&nbsp;

A local Australian has spent a Lower North Shore record $15.1 million at <a href="https://www.apartments.com.au/new-apartments/elevate-hume-place-crows-nest-25-hume-street-crows-nest-nsw-2065">Elevate Hume Place</a>, the new TOD above the recently opened Crows Nest Metro Station.

The buyer amalgamated a penthouse and sub-penthouse to create the triplex apartment that will have five bedrooms, five bathrooms, a private rooftop pool, expansive terrace, and panoramic views of Sydney Harbour and skyline. The building is being created by burgeoning developer Third.i, alongside joint venture partner Phoenix Property Investors.

The buyer was drawn to Elevate’s unrivalled connectivity, situated directly above the&nbsp;<a href="https://www.apartments.com.au/developments/crows-nest-nsw-2065">Crows Nest</a> Metro Station, and the vibrant lifestyle precinct that surrounds it. The Metro connects to the CBD in just seven minutes, and Chatswood in four.

[smartcode_project:default project_id=142550 project_image_fid=309367]

Designed by internationally acclaimed architects <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a>, Elevate draws inspiration from the ancient blue gum forests native to the area. The building is a Net Zero development, created in consultation with Indigenous communities and exceeding sustainability benchmarks. Interiors feature chevron-engineered timber flooring, natural stone benchtops, and premium Sub-Zero Wolf appliances, delivering timeless elegance and next-level comfort.

The exchange of the $15.1 million apartment, follows a recent $5 million sale, and over $30 million currently in expressions of interests. Interest in Elevate’s penthouse stock has surged, reflecting a strong appetite for ultra-luxury residences that combine design excellence with unmatched connectivity.

[smartcode_project:default project_id=142550 project_image_fid=309369]

“We’re seeing a significant uptick in interest from local and international buyers who are prioritising connectivity, sustainability, and lifestyle,” said Callum Billinghurst, Head of Sales at Third.i Group.&nbsp;

“These recent sales are a testament to the vision behind Elevate. It’s not just about luxury finishes or panoramic views, it’s about creating homes that are deeply connected to the city and the community. Buyers are responding to that. They want to live somewhere that offers more than just a postcode, they want culture, convenience, and long-term value. Elevate delivers all of that, and more.”

[smartcode_project:default project_id=142550 project_image_fid=297878]

As part of the Hume Place precinct, Elevate is transforming Crows Nest into Sydney’s most dynamic urban village. Elevate’s unique position directly above the metro, combined with its curated amenity offering, has made it a magnet for buyers seeking a future-proof investment and a vibrant urban lifestyle.

The next release at Elevate is expected later this year.

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“We’re seeing a significant uptick in interest from local and international buyers who are prioritising connectivity, sustainability, and lifestyle,” said Callum Billinghurst, Head of Sales at Third.i Group


Joel Robinson

Third.i & PPI set Lower North Shore apartment record with $15.1m sale at Elevate Hume Place penthouse amalgamation

Sydney developer Deicorp is set to officially open its <a href="https://www.apartments.com.au/new-apartments/hills-showground-village-castle-hill-2-mandala-parade-castle-hill-nsw-2154">Showground Village</a> precinct in Castle Hill.

NSW Premier Chris Minns will attend the opening on Sunday August 31, alongside&nbsp;Minister for Planning and Public Spaces Paul Scully, The Hills Shire Council Mayor Dr Michelle Byrne, Landcom CEO Alex Wendler, and Deicorp Founder Fouad Deiri.

Located just moments from Hills Showground Metro Station, the centre spans 9,500 sqm across four levels and features 26 specialty retailers as well as a 1,400 sqm public plaza, creating a new community meeting point for shopping, dining, fitness, and everyday convenience.&nbsp;

Showground Village forms part of the Hills Showground Station Precinct, an urban renewal initiative led by Landcom and Sydney Metro that will provide for around 2,300 new jobs over the next 20 years and around 9,000 new homes.&nbsp;

Deicorp was recently approved for another new development next door to Showground Village.

The new five residential buildings in the East Showgrounds Precinct, will see another 873 dwellings delivered, as well as&nbsp;3,500 sqm of open public space in the form of landscaped courtyards, a public park and communal outdoor recreational space including a playground, barbeque area, and outdoor seating.

“This approval will allow us to start construction on a range of beautifully designed, conveniently located apartments and create another vibrant, walkable and well-connected community,” said&nbsp;<a href="https://www.apartments.com.au/developers/deicorp" target="">Deicorp</a>&nbsp;Founder Fouad Deiri.

“These new homes will provide their residents with a seamless connection to jobs and services along Metro North West, and the new&nbsp;<a href="https://www.apartments.com.au/new-apartments/hills-showground-village-castle-hill-2-mandala-parade-castle-hill" target="">Hills Showground Village</a>&nbsp;retail precinct currently under construction."

Deicorp has several thousand apartments in planning and under construction across Sydney, from Zetland and Five Dock to Crows Nest and Macquarie Park.

