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>

Joel Robinson

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

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> has revealed plans for a new mixed-use tower at 10 Dangar Street, Wickham, advancing a proposal that would reshape the southern gateway to Newcastle’s city centre with one of the city’s tallest residential buildings.

The State Significant Development proposal, now on exhibition, seeks approval for a <a href="https://www.apartments.com.au/new-apartments/bowline-10-dangar-street-wickham-nsw-2293">43-storey tower</a> immediately adjacent to the Newcastle Interchange. The project would deliver around 200 apartments, including 42 affordable housing dwellings, alongside 99 co-living units, a 171-room hotel, retail space, and new public domain integrated through the site.

The scheme marks a significant escalation of plans previously approved for the site. Urban Property Group took over the prominent 2,904 sqm parcel, where excavation and demolition had already commenced under an earlier consent for a 14-storey mixed-use development.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="58a96dd9-407f-4d20-86b4-94e4bfeef74b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20podium.png?VersionId=LGlf08pdFGAZDzvx_CXC4XakHNZRuEE0" />

Designed by <a href="https://www.apartments.com.au/architects/sjb-architects">SJB</a>, the tower has been conceived as a landmark transit-oriented development anchored to the Newcastle Interchange precinct. The proposal includes 245 build-to-sell apartments across a mix of one, two, and three-bedroom residences, as well as two penthouses. Fifteen apartments and one operational unit are earmarked for NDIS housing. The co-living component would add a further 99 units, while the podium would accommodate retail uses and hotel facilities.

SJB said the site presents “a valuable opportunity to anchor the precinct by setting the standard for design, active ground planes and character at the key southern gateway.”

The architecture responds directly to the site’s position beside major transport infrastructure and within one of Newcastle’s fastest-evolving urban renewal precincts. The tower form sits above a sculpted podium designed to frame new public spaces, including a through-site pedestrian link connecting Station Street to Hannell Street, landscaped plazas, and activated retail edges.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="a7bd6ff0-f7db-4ce8-a6dc-ea56e72c6149" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20lanne.png?VersionId=xzf39VADyhj7zBQY2I9fx9vI62u2tuSb" />

The design report describes the project as part of the broader transition of Wickham into “a vibrant, high-quality mixed-use urban precinct” that leverages proximity to the station, open space, and regional connectivity.

A detailed public art strategy has also been prepared for the development. The strategy positions the project as “a transit-oriented development of state significance at the gateway to Newcastle’s city centre” and outlines a series of integrated artworks responding to Newcastle’s industrial and transport heritage.

Creative Road’s curatorial framework for the project, titled Unveil, draws on “stratified surfaces, carved volumes, and light-filled apertures” while referencing Newcastle’s transformation from an industrial city into a contemporary education and technology hub.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="77a882bb-14b1-4d28-99ff-9438e39508c0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20site.png?VersionId=cevgo_vN0eKPK78P8YcEu3mKPLkpFqE7" />

The proposal is being advanced through the NSW Housing Delivery Authority pathway after being declared State Significant Development in June 2025. The accompanying scoping report states the development aims to “maximise the site’s proximity to the Newcastle Interchange by delivering transit-oriented development” while increasing housing supply and affordable housing provision within the Newcastle LGA.

Urban Property Group’s plans align with the long-term strategic vision established under the Wickham Master Plan, which identified the interchange precinct as suitable for substantial uplift in height and density. The current proposal would significantly intensify that vision, positioning the tower among the tallest developments proposed for Newcastle.

The site sits immediately north of the Newcastle Interchange, bounded by Dangar Street, Hannell Street, and Charles Street. It is surrounded by a rapidly growing cluster of residential towers and mixed-use projects that have emerged following the completion of the light rail and transport interchange.

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

Bottega House has completed settlement of a landmark riverfront site in Macquarie Street, St Lucia, representing its first major Brisbane development.&nbsp;

Positioned on the banks of the Brisbane River, the <a href="https://www.apartments.com.au/new-apartments/180-macquarie-street-st-lucia-qld-4067">premium site at 180 Macquarie Street</a> features uninterrupted river frontage in one of Brisbane’s most tightly held residential precincts.&nbsp;

The proposed development, currently under assessment with Brisbane City Council, has been designed by <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a> with interiors by <a href="https://www.apartments.com.au/interior-designers/mim-design">Mim Design</a> and will deliver a boutique collection of premium residences positioned specifically for owner occupiers and downsizers.&nbsp;

