Abadeen has released the whole-floor penthouse crowning its recently completed <a href="https://www.apartments.com.au/buildings/park-residences-cremorne-2-sutherland-street-cremorne-nsw-2090">Park Residences</a> development in Cremorne, bringing the near-300 sqm residence to market for the first time.

Occupying the entire top floor of the boutique Lower North Shore development, the penthouse includes 221 sqm of internal living and a 74 sqm wraparound terrace, with a prized north-facing aspect taking in views across Middle Harbour.

The residence has been completed and fully furnished following a collaboration between Abadeen Executive Chairman Justin Brown and internationally recognised interior designer Jack Freeman, Founder and Managing Director of FREEMAN &amp; CO.

<a href="https://www.apartments.com.au/developers/abadeen">Abadeen</a> and Freeman approached the penthouse as a finished home, sourcing furniture, artwork, lighting and objects from Australia and overseas.

&nbsp;

[smartcode_project:default project_id=114246 project_image_fid=378718]

Pieces from Parisian design house Pierre Augustin Rose sit alongside contemporary artworks and bespoke lighting, with Freeman drawing on recent visits to PAD Paris and Salone del Mobile Milano for the final collection.

Brown said the aim was to create a penthouse that felt more like a large-scale private home than a traditional apartment.

"The experience begins the moment the lift doors open. You're welcomed into an elegant dining room before the home opens into an extraordinary living space framed by sun-drenched harbour views.

"Every time someone walks through the front door they pause. It's not just the view, it's the incredible sense of space, the warmth created by the northern sunlight that fills the interiors, and the way every room connects so effortlessly.

"It has all the proportions of a luxury home, while delivering the effortless lifestyle and personalised experience of living in a world-class six-star hotel, combined with the simplicity and convenience of apartment living."

&nbsp;

[smartcode_project:default project_id=114246 project_image_fid=378713]

A secure lift provides exclusive access to the penthouse level, opening to a dedicated arrival foyer and dining area before the residence expands into its main living and entertaining spaces.

Floor-to-ceiling glazing runs across the northern side of the home, connecting the interiors with the terrace and Middle Harbour outlook.

The penthouse also features a fireplace and substantial chef's kitchen, while the wraparound terrace has been designed to accommodate both everyday outdoor living and larger-scale entertaining.

[smartcode_project:default project_id=114246 project_image_fid=378720]

Freeman said the interiors had been deliberately kept restrained to complement the scale, natural light and outlook already established by the architecture.

"The penthouse is a serene study in quiet luxury," Freeman said.

"The interior pairs soft, sculptural forms with warm timber, pale stone and a restrained neutral palette. Curated artwork and metallic accents add depth, while abundant natural light creates a calm, effortlessly refined atmosphere. In my world, less is always more."

Freeman said the approach was centred around collecting individual pieces rather than simply decorating the apartment.

"Every material, every object and every piece of furniture has been curated with intention. I am a true believer in collecting versus decorating.

"The architecture already provided extraordinary natural light, remarkable volume and an uninterrupted connection to Middle Harbour. Our role was to complement those qualities with unique one-of-a-kind pieces of fine art and collectible design sourced from recent travels around the world."

[smartcode_project:default project_id=114246 project_image_fid=378694]

Among the collection are solid bronze sculptures by Lorenzo Quinn, alongside a curated crystalware collection and pieces sourced from international design fairs.

Park Residences sits opposite Cammeray Golf Club, Cammeray Croquet Club and Grand Slam Tennis Cammeray, around 300 metres from Neutral Bay Village and its established collection of restaurants, cafés and retail.

Brown said the combination of a whole-floor floorplan, northern aspect and proximity to Neutral Bay was becoming increasingly difficult to find on the Lower North Shore.

"Completed whole-floor penthouses with a sun-drenched north-facing aspect and sweeping Middle Harbour views are exceptionally rare," Brown said.

"Add a quiet position opposite golf, croquet and tennis facilities, a level walk to Neutral Bay Village and only minutes to the CBD, and you have a lifestyle that's incredibly difficult to replicate.

"This is a home that offers the privacy and generosity of a luxury residence together with the convenience of one of Sydney's best-connected harbourside locations."

The penthouse will be exclusively marketed by SRM Residential.

[smartcode_project_cta:default project_id=114246]

Joel Robinson

Abadeen unveils signature penthouse at Park Residences in Cremorne

New Brisbane developer Dalcott has unveiled Marrone, the first of three residential projects it is planning in and around Browning Street in South Brisbane.

<a href="https://www.apartments.com.au/new-apartments/marrone-south-brisbane-39-browning-street-south-brisbane-qld-4101">Marrone</a> will comprise 97 predominantly two- and three-bedroom apartments, with larger residences aimed squarely at the owner-occupier market.

The project will sit in a quiet pocket of South Brisbane between South Bank and West End, close to the restaurants, cultural attractions and riverfront amenity that have driven the suburb's continued transformation.

Dalcott is targeting buyers looking for more space and amenity than has traditionally been offered in the inner-city apartment market, particularly downsizers and professionals wanting to remain close to the city.

[smartcode_project:default project_id=149951 project_image_fid=377072]

Resident facilities will be concentrated around an extensive rooftop amenity offering, including a swimming pool, spa, infrared sauna, warm and cold magnesium plunge pools, private lounge, dining room and outdoor entertaining areas.

Dalcott Managing Director Lachlan Cottee said South Brisbane's combination of lifestyle, connectivity and established character had been central to the approach to Marrone.

“South Brisbane offers a combination of lifestyle, connectivity and character that’s difficult to replicate elsewhere in Brisbane,” Cottee said.

“Our focus has been on creating homes that feel connected to that environment while providing the level of design, functionality and quality that today's owner-occupiers expect.”

The residences will feature an expressive material palette. Italian Calacatta Viola marble, known for its deep burgundy veining, will be paired with aged brass tapware, Chestnut engineered timber flooring and Tuscan Oak joinery.

<img alt="Marrone" data-entity-type="file" data-entity-uuid="b8d833da-3b30-496a-ae30-07bdff371b50" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-25%20at%2010.52.35%E2%80%AFAM.png?VersionId=P6DAgOfaQzIXljKKK5j3e5NhWtrHIu9G" />

Bathrooms will feature Nara Japanese ceramics and glass bricks, while clay, walnut and brass lighting will be used throughout the apartments.

Dalcott has appointed Realm Projects, led by Managing Director Shane Foley, to handle sales and marketing following previous sold-out collaborations between the groups.

Foley said the Brisbane apartment buyer had become increasingly focused on the quality of the home itself rather than simply securing an inner-city address.

“We expect to see strong demand from buyers who still want all the advantages of inner-city living but aren’t prepared to compromise on the quality of their home,” Foley said.

“Many will be downsizers looking to leave behind the maintenance of a traditional family home without giving up the space they enjoy, while others are likely to be professionals wanting a residence that reflects the way they live today.”

“Marrone responds directly to that demand, with generous floorplans, exceptional resident amenity and a location that places some of Brisbane’s best dining, entertainment and cultural attractions within walking distance.”

<img alt="Marrone" data-entity-type="file" data-entity-uuid="61f7b22f-899e-4c0f-940a-7d3ab1bfb93a" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-25%20at%2010.52.44%E2%80%AFAM.png?VersionId=PvN1JYxBgUpyCB7efKo52WGdSDs9nmim" />

Marrone will be the first project delivered as part of Dalcott's broader investment in the precinct.

It will be followed by La Terra, a boutique project comprising penthouse-style, single-level apartments on a northeast corner site with extensive resident amenity and city views.

Cottee said Marrone represented the first stage of the group's longer-term plans for the area.

Dalcott was established in 2025 by Lachlan Cottee and Ben Dalgliesh, combining development and construction capability under an integrated model and focusing on architecturally considered residential projects.

Marrone will initially be offered through a pre-release registration campaign ahead of its broader public launch.