[smartcode_project_cta:default project_id=133881]

Deicorp, NSW Premier officially open Showground Village, new retail and hospitality hub in Castle Hill

ASX-listed developer Cedar Woods is progressing its plans for its Southbank arts precinct site.&nbsp;

The developer has filed plans, which are now with the&nbsp;Department of Transport and Planning, for a new 20-level tower at&nbsp;<a href="https://www.apartments.com.au/new-apartments/141-151-sturt-street-southbank-vic-3006">141–151 Sturt Street</a>, a 2,718 sqm block opposite the Habitat Filter sculpture.

The proposal seeks to demolish the two-level&nbsp;commercial building, including a small supermarket and medical tenancies, and create a new building with 180 apartments and a focus on an&nbsp;active public realm and arts integration.

&nbsp;

<img alt="Southbank site" data-entity-type="file" data-entity-uuid="76a72db6-91ef-43ae-827d-a9cfa72893d2" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Site.png?VersionId=DZgtB4K6BswVh0QtCs3iLjXaLp0CbcEb" />

&nbsp;

There will be a full mix of apartment configurations, including 28 studio apartments, 16 one-bedroom, 104 two-bedroom, and 32 three-bedroom units.

Retail, creative arts, and residential amenity functions are integrated across the lower levels. A food and drink tenancy is planned to front Dodds Street, while a retail tenancy fronting Sturt Street will be accessed via an elevated walkway. The first floor includes a substantial 734 sqm creative arts space, envisioned to support Melbourne’s growing cultural and digital industries.

Architecture firm <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a> has put together the plans. In their&nbsp;Urban Design Report they highlighted the project’s ambition to embed itself within Southbank’s evolving cultural fabric.

A central feature of the design is a through-block link connecting Sturt and Dodds Streets, landscaped with native plantings and embedded with universal access ramps.

“The ramp has been thoughtfully integrated as the primary access point, ensuring universal accessibility for all users,” the report noted, with the link offering “a direct response to the urban planning scheme of creating more green spaces within our communities”.

<img alt="Southbank podium" data-entity-type="file" data-entity-uuid="4d24b1b2-d69c-4a11-a11d-ec6df432221c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/podium.png?VersionId=geWoJyZDmPSLODZ_.PNJ0LvpOmyyCdpo" />

The building’s podium form responds to the mandatory height limits along Dodds Street and maintains a fine-grain interface to adjoining developments. Above the podium, the tower is articulated with recessed balconies and a focus on views toward the CBD and surrounding arts institutions. A communal rooftop recreation deck and indoor lounge are positioned on level four, adjoining seven apartments and providing over 900 sqm of resident amenity space.

Vehicle access and loading will be provided via Dodds Street, with 155 resident car spaces located across two basement levels and the first three above-ground floors. Bicycle storage is more generous, with 226 spaces distributed across resident, staff and visitor needs.

Rothelowman describes the architecture as “humanist,” with ground-level interfaces designed to encourage social interaction and provide a dignified entry for both residents and passers-by. “All street interfaces are crafted to invite and nurture human connections,” the design report states. “The façade transitions to a human scale, providing an approachable and engaging streetscape”.

Cedar Woods, while well-known for its large communities it develops outside of Australia's capital cities, they have recently developed in Melbourne's inner-ring before. They are approaching completion at <a href="https://www.apartments.com.au/new-townhouses/88-leveson-north-melbourne-88-leveson-street-north-melbourne-vic-3051">88 Leveson</a>, just 15 townhouses in the heart of North Melbourne.

Cedar Woods progresses with new apartment plans in Southbank arts precinct

Brisbane developers Core Property Partners and Vector Property Australia has teamed up for Brisbane's newest apartment development.

The duo identified <a href="https://www.apartments.com.au/developments/east-brisbane-qld-4169">East Brisbane</a> as their preferred suburb, on the fringe of the Gabba Precinct, where they've just revealed BANKSII, 72 apartments opposite Raymond Park.

[smartcode_project:default project_id=136432 project_image_fid=5481]

The one-, two-, and three-bedroom apartments will sit in a glass-wrapped building that will also feature a rooftop with an&nbsp;infinity-edge pool, a BBQ area and alfresco dining spaces, sun lounges, and a sauna, as well as a resident-only gym and a ground-floor cafe.

Rhett Williams, Director of Vector Property Australia, said the project will lift the quality of the East Brisbane community and set a new benchmark.

"In Brisbane’s current property landscape, <a href="https://www.apartments.com.au/new-apartments/banksii-east-brisbane-169-wellington-road-east-brisbane-qld-4169">BANKSII</a> stands out through its emphasis on lifestyle-oriented living, connectivity and sophisticated design," Williams says.

[smartcode_project:default project_id=136432 project_image_fid=5479]

The 10-level building has been designed by MAS Architecture. Their designs were inspired by the native Banksia flower, with the architecture and interiors reflecting the organic symmetry of its namesake flora. MAS has interpreted this throughout the building’s curved form, façade detailing and interior palette.&nbsp;

The building’s flowing geometry and natural tones are complemented by large balconies and floor-to-ceiling glazing, maximising cross-breezes, daylight and views over the city, parklands and river.

“Having a strong narrative for a building helps us architecturally,” MAS noted. "We can choose colours that come off that species of flowers. The trunk and the trees and the flower elements all are now visible in our joinery on the inside and in our architectural finishes on the outside."

