP growth was expected to have remained moderate, reflecting ongoing weak growth in household consumption and a further decline in dwelling investment. The bushfires over the summer months were expected to have affected growth in both the December quarter 2019 and the March quarter 2020, after which recovery efforts were expected to boost growth.
Members noted that economic activity in the first half of 2020 would be significantly affected by the global response to the COVID-19 outbreak. Services exports (which comprise around 5 per cent of GDP) were expected to decline by around 10 per cent in the March quarter, mainly because of a steep decline in inbound arrivals, including students, particularly from China. This effect alone was expected to lower Australian GDP growth by around ½ percentage point in the March quarter. Tourism and education exports were expected to remain low in the June quarter, before returning to their previous levels over the second half of the year as the Chinese economy recovers and travel resumes. Members observed that this estimate did not include possible effects on domestic activity of supply chain disruptions and public health safety interventions to reduce the likelihood of transmitting COVID-19.
Information from the capital expenditure (capex) survey and preliminary data on non-residential construction work done suggested that both non-mining and mining investment had decreased in the December quarter, led by weakness in building and engineering investment. However, mining firms had continued to expect solid growth in investment over the rest of 2019/20. The capex survey had also reported firms' investment intentions for 2020/21 for the first time. The responses suggested that mining investment would increase strongly, consistent with the most recent set of forecasts and the messages from liaison with businesses, while non-mining investment was expected to remain subdued.
National housing price growth had remained robust in February and most capital cities had experienced at least moderate price increases. The strong growth in housing prices had also encouraged more new residential listings, albeit from very low levels. Turnover had increased, which, by itself, was expected to help support other types of spending. Indicators of activity at the earlier stages of residential building had remained consistent with a turnaround in activity in the second half of 2020, especially for detached dwellings. However, data on residential building work done indicated dwelling investment had decreased again in the December quarter, driven by a further decline in the construction of new dwellings.
Growth in household consumption was expected to have been subdued in the December quarter; retail sales volumes had increased modestly and there had been further declines in motor vehicle sales in the quarter. A few categories of spending that are most correlated with housing activity had picked up in the quarter. The drought had continued to affect food prices and the volume of food sales had declined in the quarter. Members noted that growth in consumption in the first quarter of 2020 could be weaker than expected if the COVID-19 outbreak induced some households to cancel or defer international travel or disrupted supply chains for imported consumer durables. Although there was considerable uncertainty about the size of the net effect on GDP, it was expected to be small based on the available evidence.
Employment had grown by 1.9 per cent over the year to January, which was stronger than growth in the working-age population. However, the unemployment rate had increased to 5.3 per cent, reversing the small decline in the previous month, and the underemployment rate had increased to 8.6 per cent. The unemployment rate had been around 5¼ per cent for most of the preceding year. Members noted that the labour force data could be volatile from month to month and that it was too soon to know if the modest rise in these measures of spare capacity signalled a change in trend. The wage price index confirmed that growth in wages had remained steady at low rates in the December quarter, consistent with information from liaison with businesses, which suggested that wage outcomes had become increasingly concentrated in the 2–3 per cent range. Wages growth had slowed a little in some industries. These data and reports from liaison with businesses suggested that wages growth was unlikely to pick up in the near future.
<h2 id="considerations-for-monetary-policy">Considerations for Monetary Policy</h2>
In considering the policy decision, members observed that it was becoming increasingly clear that COVID-19 would cause major disruption to economic activity around the world. The outbreak had occurred in the context of a global economy that was gradually emerging from a soft patch in trade and manufacturing activity. However, following the outbreak, growth in output in China and other economies was expected to be significantly lower in the first half of the year, reflecting a combination of lower domestic demand, less travel and supply chain disruptions. The recent outbreaks of COVID-19 outside of China, and intensified efforts to contain its further spread, raised the prospect of a broader and more extended disruption to the global economy. It was too early to tell how persistent these effects would be and at what point economic activity would rebound. In response to the outbreak, policy measures to support growth had been announced in several countries, including China. Inflation remained subdued in most advanced economies, despite low unemployment rates.
Financial markets had been more volatile as market participants assessed the implications of COVID-19, with the prices of many risky assets falling sharply. The uncertainty generated by the outbreak, and an expectation that central banks would respond with easier policy, had resulted in long-term government bond yields falling to historic lows in many countries, including Australia. The Australian dollar had depreciated to be at its lowest level in more than a decade. Australia's financial markets were operating effectively, and the Bank would continue to ensure that the Australian financial system had sufficient liquidity.