Dalcott targets owner-occupiers with South Brisbane debut Marrone

Parnell Developments is the latest to seek significant uplift through the NSW Government's Housing Delivery Authority on a Strathfield site previously approved for a much smaller apartment development.

Parnell has sought approval for a 32-storey mixed use tower across&nbsp;<a href="https://www.apartments.com.au/new-apartments/7-lyons-street-strathfield-nsw-2135">3-7 Lyons Street and 18 Parnell Street</a>, a&nbsp;1,857 sqm site around 400 metres from Strathfield Station. The building would yield 160 apartments, 15 per cent of which will be dedicated affordable as per the government mandate for buildings seeking additional uplift.

Approved previously was a nine-storey building back in 2022 with just over 30 apartments. That approval came prior to the project being&nbsp;progressively reconsidered as planning policy shifted toward greater density around transport hubs.

<img alt="Strathfield" data-entity-type="file" data-entity-uuid="c5af5281-a643-4eb2-b8c4-0081b59c04c7" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-25%20at%209.16.48%E2%80%AFAM.png?VersionId=37bd3mI7rHNpThOV_75VO8xsGFwWOi1u" />

Turner has designed the latest building that would replace&nbsp;existing detached homes across the four lots.

The apartment mix comprises 22 one-bedroom apartments, 107 two-bedroom and two-bedroom-plus configurations, and 31 apartments with three or more bedrooms. The scheme also includes 203 car spaces across six basement levels and 58 bicycle spaces.

The proposal has been designed around a three-storey podium addressing Lyons Street, with the tower rising above and stepping toward its upper levels.

Turner said the podium was deliberately scaled to respond to the existing street, while the taller element has been designed as part of the emerging skyline anticipated around Strathfield Town Centre and the wider Homebush transport-oriented development precinct.

The Lyons Street frontage would have a more active, pedestrian-focused character, incorporating the commercial tenancy, landscaping and a brick-framed podium with an awning.

<img alt="Strathfield" data-entity-type="file" data-entity-uuid="14b20874-b8c3-4ac7-bc03-92be9a69fb78" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-25%20at%209.17.48%E2%80%AFAM.png?VersionId=av.9TxtqIRTC6v3PkSuu1rL9rreWoe2h" />

Parnell Street, which faces the railway corridor, has been given a different architectural treatment, with double-height breeze blocks, landscaping and communal areas used to soften the interface with the rail infrastructure.

The tower itself uses curved and recessed facade elements, with wave-like indentations across the northern elevation breaking the building into three vertical forms.

A palette of grey concrete, brick and breeze blocks is complemented by clay and terracotta accents, while the upper tower adopts a lighter expression through articulated slab edges, vertical fins and recessed glazing.

Residents would have access to 467 sqm of communal open space spread across three levels. The ground floor would accommodate the more active resident areas, including barbecue and group gathering spaces and an internal communal room capable of being used for working from home.

A more passive viewing deck is proposed at level three, overlooking the ground-level landscaping and neighbouring tennis courts, while a rooftop "sunset deck" at level 30 would provide another social and relaxation space.

<img alt="Parnell" data-entity-type="file" data-entity-uuid="c3dce401-a80f-4682-8471-4caa01180880" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-25%20at%209.17.34%E2%80%AFAM.png?VersionId=Xyo8JVqbOhSJXNy6Ih.1cHL.O6i0bGR." />

&nbsp;

&nbsp;

&nbsp;

Strathfield has been earmarked for substantial change through the Strathfield Town Centre planning work and the nearby Homebush TOD precinct.

Turner's report says the project has been designed to act as a transition between the existing low and mid-rise development surrounding the site and the taller built form expected to emerge across the town centre.

The proposal is being assessed as State Significant Development under the HDA pathway, alongside the concurrent request to amend the Burwood Local Environmental Plan.

First look: New apartment tower pitched for Strathfield Town Centre precinct

An $18 million penthouse has hit the market in Main Beach as construction tops out on La Mer, the $155 million apartment development rising just metres from the beach.

Spanning around 600 sqm across the top two levels of the 29-storey tower on Main Beach Parade, the four-bedroom penthouse is one of the latest eight-figure residences to test the upper end of the Gold Coast apartment market.

Its launch comes amid continued activity at the very top of the market, following the $30 million off-the-plan sale of a Burleigh Heads penthouse earlier this year, which surpassed the Gold Coast's previous $24 million apartment record set in 2023.

The <a href="https://www.apartments.com.au/new-apartments/la-mer-main-beach-3580-main-beach-parade-main-beach-qld-4217">La Mer penthouse</a> has been designed as a private residence in the sky, with 360-degree views spanning the ocean, Broadwater, hinterland and Gold Coast skyline.

[smartcode_project:default project_id=95606 project_image_fid=378731]

All four bedrooms have ensuites, while the ocean-facing master retreat occupies around half of the upper level and includes its own lounge, private balcony, two walk-in wardrobes and an oversized ensuite with a freestanding stone bath positioned to take in the views.

The residence also features a kitchen designed to accommodate a private chef, a 3.6-metre island bench, expansive butler's pantry, wine cellar and integrated bar.

[smartcode_project:default project_id=95606 project_image_fid=378732]

A rooftop pool and substantial outdoor entertaining area with its own kitchen sit above the residence, while a grand staircase connects the two internal levels. The penthouse also has its own express lift.

OTP Group Director James Elliott, who is marketing La Mer, said the penthouse was expected to appeal to high-net-worth buyers seeking either a permanent Main Beach residence or Gold Coast holiday home.

“The La Mer penthouse represents exceptional value, considering its quality design, size, privacy and location, not to mention the 360-degree views capturing the beach and Gold Coast Broadwater,” Elliott said.

“We’re anticipating interest from high-net-worth individuals and couples seeking a residence or holiday home in the sought-after village enclave of Main Beach, taking advantage of the unprecedented growth underway in the area and neighbouring The Spit.”

[smartcode_project:default project_id=95606 project_image_fid=378736]

La Mer is being developed by developer-builder ODUS and Nazero, in partnership with funder Metrics Credit Partners.

ODUS Director Byron Sakha said topping out the tower had provided the opportunity to release the project's most significant residence.

“We’ve worked with internationally-recognised studio Sici Design on the penthouse interiors, with a focus on ensuring it isn’t luxury for luxury’s sake. Every element has been thoughtfully designed to enhance quality of life for those who call it home,” Sakha said.

“The views are the hero of virtually every space, but we’ve given equal attention to the fittings and finishes, so every detail exudes elegance and refinement.”

Sici Design Founder and Director Maria Papadopoulos said the extensive views became an integral part of the interior design rather than simply something the residence was designed around.

“The views weren't something we designed around, they became part of the design itself, with the true luxury of La Mer in its feeling of peace, calm and wellbeing,” Papadopoulos said.

“Luxury isn't defined by how something looks, but how it makes you feel, and we believe a luxurious home should be beautiful to live in, not stressful to maintain.”

The interiors combine Austral Dream Dolomite natural stone and travertine with timber flooring and a restrained coastal palette.

[smartcode_project:default project_id=95606 project_image_fid=378734]

Designed by Plus Studio, La Mer is one of the more boutique additions to the rapidly changing Main Beach apartment market.

The tower comprises just 24 full-floor, three-bedroom plus multipurpose room apartments below the two-level penthouse, giving the project a considerably lower density than many of the larger towers being developed across the Gold Coast.

Residents will have access to a pool and spa, gym, sauna, barbecue facilities, private sun lounges, yoga lawn and outdoor beach shower.

The penthouse has been released as part of the final collection of residences at La Mer, with remaining apartments priced from $4.3 million.

Construction is expected to complete later this year, with a fully furnished display apartment now open on level four.