[smartcode_project:default project_id=136432 project_image_fid=5485]

Apartments will feature timber floors, soft porcelain tiles, brushed bronze fittings, and stone benchtops with warm veining.&nbsp;

Kitchens feature premium SMEG appliances and generous storage, while bathrooms have been designed as calming retreats with curved cabinetry and twin sinks in the master ensuites.

The building will feature a suite of rooftop and wellness amenities. Residents will have access to an infinity-edge pool, BBQ and alfresco dining areas, sun lounges and a rooftop sauna.&nbsp;

A residents-only gym will be located on the podium level, while a ground-floor café and landscaped laneway will further activate the site and improve neighbourhood connectivity.

[smartcode_project:default project_id=136432 project_image_fid=5488]

BANKSII will rise from a prime Wellington Road site, with the building oriented to overlook the adjacent Raymond Park and take in extensive city views. It is also on the doorstep of key&nbsp;lifestyle infrastructure, including the future Kangaroo Point Green Bridge, The Gabba stadium, and the planned Brisbane Live arena.&nbsp;

Public transport options, including ferry, bus and rail - including the future Cross River Rail Woolloongabba station - are all nearby, supporting a car-optional lifestyle just minutes from the CBD.

Williams said the team spent over a year searching for the ideal site before securing this location.

"We were attracted to <a href="https://www.apartments.com.au/developments/east-brisbane-qld-4169">East Brisbane</a> as it is a vibrant and growing community that offers a perfect balance of urban convenience and natural beauty with the parklands and river on our doorstep.”

The project is part of the broader Woolloongabba Games precinct, which is undergoing significant investment in the lead-up to the 2032 Brisbane Olympics. This urban renewal, coupled with infrastructure upgrades, is expected to enhance long-term liveability and capital growth in the area.

Given the wide max of configurations, BANKSII is expected to suit everyone from first home buyers and investors to families and downsizers.

[smartcode_project_cta:default project_id=136432]

BANKSII sales launch in booming East Brisbane apartment market

The Minns Labor Government will deliver Sydney’s first new heavy rail station in more than a decade – enabling up to 10,000 new homes by rezoning land around Woollahra and Edgecliff stations, right next to the CBD, to tackle the housing crisis and rebalance growth across the city.

Recent reports by the NSW Productivity Commission have warned that Sydney is losing twice as many young people as it is gaining, while also finding that Woollahra is the most feasible Local Government Area (LGA) in New South Wales to build new housing.

Despite this, housing approvals in Woollahra consistently lag well behind other LGAs, and the population has declined by 11 per cent over the past 50 years while Greater Sydney as a whole has grown by 74 per cent.

The new station that will be an eight-minute trip from Sydney CBD, will be located on the Eastern Suburbs train line in Woollahra, where a station build was started in the 1970s but never completed.

To enable the delivery of new homes the NSW Government will lead a rezoning of Woollahra and Edgecliff stations similar to other state led rezonings to allow additional homes to be built around the stations.

Affordable housing will also make up a proportion of development on the site with the final amount of affordable housing required, to be determined as part of the rezoning process.

The area surrounding the new station is within walking distance of major green and recreational space including Cooper, Trumper, Rushcutters Bay and Centennial Parks.

The Eastern Suburbs train line between Bondi Junction and Sydney CBD also has the lowest passenger usage rates during the AM peak of any line on the Sydney network, with only 43 per cent of operating capacity during the AM peak currently being utilised by passengers.

Sydney Water and Infrastructure NSW have confirmed there is capacity in the water and wastewater systems to accommodate the proposed 10,000 dwellings without major upgrades.

The rezoning is expected to take around two years and will further support the Government’s housing targets that rebalance the delivery of new homes around existing infrastructure.

&nbsp;

&nbsp;

Next stop Woollahra train station - delivering up to 10,000 new homes in the heart of Sydney

cash rate

Almost three-quarters of variable borrowers who asked for a rate cut, got one, a new survey has found.&nbsp;

In a RateCity.com.au survey of over 1,000 mortgage holders, of those on a variable rate, 52 per cent haggled with their bank for a lower rate. Over 73 per cent of these people were successful in getting at least one rate cut.

A rate reduction of 0.25 per cent could save the average mortgage holder $1,241 in interest after one year and $3,656 after three years. This is based on a $500,000 loan balance with 25 years remaining.

While the majority of changes to fixed rates in the last two months have been hikes, the opposite is happening in the variable rate market.&nbsp;

[smartcode_project:default project_id=29048 project_image_fid=151675]

RateCity.com.au home loan database analysis:

<ul>
	<li>49 lenders have cut at least one variable rate in the past two months.</li>
	<li>10 lenders have hiked variable rates in that time.</li>
	<li>The vast majority of variable rate cuts are reserved for new customers, not existing ones.</li>
</ul>

RateCity research director, Sally Tindall, said while the RBA is not expected to move the cash rate tomorrow, one phone call could potentially save the average variable rate mortgage holder thousands.

&ldquo;Variable rates are at record lows, however, most of these deals are reserved for new customers, not existing ones, unless you specifically ask,&rdquo; she said.

&ldquo;A lot of people think a handful of basis points won&rsquo;t make much of a difference, but if the discount is permanent, then the savings can potentially run into the thousands in just a few years.&quot;

While the majority of changes to fixed rates in the last two months have been hikes, the opposite is happening in the variable rate market

jordan_55689

Three out of four mortgage holders who asked for a rate cut, got one: RateCity 

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The RBA kept the official cash rate on hold, but that hasn’t stopped banks from moving home loan rates. 
  
