<a href="https://www.apartments.com.au/developers/sunland-group">Sunland Group</a> has officially lodged plans for its first Gold Coast apartment project since the departure of the Abedian family from the company three years ago, unveiling a new high-rise proposal for a prominent Broadbeach corner site on Old Burleigh Road.

The application was submitted by an entity directed by Tom Jamieson, stepson of longtime Sunland leader Soheil Abedian, and Riaz Rezvanipour, brother-in-law of Sahba Abedian, Soheil’s son.

Sunland acquired the 1,283 sqm site on the corner of Old Burleigh Road and Armrick Avenue for $9.5 million late last year and is now seeking approval for a <a href="https://www.apartments.com.au/new-apartments/99-101-old-burleigh-road-broadbeach-qld-4218">42-storey tower with 81 apartments</a>.

<img alt="First look: Sunland Group returns to Broadbeach with new Old Burleigh Road tower plans" data-entity-type="file" data-entity-uuid="fea2946d-90ee-4cfc-babe-2a8ad5db2cb6" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/pers.png?VersionId=BV0fihJw31nDIQ8ozY_h3GbS8mxDyhnm" />

Designed by <a href="https://www.apartments.com.au/architects/contreras-earl-architecture">Contreras Earl Architecture</a>, the proposed tower at 99-101 Old Burleigh Road would deliver a predominantly larger-format apartment mix aimed at the owner-occupier market. Plans include 17 two-bedroom apartments, 55 three-bedroom apartments, and nine four-bedroom residences across 35 residential levels.

The development also incorporates three basement levels, four podium parking levels, two levels of communal recreation facilities, and rooftop plant and equipment. A total of 189 car spaces are proposed, significantly exceeding the 90 spaces required under the planning scheme.

The architecture adopts a sculpted, curvilinear form, with deep wraparound balconies and integrated landscaping intended to soften the tower’s vertical expression. The planning report states the building’s “slender footprint/form provides a complimentary yet varied built form within the local streetscape” and contributes to “a varied, yet ordered skyline.”

Contreras Earl noted in its Architectural Statement that from the early stages, the project addressed a fundamental challenge: how to accommodate the required residential yield while avoiding the conventional model of a tower sitting on a rigid, fully resolved parking podium.

“The most direct response would have been to consolidate parking into a singular, flat podium and extrude a repetitive tower above,” the statement said. “While efficient, this approach would result in a consolidated built form with limited engagement with the surrounding landscape and public realm.”

Instead, the conventional podium model was “deliberately rejected”. The architects described the base of the building as “a landscaped architectural condition where structure, planting and circulation are integrated”.

“Rather than presenting a continuous built mass, the base of the building is articulated through a series of concrete planter elements that organise the podium into a fragmented system,” the statement said. “This approach reduces the perceived bulk of the lower levels while establishing a more permeable interface with the streetscape and adjacent open space.”

<img alt="Sunland" data-entity-type="file" data-entity-uuid="923fad8d-c960-4527-8fbe-975cf1ddf88d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-25%20at%2010.32.03%E2%80%AFAM.png?VersionId=pngwb0hYOIUpq9vDw6F2EsOiVuHF3DiX" />

&nbsp;

The site sits within the High Density Residential Zone and inside the City of Gold Coast’s unrestricted “HX” building height area, where the planning framework anticipates intensified residential development tied to the expanding light rail corridor. The planning report notes the area is undergoing “transition toward more intense development forms” given its proximity to Broadbeach, Surfers Paradise, and high-frequency public transport infrastructure.

Positioned directly opposite Broadbeach Park and within walking distance of Florida Gardens light rail station, the development would sit among a rapidly evolving stretch of Old Burleigh Road that has become one of the Gold Coast’s most active apartment development corridors.

The application joins a growing pipeline of luxury residential projects reshaping Broadbeach, including nearby developments by 5Point Projects, Polycell, and Graya.

The planning report argues the project contributes toward the Gold Coast’s long-term housing targets under the South East Queensland Regional Plan, which forecasts the need for more than 100,000 additional high-rise dwellings across the city by 2046.

<section data-scroll-anchor="false" data-testid="conversation-turn-4" data-turn="assistant" data-turn-id="request-WEB:84a2af5e-d7cf-4ddf-922a-f4d44d6c6caa-1" data-turn-id-container="request-WEB:84a2af5e-d7cf-4ddf-922a-f4d44d6c6caa-1" dir="auto">
The Abedian family departed Sunland Group in late 2023, ending a four-decade association with the company, and subsequently established the private development firm Abedian &amp; Co. The group is currently delivering <a href="https://www.apartments.com.au/new-apartments/greenmount-residences-cnr-hill-street-and-marine-parade-coolangatta-qld-4225">Greenmount Residences</a> at Rainbow Bay and recently launched <a href="https://www.apartments.com.au/new-apartments/18-mary-avenue-14-18-mary-avenue-broadbeach-qld-4218">18 Mary Avenue</a> in Broadbeach.
</section>

Joel Robinson

First look: Sunland Group returns to Broadbeach new apartment market with new Old Burleigh Road tower plans

The Minns Labor Government has established the new Bays West Delivery Authority to lead the development&nbsp;of the Bays West Precinct and Blackwattle Bay Precinct.&nbsp;

The Authority is charged with creating Sydney’s newest precinct, a thriving, connected, sustainable hub with White Bay Power Station as its cultural heart. Its vision is to build on the area’s natural, cultural and industrial history to shape a vibrant new neighbourhood.

The precinct will deliver up to 8,500 well-located homes, including a minimum of 10 per cent affordable and essential worker homes. Combine new housing with public open space, opening public access to the waterfront for the first time in more than 100 years, while retaining important deep-water facilities to support Sydney’s working harbour.

Located just minutes from the Sydney CBD and connected to a world-class metro, ferry, walking and cycling links, the Bays West precinct will rebalance housing growth towards well-serviced inner-city locations and help tackle the state’s housing crisis.

The Bays West Delivery Authority,&nbsp;an agency of the Department of Planning, Housing and Infrastructure, will report to the NSW Minister for Lands and Property who already has oversight of major precinct renewal projects including at Blackwattle Bay and Barangaroo.

As part of the broader Bays West transformation, the Minns Government recently announced that a proposal from Lendlease to redevelop part of the Bays West Precinct has progressed to Stage 2 of the NSW Government’s unsolicited proposals process.

<img alt="Sydney" data-entity-type="file" data-entity-uuid="2ed71eb9-d8e8-4fa7-b9d1-de4531dcf2f3" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-25%20at%209.42.31%E2%80%AFAM.png?VersionId=IDryFIbped9SNDg72LEN_EecvhUsOPvp" />

The Minns Labor Government has also confirmed the Bays West precinct will have a new suburb name. This will be the first major suburb built in close proximity to Sydney’s CBD in decades and will encompass the area currently being referred to as Bays West, including Glebe Island and the White Bay Power Station. Served by a new Metro station just five minutes from the CBD, it will become one of the most populous suburbs in the Inner West and one of Sydney’s premier cultural destinations.

An early works program is taking shape, which&nbsp;includes the first stages of an international design competition.&nbsp;

The aim of the Bays West&nbsp;International&nbsp;Design Competition is to&nbsp;ensure design excellence is embedded in the project from the start. The competition will deliver an&nbsp;urban framework that defines the character, ambition and long-term identity of&nbsp;this&nbsp;former industrial precinct as it transitions to a vibrant, inclusive and sustainable residential&nbsp;neighbourhood.