The residences are set to redefine luxury apartment living in the area, with a focus on architectural quality, refined finishes, landscape integration and elevated amenities including curated wellness facilities, resort-style pools and recreation spaces rarely seen in the local market.&nbsp;

Exclusive sales for the project will be led by Keenan &amp; Byrne, ahead of an anticipated launch later this year.&nbsp;

Bottega House Managing Director Nick Malloch said the project reflects the group’s ambition to deliver a highly curated residential offering within one of Brisbane’s most tightly held precincts.&nbsp;

“This is an incredibly rare riverfront opportunity and one we have approached with a long-term perspective,” Malloch said.&nbsp;

“Our vision from the outset was to create a boutique collection of residences that feel more like private homes than traditional apartments, with generous proportions, refined finishes and exceptional amenity throughout."

Malloch says there is a&nbsp;lack of premium owner-occupier stock of this quality in the market, particularly for downsizers wanting space, privacy and a true lifestyle offering without compromise.&nbsp;

"Demand is expected to be strong given the scarcity of premium riverfront opportunities of this nature within Brisbane’s inner-west."&nbsp;

Bottega House secures landmark riverfront site in St Lucia 

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

SIERA kicks off construction at Northcliffe tower Exhale

Local Little Bay residents, along with buyers from premium postcodes across Sydney’s affluent Eastern Suburbs, have dominated purchases in developer-builder Urban Property Group’s first Eastern Suburbs apartment development, <a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a>.

The $250 million coastal project, one of the first new developments in the area in several years, has proven particularly popular with downsizers, especially those from Coogee and Bondi. One Double Bay downsizer paid $4.7 million for a four-bedroom penthouse, setting a new local apartment price record in the process.

Buyers have been attracted to the combination of coastal tranquillity, premium design and amenity-rich neighbourhood living. The walkable village setting, along with proximity to three of Sydney’s leading golf courses, New South Wales Golf Club, St Michael’s Golf Club and The Coast Golf Club, has also been a key drawcard.

[smartcode_project:default project_id=112343 project_image_fid=352689]

Built across two low-rise buildings designed by <a href="https://www.apartments.com.au/architects/hill-thalis-architecture-urban-projects-pty-ltd">Hill Thalis</a> and set along a lush, landscaped green spine, designed by leading landscape architect <a href="https://www.apartments.com.au/landscape-architect/arcadia-landscape-architecture">Arcadia</a>, ESTE Little Bay offers a collection of one, two, three and four-bedroom residences with interiors by Richards Stanisich.

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> Sales Director, Tom McIvor said the response to ESTE has been "nothing short of extraordinary."

“Buyers have been quick to recognise ESTE as a rare opportunity to invest in a coastal sanctuary that offers both seclusion and connectivity to the heart of Sydney,” McIvor said.

[smartcode_project:default project_id=112343 project_image_fid=352687]

<a href="https://www.apartments.com.au/project-marketer/srm-residential">SRM Residential</a> Senior Director, <a href="https://www.apartments.com.au/project-marketer/srm-residential">Clayton Ross</a> said the local market has responded incredibly well, driven by ESTE’s exceptional location and the rarity it offers.

“We’ve seen strong interest from a variety of buyer groups, all of whom are drawn to the exclusivity and quality of the build and construction by the 4.5-star iCIRT-rated builder / developer, Urban Property Group. There’s truly nothing else like it along Sydney’s coastline.”

[smartcode_project:default project_id=112343 project_image_fid=352690]

The project also includes robust buyer protections, including Resilience Insurance’s Latent Defects Insurance, providing 10 years of structural cover, and an independent iCIRT-rating of the developer.

“The iCIRT-rating adds another layer of confidence,” Ross added. “Buyers see it as a safeguard for their investment and their lifestyle.” A highlight of ESTE’s offering is its exclusive wellness amenities, including a heated rooftop infinity pool and outdoor heated spa, a state-of-the-art Technogym fitness centre, and a sauna.

<a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a> is topped out and is on track to complete towards the end of 2026, with residents moving in before Christmas.