While lenders have made a flurry of cuts to 2- and 3-year fixed rates in the last month, there has been an increase in the number of lenders hiking 4-year fixed rates. 
  
Analysis of the RateCity.com.au database shows 11 lenders have raised 4-year fixed rates, including CBA, Bendigo Bank and Aussie Home Loans, while only two have cut them. 
  
So why are 2-year fixed rates still dropping and 4-year rates rising?

[smartcode_project:default project_id=2772] 
  
The RBA is helping facilitate the ultra-low fixed rates, in part, via its term funding facility, which allows banks to borrow money at a three-year fixed rate of 0.10 per cent. 
  
Over the last month, the majority of one- to three-year fixed rate changes have been cuts, not hikes, as lenders make the most of the low-cost funding available. 
  
However, in the last month the majority of four-year fixed rates changes were in the opposite direction as some banks start to factor in a likely rise to the cash rate in 2024 and the end of the RBA’s term funding facility on 30 June this year. 
  
The big question is whether Westpac will hike its four-year rate. Australia’s second largest bank currently has the lowest four-year fixed rate in the market. Hiking this rate could lose the bank its competitive edge in this category.

[smartcode_project:default project_id=26730] 
  
Watching these four-year rates come off the table has some people panicked they will miss the bottom. Just because these rates could be soon rise, doesn’t mean you should rush out and fix for the next four years. 
  
If you are looking to refinance, work out what type of mortgage suits your finances. 

Then shop around for a competitive rate, not the other way around.

Sally Tindall is RateCity.com.au research director
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Work out what type of mortgage suits your finances, then shop around for a competitive rate, not the other way around

Why are 2-year fixed rates still dropping and 4-year rates rising? Sally Tindall

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EXPERT INSIGHT

After years of repeatedly <a href="https://theconversation.com/vital-signs-yet-another-year-of-steady-rates-whats-the-point-of-the-rba-inflation-target-110574">missing its inflation target</a> through too timid monetary policy, in the past week the Reserve Bank has decided to get tough.

Not only did it hold its closely watched <a href="https://rba.gov.au/statistics/cash-rate/">cash rate</a> target steady at 0.10% at Tuesday’s board meeting, it ramped up its efforts to defend its separate 0.10% target for the three-year government bond rate in the face of a mini-revolt by bond traders.

A few weeks back, some of the traders in Australia and elsewhere got it into their heads that big borrowing by governments would force up bond rates - a relationship that was once thought to be clear cut but hasn’t held for some time.

The traders sold government bonds issued by Australia and other nations, which in the case of the bond market, <a href="https://www.investopedia.com/articles/bonds/07/price_yield.asp">forces up the bond interest rate</a>.

Then other traders piled on, partly because economic outlooks are improving and they thought governments might soon be issuing fewer bonds, and partly because they thought other traders might agree with the traders.

That’s right: “thought other traders might agree with the traders”.

<h2>Beauty contests can make markets mad</h2>

In financial markets you don’t make money by correctly guessing what will happen, you make it by correctly guessing what other traders think will happen.

One of the founders of modern economics, John Maynard Keynes, described it as a beauty contest in which judges are rewarded not for picking the most beautiful face, but for picking the face <a href="https://www.zeninvestor.org/keynesian-beauty-contest/">other judges</a> will think is the most beautiful.

It’s like the rules in <a href="https://www.liveabout.com/family-feud-brief-overview-1396911">Family Feud</a>.

The yield on Australian Commonwealth 10-year bonds climbed from 0.98% at the start of the year to 1.11% a month later, to an extraordinary 1.87% a month after that - a near-doubling in a matter of weeks.

Even the yield on three-year bonds, which the Reserve Bank has pledged to keep at <a href="https://theconversation.com/5-ways-the-reserve-bank-is-going-to-bat-for-australia-like-never-before-149311">0.10%</a> crept up to 0.13%.

Last Friday, the Reserve Bank fought back.

It bought extra bonds a day after completing its usual purchases on Thursday.

This Tuesday, in its statement after its monthly board meeting, it added nine words to its usual acknowledgement that “<a href="https://www.rba.gov.au/media-releases/2021/mr-21-01">wage and price pressures remain subdued</a>”.

Those words were: “<a href="https://www.rba.gov.au/media-releases/2021/mr-21-03">and are expected to remain so for some years</a>”.

And then it released a <a href="https://www.rba.gov.au/mkt-operations/announcements/rba-purchases-of-government-securities-2021-03">separate statement</a> reiterating that when its A$100 billion program of buying $5 billion of government bonds each week expires in May it will launch another $100 billion program, taking the scheduled bond buying through to November.

Since the program began last November, the bank has bought $74 billion of bonds. Its message was that if traders thought it was within $26 billion of running out of ammunition, it had another $100 billion. It doubled <a href="https://www.youtube.com/watch?v=X-M8e1YYiQg">the size of its knife</a>.