[smartcode_project_cta:default project_id=95606]

ODUS releases $18 million penthouse crowning La Mer Main Beach

<a href="https://www.apartments.com.au/developers/far-east-consortium">Far East Consortium</a> is preparing to commence construction on <a href="https://www.apartments.com.au/new-apartments/640-bourke-street-melbourne-640-bourke-street-melbourne-vic-3000">640 Bourke Street</a> this October, marking the next milestone for the Melbourne CBD development and its higher-end Eliza Collection.

Spanning levels 44 to 68 of the 68-storey <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a>-designed tower, the Eliza Collection has been conceived as a lower-density offering within the broader development, with only five apartments on each floor, dedicated lift access and a collection of resident spaces reserved exclusively for Eliza Collection residents.

The Eliza Collection forms part of Far East Consortium's broader move toward larger-format residences at 640 Bourke Street, where the number of apartments was reduced from earlier plans as apartment sizes increased.

[smartcode_project:default project_id=509 project_image_fid=365685]

"What it's meant for 640 Bourke is we've actually reduced the number of apartments. We've increased the overall size of the apartments. We don't have any studios in here, and what that does for a project is it elevates it," Far East Consortium Director of Sales and Marketing Lauren Sheldon said.

Rothelowman Associate Jun Chang said the design process provided an opportunity to create more generous floorplans.

"We were given the opportunity to be more generous. The apartments became bigger and squarer than any other apartments which had been designed in the CBD before that."

[smartcode_project:default project_id=509 project_image_fid=368869]

That thinking carries through to the Eliza Collection, where the residences have been designed around the space and functionality associated with a larger home, but positioned high above the centre of Melbourne.

Kitchens are equipped with Gaggenau appliances, a butler's pantry, temperature-controlled wine cabinet and sculptural pendant lighting, while engineered timber flooring, stone and porcelain finishes and custom cabinetry feature throughout the broader interiors.

Privacy and security are another point of distinction. Eliza Collection residents have dedicated lift access, while 640 Bourke Street will provide concierge services and secure resident parking. Short-stay accommodation, including Airbnb, will not be permitted within the development.

[smartcode_project:default project_id=509 project_image_fid=365689]

Eliza Collection residents will also have exclusive access to selected amenity spaces across levels one and three of the restored Eliza Tinsley building. These include the Salon with grand piano, an art therapy room, private dining rooms and treatment rooms.

They sit within more than 3,000 sqm of amenity planned across 640 Bourke Street, alongside facilities including a pool, gym, whisky lounge and further social and wellness spaces.

The Eliza Tinsley building itself is central to the wider project's identity. Rather than treating the existing Eliza Tinsley façade as a separate element, Rothelowman used it as a starting point for the architecture of the new tower, with the historic building to accommodate the project's gallery and lobby.

"It's a significant asset and wants to be celebrated and experienced by all residents every single time they go in and out of the building," Rothelowman Principal Stuart Marsland said.

[smartcode_project:default project_id=509 project_image_fid=368872]

The tower will rise behind the retained heritage building at 640 Bourke Street, placing residents within walking distance of Southern Cross Station, Flagstaff Gardens, Queen Victoria Market and the Docklands waterfront.

With construction scheduled to begin in October, Far East Consortium has established an onsite display gallery at 640 Bourke Street, including fully built apartments that allow the project's layouts, materials and finishes to be inspected at full scale.

A fully built Eliza Collection apartment is also available to view at the display suite by appointment ahead of the planned October construction commencement.

Eligible purchasers who buy before construction commences can secure the full available off-the-plan stamp duty savings, subject to eligibility and applicable conditions.

[smartcode_project_cta:default project_id=509]

Far East Consortium brings Eliza Collection to 640 Bourke Street ahead of October construction start

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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At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 percent.
Tim Lawless, CoreLogic head of research said the RBA is unwilling to drop rates because this would likely add further fuel to the housing market.
"They don’t want to push rates higher as this will stifle consumption and investment more broadly as well as potentially place some upwards pressure on the Australian dollar," he said.
"While interest rates remain at their current low level, and in the absence of additional macro prudential measures, we should expect housing demand from investors and owner occupiers to remain strong, particularly in those cities where economic conditions remain strong and migration rates remain high. 
"No doubt, one of the key topics of conversation at this month’s RBA board meeting will be around housing market conditions and the ongoing rebound in the rate of capital gains over the second half of 2016 and first two months of 2017.
"The CoreLogic monthly hedonic index shows capital city dwelling values have increased by 7.8 percent since the May ‘16 rate cut. 
"The renewed exuberance in the housing market over the past eight months is due to more than just low mortgage rates. 
"The reacceleration in capital gains also coincides with a substantial rebound in investment purchasing activity which has been a key driver of market demand and upwards price pressures."
 
 
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jonathanchancellor-7SQnKwU6yx

Unchanged RBA March 2017 cash rate decision

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ANZ is closing a loophole by tightening rules for investors attempting to switch their investment loan to a standard homeowner loan.
ANZ head of national broker distribution Simone Tilley has advised mortgage brokers it would like to "reinforce that it continues to accept both owner-occupier and investor borrower applications".
But it is also closing down a popular loophole where borrowers switch from investor loan rates to cheaper owner-occupier rates.  
From today, borrowers changing their investment loan to a home loan will need to provide supporting documents to prove it is not being used for investment purposes.
These will include evidence such as utility bills and car licence details.
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jchancellor-FAypfDUnLy

ANZ to close loophole for investment home loan switch

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GUEST OBSERVER 
The Reserve Bank Board meets next week on March 7.
We can be certain that the decision from the Board will be to hold rates steady.
Recall the comments from the Governor in his answer to a question during his appearance before the House of Representatives Standing Committee on Economics, “At the moment the market pricing is for interest rates to be constant right through this year. That seems a reasonable proposition to me.... The central scenario of a period of stability of interest rates is quite reasonable to me.”
Now we have never framed our medium term forecasts around the views of the Reserve Bank – after all they are only “mortal” forecasters like the rest of us . Their forecasts can go awry and policy can change accordingly. But for the immediate future ( like next week) we can take the Governor’s views as definitive.
Our view since the rate cut in May last year has always been for a follow up move in August and the steady rates throughout the remainder of 2016 , 2017 and 2018.
We assess that at least the Governor currently has that view for 2017 but has not commented on the market implied two rate hikes in 2018.
His growth forecast in 2018 is 2.75 percent-3.75 percent (down from 3-4 percent) well above our forecast of around 2.5% (with downside risks). Achieving the RBA’s growth forecast in 2018 might be consistent with market pricing but, certainly, our forecast for a slowdown in 2018 is not consistent with rate hikes – below trend growth signals steady rates at best.
In his comments to the House the Governor considers the case for rate cuts in 2017. He points out that inflation is below the target range ( “a bit low”) and the unemployment rate is “a bit high”. We would assess full employment at around 5% so, at 5.8%, there is clear excess capacity in the labour market. Of course, that spare capacity is further emphasised in the latest wages report which showed wages growth at a record low of 1.8 percent.
However, his clear problem with leaning further on interest rates is “The main effect (of a rate cut) would be more borrowing for housing, pushing up house prices...”.
His concerns with the impact of rate cuts on the housing market are well based.
Consider figures 1 and 2.
Figure 1 shows recent trends in house prices in Australia. The recent periods of rate cuts (first half of 2015 - February and May) and second half of 2016 (rate cuts in May and August) are associated with significant increases in house price inflation. However, note the trends in the intervening period. These will not be lost on the Governor.
During the period (second half of 2015) when the Bank and APRA imposed macro prudential guidelines to slow the pace of lending to investors the pace of house price inflation (national) slowed from 13.7% (six month annualised to August 2015) to zero (6 month annualised to March 2016). In response to the May and August rate cuts house price inflation has lifted to 10% (6 month annualised to February 2017). 
<a href="https://www.propertyobserver.com.au/images/2017/03/02/Screen%20Shot%202017-03-02%20at%2011.52.00%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/03/02/Screen%20Shot%202017-03-02%20at%2011.52.00%20AM.png" alt="">
Figure 2 shows a similar trend for new lending for housing (key to Governor’s concerns about rate cuts just boosting household debt). In response to the rate cuts in 2015 new lending for housing peaked at $26.8 billion in August 2015 . It subsequently slowed to $23.8 billion by January 2016 (down 11%) only to pick up to $27.1 billion (up 14%) by December 2016 in response to the May and August rate cuts.
The conclusion that the Bank would have reached is that macro prudential policies do work and rate cuts stimulate prices and credit despite rates being so low.
Little wonder that the Governor noted at the Hearing when referring to recent macro prudential policies, “For us, that is a first order thing that we can do to limit the growth rate of investor credit and, I think, that has been a successful public policy intervention.” 
I assess that, given that both Sydney and Melbourne prices are up 14% (six month annualised – Core Logic data) the Bank and APRA may be considering even tighter macro prudential policies.
It is not only inflation and the unemployment rate that would be of concern to the Reserve Bank.
Throughout the Hearing he indicated a preference for a lower Australian dollar. He accepts that the AUD is probably around fair value but questioned the feed-back to activity from higher commodity prices with miners apparently reluctant to increase capacity and wage pressures in the sector continuing to ease.
He has also adopted a more conservative attitude to the consumer, expecting that the recent falls in the savings rate are unlikely to be sustained.
Most of this “mood” does not sit well with the expectation that growth will lift in 2018, particularly in the face of a downturn in residential construction. His “faith” that non mining investment will lift to reflect tightening capacity utilisation is not convincing particularly with the higher AUD and a more cautious consumer.
Overall we saw little in the comments at the Hearing to sway our expectation of a slowing economy in 2018. If, as we expect, the Bank will get around to adopting additional macro prudential policies to slow housing in the second half of 2017 the stage will be set for another year of steady rates in 2018.
With the economy slowing and macro prudential policies further tightening housing markets, the risks to rates in 2018 will be to the downside rather the upside as currently expected by markets. 
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>. 
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bevans-rYk9SxEa4r