[smartcode_project_cta:default project_id=112343]

Eastern Suburbs buyers snap up ESTE Little Bay apartments

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 cash rate could fall as low as 1.5% because other sectors of the economy won’t pick up the slack from the declining mining sector, says former Reserve Bank board member professor Bob Gregory.
Gregory’s dark prediction is at the far end of the spectrum, the very far end in fact.
Bank economists reacting to today’s monetary policy statement put out by the Reserve Bank says it maintains an easing bias, but are circumspect on whether the cash rate will be cut much beyond one or two more times.
The Reserve Bank downgraded its economic forecasts today from a range of 2.25% - 3.25% to 2% - 3% with concerns about the pick-up in non-mining investment given the high Australian dollar and the labour market, though it did note a recover in dwelling investment and the housing market on the back of previous rate cuts.
Speaking at a recent economic conference, Gregory said interest rates could fall as low as 1.5% because the RBA will try to stimulate the economy to compensate for the end of the resources investment boom and a substantial decline in the prices of raw materials.
“Interest rates will fall. But I don’t think it’s going to work that much,” said Professor Gregory in comments reported on Wednesday by the Australian Financial Review.
Gregory’s conviction of a massive drop in the cash rate will be duly noted by many: aside from his former role as RBA board member from 1985 to 1990, he was also the first to diagnose the phenomenon of Dutch disease, where a mining boom drives up exchange rates and hurts the rest of the economy.
Along with the mining investment slide, Gregory predicts that real income in Australia could fall by 15% in the next few years with resulting lower living standards.
Commenting on the monetary policy statement, Westpac chief economist Bill Evans says the bank is encouraged that RBA governor Glenn Stevens “pointed out that there was scope to further cut rates should demand conditions require it”.
Evans points out that Stevens uses the word “scope” and “for the time being” in his comments on the cash rate.
“It is our experience that the use of [these terms] both indicate that the bank remains quite open to further easing policy.
Evans expects one further rate cut in the current easing cycle to take the cash rate to 2.75%.
ANZ’s head of Australian economics and property research, Ivan Colhoun, says the risks section of the report “details concerns the bank has about each of residential construction, mining investment, non-mining investment and public spending.
“These risks and the forecast for growth at or below trend over the next two years with low inflation suggests a strong bias to ease (as does the use of the term policy remained appropriate for the time being)”.
But, Colhoun says the RBA is still “clearly in assessment phase and will watch incoming data to decide whether the economy needs more stimulus.
“The continuing slow growth of employment and forecast rise in unemployment suggests clearly to us that the economy could afford to grow more quickly than at the present time and further gradual easing should be expected over 2013,” he says.
ANZ has moderated its forecast of a cash rate of 2% by year-end, but says there could be up to two rate cuts.
CommSec senior economist Savanth Sebastian says the RBA is "clearly in wait and see mode" after providing the domestic economy with 1.25 percentage point worth of rate cuts in a nine month period. “Overall, the average interest rate on outstanding housing loans is now about 25 basis points above its 2009 low” … “The cumulative reduction in interest rates is affecting interest-sensitive parts of the economy, though the full effects will, of course, take more time to become apparent”.
Responding to the monetary policy statement, Sebastian says that while the Reserve Bank may have downgraded growth forecasts over the next year, “the accompanying commentary certainly suggests that board members are more comfortable than even just three months ago”.
“The risks to the ‘global economy appear to be more balanced’ while domestically the ‘significant monetary stimulus already in place, and signs of lower interest rates are having some of the expected effects’.
“In addition the Reserve Bank was at pains to point out that the average interest rate on outstanding housing loans is only ‘25 basis points above its 2009 low’,” he says.
CommSec expects the RBA to leave the cash rate on hold over the next couple of months though it “remains watchful”.
“There are few signs that the RBA is preparing to cut rates again in the short term, but arguably there are more events likely to result in lower rates than higher rates in the period ahead,” says Sebastian.
Commonwealth Bank economist John Peters says the monetary policy statement confirms the RBA’s “clear easing bias”.
“The financial markets have another two rate cuts priced in over the next few quarters, with the first next month.
“The capex data later this month is likely to confirm the RBA’s view that mining investment looks set to peak late this year.
“It may be sufficient to convince them, along with a benign fourth quarter (of 2012) wages report, that more insurance, via another rate cut, is required,” he says
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Gloomy former RBA board member Bob Gregory predicts cash rate to fall to 1.5% but other bank economists more circumspect

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ANZ has announced that variable interest rates for Australian retail mortgages will remain unchanged after its February interest rate review.
ANZ’s standard variable mortgage rate remains at 6.40% per annum (6.50% p.a. comparison rate).
Variable interest rates for small business lending also remain unchanged.
ANZ conducts its own review of interest rate setting on the second Friday of every month.
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ANZ leaves variable mortgage rates unchanged at independent review