The bank can’t afford to lose

Keeping control of rates is a fight the Reserve Bank has to win. When it announces a change in an interest rate, usually the <a href="https://rba.gov.au/statistics/cash-rate/">cash rate</a>, it uses words along the lines of “<a href="https://www.rba.gov.au/media-releases/2020/mr-20-06">the board decided to lower the cash rate</a>,” implying that it can.

The more accurate words it <a href="https://www.rba.gov.au/media-releases/2001/mr-01-17">used to use</a> were “the bank will be operating in the money market this morning to reduce the cash rate,” an admission that it could only try to move the cash rate, by trading in financial instruments.

So effective have its pronouncements become that in recent years it hasn’t needed to do much trading to move the cash rate - it has just announced the move knowing that traders will fall into line because it could buy or sell financial instruments if it wanted to.

If it loses a battle with traders over rates, what it says will have much less force.

It has the resources it needs to win

The bank will win whatever battle it chooses to fight because it has unlimited resources. Unlike traders, it can <a href="https://www.rba.gov.au/education/resources/explainers/unconventional-monetary-policy">create</a> as many Australian dollars as it needs in order to buy as many bonds as it needs.

So far it has chosen to defend its ground on the cash rate and the three-year bond rate. It wants both at 0.1%.

It said on Tuesday it would “not increase the cash rate until actual inflation is sustainably within the 2 to 3% target range”.

It added that for that to occur, wage growth will have to be “materially higher”, which would require significant gains in employment and a return to a tight labour market.

And then the killer sentence, <a href="https://www.rba.gov.au/media-releases/2021/mr-21-03">the last</a>, aimed directly at the traders: “The Board does not expect these conditions to be met until 2024 at the earliest.”

Although it released the statement one day before Wednesday’s <a href="https://theconversation.com/gdp-is-v-shaped-but-not-yet-good-these-three-graphs-tell-the-story-156372">national accounts</a> that showed the economic recovery continuing, it would have been aware of what they were likely to show.

It remains resolute.<img alt="The Conversation" height="1" src="https://counter.theconversation.com/content/156410/count.gif?distributor=republish-lightbox-basic" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important" t1tcsswdv="" width="1">

<a href="https://theconversation.com/profiles/richard-holden-118107">Richard Holden</a>, Professor of Economics, <a href="https://theconversation.com/institutions/unsw-1414">UNSW</a>

This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/vital-signs-in-the-battle-over-interest-rates-itd-be-unwise-to-bet-against-the-rba-156410">original article</a>.
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In the battle over interest rates, it'd be unwise to bet against the RBA: Richard Holden

<html><body>
Experts and economists are united in their view that the RBA will hold the cash rate this month, with only one prediction for any movements at all in 2021, according to the latest survey from Finder.com.au.

Tony Makin of Griffith University, believes the rate will increase this year due to the economic effects of the COVID-19 vaccination rollout.

“Global economic activity will pick up as countries are vaccinated. Given the expansion in money supplies, other things equal this will put upward pressure on inflation. Otherwise, macroeconomics textbooks need to be rewritten. 

“At the same time, record-breaking levels of public debt worldwide will continue to exert upward pressure on bond yields," Makin said.

Shane Oliver from AMP Capital said that while the economy has recovered faster than expected, the RBA is still a long way away from meeting its inflation and employment goals. 

“A rate hike is still a long way away. 

“That said, the faster than expected recovery will likely see the first hike occur earlier than the RBA's expectation of ‘no increase before 2024’. It could come late next year or early 2023," Oliver said.

Positive sentiment around both housing affordability (3%) and cost of living (3%) reached the lowest level ever recorded since the Finder survey began in 2018.

Employment continued to be the highest indicator measured with 55% expressing positive sentiment, down from its record-high of 73% last month.

Positive sentiment around employment plummeted to 0% in April when the lockdowns first began, but the nation’s stronger-than-expected economic recovery has resulted in a rosier outlook for the job market. 
</body></html>

Experts and economists are united in their view that the RBA will hold the cash rate this month, with only one prediction for any movements at all in 2021

Experts and economists forecast a cash rate lockdown until 2022

<html><body>
EXPERT OBSERVER

The Reserve Bank (RBA) has left the target rates for both the cash rate and 3-year government bond yield at 0.10 per cent. The RBA will purchase an additional $100 billion of bonds issued by the Australian Government and states and territories when the current bond purchase program is completed in mid-April. 
 

<h2>What has changed since the last RBA Board meeting on December 1?</h2>

• Joe Biden was sworn in as the 46th US President.

• ANZ job advertisements rose by 2.3 per cent in January to 161,582 available positions. Ads have lifted for eight successive months to be up 5.3 per cent from a year ago.

• Employment rose by 50,000 in December after increasing by 90,000 jobs in November. Full-time jobs rose by 35,700 and part-time jobs rose by 14,300. The unemployment rate fell from 6.8 per cent to 6.6 per cent in December.

• Preliminary retail trade fell 4.2 per cent in December (9.4 per cent annual) after rising 7.1 per cent in November.

• The weekly ANZ-Roy Morgan consumer confidence rating rose to a 15-month high.

• The NAB business confidence index fell from a 31-month high of +12.7 points to +4.5 points in December. But the business conditions index lifted from +7.0 points to 28-month highs of +14.2 points.