RBA to hold interest rates next week: Westpac's Bill Evans

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Adult children inheriting or gifted wealth from their parents are more likely to start businesses, hold bachelor’s degrees and have more money in the bank, says a new study. 
 
The report A new look at the channels from housing to employment decisions, by RMIT University and Curtin University researchers working on behalf of the Australian Housing and Urban Research Institute (AHURI),
 
The report was authored by Melek Cigdem-Bayram and Gavin Wood of RMIT University and Rachel Ong of Curtin University.  
 
 explored how inter-generational wealth transfers, which are typically financed through housing wealth, influence the education and work careers of beneficiaries. 
 
The report shows that although the proportion of beneficiaries in the labour force is roughly the same as non-beneficiaries, a significantly higher proportion of beneficiaries are self-employed, said Professor Wood.
 
“Young Australians that receive inherited wealth and parental cash transfers financed from housing wealth are being helped by booming house prices,” Professor Wood said. 
 
“They have more financial assets that can act as a buffer to meet income shocks, and collateral to relax borrowing constraints. Therefore, they may be more likely to take risks, like financing their own business ventures.” 
 
Nearly 1.8 million Australians inherited money at least once between 2002 and 2012, with the average amount of each inheritance being $79,000. 
<a href="https://www.propertyobserver.com.au/images/2017/03/02/MumDadTable8.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/03/02/MumDadTable8.png" alt="">
 
<a href="https://www.propertyobserver.com.au/images/2017/03/02/MumDadTable9.png" target="_blank">Click to enlarge</a>
 <img src="https://www.urban.com.au/images/2017/03/02/MumDadTable9.png" alt="">
 Beneficiaries of parental cash transfers also have average bank deposit account balances that are more than double those of non-beneficiaries, and their average net investment income is roughly one-third higher, the report stated. 
Children who received cash transfers or bequests from their parents are also more likely to hold a bachelor’s degree.
While this may seem like good news for young Australians lucky enough to be recipients of housing wealth, this could entrench and even exacerbate inequality in lifetime economic opportunities, says Professor Wood. 
“Intergenerational transfers are an important feature of contemporary family life and housing wealth is an important direct or indirect funding source for these transfers,” Professor Wood said. 
“The evidence presented in this report confirms expectations that intergenerational transfers help beneficiaries to ‘get ahead’. 
“But if intergenerational transfers become increasingly important as a pillar supporting educational, housing and business start-up opportunities, policy-makers will need to heed the consequences for those children of less well-off parents who are bypassed by the intergenerational circulation of housing wealth.” 
 
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prateek24-ezbwHMbNAk

‘Bank of Mum and Dad’ helps kids also get ahead in education and business start-ups

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<img src="https://counter.theconversation.edu.au/content/73355/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">GUEST OBSERVER
The two central banks that matter most for Australians - the Reserve Bank of Australia (RBA) and the US Federal Reserve (the Fed) - released minutes from their latest meetings this week. And although there were not a lot of surprises, there was a fair bit of detail about what we can expect on interest rates going forward.
The Federal Open Market Committee’s (FOMC) main message was unmistakable -expect interest rate rises, and expect them sooner rather than later:
Many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations or if the risks of overshooting the committee’s maximum-employment and inflation objectives increased.
and that they:
continued to see only a modest risk of a scenario in which the unemployment rate would substantially undershoot its longer-run normal level and inflation pressures would increase significantly.
This is exactly what markets have been expecting, and it seems clear that the balance of risks is no longer that the labour market is too weak or inflation too low, but that the Fed might wait too long to continue its path of rate rises.
The really big unknown is how the Fed goes about unwinding a good chunk of its balance sheet, which involves US$2.64 trillion (with a “T”) of treasury bonds that were purchased as part of its effort to stimulate the economy in the wake of the financial crisis. The Fed also holds around US$1.75 trillion of mortgage-backed securities (“MBSs”).
The natural way to unwind this is by not reinvesting those funds when the securities mature. The Fed gets its money back and doesn’t purchase new treasuries or MBSs.
But it’s more complicated than that. New post-crisis capital rules require commercial banks to keep a large amount of reserves sitting at the Fed. This is now around US$2 trillion. The Fed has to match this liability with assets, like treasuries.
Nobody knows, but my guess is that the Fed shifts MBSs to treasuries over time, but has to keep a large asset side of the balance sheet. This suggests that maybe the whole balance sheet unwinding problem may not be as significant an issue as first thought. But this is genuinely unchartered territory.
At home, the RBA minutes confirmed the ongoing dilemma governor Philip Lowe faces. Like his predecessor, Glenn Stevens, Lowe is trying to manage: unemployment, the Aussie dollar exchange rate, business investment, overall growth, inflation and housing price stability all at the same time, but with only one instrument: the cash rate.
To see this, just look at the opening sentences of the long section of the RBA minutes titled “Considerations for Monetary Policy”. They read as follows:
In considering the stance of monetary policy, members viewed the near-term prospects for global growth as being more positive, although recognised the risks from policy uncertainty in the medium term… Domestically, the economy was continuing its transition following the end of the mining investment boom… Non-mining business investment was also expected to gain some momentum…
Conditions in housing markets varied considerably across the country… Inflation outcomes for the December quarter were much as had been expected and there had been very little change to the forecast for inflation…Labour cost pressures were expected to build gradually from their current low levels…
Wow. That’s a whole lot of targets to try and hit with a single (non-magic, non-silver) bullet. No wonder Dr Lowe has now taken to giving speeches that essentially plead businesses to invest.
It hasn’t quite gotten to “there’s never been a better time to be a business in Australia”. But close. It may, however, be that it’s never been a tougher time to be a governor of the RBA.
Richard Holden is professor of Economics and PLuS Alliance Fellow, UNSW and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">here</a>.
 