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After the January labour force data was released by the ABS, at close of trade on Thursday February 7 the <a target="_blank" href="https://www.sfe.com.au/content/prices/rtp15SFIB">ASX 30-Day Interbank Cash Rate Futures</a> March 2013 contract was trading at 97.105.
As is immediately evident from this settlement figure, given that the Reserve Bank does not next meet until March 5, this places the likelihood of the cash rate in March falling from 3% to 2.75% at somewhere close to a coin flip.
In fact, the ASX target rate tracker suggests exactly that, indicating a 50% chance of a cut in March.
While duly noting that the yield curve is an implication rather than a prediction, the implied yield curve of the aforementioned cash rate futures appears thus:
<img alt="wargentfeb8" height="287" width="470" src="/images/stories/2013/02/wargentfeb8.jpg">
Source: <a target="_blank" href="https://www.asx.com.au">asx.com.au</a>
The implied curve remains demonstrably inverted and strongly suggests that the cash rate is likely to be cut again this year to a new low of just 2.75%, perhaps as soon as April (Point A).
Further, the implied nadir of just 2.51% in October 2013 (Point B) indicates that two further interest rate cuts remain eminently possible in this cycle.
Conflicting viewpoints
We’re hearing conflicting viewpoints at the moment.
Some prominent commentators have called an end to the easing cycle due to resurgent iron ore prices (the iron ore spot sitting remarkably close to testing new recent highs at above $155/tonne), promising if not compelling dwelling price data over recent months, a gradually easing Australian dollar and the All Ordinaries Index threatening 5,000 and levels not seen since the middle of 2008.
Others highlight with some justification that, as can be seen in the ABS graph below, we have an economy that comprises a thriving mining sector and little else to write home about. Weak retail figures for December have added further urgency to the clamour for another rate cut.
Others still change their mind on a near-daily basis as if playing a peculiar, myopic game of monetary policy ping-pong.
The global outlook and sentiment will naturally continue to play its own role.
<img alt="wargentfeb8" height="227" width="397" src="/images/stories/2013/02/wargentfeb8.gif">
The blunt tool and the great transition
Being a Reserve Bank governor is a fairly thankless task, but monetary policy in recent times has largely been transparently applied, and in a consistent manner.
One of the great quandaries for a central bank is how to most effectively use its blunt interest rate tool to manage a range of conflicting challenges and sectors of the economy (be thankful we’re not living in the eurozone). Thus expect plenty of gainful employment of the Reserve Bank jawbone over the testing period ahead.
Australia imminently faces an awkward transition from the summit of the mining capital investment boom to the subsequent production phase. It is precisely whether this “great rebalancing” can be successfully managed that divides the optimists from the pessimists (who would doubtless prefer the moniker of ‘realists’).
What for property investors?
The January labour force data revealed some interesting trends with the two-speed economy still very much in evidence.
The headline rate of unemployment remaining flat at just 5.4% was somewhat unexpected and potentially represents an unemployment rate, which could yet peak at a surprisingly low figure in this cycle.
What the headline unemployment rate masks is an increase in the number of those employed part time, a lower participation rate and a declining total number of hours worked. For this, and a number of other reasons, it can be reasonably argued that unemployment will over time move higher than the figures currently reported.
Through drilling into the state-by-state figures we can see that particularly Queensland and perhaps more surprisingly New South Wales have shown strong jobs growth over the past year. And, as we might expect, unemployment is very low in resources-rich Western Australia at just 4.0%.
The outlook is not so strong in Victoria, where the unemployment rate has been trending up for a prolonged period of time, in South Australia with a headline unemployment rate now above 6%, and in Tasmania where the rate increased to 7.8%.
These figures support a prevailing notion that the property market outlook in Sydney and Perth is stronger than in other capital cities, and may also imply that brighter times lie ahead in Brisbane and in certain other Queensland markets.
The interest rate outlook
It’s too early to make an informed call on the March 5 monetary policy decision, but relatively benign CPI prints – a headline inflation of just 2.2% and core inflation only a notch higher - have certainly left ‘room’ for another interest rate cut as and when it is required.
On balance, therefore, it is reasonable to suggest that we may see a new low cash rate of just 2.75% at some point in the coming months.
Pete Wargent holds a range of finance and property qualifications and is the author of <a target="_blank" href="https://petewargent.blogspot.com.au/">Get a Financial Grip – a simple plan for financial fr</a><a target="_blank" href="https://petewargent.blogspot.com.au/">eedom.</a> 
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March RBA cash rate cut is a coin flip: Pete Wargent