• The International Monetary Fund expects the global economy to expand by 5.5 per cent in 2021, which is 0.3 percentage points higher than the October 2020 forecast.

• The Consumer Price Index rose by 0.9 per cent in the December quarter to be up by 0.9 per cent on the year. The trimmed mean (underlying) measure rose 0.4 per cent in the quarter to be up 1.2 per cent on the year.

• Private sector credit (effectively outstanding loans) rose by 0.3 per cent in December to be up 1.8 per cent over the year.

• In the full twelve months to December the underlying Commonwealth Government cash balance was $186,120 million (9.5 per cent of GDP). The budget deficit for the six months to December was $9.5 billion lower than the ‘profile’ deficit.

• A retail trading frenzy for highly shorted stocks led to volatility on global sharemarkets and spilled over into the silver market.

• The Aussie dollar has lifted from US73-74 cents to US75-77 cents.

<h2>The Assessment</h2>

The Reserve Bank Board is not expecting to increase the cash rate until 2024 “at the earliest”. The first Tuesday in the month will never be the same.

<img alt="" height="436" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/screen_shot_2021-02-02_at_3.16.43_pm.png" width="620">

<h2>Perspectives on interest rates</h2>

The Reserve Bank left the cash rate at 0.10 per cent after cutting the rate from 0.25 per cent on November 3. The RBA previously cut the cash rate on March 3 and March 19, 2020, each by 25 basis points. The target rate for 3-year bond yields was left at 0.10 per cent.

On November 3 the RBA cut the 3-year bond target from 0.25 per cent to 0.10 per cent. The RBA implemented the 0.25 per cent target rate for 3-year bond yields on March 19, 2020. There have been 18 cash rate cuts since November 2011 with the cash rate cut from 4.75 per cent. Previously cash rates rose seven times from October 2009 to November 2010 from 3.00 per cent to 4.75 per cent.

<h2>What are the implications of RBA's decision?</h2>

• The Reserve Bank used the word, “strong”, five times in the statement. The economic recovery, employment and retail spending were all described as “strong”.

• The Reserve Bank Governor will go into more depth about the economic recovery in a speech tomorrow. Further, Governor Lowe gives testimony to the House of Representatives Economics Committee on Friday. On the same day the RBA issues the quarterly Statement on Monetary Policy that includes the latest forecasts. We received some inkling of the forecasts today: “In underlying terms, inflation is expected to be 11⁄4 per cent over 2021 and 11⁄2 per cent over 2022.”; “the central scenario is for unemployment to be around 6 per cent at the end of this year and 51⁄2 per cent at the end of 2022.”; the central scenario being for GDP to grow by 31⁄2 per cent over both 2021 and 2022.

• The Reserve Bank Board’s central scenario requires significant job gains and a return to a tight labour market to stoke inflation. And that is not expected until 2024 at the earliest.
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The RBA has left the target rates for both the cash rate and 3-year government bond yield at 0.10 per cent, with an increase not expected until 2024 "at the earliest"

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RBA interest rates - Set the watch for 2024: CommSec's Craig James

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EXPERT OBSERVER
<div>A double-shot Friday, with speeches from both Reserve Bank Governor Lowe and Assistant Governor Luci Ellis.</div>
<div> </div>
<div>Lowe's speech effectively confirmed that the inflation target is asymmetric.</div>
<div> </div>
<div>Although 'committed' to the 2 to 3 per cent inflation target, the next move in interest rates will be up, he noted, even though inflation is yet again set to fall below the target. As energy and fuel price pressures ease the rate of inflation will likely drop over the second half of the year. That's good to the extent that it eases pressure on household budgets, of course. But, in the spirit of Mr. Micawber, it is hoped that eventually inflation will pick up again. Amazon might have something to say about that as retail price deflation again rears its head. Rates on hold
</div>
<div> </div>
<div>Whether you agree or otherwise, at least it's been made clear: the cash rate is going to be set at 1.5 per cent for a long time! Probably a very long time.</div>
<div> </div>
<div>Lowe also delivered an interesting interpretation of housing credit dynamics, noting that the slowing of the housing market had reduced demand for credit by investors, in doing so citing low mortgage rates as evidence that the reduced supply of credit has not been the main story.</div>
<div> </div>
<div>The plural of anecdote is not data, but that's not quite the feedback we've been getting from mortgage brokers. </div>
<div> </div>
<div>Semantics, maybe, given the reflexive nature of such things.</div>
<div> </div>
<div>Luci on lags</div>
<div> </div>
<div>Assistant Governor Ellis also presented an interesting speech on lags, showing how the unemployment rate has been improving (if not very much for the long term unemployed).</div>
<div> </div>
<div>No arguments there, although building permits are now falling away outside Melbourne (OK, and Hobart), while money growth is now at the lowest level in more than a quarter of a century. </div>
<div> </div>
<div>If those weak leading indicators persist, then eventually the economy will start to slow too...yes, it's those pesky lags again!</div>
<div> </div>
<div>Maybe that's already happening, according to the timeliest business surveys.</div>
<div> </div>
<div>The labour force figures released this week also showed that the growth in hours worked is already on the way down. </div>
 