The advent of COVID-19 around the world was having a significant effect on the Australian economy, particularly in the education, transport and tourism sectors. The uncertainty associated with the outbreak was also likely to affect household spending and business investment in coming months. As a result, GDP growth in the March quarter was likely to be noticeably weaker than previously expected, and it was difficult to predict how long it would take for the economy to return to more usual levels of activity. Once the disruptions passed, GDP growth was expected to pick up, supported by the low level of interest rates, high levels of spending on infrastructure, the lower exchange rate, stronger investment in the resources sector and recoveries in residential construction and household consumption. The Australian Government had also indicated that it would assist areas of the economy most affected by the COVID-19 outbreak.
Given these developments, members considered how best to respond, noting that even prior to the COVID-19 outbreak, progress towards full employment and the inflation target had been expected to be only gradual. The COVID-19 outbreak was expected to delay that progress further.
In discussing a possible monetary policy response, members welcomed indications from the Australian Government that fiscal measures would be taken to support investment, the cash flow of affected businesses and jobs. They also discussed the support that lower interest rates would provide to jobs and economic activity through a lower exchange rate and a boost to aggregate cash flows for households and businesses. Members recognised that the combined monetary and fiscal responses would help the economy deal with the challenges posed by COVID-19.
As part of their deliberations, members considered a number of scenarios, including one where the COVID-19 outbreak would be contained in the very near future and where there would be a rapid recovery in economic activity. In that scenario, the maximum effect of any additional monetary policy stimulus would be felt in the recovery phase, rather than in the short term, when policy support would most be needed. However, this scenario was considered very unlikely, with the more realistic scenario being that the outbreak would have a significant effect on the Australian economy.
Members also discussed the risk that a further reduction in interest rates could encourage additional borrowing at a time when there was already a strong upswing in the housing market. In the current context of heightened uncertainty, that risk was not viewed as particularly high relative to the benefits from lower interest rates.
The Board concluded that it was appropriate to ease monetary policy further in response to the global COVID-19 outbreak to provide additional support to employment and economic activity. Members agreed that it was reasonable to expect that an extended period of low interest rates would be required in Australia to reach full employment and achieve the inflation target. Members also agreed on the importance of monitoring the rapidly changing developments closely in subsequent weeks and maintaining contact to assess the implications of the COVID-19 outbreak for the economy. The Board was prepared to ease monetary policy further to support the Australian economy.
To read the RBA minutes from the RBA website, <a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2020/2020-03-03" target="_blank">click here</a>.
 
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COVID-19 dominates RBA March meeting minutes

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EXPERT OBSERVER
Today, the Reserve Bank released a Statement which was aimed at addressing liquidity issues in the Australian financial market.
The liquidity policies were aimed at both the government bond market and the bank funding markets.
Earlier in the day, we saw aggressive policy changes from both the US FOMC and the Reserve Bank of New Zealand.
The RBA Governor’s Statement noted that the Reserve Bank “stands ready to purchase Australian government bonds in the secondary market”.
The Statement indicated that the action was aimed at supporting the smooth functioning of the bond market.
At a recent Conference, on March 11, RBA Deputy Governor Debelle noted that “at the moment we don’t see material disruptions in financial markets. If that were to change we obviously have the capacity to act in the market like we did back in 2008 in terms of ensuring sufficient liquidity to the market. We don’t see the need for that now, but obviously if circumstances change, that might also need to change”.
Clearly from the RBA’s perspective the circumstances have changed. So this action in the bond market is targeted at boosting liquidity in a market that is seen as a “key pricing benchmark for the Australian financial system”.
Other liquidity based policies which were announced include one month; three month; and six month or longer repo operations to support liquidity in bank funding markets.
This action in the bond market is not the Quantitative Easing policy which we have been anticipating will be adopted when the overnight cash rate reaches 0.25% (defined by Governor Lowe as the zero lower bound at a speech on November 26).
In explaining its proposed approach to Quantitative Easing Deputy Governor Debelle pointed out at the same Conference, “So we would talk about the likely future path of interest rates – what is generally known as forward guidance – and to validate that we would be operating in the bond market as necessary to keep government bond rates, or the risk free curve, consistent with our outlook for interest rates".
It is interesting that the Bank’s first foray into the bond market is based on liquidity but we do not expect that the Quantitative Easing approach has been shelved.
The Governor's statement today also indicated that: "further policy measures to support the Australian economy" will be announced on Thursday March 19.
Those policy measures are expected to include a lowering of the overnight cash rate from 0.50% to 0.25%.
Quantitative Easing, along the lines described by the Deputy Governor, is also expected to be announced. This would involve the RBA targeting a particular outlook for the risk free curve.