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Mortgage insurer Genworth has reported both a drop in the number of lenders mortgage insurance (LMI) claims paid out and the average size of claims in its latest quarterly update.
Genworth paid 878 claims over the December 2012 quarter, compared with 963 in the September quarter – a decline of 9.6%.
The average value of claims declined from $84,000 to $81,000.
Across Australia, the overall delinquency rate on LMI mortgages improved by 6 basis points to 0.41% quarter-on-quarter.
Lenders Mortgage Insurance (LMI) is generally required for borrowers that don’t have a 20% deposit and insures the lender against any shortfall if the borrower defaults on their home loan and the lender is required to sell the property as mortgagee in possession.
<img alt="genworthfeb11" height="598" width="470" src="/images/stories/2013/02/genworthfeb11.gif">
The highest number of claims by region were for loans over properties in the tourism-dependent and struggling Coastal Queensland market, with 112 claims paid, but this was down from 113 and 128 in the two previous quarters.
Claims for loans to small businesses and self-employed borrowers declined from 116 to 103 over the quarter.
Globally, Genworth reported a strong rise in net income from US$34 million to US$166 million with earnings per share of 34 cents..
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Size and number of mortgage insurance claims fall in December quarter: Genworth

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Self-funded retirees who invested their savings in failed debenture issuer and mortgage lender Wickham securities should expect to be reimbursed at best around a quarter of their capital.
Investors in Wickham Securities $1 notes are owed around $30 million.
Based on the information currently available, Grant Sparks, joint liquidator from PPB Advisory, says a return of between six cents and 22 cents for every dollar owed should be expected.
Creditors voted this week to place <a target="_blank" href="https://www.propertyobserver.com.au/industry-news/administrators-find-%24108-million-black-hole-in-wickham-securities/2013013059033">Queensland-based Wickham Securities</a> in liquidation.
“We will continue our investigations and seek to realise the loan book,” Sparks tells Property Observer.
Wickham Securities provided 21 loans totalling $28 million at high interest rates to borrowers to fund or refinance commercial property developments.
Of this amount, $5 million was lent to borrowers who are now in liquidation while a further $9.5 million was lent to borrowers where receivers or administrators have been appointed.
PPB Advisory will also examine third party security to see if that can be recovered to pay back investors.
PPB Advisory were also appointed administrators of seven companies related to Wickham, including Sherwin Financial Planners, a business run by Wickham chairman Bradley Sherwin, whose clients included self-funded retirees and some high-net worth individuals advised to invest in the mortgage lender's fund programs.
“We will also continue to provide reports to ASIC,” says Sparks.
Investigations by PPB Advisory found what appears to be a<a target="_blank" href="https://www.propertyobserver.com.au/industry-news/administrators-find-%24108-million-black-hole-in-wickham-securities/2013013059033"> $10.8 million hole in Wickham’s cash flow position</a>.
Sparks says he should next be able to provide a meaningful update to creditors in around eight weeks’ time.
No date has yet been set for an update.
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Wickham Securities creditors to get between 6 and 22 cents back for every dollar: liquidator

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The tax industry has welcomed a clarification from the federal government it won't begin taxing super holders aged over 60, but says it needs more clarification over what exactly Labor has planned in order to scrape more savings for the May budget.
Prime Minister Julia Gillard <a target="_blank" href="https://www.propertyobserver.com.au/news/tax-free-superannuation-payments-for-the-over-60s-to-remain-julia-gillard/2013020759211?utm_source=po&amp;utm_medium=aida&amp;utm_campaign=news">confirmed with Parliament yesterday</a> the government "will never remove tax-free superannuation payments for the over-60s", including super lump sums and pensions.
The statement was a rare clarification of what Gillard actually plans to do as part of a campaign to rein in tax concessions. Having thrown away its promise of a surplus, Labor is attempting to shrink the deficit as much as possible.
CPA Australia policy head Paul Drum told SmartCompany this morning while the clarification is welcome, more information is needed about the government's plans – early reports suggest it will focus on curbing tax concessions for the wealthy.
"We actually need some clarity here," he says. "We need bipartisan support on having a review of the retirement savings system, and what should be done there."
"CPA's view is that we want both major parties to come clean and clarify what their views are in respect of having a grand vision for retirement savings policy in Australia."
Reports in both the <a target="_blank" href="https://www.theaustralian.com.au/national-affairs/treasury/wealthy-in-wayne-swans-sights-on-superannuation/story-fn59nsif-1226572182403" rel="nofollow">The Australian</a> and <a target="_blank" href="https://www.theage.com.au/opinion/political-news/labor-mulls-rise-in-superannuation-tax-for-rich-20130206-2dyw5" rel="nofollow">Fairfax</a> suggest the government is considering increasing the tax rate on superannuation for the wealthy. One plan under consideration could see the wealthiest 1% charged a higher rate when super is being accumulated, instead of a tax on withdrawing funds. The change would affect as many as 100,000 people, the report claims.
The consideration comes despite a number of changes to the super system over the past few years, including lifting tax on contributions for those earning over $300,000.
Superannuation is usually taxed through contributions, money earned through the fund itself, and withdrawals during retirement. If the government is ruling out tax withdrawals, it means it will focus on money earned in the fund or contributions.
But Drum says the notion of clawing out savings from the superannuation system is faulty and isn't sustainable in the long run.
"One the one hand, you have a system that is meandering along and is not delivering on its promise, nor is it reducing the future burden on the public purse."
"We're opposed to governments coming in to home in on the super honey pot, as it were, and treating it as just another source of revenue. But notwithstanding that, it does need an overhaul."
Drum says CPA Australia wants the government to announce a full Productivity Commission review of the super system and then work from there.
"This would consider whether big changes are needed, such as whether we should have progressive rates on contributions."
"Australian confidence in superannuation is at an all-time low, and it's partly because the rules keep changing."
The super system has been in the public eye over the past few years due to both the changing laws and also a greater public awareness of massive tax bills which can occur if something goes wrong. Superannuation Minister Bill Shorten was even caught out by the rules and was stung with a tax bill for contributing too much money in the one financial year.
Drum urged the government to clarify its plans.
"But we would discourage making any announcements about the super system without having a review."
This article first appeared on<a href="https://www.smartcompany.com.au/index.php" target="_blank"> Smart Company</a>.
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Tax industry welcomes over 60s superannuation clarification 