<div><a href="https://3.bp.blogspot.com/-kDmz34Ipxs0/W3dJwWlfd7I/AAAAAAAArlU/3SWaE5U_PZwsGrTrZ21uEB5LO6qLF99oACLcBGAs/s1600/a1.jpg"><img src="https://3.bp.blogspot.com/-kDmz34Ipxs0/W3dJwWlfd7I/AAAAAAAArlU/3SWaE5U_PZwsGrTrZ21uEB5LO6qLF99oACLcBGAs/s640/a1.jpg" width="640" height="378" data-original-height="795" data-original-width="1342"></a></div>
Long story short, inflation is low because the economy remains well below its full capacity.
<div>PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.</div>
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The cash rate is going to be locked at 1.5 per cent for a very long time: Pete Wargent

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EXPERT OBSERVATION
As widely expected, at its May meeting the RBA made no further changes to monetary policy having undertaken a substantial easing in March via a cut in the cash rate to 0.25%, targeting the three year bond yield at 0.25% to be supported by quantitative easing and providing funding to the banks for three years at just 0.25%.
So right now and given the expected and still unfolding hit to the global and Australian economies from coronavirus related shutdowns the RBA is basically in a wait and see mode.
The Bank reiterated that it has scaled back the size of its bond purchases as the 3 year bond yield is around its target of 0.25% and as the functioning of the bond market has improved.
So far it has purchased around $50 billion of bonds but has indicated that it's prepared to scale them up again to do “whatever is necessary” to ensure functional bond markets and achieve the 3 year yield target.
It also announced a slight broadening in the range of corporate debt that it is prepared to accept as collateral as part of its open market operations.
RBA Governor Lowe restated the base case Australian economic forecasts that he first ran through in his 21stApril speech.
These basically see a 10% hit to growth in the first half of the year with around a 6% decline in GDP for 2020 as a whole, followed by 6% growth next year, unemployment to peak at around 10% in coming months and still be above 7% by end 2021, and inflation going negative in the current quarter and remaining below 2% over the next few years.
These are fairly similar to our own forecasts and assume some easing in the lockdown in the months ahead. 
The RBA repeated its commitment to do “what it can” to support jobs, incomes and businesses and affirmed that it will “not increase the cash rate until progress is made towards full employment and it is confident that inflation will be sustainably within the 2-3% target band.”
For those focussed on the RBA’s cash rate, the next few years are likely to be pretty boring.
The cash rate is at the RBA’s long stated lower bound and there is no value in taking it negative, so it won’t be cut any further.
And in the meantime, we are yet to see the full extent of the hit to the economy from the coronavirus related shutdowns and it will take several years to fully recover so a rate hike is years away.
We expect the cash rate to be stuck at 0.25% for at least the next three years.
The extraordinary monetary and fiscal policy response seen from March won’t stop the hit to the economy from the shutdowns and a sharp rise in unemployment, but they should help minimise the fall out in terms of jobs, incomes and businesses such that we can recover more quickly once the virus is better controlled.
Shane Oliver is the Head of Investment Strategy and Chief Economist at AMP Capital
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Cash rate to stay at 0.25% until at least 2023: Shane Oliver

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EXPERT OBSERVER
With the unemployment rate unlikely to fall below 6% and central banks unconvinced about any urgent need to be pre-emptive the cash rate target is likely to hold at 0.25% at least until end of 2023. However the RBA can remain an effective force in the Policy debate through its management of the three year bond yield target.
On Tuesday the Reserve Bank Governor Lowe made a major speech where he outlined the Bank’s key economic forecasts.
These forecasts are based on the Bank’s central outlook for the policy response to the Covid Crisis whereby domestic shutdowns are gradually eased through the June and September quarters and “mostly removed by late in the year”.
Westpac released forecasts on March 31 where the central outlook for the Crisis was similar to the Bank’s central view.
We are encouraged that our forecasts are broadly in line with the forecasts the Governor released in his speech. Westpac forecast that the economy would contract by around 9.5% in the first half of 2020 (RBA minus 10%); the economy would contract by 5% over 2020 (RBA minus 6%); the unemployment rate would lift to 9% by end June (RBA 10%); implying that growth would bounce back by 4–5% in the second half of 2020, (RBA similar).
We do however differ with the RBA’s forecast for growth in 2021 with the RBA forecasting 6–7% and Westpac at 4%.
It appears that, next year, we are heading for a repeat of the last few years when RBA growth forecasts were consistently significantly above our own forecasts. That bullish view is despite the observation that “the twin health and economic emergencies that we are experiencing now will cast a shadow over our economy for some time to come”.
The other key observation was around the outlook for interest rates. The Governor indicated that he expected the three year bond target to remain in place for a “number of years”.
He also reiterated that the cash rate target would not be lifted before the three year bond yield target was lifted.
The choice of the three year bond target rate as the same as the cash rate target is strategic since it sends a clear message that if the Bank is prepared to purchase three year bonds at the overnight cash rate it is reasonable to expect that it is comfortable with the cash rate holding at 0.25% for the full three years.
This does not mean that it cannot lift the rate for the bond yield target. A higher target rate would imply that the Bank now expects the cash rate to be lifted within the three year window therefore signalling an appropriately tighter monetary policy.
A lift in the target rate would see the market’s timing for the cash rate increase brought forward and the arbitrage between swap markets and the bond rate would pin point that expected timing.
BILL EVANS is the <a href="https://westpaciq.westpac.com.au/Article/42804/16785/" target="_blank">Chief Economist at Westpac</a>
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RBA likely to hold cash rate at 0.25% till 2023: Bill Evans