The competition will be led by the Bays West Delivery Authority in partnership with Government Architect NSW.&nbsp;

It will launch with an invitation for a global Expressions of Interest, before moving to an invitation-only stage that will be assessed by a panel that&nbsp;will provide advice to Cabinet who will select a winner.

Premier of NSW, Chris Minns said the establishment of the new Authority is the first step in transforming the Bays West precinct into a vibrant, livable suburb minutes from the Sydney CBD and two stops from Hunter St Station on the Metro West line.

“The Authority will deliver well-located homes close to the heart of the city and integrate the new precinct with Blackwattle Bay and the new Sydney Fish Market.

“This is a generational opportunity to build a new suburb on the city’s edge and open the harbour foreshore to the public for the first time in a century.”&nbsp;

Minister for Lands and Property Steve Kamper said the new Bays West Delivery Authority established by the Minns Government will turbocharge the development of Sydney’s newest suburb.

“The Authority is working at a record pace to deliver an international design competition, planning pathways and a financial model so that this development benefits Sydney with well-designed homes in a central location, close to public transport, jobs, entertainment and essential services.

“If we want Sydney to stay liveable and affordable, we need to be bold about using underutilised government-owned land to deliver homes for the future while making sure essential working harbour functions can be accommodated.”

Bays West Delivery Authority established to "turbocharge" Sydney’s newest suburb

Around 400 additional homes could be built at Southwark Grounds on Port Road, lifting total site capacity from 1300 to around 1700 dwellings.

A recently approved code amendment would allow apartment towers of up to 14 storeys in some areas of Renewal SA’s redevelopment of the former West End Brewery.

Renewal SA Acting Chief Executive Shane Wingard said he welcomed the code amendment, with the increase in heights and homes making a positive impact on the supply of high-quality, well-connected housing close to the city.

“By going higher across some parts of Southwark Grounds, we are adding a substantial number of very well-located homes with little impact on project delivery time or planned open space,” Mr Wingard said.

Since the project officially launched in 2025, Mr Wingard said more than 12,000 enquiries had been received about living at Southwark Grounds.

“The very strong early interest we’ve seen since homes were first released in the precinct reinforces our plans to create more housing opportunities,” he said.

The Southwark Grounds code amendment was launched in December last year, with community engagement undertaken over five weeks from January.

It proposed increasing maximum building heights from eight to 14 storeys on the eastern section of Southwark Grounds, and to 12 storeys across the remainder of the site, with minimum building heights ranging from two to four storeys.

The code amendment was implemented through an Early Commencement policy in late January, allowing developers to quickly explore the viability of increased height and housing yield while other planning processes continue.

One of the first developers delivering apartment sites have already finalised redesigns to increase the number of apartments following the code amendment.

Samaras’ development adjacent to the future Colonel Light Park is now planning to deliver 125 apartments across 11 storeys, significantly greater than original plans of around 50 apartments across four storeys.

The developer is also exploring the potential for additional affordable housing outcomes.

Most of the apartments at Southwark Grounds will be delivered within a master-planned precinct on a large parcel of land on the eastern portion of the site, covering around two-thirds of its 8.4 hectares.

Wingard said detailed precinct planning over the coming months may identify further opportunities to increase yield further that could see total apartment numbers at Southwark Grounds, exceed this number.

Affordable homes at Southwark Grounds will also see a net increase, with Renewal SA maintaining its commitment to a minimum of 20 per cent affordable housing across the development.

&nbsp;

&nbsp;

Civil works have begun across the site, with construction under way on the first new roads surrounding a townhouse precinct in the south‑west corner of Southwark Grounds. This includes Renewal SA’s 17 Founder’s Row homes, which are on track for completion by Christmas.

“We expect to have people living at Southwark Grounds by the end of the year, so delivering roads and public spaces for those residents is among our highest priorities.”

Construction of 40 townhouses off Anderson Street, known as West Village and being delivered by Contour, is forecast to begin in mid‑2026. Kolabb’s Anderson Lane development will follow shortly after, delivering a further 26 townhouses.

Southwark Grounds is a state government‑led urban renewal project now set to deliver around 1,700 homes over the next decade.

Homes will be supported by a supermarket, a range of retail and hospitality offerings anchored by a revitalised Walkerville Brew Tower, a childcare centre, car parking and well‑connected public spaces.

400 new homes planned for Adelaide's former West End Brewery site

Brisbane developer&nbsp;<a href="https://www.apartments.com.au/developers/cavcorp">Cavcorp</a> has lodged plans for a new mixed-use residential development at <a href="https://www.apartments.com.au/new-apartments/55-wyandra-street-teneriffe-qld-4005">55 Wyandra Street</a>, Teneriffe, anchored by an 85-metre public laneway designed to reconnect the suburb’s riverfront with the Gasworks precinct.

The buildings, known as Teneriffe House and Teneriffe Lane, would replace the existing Queensland Cotton head office site with a 15-storey residential tower transitioning to eight storeys toward Helen Street. The project has been designed by Plazibat Architects and lodged as a code assessable development application for 93 apartments across a 3,401 sqm mixed-use site within the Newstead and Teneriffe Waterfront neighbourhood plan.

Central to the scheme is the transformation of an existing service easement into a publicly accessible cross-block connection linking Wyandra and Helen Streets. Cavcorp says the new laneway will act as both a pedestrian shortcut and a landscaped civic space between the Teneriffe Riverwalk, ferry terminal, and Gasworks precinct.

<img alt="First Look: Cavcorp unveils Teneriffe House and Teneriffe Lane plans for landmark wellness tower in Teneriffe" data-entity-type="file" data-entity-uuid="26e7f058-b065-4de8-b13d-a2b8cb64dfcc" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/bldg.png?VersionId=sELS0ZKYi361oYipUa1BIKfe_.DLZoFV" />

“The revised proposal delivers a legacy public-realm cross-block link, permanently secured for community use, transforming an existing private easement into a safe, high-quality pedestrian connection between the Teneriffe heritage riverwalk and the Gasworks–Long Island precinct,” the planning report states.

The laneway will sit beneath a large subtropical loggia integrated into the podium levels of the development. The design incorporates deep landscaping, water gardens, lobby spaces, business lounges, and ground-floor apartments to create what Cavcorp describes as a climate-responsive “urban verandah.”

The tower itself has been designed as a slender form with recessed floorplates and curved translucent corners inspired by contemporary Japanese architecture. The building height aligns with the Commercial Road precinct controls, which permit towers up to 15 storeys within proximity to Longland Street.

<img alt="First Look: Cavcorp unveils Teneriffe House and Teneriffe Lane plans for landmark wellness tower in Teneriffe" data-entity-type="file" data-entity-uuid="a8a17d40-43b6-4718-b3fd-67676fcbb485" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/pers%202_1.png?VersionId=i3VwDtp5AmL_8InW7w4qRbDFEpb744Jt" />

The project will comprise a mix of larger-format apartments aimed at owner-occupiers, downsizers, and families. The proposed apartment mix includes 11 loggia apartments across the lower levels, 50 four-bedroom Sky-Terrace apartments from levels three to seven, and 32 Sky-Pool Homes occupying the upper tower levels. The Sky-Pool Homes will feature private thermal plunge pools integrated into oversized balconies.