The Governor’s Statement also noted that the RBA and the AOFM are in close liaison. Recall that during the Global Financial Crisis the AOFM purchased a range of mortgage backed securities. A repeat of that successful exercise is also likely to be announced.
Last year Westpac raised the issue of the RBA adopting a similar policy to the Bank of England to support small businesses and households while supporting banks’ funding at a time of excessively low interest rates.
Under the arrangement the RBA would lend long term funds to the commercial banks at a rate close to the overnight cash rate with the funds being tied to loans to business and households.
We understand that in this current crisis a key priority is about ensuring that good companies stay afloat until the crisis has passed and in turn that companies are able to retain their employees.
The Government’s Fiscal Stimulus Package addressed these issues but we think that the monetary authorities, in conjunction with our unquestionably strong banking system, can also play a role.
BILL EVANS is the <a href="https://westpaciq.westpac.com.au/Article/42581/14186/" target="_blank">chief economist for Westpac</a>.
This article was first published on <a href="https://westpaciq.westpac.com.au/Article/42581/14186/" target="_blank">Westpac IQ</a>.
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RBA to cut cash rate to record low 0.25% and announce QE: Westpac's Bill Evans

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EXPERT OBSERVER
The January housing finance report showed another robust broad-based gain, the total value of housing loan approvals surging 4.6%mth, above the consensus forecast of a 3%mth rise.
The upturn continues to be across both volumes and values – the number of owner occupier loans up 3.1%mth and up 11% from their low last May. The value of owner occupier loans is up 28% over the same period implying a sizeable 17% rise in average loan values.
Gains in the owner occupier segment have been across both upgraders and first home buyers, the latter showing a slightly stronger 20% in the number of approvals since May.
Investor activity also picked up but continues to show a more restrained upturn, particularly compared to previous cycles. The value of loans to investors rose 3.6%mth and is now up 22% from its May low but still 37% below its 2017 peak.
On a combined basis, the total value of loans was up 4.6%mth and 23%yr.
NSW and Vic continue to lead the resurgence, the total value of loans in NSW up +7%mth, +30%yr; and in Vic up 5.3%mth, 27%yr. The value of loans dipped 2% in Qld but is still up a solid 17%yr. WA and SA have seen more moderate 10% gains over the year.
Construction-related finance approvals showed a more convincing gain in Jan, loans for the purchase of newly built dwellings (including 'off the plan' purchases) posting a very strong 13.4% and construction loans up 4.2%. Overall, the picture continues to point to a clear turning point in non high rise building activity. The lift in purchases of newly built dwellings will also help high rise developers clear unsold stock but is less likely to drive a lift in new projects.
The finance figures confirm that the housing market was carrying strong momentum heading into early 2020. Auction markets suggest this has continued into February and early March. However, the worsening coronavirus shock will likely be a major disruption to activity in coming months.
MATTHEW HASSAN is a Senior Economist for Westpac
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Housing finance resurgence continues in 2020: Matthew Hassan

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Data released today from the Australian Bureau of Statistics (ABS) has revealed that home loan demand surged in January 2020.
The total value of loans to owner-occupiers rose 6.1% over the month of January, while the total value of loans to investors rose 3.6% over the month.
Mortgage Choice Chief Executive Officer Susan Mitchell said, "The latest data from the ABS shows that the nation's housing market kicked off 2020 with a bang, continuing the turnaround in the second half of 2019."
"The strong growth across both owner-occupiers and investor borrowers was larger than expected. Heightened borrowing activity suggests that the ongoing growth in dwelling values is likely to persist for some time yet."
"Indeed, the latest figures from CoreLogic reveal that national dwelling values surged by 1.1% over February, with values across five of the nation's eight capital cities reaching a record-high."
"Extremely attractive home loan interest rates and more relaxed lender policy may be fuelling investor demand. We are seeing competitive pricing on longer-term fixed rate home loan products, with some lenders offering rates below 3%, which is unprecedented.
"While we can only speculate on the outlook of investors going forward, the uncertainty in both the domestic and global economy may be encouraging consumers to invest their money in stable asset classes. As the expression would suggest, investors may be choosing to park their funds in property, which is safe as houses.
"Only time will tell if the momentum will continue long-term. As the global and domestic economic outlook faces significant headwinds, property investors may park their buying plans.
Looking to the future, Ms Mitchell said while there is some uncertainty ahead, demand for property is likely to remain robust.
"Interest rates have fallen to new historic lows and may fall even further in coming months. As such, now may be a good time for buyers hoping to take advantage of competitive home loan deals to discuss their options with their local mortgage broker," concluded Ms Mitchell.
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