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There’s never been a tougher time to be a central banker

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Opening Statement to the House of Representatives Standing Committee on Economics by Philip Lowe, Governor, Reserve Bank.
Thank you for the opportunity to appear today to explain how we see the Australian economy as well as to discuss some of the work we have been doing at the Reserve Bank.
At the equivalent hearing a year ago, the tone of the global economy was pretty sombre. We had seen turbulence in Chinese financial markets. Commodity and equity prices were declining. Some overseas central banks had pushed their interest rates into negative territory. And global growth forecasts were being lowered again.
Twelve months on, the global economy looks to be on a firmer footing. In China, the growth target for 2016 was achieved despite the nervousness early in the year. In the United States, growth has strengthened and the economy is operating at close to full employment. And in Europe, the recovery is continuing, although it has a fair way to go in some countries. The Federal Reserve increased interest rates in December and further rises are expected this year. Elsewhere in the major economies there is no longer an expectation of further monetary easing, although some central banks are still continuing to expand their balance sheets. 
Commodity prices have moved higher. Long-term bond yields have also increased and most investors are no longer paying governments to look after their money for 10 years. Headline inflation has risen in most countries, and is much closer to target than it has been for some years. And forecasts for global growth have been revised up over recent months. This is the first time this has happened for quite a few years.
So, overall it is a more positive picture. That is the good news. There are, though, still a number of significant risks on the horizon.
In China, the growth target was achieved last year partly through a further build-up in debt especially to finance infrastructure investment and property development. This strategy was clearly helpful in the short run and it supported commodity prices, and Australia has benefited from that. But it runs counter to the Chinese authorities' goal of addressing the high levels of debt and getting domestic finances on a more stable footing. 
So we can't be sure about the longer-run implications. Recently, the Chinese authorities have taken some steps to tighten things up a bit. They have also been managing a depreciation of their currency against the US dollar and increased capital outflows as Chinese citizens send funds abroad. It's a difficult balancing act.
Turning to the United States, we can't be confident about how things will play out. It is possible that the new administration's policies could boost US and global growth. More infrastructure investment, tax reform and deregulation could all work to that end. On the other hand, if there were to be a retreat from the open international trading system, that would be damaging to the global economy, including to us here in Australia. We have much to lose if this were to occur. It is too early to tell which way things will go. Like others, we are in ‘wait and see’ mode.
In Europe, while there have been no major problems for some time, there are still a number of faultlines. Some of these could be put under pressure in the year ahead, in many cases depending on the outcomes of elections.
So there are still a number of risks in the global economy, although they no longer seem tilted to the downside. There are reasonable scenarios in which global growth picks up further and other scenarios in which it disappoints again.
I would now like to turn to the domestic economy.
A year ago, we were expecting the Australian economy to grow by around 2½–3 per cent in 2016. We haven't yet received the final figures for the year, but the outcome is likely to be lower, at around 2 per cent. The September quarter was surprisingly weak, largely reflecting temporary factors. We are not expecting a repeat of this for the December quarter, with most of the available indictors suggesting a return to reasonable growth in the quarter.
Looking forward, we still expect the Australian economy to grow by around 3 per cent this year and next. For most of the time since 2012 we have been facing headwinds from declining mining investment and falling commodity prices. Then, around the middle of last year, the headwind from falling commodity prices turned into a gentle tailwind as commodity prices lifted. And the headwind from falling mining investment should blow itself out before too long as mining investment returns to more normal levels. We will also benefit over the next few years from large increases in production of liquefied natural gas.
Economic conditions continue to vary significantly across the country. They are weaker in those parts of the country adjusting to the lower levels of mining investment and they are stronger elsewhere. Nationally, measures of business conditions have picked up noticeably recently. For some time we have been waiting for a lift in non-mining business investment. It has been a long time coming. Encouragingly, in New South Wales and Victoria we have now seen a reasonable pick-up in investment. However, we are yet to see this in most other states, where the unwinding of the mining investment boom continues to affect the overall business climate. With the decline in mining investment coming to an end, we hope to see a broader pick-up over time.
One area that we are watching closely is the cycle in residential construction activity, as the upswing has helped support the economy over recent years. The rate of new building approvals has slowed, but there is a large amount of work still in the pipeline, particularly for apartments, so we still expect some further growth in this part of the economy this year. There has, however, been some tightening in conditions for property developers in some markets.
In the broader housing market, the picture remains quite complicated. There is not a single story across the country. In parts of the country that have been adjusting to the downswing in mining investment or where there have been big increases in supply of apartments, housing prices have declined. In other parts, where the economy has been stronger and the supply-side has had trouble keeping up with strong population growth, housing prices are still rising quickly. In most areas, growth in rents is low. And recently we have seen a pick-up in growth in credit to investors, which needs to be watched carefully.
In terms of consumer prices, a year ago we had expected the inflation rate to remain above 2 per cent. It has turned out to be lower than this last year, at around 1½ per cent. Wage growth has been quite subdued, reflecting spare capacity in the labour market and the adjustment to the unwinding of the mining investment boom. We anticipate the subdued outcomes to continue for a while yet. Increased competition in retailing is also having an effect on prices, as is the low rate of increase in rents.
We do not expect the rate of inflation to fall further. Our judgement is that there are reasonable prospects for inflation to rise towards the middle of the target over time. The recent improvement in the global economy provides some extra assurance on this front. Headline inflation is expected to be back above 2 per cent later this year, boosted by higher prices for petrol and tobacco. The pick-up in underlying inflation is expected to be more gradual.
Since we appeared before this Committee last September, the Reserve Bank Board has kept the cash rate unchanged at 1.5 per cent.
At its recent meetings the Board has been paying close attention to the outlook for inflation as well as two other issues: trends in household borrowing and in the labour market.
One of the ways in which monetary policy works is to make it easier for people to borrow and spend. But there is a balance to be struck. Too much borrowing today can create problems for tomorrow, because debt does have to be repaid. At the moment, most households with borrowings do seem to be coping pretty well. But the current high level of debt, combined with low nominal income growth, is affecting the appetite of households to spend, and we are seeing some evidence of this in the consumption figures. The balance that is required is to support spending in the economy today while avoiding creating fragilities in household balance sheets that could cause problems for the economy later on. This is also something we need to watch carefully.
Trends in the labour market are also important. As in the housing market, the picture in the labour market varies significantly around the country. Overall, the unemployment rate has been steady now for a little over a year at around 5¾ per cent. In a historical context this would have been considered a good outcome, although, today, a sustainably lower unemployment rate should be possible in Australia. The other aspect of the labour market that is worth noting is the continuing trend towards part-time employment. Over the past year, all the growth in employment is accounted for by part-time jobs. There is a structural element to this, but it is also partly cyclical. We expect that the unemployment rate will remain around its current level for a while yet.
The Reserve Bank Board continues to balance these various issues within the framework of our flexible medium-term inflation target, which aims to achieve an average rate of inflation over time of 2 point something. Our judgement is that the current setting of the cash rate is consistent with both this and achieving sustainable growth in our economy. We will continue to review that judgement at future meetings.
I would like to turn to some other aspects of the work we do at the Reserve Bank.
In the area of payments, the Reserve Bank is continuing to work with industry on the development of the new payments infrastructure that will allow us all to move money around and make electronic payments more easily. The Bank is building part of the infrastructure that stands at the centre of this new system that will allow funds to be exchanged instantaneously so that customers can have very quick access to their funds. Our work is on schedule and is now being used in industry testing. Financial institutions are also working hard on their internal systems so that customers can take advantage of the new system. Developments look to be on track to allow the first payments to be made through this new system towards the end of the year.
A related focus of the Payments System Board is the important role that new technologies can play in promoting efficiency and competition. In recent meetings the Board has discussed the opportunities that distributed ledger technology could offer in the payments system and in financial market infrastructures. And it is also interested in the potential for fintech to deliver improved customer experiences. The Board is therefore taking a keen interest in the work being done by the Australian Payments Council on digital identity and customers' access to their banking and payments data.
I hope that you have all come across the new $5 banknote, which was issued by the Bank from early September last year. The note was well received by the community. You might also have noticed that last Friday we released the design for the new $10 banknote. Like the new $5, the new $10 will have world-leading security features, including the clear top-to-bottom window and a rolling colour effect that changes as the banknote is tilted. It will also have two raised bumps to assist people with vision impairment. Just like the current $10 note, the new note will feature two of Australia's most famous writers, Dame Mary Gilmore and Banjo Paterson. The printing presses are busy printing the new notes and they will be issued from September this year. We are also finalising the design of the new $50 banknote, which we plan to issue next year.
One other matter that I would like to bring to your attention is that we are in the process of commissioning an external review of the efficiency of our operations. We want to make sure that we are continuously improving as an organisation and we are seeking outside assistance to identify opportunities for improvement. The review will be focused primarily on operational and administrative matters and not on our policy frameworks. It will commence within the next month and I will be in a position to share the key conclusions with the Committee when we meet later in the year.
Finally, at previous hearings members of the Committee asked about the number of women at senior levels of the Reserve Bank. I am pleased to be able to report that we have made further progress here. Of the three assistant governors responsible for monetary and financial policies at the Reserve Bank, two are women. And women run over a third of the departments in the Bank, including those responsible for the Bank's economic analysis function and for the implementation of monetary policy. So it's quite a big change from days gone by when almost all of these important positions were held by men. 
I want to highlight these changes in the hope that they might provide some inspiration to women who are thinking of studying economics, finance and business. There are fantastic career opportunities out there and it would be great to see more women studying these disciplines, and perhaps considering a career at Australia's central bank. We are currently working on some initiatives to encourage this, at both the school and university level.
 