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Fears the federal government would impose greater taxes on superannuants over 60 have been allayed.
Prime Minister Julia Gillard said the government had no plans to introduce taxes <a target="_blank" href="https://www.propertyobserver.com.au/news/tax-industry-welcomes-over-60s-superanuation-clarfication/2013020759212">on superannuation payments for over 60s.</a>
“The government reaffirms that it will never remove tax-free superannuation payments for the over 60s,” she told Parliament.
The prosect was raised earlier this year given the government needs to seeks new ways to pay for spending promises.
It was suggested the $1.5 trillion Australian industry could have been on top of the list to fund the promises.
It has been estimated $32 billion worth of tax concessions are derived annually by superannuants.
Last May the government lifted the tax on superannuation contributions for Australians earning more than $300,000.
The government currently has a 15% tax rate on super contributions and earnings.
 
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Tax-free superannuation payments for the over 60s to remain: Julia Gillard

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St George has cut its fixed home loan rates by between 10 and 15 basis points.
For those who take out an advantage package loan, the bank cut its one-year fixed rate to 5.15% per annum, its three-year fixed-rate to 5.29%, four-year fixed rate to 5.64% and five-year fixed rate to 5.69%.
The new rates are available for a limited time for new and existing customers.
Customers with fixed rate applications underway that have not yet settled, are also eligible for these new lower interest rates.

It has also cut its fixed rates for non-package customers with a one-year fixed rate to 5.30% pa, its three-year fixed-rate to 5.44%, four-year fixed rate to 5.79% and five-year fixed rate to 5.84%.
“Fixed loans are a popular option, as they provide customers with the security of having a set loan repayment each month. This is a good way for customers to manage their household finances more effectively and St George’s current fixed rate offer for 1, 3, 4 and 5 years puts us in a leading position against the four major banks,” says Andy Fell, general manager at St George Retail Banking.

In addition, anyone who applies for a St George home loan receives a free Australian Property Monitors (APM) property profile report for the property they are interested in buying and its location.  St George also offers conditional loan pre-approval that is valid for six months, as well as a 5% deposit requirement.
Also announcing a cut today was <a target="_blank" href="https://www.propertyobserver.com.au/news/westpac-lead-the-big-banks-below-5-on-nfixed-home-loans/2013020659208?utm_source=po&amp;utm_medium=aida&amp;utm_campaign=news">Westpac, with its packaged two-year fixed-rate mortgage now at 4.99%.</a> Since the RBA left the cash rate steady on Tuesday several lenders, including most of the major banks, have trimmed up to 40 basis points off certain fixed rate products, says leading mortgage broker Loan Market.
Loan Market corporate spokesperson Paul Smith says the latest shift in fixed interest rates indicates lenders are all anticipating further rate cuts this year.
“We haven’t seen fixed rate this low in several years and the spread between them and variable remains in the unique position where variable are nearly a full per cent higher,” Smith says.