According to the application, the apartments are intended to reinterpret the scale and character of Teneriffe’s woolstore conversions and Queensland homes within a vertical residential format.

“The sky-pool homes build on Cavcorp’s previous projects and introduce a distinct apartment typology to Teneriffe, informed by both local and international precedent and responding to an identified market demand for enhanced safety, space and amenity,” the planning submission notes.

A major focus of the proposal is its five-level wellness and lifestyle offering, extending from the basement through to the rooftop.

Amenities proposed include a rooftop Swim &amp; Racquet Club with a 25-metre Olympic lap pool and tennis court, coworking spaces and libraries, golf simulators, wine storage, concierge facilities, business lounges, pet wash areas, and rooftop longevity-focused wellness spaces with spas, outdoor fitness zones, and landscaped terraces.

<img alt="First Look: Cavcorp unveils Teneriffe House and Teneriffe Lane plans for landmark wellness tower in Teneriffe" data-entity-type="file" data-entity-uuid="944b352c-49b9-4247-a4c6-5967b4b69fda" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/amenity.png?VersionId=Ed_qKjAtMwFT.5gfl3jiA9QwdWxSMsaX" />

All parking will be concealed within basement levels accessed from Wyandra and Helen Streets. Cavcorp says the deep-basement engineering approach allows the entire ground plane to prioritise landscaping, pedestrian movement, and active frontage rather than vehicle infrastructure.

The development continues Cavcorp’s concentration in Newstead and Teneriffe, where the Brisbane developer has delivered a number of apartment projects including Lucent, Le Bain, and Luminare, as well as the Long Island Wellness Precinct nearby. Several of those projects have received national design and architecture awards, including recognition under Brisbane’s “Buildings that Breathe” program.

Cavcorp unveils wellness-focused Teneriffe House and Teneriffe Lane apartment buildings

Focus Group Investments has lodged plans for a new apartment development at <a href="https://www.apartments.com.au/new-apartments/64-70-hanover-street-fitzroy-vic-3065">64–70 Hanover Street</a> in Fitzroy, seeking to utilise the Victorian Government’s recently introduced Great Design Fast Track pathway to accelerate approvals for the project.

The proposal is among the latest developments to emerge through the state-led initiative, which was established to fast-track well-designed residential projects in activity centres and transport-connected inner-city locations. The pathway allows qualifying developments that meet elevated design and housing benchmarks to bypass traditional council planning timeframes and instead be assessed directly by the Department of Transport and Planning.

Designed by SJB, the development will comprise a mix of apartments above activated lower levels, with a strong focus on architectural articulation, landscaping, and communal amenity. The design response seeks to balance the industrial character of Richmond’s former warehouse precincts with a more contemporary residential form.

<img alt="First look: Focus Group Investments taps Victoria’s Great Design Fast Track for Richmond apartments" data-entity-type="file" data-entity-uuid="abea51cc-d85b-479e-9aef-a589f3b37ca7" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/ground.png?VersionId=e1Kf8EyPWwyiVumtqQ4rM5S4GpOR3CCz" />

Proposed are 63 new dwellings, a wide ranging mix of studio, one-, two-, and three-bedroom apartments, and townhouses and duplexes. They will be spread across a part-three, part-eight storey building.

The Planning and Urban Context Report by Tract says the development is of an "exemplary architectural standard" and has been carefully crafted by SJB Architects.

"Dwellings&nbsp;will benefit from excellent access to natural light, cross-ventilation opportunities and extensive communal space," the report noted.

The architectural material highlights the project’s integration of landscaped elements and communal spaces throughout the building. The proposal also incorporates sustainability initiatives aligned with the Victorian Government’s push for higher-performing apartment developments under the fast-track program.

The Great Design Fast Track was unveiled by the Victorian Government in 2024 as part of a broader housing supply strategy aimed at accelerating the delivery of new homes. Projects assessed through the pathway must demonstrate high-quality architecture, sustainability outcomes, and housing diversity while being located close to public transport and existing infrastructure.

<img alt="First look: Focus Group Investments taps Victoria’s Great Design Fast Track for Richmond apartments" data-entity-type="file" data-entity-uuid="afdbe834-8dc4-4a77-a943-ba07bc927348" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/site_11.png?VersionId=0J657j.TaChAZfp93wqJYBTqSsnREJx2" />

Focus Group, founder and led by Paul De Lutiis, is increasingly active across Melbourne’s inner suburbs, targeting well-connected urban renewal locations suited to medium and higher-density residential development. The Fitzroy proposal continues that strategy, leveraging the area’s strong transport links, established retail amenity, and proximity to the CBD.

Fitzroy has been one of the most popular spots for developers and buyers in recent years. The likes of PACE Development Group, SMA Projects, Crema Group and Chapter Group, currently selling projects in the suburb.

First look: Focus Group Investments taps Victoria’s Great Design Fast Track for Fitzroy 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