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Most households with borrowings seem to be coping pretty well: RBA's Philip Lowe

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Housing markets in Australia and Canada have many similarities such as large increases in home prices in cities, high household debt levels and strong investor interest in property, says RBA Governor Philip Lowe. 
He put his views across at the recent Australia-Canada Leadership Forum, saying, “We are both attractive places for non-residents to invest their savings. We both have growing populations. And we both have had to deal with very large increases in housing prices in some of our cities. With all this in common, it is not surprising that we find much to talk about and experiences to share.” 
The 13th Annual Demographia International Housing Affordability Survey ranked Sydney as the second least affordable housing market behind Hong Kong. Canada’s Vancouver was ranked third.  
Sydney’s “median multiple”, or the median house price divided by the median household income is 12.2 while Vancouver had a score of 11.8.
Other major Australian cities such as Melbourne, Adelaide and Canada’s Toronto too are not too far behind in unaffordability.
<img src="https://www.urban.com.au/images/2017/02/23/RBAHousePriceGrowth.png" alt="">
He also drew similarities on high household debt to income ratio, saying, “The increase in overall housing prices in both our countries has gone hand in hand with a further pick-up in household indebtedness (Graph 7). 
<img src="https://www.urban.com.au/images/2017/02/23/RBADebttoIncome.png" alt="">
“In both countries the ratio of household debt to income is at a record high, although the low level of interest rates means that the debt-servicing burdens are not that high at the moment.”
Another commonality was addressing the supply side of the housing market equation, with low investment in infrastructure contributing to high prices. 
“Another characteristic that we have in common is that at a time of strong demand from both residents and non-residents, there are challenges on the supply side,” Lowe said.
“I understand that zoning is an issue in Canada, just as in Australia. In some parts of Australia, there has also been underinvestment in transport infrastructure, which has limited the supply of well-located land at a time when demand for such land has been growing quickly. The result is higher prices.”
He said both countries had large differences across the various sub-markets.  
“The strength in housing markets in our major cities contrasts with marked weakness in the mining regions following the end of the mining investment boom (Graph 6).”
 <img src="https://www.urban.com.au/images/2017/02/23/RBAHousePriceCity.png" alt="" style="font-size: 12.16px;">
 
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Ratio of household debt to income at record highs in Canada and Australia: RBA Governor Lowe

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RBA Governor Philip Lowe says inflation will only rise slowly but the combination of record high household debt to income when wages were growing slowly was a “sobering combination”.
Speaking at the Australia-Canada Leadership forum, Lowe said “households are carrying more debt than they have before and, at the same time, they are experiencing slower growth in their nominal incomes than they have for some decades. For many, this is a sobering combination”.
He said “wage growth has been subdued given the ongoing slack in the labour market” and there was “downward pressure on retail prices from intensified competition”.
Although, low level of interest rates means that the debt-servicing burdens are not that high at the moment.
He said with given that outlook, underlying inflation would only increase gradually.
“Our central forecast is for headline inflation to increase to above 2 per cent later this year, boosted by increases in oil and tobacco prices. The increase in underlying inflation is expected to be a bit more gradual.”
The RBA has stuck to its forecast of 3 percent economic growth over the next couple of years. 
“If inflation is low for a long period of time, it is certainly possible that inflation expectations adjust, making it harder to achieve the objective. At the moment though, I don't see a particularly high risk of this in Australia. The recent lift in headline inflation is helpful here and most measures of inflation expectations are within the range seen over recent decades,” he said.
In relation to the risks from additional borrowing, he said it was possible that continuing rises in indebtedness, partly as a result of low interest rates, increase the fragility of household balance sheets and hurt the overall economy.  
In summary, Lowe said “flexible inflation targeting with a medium-term focus remains the right monetary policy framework for Australia”. 
 
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High debt, weak wages a 'sobering combination', warns RBA’s Lowe

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GUEST OBSERVER
RBA Governor Lowe delivered a speech in Sydney titled “Australia and Canada – Shared Experiences”. It could have easily been titled, “Household debt, inflation targeting and monetary policy”.
The Governor’s remarks reaffirmed the increased importance that the RBA is placing on financial stability. And they were another strong hint that the hurdle for policy easing under Dr Lowe is higher than it was under former Governor Glenn Stevens.
A significant chuck of the speech was devoted to recent trends in housing and borrowing. While some policymakers have chosen to focus only on supply, Dr Lowe pointed to the impact that both demand and supply factors have had on price growth.
Specifically, the Governor put forward three explanations for high demand: (i) a population growing quickly for an advanced industrialised country (i.e. high immigration); (ii) “strong” demand from overseas residents; and (iii) the global monetary environment (i.e. low rates). On the supply side, Lowe noted that there has been, “underinvestment in transport infrastructure, which has limited the supply of well- located land at a time when demand for such land has been growing quickly”.
<a href="https://www.propertyobserver.com.au/images/2017/02/22/Screen%20Shot%202017-02-22%20at%2010.32.41%20AM.png" target="_blank">Click to enlarge</a> <img src="https://www.urban.com.au/images/2017/02/22/Screen%20Shot%202017-02-22%20at%2010.32.41%20AM.png" alt="">
This is a call from the Governor to further lift public investment. And he noted in the Q&amp;A that governments should not be afraid to borrow more to fund it.
Dr Lowe then went on to say that dwelling price rises have “gone hand in hand with a further pick-up in household indebtedness”. In other words, Australia has blown up the household balance sheet. This has been facilitated by rate cuts which have reduced the debt-servicing burden. As we argued recently, we think that this has brought down the neutral interest rate in Australia to just 3 percent. The Governor noted the “sobering” combination of households carrying more debt than ever before and multi-decade low nominal income growth. Basically Lowe does not want to see household indebtedness rise further.
Dr Lowe then went on to talk about inflation targeting and more specifically, how the RBA is dealing with, “sustained low inflation and rapid increases in borrowing and housing prices”. The Governor explicitly stated that choosing the right path back to target inflation is the one that “best promotes the welfare of the Australian people”. This statement is yet another indication that the Governor is willing to take a more flexible approach to the inflation target if it reduces the further build-up of household debt and risks to financial stability. One wonders whether the RBA would have eased policy in May and August last year if Lowe had been Governor.
From a monetary policy perspective, the overriding message from the Governor is that he is very reluctant to cut the cash rate from here. Lowe basically stated that it would take the unemployment rate to rise from here for policy to be eased again. As we have argued more recently, trends in the labour market are the one to watch in 2017 rather than the inflation prints. We expect core inflation to continue to print below the Bank’s target but that won’t be enough for Lowe to cut the cash rate.
<a href="https://www.propertyobserver.com.au/images/2017/02/22/Screen%20Shot%202017-02-22%20at%2010.33.46%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/02/22/Screen%20Shot%202017-02-22%20at%2010.33.46%20AM.png" alt="">
Finally, in the Q&amp;A session the Governor expressed concerns that wages growth is too slow. And he suggested that “some pickup in wages growth would be welcome”. We’d agree and would add that it is desirable that the fruits of rising commodity prices spill over to higher wages growth as has historically been the case. 
Gareth Aird is economist at Commonwealth Bank and can be contacted <a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/gareth-aird/14/790/905">here</a>.
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RBA Governor talks debt, house prices and monetary policy: Gareth Aird