Smith says that although the RBA cash rate is at 3% the chances of it falling more than a full percentage point in the year next were slim, considering the RBA’s conservative response to the soft areas of the economy over the past year.
“Fixed-rate products are currently priced at a level that variable rates may not reach for several months; even with the help of RBA rate cuts."
Smith says all borrowers had varying considerations and that one’s personal circumstances, aversion for risk and financial goals were the key fundamental to bear in mind when looking at fixed interest rates.

“Fixed-rate borrowers should have the mindset to accept that variable rates could fall to a place lower than their fixed rates.”
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St George cuts fixed rates, with three-year fixed at 5.29% 

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The Gold Coast has replaced the outer south-west Sydney regions of Fairfield and Liverpool as having the highest proportion of home owners more than a month behind on their mortgage repayments.
The Gold Coast east market (including <a href="/news">Surfers Paradise</a> and <a href="/news">Broadbeach</a>) ranks as the worst-performing region, with a delinquency rate of 2.44%. The Gold Coast west (suburbs including <a href="/news">Nerang </a>and <a href="/news">Carrara</a>) ranked second, with a delinquency rate of 2.08%, according to the latest Fitch Ratings Australian Mortgage Delinquency report for the six months to September 2012.
The two markets ranked fifth and sixth in the March 2012 Fitch report have improved in line with the national trend, but not at the same pace as other regions.
At its current delinquency rate, the Gold Coast east region would have ranked as the eighth worst performing region in Australia six months ago (March 2012 report).
But demonstrating that tourism-dependent regions have not benefited to the same degree as other parts of the country from interest rate reductions and improved affordability, the Sunshine Coast ranked fourth most delinquent region with a 30 days-plus arrears rate of 1.89%. The NSW central coast market ranked sixth, with a delinquency rate of 1.81%.
All are well above the national delinquency rate, which improved from 1.6% at the end of March 2012 to 1.4% at the end of September, to be currently significantly below the five-year average of 1.56%.
“Tourist areas are less affected by monetary policy and more by the high Australian dollar, housing prices, occupancy rates and rental yields,” says Fitch.
“This is evident in popular tourist destinations being among the worst-performing postcodes. “
On a postcode basis, the well-known tourist destination of <a href="/news">Nelson Bay</a> in the NSW Hunter region remains the worst-performing postcode by value of mortgages in arrears, with a 30+ day delinquency rate of 6.6%.
Click to enlarge
<a href="/images/stories/2013/02/fitchfeb6.gif" rel="shadowbox" title="Click to enlarge"><img src="/images/stories/2013/02/fitchfeb6thumb.gif"></a>
In the previous March survey, Fairfield and Liverpool ranked as the worst-performing region in Australia, but in line with an improving outlook for the western Sydney market and parts of it being considered investment hotspots –<a target="_blank" href="https://www.propertyobserver.com.au/landlords/investors-returning-in-droves-to-outer-western-sydney-with-granny-flat-appeal-htw/2012121158164"> granny flat conversions are growing increasingly prevalent </a>– its delinquency rate improved from 2.82% to 1.82% and its ranking has fallen from first to fifth most delinquent market.
Similarly, the delinquency rate improved noticeably in the outer south-west Sydney region from 2.78% to 1.99% between March and September.
Another region on the western outskirts of Sydney, <a target="_blank" href="/news">Blacktown</a>, which was among the 10 worst-performing regions by value until September 2011, “continues to perform remarkably”, says Fitch, with a delinquency rate of 1.55% at the end of September 2012.
Fitch notes that most of the 10 worst-performing regions were in Queensland, not NSW, as was the case in March 2012.
“House price stagnation in Queensland particularly affected Gold Coast east ? which has been among the worst performing regions since September 2008 ? and the Sunshine Coast. Other regions in Queensland, which have been historically characterised by serviceability constraints, remained among the worst performing regions despite their remarkable improvement following cash-rate cuts.
“For example, delinquencies in Ipswich and Logan City, which started to increase at the beginning of 2011, have improved significantly (100bp and 91bp, respectively) in the six months end-September 2012,” says Fitch.
 