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Thankfully Paul Howes, national secretary of the Australian Workers Union, and Garry Weaven, chair of Industry Funds Management, have zero influence on economic policy. Last week, both made some absurd points and claims regarding monetary policy, the inflation target, the Australian dollar and the operations of the RBA. Both Howes and Weaven revealed the shallowness of their experience by showing little or no understanding of the critical importance of the inflation target. It is imperative that the inflation target remains in place because ongoing low inflation is the best thing policy makers can deliver if there is to be a boost to competitiveness, productivity and with those, employment and real wages. There is also zero chance that the RBA charter is going to change, at least under this government, nor will the inflation target change, nor will there be any material changes to how the RBA works. Howes’ and Weaven’s comments deserve criticism, as do others who say and write misguided, factually flawed or faulty economic analysis. The economy is too important for ill-informed commentary and misguided policy prescriptions. Which brings us to the point made by an ignorant and sometimes politically biased few that the RBA now is somehow being politicised, losing its independence or being lent upon by the government. That clearly is a fantasy. If it were true, the only way it would show up would be in the RBA having inappropriate monetary policy settings and not achieving its inflation target. There is no other way to even vaguely support the claim of political interference or undue influence. Is there any other way any such politicisation of the RBA board would show up? Clearly not, and only poor quality, inexperienced and/or biased commentators trying to get some attention would suggest that the RBA is structurally flawed due to any government decision or appointment. Let’s turn this around and look at some facts to see whether there ever has been any political influence on the RBA. Before starting, let’s agree with the unanimous assessment that a series of monetary policy changes starting today will not have a material impact on inflation for a year or two. There is no debate about the long lags between interest rate changes and the impact on the economy. Consider the only bad miss of the RBA in terms of its 2 to 3% target for inflation. That error of the RBA showed up in the period from the end of 2007 to the end of 2009 when the underlying inflation rate averaged a shocking 4.0% having hit a peak of 5.0% in the September quarter of 2008. That monetary policy error had its seeds sown during 2005 and was really compounded during 2006 and early 2007 when policy was too loose for too long. It must have been – there is no other explanation for such a bad miss on inflation. Recall that in 2005, with mortgage rates some 50 basis points lower than where they are today, the RBA delivered just one, piddling 25 basis point rate hike having left interest rates steady at very accommodative settings right through 2004. In 2006, the year started with monetary policy still accommodative and despite the massive upswing in the terms of trade and sharp falls in unemployment, the RBA dragged the chain with just 3 hikes in the year.  Only at the very end of 2006 did the mortgage rate reach neutral; that is, roughly where it is today. Clearly, the RBA delivered easy monetary policy for a very long three year period. It is unlikely that there was any direct political interference on the RBA over that time, but curiously, it was the Liberal Party appointed board of the RBA, including Governor Ian Macfarlane, that so badly blew the inflation target. Monetary policy was kept too easy in the period from 2005 to 2007, curiously when the Liberal Party was in office and when Prime Minister Howard and Treasurer Costello used monetary policy and interest rates in its campaigning and economic rhetoric in a way the current government is still a million miles from approaching. By the end of 2002, every member of the RBA Board with the exception of Frank Lowy, had been a Liberal Party appointment. Mr Lowy’s term ended in December 2005 meaning that during 2006 and up to the election in 2007, every RBA board member was a Liberal Party appointee. It was only when Glenn Stevens became governor, in September 2006, that monetary policy moved towards an appropriately tight setting. While Glenn Stevens was appointed by the Coalition, there were no other contenders for the role when Ian Macfarlane retired. To appoint anyone else would have been truly shocking.
Stevens quite forcefully delivered 5 interest rates hikes in his first 16 RBA board meetings as governor, including two in early 2008 when the financial crisis was rapidly unfolding. Finally, the RBA was acting to reign in inflation with a hugely hawkish approach. And to the credit of Glenn Stevens and the RBA, that policy approach worked with inflation back on target by the middle of 2010. The underlying inflation rate has been 2.75% or less since the middle of 2010 and it will be probably be close to, or at a 12 year low below 2.5%, when the March quarter CPI is released on April 24.  Unemployment has also recently edged up, fiscal policy has been tight, the world economy weak, yet the 'politicised' RBA has rates at the upper end of neutral and shocked the market in the early months of 2012 by not cutting interest rates. This is despite only 3 of the 6 outside board members being appointed by the Labor Party. And just getting back to the key point in this – if the RBA was being politicised, it would show up in monetary policy being too loose for too long and inflation building to a level above the target. The exact opposite is happening right now. In the last 20 years, there has only been one example where monetary policy has been too easy for too long and that was in the period from 2005 to 2007 when every member of the RBA board has been appointed by the incumbent government. Look at these facts and make up your own mind about the issue of politicising the RBA and monetary policy.
 Stephen Koukoulas is managing director of Market Economics and was former economics advisor to Prime Minister Julia Gillard. 
This article originally appeared on Business Spectator and <a href="https://www.marketeconomics.com.au/" target="_blank">Market Economics</a>.
 
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skouk-W92Y2kwjBG

Playing politics with the RBA: Stephen Koukoulas

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They are two of Australia’s biggest, yet less understood, companies: the lenders mortgage loss insurers, or “LMIs”: Genworth and QBE LMI. 
Both have estimated market values well in excess of $1 billion. Collectively they insure half a trillion dollars’ worth of Aussie home loans. And the recently deferred IPO of Genworth has suddenly brought the industry into focus. In particular, correspondents overseas have argued that this could be the “canary in the coal mine” for the Aussie housing market. 
But it is an odd time to be getting negative on this admittedly oblique industry. Australian Property Monitors reports today that Australian house prices rose by 0.9% in the first quarter of 2012 following the RBA’s two rate cuts in November and December. Unemployment is sitting at a historically low 5.2% and shows no signs of rising. And with the RBA all but certain to cut its cash rate by 50 basis points, which should deliver a net reduction in borrowing rates of about 75 basis points since November, conditions in the housing and mortgage markets are likely to improve further. Declining interest rates, low unemployment, and steady house prices are surely sanguine conditions for LMIs. 
Genworth Australia’s parent was planning on selling (only) 40% of the local business via an ASX listing in 2012. It was slated to be one of the biggest IPOs of the year. The explanation of the deferral of the IPO was tied to the expectation that there would be a “modest loss” reported by the Australian business in the first quarter of 2012. 
Yet it is not clear whether this decision was motivated by the modest loss, or just as much by the desire of the ailing US parent company to keep repatriating valuable dividends delivered by its Australian jewel. I’d suggest the latter is a very real possibility. 
In 2011 alone, the Australian business paid the parent $166 million in dividends. Since that time, there has been a material increase in premiums earned from the sale of insurance in Australia. 
The Australian business also has enormous excess capital. Standard &amp; Poor’s assesses that Genworth Australia’s total assessed capital before debt funding and reinsurance contracts, which further mitigate risk, is $3.3 billion. This is impressive because APRA’s minimum capital requirement for Genworth Australia is just $1.5 billion. The business’s formal Tier 1 capital is $2.3 billion, or over 1.5 times the minimum APRA wants. As the chart from S&amp;P below shows, Genworth’s capital ratios are substantially better than its main competitor, QBE LMI.
Click to enlarge
<a href="/images/stories/genworth.gif" rel="shadowbox" title="Click to enlarge"><img src="/images/stories/genworththumb.gif"></a>
What is more remarkable is that the Australian business has basically no debt at all. S&amp;P assesses total leverage to equal just 4.1%, with a single Lower Tier 2 loan of $140 million outstanding. 
This contrasts strikingly with the AA- rated major banks, which are heavily leveraged with substantial senior-secured (covered bonds), senior unsecured, subordinated and hybrid debt. The typical leverage ratio for the major banks is 15 to 18 times shareholder equity. Here S&amp;P notes that Genworth’s leverage (or lack thereof) is of “AAA” quality: 
“As of Dec. 31, 2011, GFMI's capitalization metrics continue to be very strong, with an S&amp;P capital model score maintained at 'AA,' and APRA MCR multiple of 1.55x. The company's leverage also remains well within our 'AAA' rating tolerance, with the A$140m 10NC5 subordinated debt issue representing 4.1% of total assessed capital.” 
Following the deferral of the IPO, S&amp;P issued no ratings action. Moody’s, on the other hand, put Genworth Australia’s rating “under review”. 
While S&amp;P assumes when giving the Australian business its “AA-“ rating that (1) the IPO doesn’t occur, (2) any reinsurance provided by the US parent, which is a declining minority of the Australian business’s total reinsurance, has zero value, and (3) that the housing market continues to remain “soft” with, importantly, no further interest rate relief, Moody’s has, relatively speaking, had a more negative view on the major banks, the LMIs, and the Australian housing market more generally. 
Notwithstanding their significance to the national economy, the business models of the two LMIs are not well understood. They are nevertheless quite simple. 
In short, Genworth and QBE LMI insure the risk of default on Aussie home loans. Collectively, they cover about $500 billion. Since there is a total of $1.23 trillion of home loans outstanding, the major banks, in effect, self-insure most of the default risk on the remaining $723 billion. The major banks are, therefore, mortgage loss insurers in addition to being deposit-taking and lending institutions. 
The LMIs do make interesting comparisons to the major banks. Unlike the major banks, they have basically no debt. They face no risk of a run on retail deposits, or the refusal of wholesale funders to refinance their debts. They have no exposures to the riskier corporate, personal, or commercial real estate lending markets (as judged by both default rates and APRA). And they have no non-core businesses that can introduce catastrophic risks (e.g., Asian expansion strategies). 
But what does a worst-case scenario for the LMIs look like? Tapping the parent’s US filings, we can look at Genworth’s total loans insured, the share of “bad” loans, and then compare these to the rest of the Australian home loan market. The next chart summarises the first part of this analysis.
Click to enlarge
<a href="/images/stories/genworth1.gif" rel="shadowbox" title="Click to enlarge"><img src="/images/stories/genworth1thumb.gif"></a>
At the end of December 2011, Genworth’s 90-day delinquency rate across its 1.4 million loans was only 0.55%. This represents a fall from 0.59% in the September quarter and 0.56% in the June quarter. Importantly, this delinquency rate is actually below the industry-wide level assessed by the RBA, which was 0.6% at the end of December. 
Genworth’s low delinquency rate is a little surprising given that LMI is assumed to normally only apply to high loan-to-value ratio (LVR) loans of 80% or more. In fact, Genworth also does a lot of portfolio-wide insurance. 
In December 2011, Genworth reported that the weighted-average LVR across its book of 1.4 million loans was 62%. Its geographic distribution of loans is also what you would expect, and in line with the major banks, as the third chart below shows. Only 22% of its loans were originated in Queensland, which is consistent with the state’s share of the overall mortgage market.
Click to enlarge
<a href="/images/stories/genworth2.gif" rel="shadowbox" title="Click to enlarge"><img src="/images/stories/genworth2thumb.gif"></a>
While Genworth’s Australian business has performed consistently well (e.g., during the GFC) and realised a strong increase in new net premium revenue over 2010 and 2011 (see next chart), its “loss ratio”, which reflects claims and provisions relative to premiums earned, had increased slightly over 2011. This is not a total surprise given the RBA’s decision to hike rates in late 2010, and the flat-lining of employment growth thereafter.
Click to enlarge
<a href="/images/stories/genworth3.gif" rel="shadowbox" title="Click to enlarge"><img src="/images/stories/genworth3thumb.gif"></a>
The explanation for the “modest loss” that is expected to be reported in the March quarter reiterates messages Genworth had communicated months earlier to the rating agencies. For example, S&amp;P commented prior to the deferral of the IPO that: 
“GFMI's operating performance has remained steady and in line with our expectations, with Dec. 31, 2011, results showing good year-on-year gross written premium growth of 8.6%. However, this was offset by a loss ratio of 49.5%, up from 43.3% a year earlier due to continued pressure from southeastern Queensland, and certain lenders accelerating the claims process to address aged arrears.” 
What does a realistic worst-case scenario look like? Despite the strong geographic diversification and relatively low LVRs in its portfolio, you could, in such a scenario, boost its delinquency rate seven times to, say, 3%, which is in line with the peak in the UK during the GFC. 
You could then assume that half these loans go bad, which would be about right. So there are full mortgage loss insurance claims on 1.5% of all loans insured. Today the average claim per loan is about $65,000. Let’s hike this to $100,000 per loan. 
Total claims in this scenario would then sum to about $2.2 billion, which is well below Genworth’s current capital of $3.3 billion. Thus without any new funding at all, it could cover this realistic catastrophe. It would, of course, need to raise about $400 million of new capital to meet its minimum APRA requirements. Yet since these claims would be strung out over a period of two to three years, this seems like a straightforward task. 
The LMIs’ business models have risk — but no more than a major bank.
Dr Elvis Jarnecic is a senior lecturer at the <a href="https://sydney.edu.au/" target="_blank">University of Sydney</a>.
 