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Philip Lowe, Governor, Reserve Bank of Australia's speech to the Australia-Canada Economic Leadership Forum.
Thank you for inviting me to address this year's Australia-Canada Leadership Forum. It is a real pleasure for me to be here.
The original plan for this session was to have Bank of Canada Governor, Steve Poloz, also speak. But the timing of the Bank of Canada's next regular monetary policy meeting has meant that this wasn't possible. Like us, the Bank of Canada has a blackout period around their policy meetings. So this means that I will need to wait for a future occasion to welcome Governor Poloz to Australia.
The Bank of Canada and the Reserve Bank of Australia enjoy a very warm relationship. Many of the issues we face are similar and our perspectives are often very close to one another. This is partly because of the similarities in our economies. But it is also because Australians and Canadians are both pragmatic and open-minded people and we don't take ourselves too seriously. So, there is a natural affinity.
On the economic front, we are both medium-sized trading nations. We are both rich in natural resources. We have both had to come to terms with volatile prices for our key exports. We both have strong and resilient banking systems. We both have floating exchange rates and we operate flexible inflation targets. We are both attractive places for non-residents to invest their savings. We both have growing populations. And we both have had to deal with very large increases in housing prices in some of our cities. With all this in common, it is not surprising that we find much to talk about and experiences to share.
Australia and Canada are also both countries that have benefited greatly from international trade. We are both strong supporters of a rules-based open international trading system.
Too often these days, a commitment to open international trade, integration into global capital markets, a strong role for markets and a dynamic financial sector are seen as liabilities, not as assets. Australia and Canada provide strong counter examples. We show that openness can deliver both prosperity and resilience. We both enjoy standards of living that relatively few people elsewhere in the world enjoy. And while our economies have had their ups and downs, they have also proved to be pretty resilient.
Australians and Canadians also understand that the benefits from openness can fall unevenly across our communities. We recognise that while openness makes the size of the pie bigger, it can also affect the distribution of the pie in a way that our societies feel uncomfortable with. This is something that we have both tried to address and have had more success on this front than some other countries.
With that introduction, the main focus of my remarks this morning is on the outlook for the Australian economy. I would like to talk about this outlook in the context of three issues that I hope will have strong resonance with the Canadians in the audience. The first of these is the cycle in investment in the resources sector. The second is developments in the housing market and household borrowing. And the third is inflation targeting in a low inflation, low interest rate environment.
The Outlook
The RBA released its latest economic forecasts a couple of weeks ago.
We expect economic growth to be around 3 per cent over the next couple of years. This is a little faster than our current estimate of the potential growth of our economy. Despite this, we do not expect much change in the current rate of unemployment, which stands at around 5¾ per cent. This is because some of the above-potential growth is a result of the expansion of LNG production, which does not employ that many people.
Given this outlook, we expect underlying inflation to increase, but to do so only gradually. Wage growth remains subdued, but is not expected to decline further, and spare capacity is likely to remain in the economy for some time yet. Our central forecast is for headline inflation to increase to above 2 per cent later this year, boosted by increases in oil and tobacco prices. The increase in underlying inflation is expected to be a bit more gradual.
Commodities and Investment
The first of the three issues that I expect will strike a resonance with Canadians is the shifts in commodity prices and investment in the resources sector. This is a major factor that has shaped economic outcomes in both our countries.
While the general stories are similar, the details are different. One area of difference is the size of the movements in the prices of our main exports, summarised in the terms of trade (Graph 1). Australia's terms of trade almost doubled over the first decade of this century and in 2011 reached their highest level since the gold rushes of the 1850s. The increase in Canada was also large in a historical context, although it was not as large as that in Australia.
<a href="https://www.propertyobserver.com.au/images/2017/02/22/sp-so-2017-02-22-graph1.gif" target="_blank">Click to enlarge</a>
 <img src="https://www.urban.com.au/images/2017/02/22/sp-so-2017-02-22-graph1.gif" alt="">
This difference reflects two factors. The first is that the prices of Australia's main commodity exports – iron ore and coal – increased by significantly more than the price of Canada's main commodity export, oil. The short-run supply curve in iron ore and coal tends to be very steep, so the prices for these steel-making commodities increased very sharply when Chinese investment in property and infrastructure really took off. The second factor is that commodities make up a larger share of Australia's total exports than is the case for Canada.
Both of our countries have also experienced a pronounced cycle in mining investment. Not surprisingly, reflecting the larger movement in our commodity prices, the cycle has been bigger in Australia. Here, mining investment went from 2 per cent of GDP in the early 2000s to 9 per cent in 2012 (Graph 2). Another difference with Canada is that our main export partner, China, has grown at an average rate of almost 10 per cent over this period, compared with just 2 per cent average growth in Canada's main export partner, the United States.
<a href="https://www.propertyobserver.com.au/images/2017/02/22/sp-so-2017-02-22-graph2.gif" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/02/22/sp-so-2017-02-22-graph2.gif" alt="">
 
Both our countries accommodated the increase in mining investment without overheating. Our flexible exchange rates played an important role here.
Given the larger cycle in mining investment here, the impact on the rest of the economy has been more pronounced. While many parts of our economy did well from the boom in mining investment, others did not as they dealt with the higher exchange rate and found it difficult and more expensive to hire workers. One illustration of this broad impact is the substantial decline in Australia in non-mining investment as a share of GDP from the mid 2000s (Graph 2). By way of contrast, Canadian non-mining investment has shown much less variation.
For some time, a major factor shaping our forecasts for the Australian economy has been a rebalancing of investment between the resources and non-resources sectors. We estimate that the decline of mining investment back to normal levels is around 90 per cent done. So this headwind, which has been weighing on GDP growth for some time, will blow itself out before too long.
Another headwind we have had for some years is the fall in commodity prices, but this has turned into a gentle tailwind since mid last year. Since then the prices of all our main commodity exports have risen. This is good news for us, although we are not expecting the higher prices to lead to the type of pick-up in investment in the resources sector that might once have occurred. There has already been a very large expansion in supply capacity and we expect some unwinding of the recent increase in prices as supply increases. The higher prices, though, are providing a boost to our national income and this is expected to have some flow-through effects to the rest of the economy.
The other part of the story has been the expected pick-up in non-mining investment. This pick-up has been a long time coming. As in Canada, the picture is complicated by significant differences across regions. In those parts of Australia where mining investment has been declining, non-mining investment has also been falling because of the significant spill-over effects (Graph 3). Elsewhere, the picture is more encouraging. Non-mining investment has now picked up in New South Wales and Victoria. Survey measures of capacity utilisation have increased and so too have broader-based measures of business conditions. So while the near-term outlook for non-mining investment for the country as a whole remains subdued, we continue to forecast a pick-up later in the forecast period.
<a href="https://www.propertyobserver.com.au/images/2017/02/22/sp-so-2017-02-22-graph3.gif" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/02/22/sp-so-2017-02-22-graph3.gif" alt="">
 