<hr class="system-pagebreak">
 
Melbourne dominates the best-performing regions, with five of the top six locations led by northern middle Melbourne (suburbs like <a target="_blank" href="/news">North Melbourne</a>, <a target="_blank" href="/news">Kensington</a>, <a target="_blank" href="/news">Ascot Vale</a>) with an arrears rate of just 0.55% compared with a rate of 0.7% six months ago.
The affluent lower northern Sydney market (including million dollar suburbs like <a target="_blank" href="/news">Cremorne</a>, <a target="_blank" href="/news">Kirribilli </a>and <a target="_blank" href="/news">Neutral Bay</a>) ranks second with a 30 days plus arrears rate of 0.56%, up from 0.63%. 
Click to enlarge
<a href="/images/stories/2013/02/fitchfeb61.gif" rel="shadowbox" title="Click to enlarge"><img src="/images/stories/2013/02/fitchfeb61thumb.gif"></a>
 
Commenting on the national improvement in the delinquency rate, Nomura banking analyst Victor German says the sharp but consistent improvements seen in delinquency rates coincide with the 50-basis-point and 25-basis-point interest rate cuts announced by the RBA in May and June 2012, respectively.
“With further 25-basis-point interest rate cuts put through in Oct and Dec 2012, we will be looking for signs of further improvement in delinquency rates during the upcoming reporting season,” German says.
On a state-by-state basis, Queensland has the highest arrears rate (1.41%), followed by NSW (1.25%), WA and Tasmania (1.2%) and South Australia (1.19%). The remaining states are all below 1%.
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Gold Coast replaces Sydney south-west fringe as most mortgage delinquent region in Australia: Fitch Ratings

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Borrowers risk a headache and frustration if they expect consensus from the major banks about the direction of interest rates in 2013.
Westpac chief economist Bill Evans is tipping one more rate cut in March; ANZ says possibly two rate cuts but maybe not in March; while the Commonwealth Bank’s Michael Blythe says there could be no more rate cuts in 2013.
NAB has yet to update its position, having forecast three more rate cuts last week when surveyed by Bloomberg.
The key issue appears to be how the non-mining sections of the economy will fare over the year and whether they will pick up the slack from the resources sector.
Inflation is expected to remain low throughout the year, providing scope for further rate cuts if they are needed.
In a note following yesterday’s decision, Bill Evans says there is “considerable encouragement in the [monetary policy] statement for our near term view that they will decide to cut rates by 25 basis points at the next meeting on March 5”.
Evans says the most important justification for this expectation is around the sentence in the final paragraph of the statement:
"The inflation outlook as assessed at present would afford scope to ease policy further should that be necessary to support demand."
“Our experience is that use of that word ‘scope’ in a forward sense indicates a decent chance that the bank will move at the next meeting,” says Evans.
He also points out that not much has changed in the domestic economy since the RBA last met in December, with “two extra months of low rates have not provided the board with much encouragement that things are turning”.
Evans notes the RBA’s “modest uplift in the assessment of the housing sector” but also fresh concerns around the outlook for employment growth and weak credit growth in both households and firms.
ANZ has moderated its expectations about further rate cuts.
Having previously forecast the cash rate to fall to 2% by year-end, ANZ says it is now “a little less confident about this call”, though the bank says its “expectations for employment growth and unemployment still suggest significant risk of at least two further rate cuts, even though the global picture appears to be improving”.
“Just as the mining boom kept Australia outperforming during recent years of global weakness, this effect will be a drag for Australia in coming years.
As for a March rate cut, ANZ appears to be hedging its bets at present and waiting for further data.
The bank says the RBA is “comfortably in assessment mode, waiting to see whether its policy easing to date is going to be sufficient to ensure enough of a pick-up in the non-mining sectors of the economy to offset the expected moderation in mining investment”.
“While the chances of a rate cut in March appear to have fallen somewhat, key to the near term path for the cash rate will be incoming labour market data and the outlook for non-mining investment,” says ANZ.
According to ANZ, the capex survey released on February 28 now takes on significant importance “given that it will include firms’ initial estimate of investment intentions for fiscal year 2013-14”.
The Commonwealth Bank’s Michael Blythe expects the cash rate to remain unchanged at 3% during 2013.
“Many of the forces that drove rates lower in 2012 have abated and the transition to non?mining led growth is underway,” says Blythe.
However, he tempers this by saying that an easing bias “persists” and would be triggered by any stumble in the non?mining economy.
“The RBA game plan during 2012 moved along the lines of providing some defence against global risks, moderating some of the pain imposed by a strong currency and fiscal consolidation, and getting the transition towards non mining led growth underway.  It may not be quite 'mission accomplished' but a lot of progress has been made,” says Blythe.
“The RBA notes that downside risks to global growth have ‘abated’, even if it is ‘for the moment at least’.
“Most importantly, growth in China has stabilized at ‘a fairly robust pace’ and commodity prices have ‘firmed’.
“Public spending is expected to be ‘constrained’ but the RBA has no doubt taken some comfort from the government’s decision to abandon the hard edged budget surplus commitment,” Blythe says.
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