 
 
 
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cknowlton-QnEa6ntUYP

Genworth no riskier than major banks despite Queensland exposure

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John Symond, the founder and chairman of Aussie Home Loans, believes the Reserve Bank of Australia should cut rates by 0.5 percentage points tomorrow to stimulate growth in the non-mining sector of the economy.
"With the ANZ Bank lifting its mortgage rates recently and other banks seeking to do the same, no change or a drop of 0.25% will not do any good for the vast majority of Australians and businesses doing it tough," he says.
Symond says that weak home finance and retail figures are indicators that the economy is struggling with accelerating job cuts across Australia creating fear among consumers, who had reacted by "pulling in their horns."
"The Reserve Bank needs to provide stimulus for consumers to spend again, build or invest in property and take a holiday at home instead of capitalising on the high Australian dollars and travelling overseas.
"The Reserve Bank admitted last month that there is scope for a rate change in May as economic growth is slowing and concerns about unemployment are on the rise while recognising finally that we currently have a two-speed economy," he says.
Evidence of the lack of confidence among borrowers had been found in the surge of inquiries to Aussie from consumers doing their own financial or mortgage health checks.
But he told the News Ltd papers that it was vital that Australians become more vigilant and start asking questions about their mortgages, especially if the Reserve Bank doesn't act decisively at the May board meeting.
"Our research shows that more than 50% of our customers achieve up to a 0.75% saving by switching home loans," he says.
"Apathy is a killer for consumers getting a better deal and controlling their expenses, which will come under further pressure when the carbon tax kicks in on July 1," he says.
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jchancellor-FAypfDUnLy

 RBA interest rate cut of 0.5% needed: John Symond

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Tomorrow I predict the Reserve Bank of Australia is going to cut official interest rates by either 0.25 percentage points or 0.5 percentage points.
Look at the official figures. The Reserve Bank follows a whole lot of economic data, but the number it focuses on is inflation, taken from the Consumer Price Index.
The March quarter CPI came out last Tuesday, and it printed an inflation number well below what most economists were thinking.
The Reserve Bank is bound to use monetary policy to keep inflation in the target range of 2% to 3%. And the March CPI means core inflation becomes around 2.2%.
When this is the trend, the economy might need a kick-start, by reducing the price of money – the cash rate – and hoping that Australians will spend more.
There are other indicators that the RBA could be looking at. I call these my indicators of the “real economy”.
I talk to business owners and I look at the “for lease” signs, the “closing down sale” signs and the “50% off” specials in shop windows.
I look for empty shops, car yards with no people in them and bank boards on the pavement that spruik their deposit rates, not their variable mortgage rates.
I look at the newspapers: who’s being laid off? Car workers and bank staff.
These indicators tell a story of struggling businesses and cautious consumers. This sort of dynamic can become a nasty spiral if it’s not broken at the right time, because consumers become more cautious with their money and businesses wear the consequences, having to lay off staff, which feeds greater consumer uncertainty and feeds a worse climate for businesses.
With my view of the real economy and the CPI and inflation figures, I think it’s time to break the spiral. When you have large concerns such as Toyota and Harvey Norman talking about a downturn in consumer demand, you have to multiply that stress several times to glimpse what the average small business owner is going through.
It’s a dangerous position, because our 3.5 million business owners are our biggest employers. We can cut the cash rate, making borrowing easier for business owners and easier for householders.
But while you can’t affect what the Reserve Bank does, or what the major banks do, you can use a rate cut to your advantage. If you’re not financially stressed, you can continue to make your normal repayment even after the bank cuts your variable rate.
A 0.25-percentage-point cut on a 30-year $300,000 loan at 7.4% will save you just over $50 a month, worth $18,000 over the life of the loan. A 0.5-percentage-point will save you $101 per month, worth $36,000 over the life of a loan.
You can’t change the RBA or your bank, but you can put the interest rate savings straight back into the mortgage, or put them into a high interest bearing fixed interest account. You can’t change the world but you can make good decisions when the cash rate drops.
Mark Bouris is executive chairman of <a target="_blank" href="https://www.ybr.com.au/">Yellow Brick Road</a>, a financial services company offering home loans, financial planning, accounting and tax, and insurance. He runs a <a href="https://twitter.com/#!/markbouris" target="_blank">Q&amp;A session on Twitter</a> every Monday afternoon at 4pm for small business owners using the hashtag #bizQandA.
 