Housing and Borrowing
I would now like to turn to a second issue that I think will strike resonance with Canadians: housing prices and borrowing. This is an issue that is discussed a lot in both our countries. We have both had strong housing markets over recent years and there are concerns about the level of household indebtedness. There are some similarities in the factors at work.
One is that our populations have been growing quickly for advanced industrialised countries. In Australia, population growth has averaged 1.7 per cent over the past decade, while in Canada it has averaged 1.1 per cent. Over the past couple of years the growth rates have moved closer together.
<a href="https://www.propertyobserver.com.au/images/2017/02/22/sp-so-2017-02-22-graph4.gif" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/02/22/sp-so-2017-02-22-graph4.gif" alt="">
Another similarity is that there has been strong demand from overseas residents for investments in residential property, particularly in our wonderful Pacific-rim cities. Not only are these cities attractive places to live, but we also offer investors security of property rights and economic and financial stability. Given the strong demand and its impact on prices in some areas, some state and provincial governments have recently levied additional taxes on foreign investors in residential property.
Our housing markets have also been affected by the global monetary environment. We both run independent monetary policies, but the level of our interest rates is influenced by what happens elsewhere in the world. With interest rates so low and our economies being resilient, it is not so surprising that people have found it an attractive time to borrow to buy housing.
<a href="https://www.propertyobserver.com.au/images/2017/02/22/sp-so-2017-02-22-graph5.gif" target="_blank">Click to enlarge</a>
 <img src="https://www.urban.com.au/images/2017/02/22/sp-so-2017-02-22-graph5.gif" alt="">
Another characteristic that we have in common is that at a time of strong demand from both residents and non-residents, there are challenges on the supply side. I understand that zoning is an issue in Canada, just as in Australia. In some parts of Australia, there has also been underinvestment in transport infrastructure, which has limited the supply of well-located land at a time when demand for such land has been growing quickly. The result is higher prices.
We are also both experiencing large differences across the various sub-markets within our countries. The strength in housing markets in our major cities contrasts with marked weakness in the mining regions following the end of the mining investment boom (Graph 6).
<a href="https://www.propertyobserver.com.au/images/2017/02/22/sp-so-2017-02-22-graph6.gif" target="_blank">Click to enlarge</a>
 <img src="https://www.urban.com.au/images/2017/02/22/sp-so-2017-02-22-graph6.gif" alt="">
The increase in overall housing prices in both our countries has gone hand in hand with a further pick-up in household indebtedness (Graph 7). In both countries the ratio of household debt to income is at a record high, although the low level of interest rates means that the debt-servicing burdens are not that high at the moment.
<a href="https://www.propertyobserver.com.au/images/2017/02/22/sp-so-2017-02-22-graph7.gif" target="_blank">Click to enlarge</a>
 <img src="https://www.urban.com.au/images/2017/02/22/sp-so-2017-02-22-graph7.gif" alt="">
In Australia, the household sector is coping reasonably well with the high levels of debt. But there are some signs that debt levels are affecting household spending. In aggregate, households are carrying more debt than they have before and, at the same time, they are experiencing slower growth in their nominal incomes than they have for some decades. For many, this is a sobering combination.
Reflecting this, our latest forecasts were prepared on the basis that growth in consumption was unlikely to run ahead of growth in household income over the next couple of years; in other words the household saving rate was likely to remain constant. This is a bit different from recent years, over which the saving rate had trended down slowly (Graph 8).
<a href="https://www.propertyobserver.com.au/images/2017/02/22/sp-so-2017-02-22-graph8.gif" target="_blank">Click to enlarge</a>
 <img src="https://www.urban.com.au/images/2017/02/22/sp-so-2017-02-22-graph8.gif" alt="">
This interaction between consumption, saving and borrowing for housing is a significant issue and one that I know both central banks are watching carefully. It is one of the key uncertainties around our central scenario for the Australian economy. It was also cited as one of the key risks for the inflation outlook in the Bank of Canada's latest Monetary Policy Report. We are still learning how households respond to higher debt levels and lower nominal income growth.
Inflation Targeting in a Low Inflation Environment
I would now like to turn to a third issue where there is some commonality of experience: that is dealing with an extended period of low inflation.
For a few years now, both countries have experienced low rates of inflation (Graph 9). Many of the same factors have been at play. Wage growth has been subdued given the ongoing slack in the labour market. We have both also seen downward pressure on retail prices from intensified competition. In its latest Monetary Policy Report, the Bank of Canada noted that this was one issue affecting food prices. The same is true in Australia, but the experience here is broader, with new entrants, including overseas retailers, putting downward pressure on the prices of a wide range of goods.
<a href="https://www.propertyobserver.com.au/images/2017/02/22/sp-so-2017-02-22-graph9.gif" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/02/22/sp-so-2017-02-22-graph9.gif" alt=""> 
We are both expecting inflation to increase, but only gradually so. In our case, we expect the disinflationary effects of the earlier decline in commodity prices and the competitive pressures in retailing to wane. Some pick-up in wages growth is also expected, although wage increases are likely to remain below average for some time yet. Our liaison with businesses does not suggest that a pick-up in wage growth is imminent, but nor does it suggest that a further slowing is in prospect.
Over recent times, both central banks have had to think about the implications for their monetary policy frameworks of sustained low inflation and rapid increases in borrowing and housing prices. Both have recently reaffirmed that inflation targeting remains the right monetary policy framework.[1] We have also emphasised that our inflation targets are flexible, not rigid straightjackets. In our case, the emphasis is very much on medium-term outcomes, rather than the outcome over any particular period.
While there are some differences in emphasis in language, there is a high degree of commonality in our approaches. Governor Poloz has said on a number of occasions that the Bank of Canada takes a ‘risk management approach’ to monetary policy.[2] This strikes a very strong resonance with us at the Reserve Bank of Australia.
At any point in time there are quite a few possible paths that the cash rate could follow to achieve Australia's inflation target, which is to achieve an average rate of inflation over time of 2 point something. Consistent with the Reserve Bank Act, we set out to choose the path that, in our judgement, best promotes the welfare of the Australian people.
In our risk management exercises, we have been seeking to balance the risks from having inflation low for a longer period against the risks from attempting to increase inflation more quickly, which would partly occur through encouraging more borrowing.
If inflation is low for a long period of time, it is certainly possible that inflation expectations adjust, making it harder to achieve the objective. At the moment though, I don't see a particularly high risk of this in Australia. The recent lift in headline inflation is helpful here and most measures of inflation expectations are within the range seen over recent decades.
In relation to the risks from additional borrowing, it is possible that continuing rises in indebtedness, partly as a result of low interest rates, increase the fragility of household balance sheets. If so, then at some point in the future, households having decided that they had borrowed too much, might cut back consumption sharply, hurting the overall economy and employment. It is difficult to quantify this risk, but it is one that is difficult to ignore. As I said, our focus is on the medium term, not just the next year or so.
Another consideration in thinking about the risks are the trends in the labour market. All else constant, if the unemployment rate is high and rising, the stronger would be the case for policy to pursue a quicker return of inflation to the midpoint of the target. To date, we have been satisfied that the labour market is heading in the right direction, if not as quickly as we'd like. After declining over 2015, our unemployment rate has been broadly steady, with employment growth concentrated in part-time jobs. And like the housing market, the labour market outcomes vary significantly across the country. So it is an area that we continue to watch carefully.
In summary then, flexible inflation targeting with a medium-term focus remains the right monetary policy framework for Australia. In both Australia and Canada our monetary policy frameworks have played important roles in our economic stability of recent times. As I mentioned at the start of my remarks, we also share other strengths – a rich commodity base, strong and resilient banking systems, an attractive destination for foreign investment, flexible exchange rates and a commitment to openness and competitive markets. But overall, Australia and Canada provide pretty good advertisements for flexible inflation-targeting frameworks.
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