 
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mbouris-tauSvXGAM2

It is time for an RBA interest rate cut

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With underlying inflation figures coming in considerably lower than expected at 0.35% for the quarter and 2.15% for the year, the lowest in 13 years, the Reserve Bank will have little choice but to cut the cash interest rate at their up-coming May meeting.
I have said it back in February, that a further cut should have taken place, followed by another in March and April.
Bringing the interest rate down would have cemented consumer confidence, increase spending and motivated property market activity, I think the RBA got it wrong.
With the consumer price index moving up by just 0.1% for the first three months of 2012 and 1.6% for the year until March, the lowest since the 2009 GFC, the RBA’s decision should not be whether to reduce the rate, but by how much.
While lifting CPI prices on services such as electricity, childcare and water/sewerage, all over 9% increase, place extra pressure on consumers, a considerable interest rate cut would not only ease the situation, but improve consumer confidence, especially in view of the pending introduction of the carbon tax in July.
Since failing to cut the interest rate at recent RBA meetings, I anticipate cuts of up to 1% over the coming few months, which, if passed on by the banks and lenders, would make a considerable difference to existing borrowers and encourage first home buyers into the market.
If the RBA were to reduce the cash rate to 3.25% and banks did pass this fully onto consumers, on a $300,000 mortgage the reduction in repayments would be $250 per month. Surely, this would enhance construction, retail and property sector activity, providing a much-needed boost to our economy.
Robert Projeski is a leading property finance expert and the founder and managing director of <a href="https://%20www.amo.com.au" target="_blank">Australian Mortgage Options</a>. He has appeared on radio and TV and written extensively on property and finance matters.
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rprojeski-4QFJisNwt8

RBA interest rate cut is now a must

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Before yesterday the last time the RBA reduced interest rates by 50 points or more was in February 2009, when it trimmed the cash rate by 100 basis points t0 3.25%.
The February 2009 rate cut was the fourth in a series of successive big rate cuts following the GFC, during which the central bank cut a cumulative 375 basis points from the cash rate of 7% in August 2008.
An even longer series of big rate cuts occurred in the early 1990s following the 1991 recession.
There have been nine smaller interest rate cuts of 25 basis points over the last 22 years.
Over this time the RBA has cut rates 35 times and raised them 27 times.
Here’s a rundown of when rate cuts of 50 basis points or more have taken place:
100 basis points
February 2009 – cash rate down to 3.25%
100 basis points
December 2008 - cash rate down to 4.25%
75 basis points
November 2008 - cash rate down to 5.25%
100 basis points
October 2008 - cash rate down to 6%
50 basis points
April 2001 - cash rate down to 5%
50 basis points
February 2001 - cash rate down to 5.75%
50 basis points
July 1997 - cash rate down to 5.00%
50 basis points
May 1997 - cash rate down to 5.5%
50 basis points
December 1996 - cash rate down to 6%
50 basis points
November 1996 - cash rate down to 6.5%
50 basis points
July 1996 - cash rate down to 7%
50 basis points
July 1993 - cash rate down to 4.75%
50 basis points
March 1993 - cash rate down to 5.25%
75 basis points
July 1992 - cash rate down to 5.75%
100 basis points
May 1992 - cash rate down to 6.5%
100 basis points
January 1992 - cash rate down to 7.5%
100 basis points
November 1991 - cash rate down to 8.5%
100 basis points
September 1991 - cash rate down to 9.5%
100 basis points
May 1991 - cash rate down to 10.5%
50 basis points
April 1991 - cash rate down to 11.5%
100 basis points
December 1990 - cash rate down to 12%
100 basis points
October 1990 - cash rate down to 13%
100 basis points
August 1990 - cash rate down to 14%
100 - 150 basis points
April 1990 - cash rate down to 15% to % 15.5%
50 basis points
February 1990 - cash rate down to 16.5% to % 17%
50- 100 basis points
Jan 1990 - cash rate down to 17.00% to % 17.5%
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lschlesinger-FZcF9M3vE6

The RBA’s biggest interest rate cuts: a timeline since 1990

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Today I am going to dive into two controversial issues: whether the RBA “should” cut rates by 25 or 50 basis points next week, and what I call the “great RBA counter-factual”. That is, what Australia’s inflation rate would have looked like had the RBA not made its many purported policy “errors”.
Let’s deal with the second issue first. You have to pity our inflation-targeting central bank. You get consistently high underlying inflation, and you get slammed. You do the job you were given, lift interest rates, and allow the currency to appreciate (as you expected), and you get some low inflation. Just what you were shooting for.
And, by the way, “low inflation” is not something Australians are used to seeing. It’s not even really that low – still above the bottom of the RBA’s target 2% to 3% per annum band – and when you strip out “internationally traded” good and services, you find that Australia’s “domestic” inflation looks pretty ugly. But you still get slammed again. According to Alan Kohler today, you will be a “bedraggled, hangdog group of economists who shuffle” into your board meeting next week.
Apparently you made a huge mistake delivering what you were supposed to: much lower tradeables inflation, which is the only reason overall Australian inflation has been wrenched back down towards the bottom of your mandated zone.
Yep, because of the RBA’s decisions, Australia’s economic station looks horrific: we’ve had the first mining boom in recorded history without a major inflation outbreak, 5.2% unemployment, interest rates around their long-term averages, business surveys that suggest growth is near trend (as does the unemployment rate), and underlying consumer inflation of 2.2% per annum, which is still above the targets of most other central banks.
There is an enormous amount of circularity in the current debate about Australian inflation and interest rates. Contrary to popular myth, the latest inflation results are not a disaster. They are the very pleasing and expected result of the RBA’s considered policy actions.
Let me put prove this point graphically. If you compare inflation in "domestic" goods and services (called "non-tradeables"), which also happen to be things that we tend to buy more frequently (and are associated with “cost of living” perceptions) with inflation in so-called "tradeables", which are those goods and services that the ABS defines as having their prices determined in global markets, you will see that almost all the reduction in Australian inflation has been driven by these global consumer prices. And the reason these prices have been falling is because of the appreciation in Australia’s trade-weighted exchange rate, which is one of the RBA’s two key policy tools.
This is illustrated strikingly by the blue line in the chart. Overall inflation is a combination of the blue and red lines. What you can see is that inflation in non-tradeables (i.e., domestic items) remains way above the RBA's target, and is in line with its average 3.7% per annum rate since December 2001.
Click to enlarge
<a href="/images/stories/april261.gif" rel="shadowbox" title="Click to enlarge"><img src="/images/stories/april261thumb.gif"></a>
So this is where the debate about interest rates and inflation becomes circular. Those arguing for much lower interest rates, and a much lower currency, are, by definition, comfortable with higher tradeables inflation. A big decline in the currency would reverse-out a lot of the deflationary benefits yielded by the blue line slumping in the chart above. And without this tradeables deflation we would likely have an overall inflation problem, given domestic consumer prices have been expanding at 3.5% per annum.
One of the reasons "tradeables" inflation has averaged only 1.7% per annum since 2001 is because our main trading partners, such as China, were flooding our markets with cheap imports – that is, exporting deflation. This dynamic has slowed due to rising wage costs and inflation in China and India. As the RBA has observed (and I’ve argued here for years), China is now a source of inflation rather than disinflation. That means that in the future, tradeables inflation will likely be higher than it was during the 2000s.
A related question is whether core inflation of 2.2% per annum, or lower, is such a bad thing. What has happened to core inflation in Australia since the RBA began targeting it in 1993? Is there any evidence we’ve had a structural inflation problem?
And, on a more nuanced level, what does the distribution of inflation outcomes since 1993 look like? That is, does the RBA struggle to keep core inflation around the mid-point of its already high and wide (by international standards) 2% to 3% per annum target band? Do we have a bias in Australia towards high rather than low core inflation outcomes?
To try and answer these questions I have started with a chart that illustrates Australia’s core inflation rate on a three-year and five-year moving average basis since 1993. This suggests that during the 1990s and 2000s there did indeed seem to be an upward drift in underlying Australian inflation. The RBA has acknowledged as much, conceding that it finds it hard to forecast high core inflation events. (The same phenomenon was also found in consumer inflation expectations, which is arguably more worrying.)
Click to enlarge
<img src="/images/stories/april262thumb.gif">
A possibly more interesting analysis is to measure the amount of time Australia’s core inflation rate is above or below the mid-point of the RBA’s target zone. I’ve done this for two periods: since 1993 and since December 2001 (i.e., after the introduction of the GST) in my final charts.
The results are remarkable. Over the last decade plus, core inflation in Australia has been above the mid-point of the RBA’s target 2% to 3% band an extraordinary 92.9% of the time. It has been above 3% per annum an equally amazing 33.3% of the time. It has been below the mid-point only 7.1% of the time. And since 2001 it has never been less than 2% per annum (year-on-year rolling quarterly). That will hopefully change next quarter.
Click to enlarge
<a href="/images/stories/april263.gif" rel="shadowbox" title="Click to enlarge"><img src="/images/stories/april263thumb.gif"></a>
If we examine the RBA’s track record over the full inflation-targeting period of March 1993 to March 2012 we find similar results: core inflation has been less than 2.5% per annum only 35.1% of the time, but above the mid-point 61% of the time (there have been three quarters in which year-on-year inflation was exactly 2.5%).
This strong asymmetry in Australian inflation, whereby it tends to overshoot rather than undershoot the target, is also evident when we look at the top and bottom of the band. Whereas core inflation has been above 3% per annum around 20% of the time over the last 19 years, it has been below 2% per annum only 8% of the time.
Inflation is a tax on your purchasing power and savings. That’s precisely why the central bank’s job is to keep it low and steady. Having a core inflation rate of around 2% per annum when it is being driven almost entirely by tradeables deflation, is a good policy outcome whilst non-tradeables inflation is running at 3.5% per annum.
With that explanation behind us, let’s think about the RBA’s May meeting. The arguments in favour of a 50-basis-point cut are obvious and simple: the RBA’s made a terrible policy error, is now behind the inflation curve, and it needs to slash rates, and pull the currency down, to save trade-affected industries.
Another argument is that the RBA will not want to cut after the budget for fear of being seen to be endorsing the government’s decisions.
The arguments against 50 basis points, and in favour of a one quarter of a percentage point cut, are more nuanced (and accurate). The first is that a 50 basis point move signals the RBA has made a mistake, and undermines its credibility.
A second is that if the RBA wants to genuinely stimulate the economy, it will get more bang for its buck by spreading the cuts out over multiple months and maximising the “jaw-boning” effect.
I’ve talked a lot in the past about the virtual rate hikes we had in 2011 care of the RBA regularly beating the inflation drum, which everyone seemed to accept. The same is true in reverse, but most commentators appear to have forgotten. The media can get the community all excited about interest rate relief in May and June, rather than just in May alone. It’s smart psychology.
A third reason to go 25 rather than 50 is a very poorly understood problem that a big cut creates for the banks. I was speaking to the treasurer of a bank about this issue on Friday. He said to me, “God, I hope the RBA goes 25 and not 50.” I was a little surprised, and asked him why.
He explained that because all the banks have so much retail money tied up in term deposits these days, and because their variable-rate “wholesale funding” prices off the three month bank bill rate, a sudden cut in rates actually damages bank profitability. That’s because the banks cannot immediately reduce all the retail deposit and wholesale funding rates for existing funders.
So, perversely, by cutting 50 you are actually going to encourage the banks to pass on even less to borrowers to save their margins because they cannot immediately reduce their funding costs by the same amount as the RBA’s cash rate change. This bank treasurer argued that all Australian banks will have the same problem.
A final obvious reason to go 25 and not 50 is that you get the benefit of much more information. You get to evaluate the budget, see the next round of unemployment and labour cost data, watch the reaction of the currency, and then re-calibrate your growth and inflation forecasts. And a one month delay is not going to make a material difference to the economy.
Of course, exactly what the RBA does on Tuesday is harder to call. The six business executives on the board will probably opt for the simpler story that says the RBA has to slash rates by 50 to save the economy from low inflation. They would be wrong.
Christopher Joye is a leading financial economist and a director of <a href="https://www.ybr.com.au/savings/index.cfm">Yellow Brick Road Funds Management</a> and Rismark. The above article is not investment advice.
 
 
 
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A 50-basis-point interest rate cut would undermine the RBA’s credibility: Christopher Joye

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The Reserve Bank's economics department had a bad year in 2011, and as a result the board is now high and dry with an official cash rate that is obviously wrong. It needs to come down by 0.5%, to 3.75%. 
In its February 2011 Statement on Monetary Policy, the RBA had a GDP growth forecast for the year ended December 2011 of 4.25% and for June 2012 of 3.75%. CPI inflation for June 2012 was forecast at 2.75%, the same as underlying inflation.
But then in May the bank's economists came over all bullish and upped their GDP forecast for June 2012 to 4.25%, while leaving the December forecast at 4.25%. CPI inflation for June was cut to 2.5%. In August the GDP forecast was up again to 4.5% and while the CPI forecast was left at 2.5%, the underlying inflation forecast was jacked up to 3%.
In November wobbles started to appear and the GDP forecast was cut to 4% and underlying inflation back to 2.5%. In February this year the GDP forecast for June 2012 was back to 3.5% but underlying inflation was actually raised to 2.75%.
So the RBA's economists have made two big mistakes: they got 2011 GDP growth horribly wrong and raised their inflation forecast in February for this financial year even as GDP was falling short.
It's hard to know what came over them on GDP in May last year, but the statement was especially bullish about commodity prices and resource and farm exports. Maybe they were influenced by Treasury, which had a GDP forecast for 2011-12 of 4% in the May budget last year, which has also turned out to be wildly wrong, leading to a bigger than expected deficit (by almost $10 billion).
But why the RBA felt the need to be more bullish about economic growth than Treasury in the middle of last year will probably have to remain a mystery, but that rush of blood to the head in May is still dogging the Reserve bank governor, Glenn Stevens and his board.
With GDP growth of 3.5% and underlying inflation of 2.75% in their February SMP forecasts for 2012, the board could hardly cut rates then, no matter how hard the business people on the board were arguing for it.
The minutes for the April meeting drily say: "Members noted that the national accounts for the December quarter had shown an increase in real GDP of 0.4% in the quarter and 2.3% over the year, which were both lower than expected."
Well, yes, that's an understatement – as recently as November the economists were forecasting 2.75% growth for 2011; just six months earlier they'd been forecasting 4.25%! That's almost twice reality.
One can imagine a fierce debate in the April meeting between the business people and the economists, with the latter clinging to the last shreds of their dignity. In the event they persuaded the board to wait for the March quarter inflation figure before cutting rates and hanging them out to dry.
Kerplunk! March quarter CPI inflation was 1.6%, against last November's forecast for the year to June of 3.25% (there wasn't a forecast for the March quarter). By February that had been slashed to 1.75%, but even that now looks too high.
Next Tuesday it will be, or should be at least, a bedraggled, hangdog group of economists who shuffle into the RBA board meeting for their presentation. And many of the board members may well be checking their emails while it's going on, having already made up their minds to cut rates by 50 basis points.
Which is what they should do.
This article originally appeared on <a href="https://www.businessspectator.com.au/" target="_blank">Business Spectator.</a>
 
 
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The RBA has egg on its face and needs to cut rates by 50 basis points: Alan Kohler

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After last month’s Reserve Bank board meeting governor Glenn Stevens made it fairly clear that if the March quarter inflation numbers were benign the bank would be inclined to cut official interest rates. Well, the numbers are in, inflation is even weaker than was anticipated and the debate has shifted from whether the RBA will cut to how much it will cut. 
With headline inflation of 1.6% and underlying inflation of 2.2% there was nothing in today’s numbers to suggest anything other than that the economy is continuing to weaken. 
Consumer spending is at recessionary levels, the housing market is in a similar state, job losses in the manufacturing sector are mounting, the impact of the continuing (albeit tapering) boom in the resources sector isn’t flowing through to the rest of the economy and Wayne Swan is about to attempt to pull about $40 billion out of the economy, or 2.5% of GDP, if not more. Some of that may be done with "smoke and mirrors" but it isn’t going to be possible to achieve those sorts of numbers without real and very substantial cuts in expenditures and increases in government revenues. In the circumstances, the horror budget that is looming can’t be considered as anything other than a major depressant on an already weakening economy. In that context, a reduction in official interest rates next Tuesday appears inevitable. The larger question, however, is whether that would be sufficient to blunt the negative influences now pervading the economy. It is a question complicated by the RBA’s need to second-guess the responses of the major banks to a rate cut, given that there is a probability that they will retain at least some proportion – perhaps 10 to 15 basis points – of any reduction.  Led by ANZ, the banks have to a degree de-linked their mortgage and deposit rate movements from the RBA’s decisions and they have been making it plain that they are continuing to experience the funding pressures that have caused them to pass through rate cuts lower than the movements in official rates since the onset of the financial crisis. If the RBA cuts the cash rate by 25 basis points next week and the banks pass on only 10 to 15 basis points of it, would the decision have any meaningful impact on the economy and the psychology of consumers and businesses? One doubts it. That’s why there are plenty of people now focusing on the prospect of a 50 basis point reduction in the cash rate, which would allow the banks to retain their 10 or 15 basis points while still enabling a meaningful reduction to flow through to borrowers. No doubt the RBA staff has been in close contact with the major banks to make sure they understand their likely responses to a cut. The RBA has made it clear that it does take the anticipated reaction of the major banks to rate movements into account when deciding whether to move the cash rate and the size of the movements. It is concerned not about the level of the cash rate per se, but the influence it has on the actual rates being charged borrowers. The one issue that might make the RBA cautious about the size of any reduction would be the looming federal budget. It might want to see the nature and quality of Swan’s budget measures – how "real" they are – before moving more than the usual 25 basis points. However, with commodity prices and the terms of trade now off their peak, China slowing, Europe still wobbling, swelling question marks over some of the biggest of the new resource projects in the pipeline, the non-resource economy slowing discernibly from already weak levels, households confronted with rising utility costs and the carbon tax imminent, if the RBA doesn’t lop 50 basis points off the cash rate next week the probability is that there will be a succession of rate cuts between now and the end of the year.
This article originally appeared on <a href="https://www.businessspectator.com.au/" target="_blank">Business Spectator</a>.
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Size all that matters now for RBA interest rate cut: Stephen Bartholomeusz

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Many people who have invested in property may have purchased the property in the wrong name, and the cost to correct it creates a stamp duty and capital gains tax liability and thus prohibits the property from being moved. 
Why would people buy properties in their own names? 
The main reason is for tax. 
Generally if the property is negatively geared, then having it in the name of the person paying the highest tax means that he/she gets back the largest tax refund from the ATO. However, if that person’s occupation exposes him/her to litigation, such as a doctor or someone running a business or a director of a company, then holding assets in their his or her own name would be a silly thing to do. 
If someone sued him/her than any assets that are in his/her own name are up for grabs. 
Australia only trails the US for being one of the most litigious countries in the world. Last year a mother of three in the US was sued by a music company for illegally downloading 12 songs from the internet. The judge found in favour of the music company and ordered damages of $100,000 per song. Unable to pay the total damages bill of $1.2 million plus costs she lost her home and any other assets she held in her name. 
Properties that have been bought in one’s name can be protected without needing to move them using several different strategies.
The principle behind this asset protection strategy is to protect the equity in the properties. Litigants are not interested in the property itself, but they are interested in the equity. Thus protecting the equity is more important than protecting the asset itself. 
1. You can strip any equity that is left within the "at risk" property by asking the bank to take 100% of the equity of the "at-risk" properties for their security and leaving properties that are not "at risk". 
2. Properties that are not "at risk" are those that are held in a property investor’s trust (PIT) or those held in a "not at risk" spouse’s name. However, be careful that you have considered the tax benefits that may be lost if the property is negatively geared and your spouse earns and pays less tax than you do. 
3. If you are unable to adopt the above strategy than you can use an "equity bank trust" that will strip the equity from your "at-risk" assets. This is a relatively low-cost solution but a very effective strategy. 
4. Naturally the best solution is to ensure that the properties are purchased in the correct entity to begin with. Having the property in an entity such as the PIT deed that has an ATO approved product ruling (Product Ruling PR2011/15) is better than trying to fix the problem later. The PIT allows you to claim the negative gearing in your own hands (as long as it’s set up correctly) and protects the property from litigation. The PIT does not have a vesting date, so the assets can be passed from generation to generation. 
5. If both husband and wife are in high-risk occupations they should not have their homes in their own names in case they are sued. However, the problem with holding the home in a trust is that one loses one’s principal place of residence tax free status for both land tax and capital gains tax. Depending on where you live (in which state or territory), one can hold the property in a PIT and grant a life interest to the individual to retain his or her land tax-free status  and capital gains tax-free status. However, you must seek advice, because if not set up properly this strategy could potentially backfire. It would also be a good idea to get a private ruling to ensure that this will work in your particular circumstances. 
6. If you have loaned money to your daughter or son to purchase a property with, make sure that you have either registered a second mortgage or a caveat over the property in case his or her marriage and or de facto relationship fails. The second mortgage/caveat ensures that you at least get back the loan or gift you had given your son or daughter.
Ed Chan is a founding partner of <a href="https://www.chan-naylor.com.au/" target="_blank">Chan and Naylor</a> accountants and a leading property tax specialist. He has co-authored three best-selling books as a seasoned property investor who understands the relationship between property investment and tax.
 
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