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Economists are highly divided on whether the Reserve Bank of Australia (RBA) made the right number of cuts to the cash rate last year, according to the latest Finder survey.
In this month’s Finder RBA Cash Rate Survey, when asked if the RBA was right to make 3 cuts in 2019, only half of the respondents to this question said it made the right call (50%,13/26).
Of the other half of experts who disagreed with the Reserve Bank's decisions, most (42%, 11/26) said the RBA should have cut less.
Graham Cooke, insights manager at Finder, said the RBA’s decisions will never please everybody.
“On the one hand, some experts say the cutting was 'overzealous' and is seeing house prices soar while most economic metrics have been stagnant."
“Others think the RBA hasn’t done enough to repair the economy in light of lagging employment and inflation figures."
“One thing is clear: three cuts have reignited the housing market and pumped up property prices across the country."
“With more cuts on the horizon, it remains to be seen whether cheaper credit and lower rates will be an elixir or a poison pill," he said."
RBA cash rate expected to hold
Nearly 9 in 10 experts and economists predict the RBA will hold the cash rate in February (87%, 34/39) with just 13% expecting a cut.
The experts predicting a cut cited the bushfires, weak wage growth, low inflation and high unemployment as the main issues necessitating an easing.
Besa Deda of St.George Economics said; “In the absence of wage pressures, inflation remains well below target. More stimulus is required to return growth to trend.”
Cooke noted the forecast for a rate cut in February dropped from 66% before the December meeting to just 13% this month.
Nearly 4 out of 5 who made a forward prediction (not including February) forecast a cash rate drop by May 2020 (79%, 23/29).
A quarter of experts predict a cut in March (24%, 7/29), while nearly a third predict a cut in April (31%, 9/29). Another quarter predict a cut in May (24%, 7/29).
Only 2 of the 39 experts (5%) on the panel thought the eventual move, whenever it happens, would be a rise.
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Half surveyed experts think RBA went wrong with rate cuts: Finder Survey

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GUEST OBSERVATION
Governor Phillip Lowe has laid out in very clear terms the circumstances in which the bank would resort to quantitative easing and the way in which it would implement it.
Quantitative easing is simply a change in the way it eases monetary policy when the official interest rate approaches zero.
Usually it does it by cutting the so-called <a href="https://www.rba.gov.au/education/resources/explainers/how-rba-implements-monetary-policy" target="_blank">cash rate</a>, which is the rate banks pay each other for money deposited overnight.
Eight years ago the cash rate was 4.5%. Three years ago it was 1.5%. After the most recent three cuts in June, July and October, it is just 0.75%
<hr>
<a href="https://images.theconversation.com/files/303837/original/file-20191126-112484-iegrak.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/303837/original/file-20191126-112484-iegrak.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
<a class="source" href="https://www.rba.gov.au/statistics/cash-rate/" target="_blank">Source: RBA</a>
Last night, Governor Lowe said the <a href="https://www.rba.gov.au/speeches/2019/sp-gov-2019-11-26" target="_blank">effective lower bound was 0.25%</a>. Rather than let the cash rate get any lower or negative (an option he explicitly ruled out), the bank will push down other longer-term rates by buying government bonds.
It’s the “quantitative easing” approach adopted by the US Federal Reserve between 2009 and 2014.
Government bonds are sold by governments in return for money, a means of borrowing. The buyer gets guaranteed interest payments and a guarantee that their money will be returned in full after three, five, 10 or even 20 years depending on the length of the bond.
Once issued, bonds can be traded on a market, and the price at which they change hands can be expressed as an implied interest rate, which becomes the risk-free rate against which all other interest rates are benchmarked.
How quantitative easing would work
Buying bonds from investors would push down that risk-free rate, pushing down the entire structure of long-term interest rates.
All other things being equal, this should also push down the exchange rate by reducing the return on Australian dollar denominated financial investments.
Governor Lowe indicated he might buy state government bonds as well as Commonwealth bonds.
Importantly, he argued that although the bank would be mindful of the need to ensure private banks had enough access to the bonds they needed to hold for regulatory purposes, those holdings would not be an impediment to quantitative easing.
He ruled out buying residential mortgage-backed securities and other private assets given that those markets are currently functioning well and Reserve Bank purchases could distort them.
The approach borrows heavily from the US Fed.
As in the US, Lowe says quantitative easing would be complemented by “forward guidance”, where the Reserve Bank would signal early how long-term interest rates would be kept low and the circumstances in which it expected to raise them again.
The guidance is designed to influence market expectations for future interest rates, enhancing the effectiveness of cuts in long term interest rates.
When it would happen
In addition to “how”, Governor Lowe spelled out “when” – the economic circumstances in which the bank would resort to quantitative easing.
It would do it when the cash rate was at 0.25% and inflation and unemployment were moving away from its objectives.
The bank targets 2-3% inflation on average over time and has recently identified 4.5% as the “full employment” unemployment rate.
Importantly, Lowe emphasised that the Australian economy has not yet reached the point where a cash rate as low as 0.25% would be needed and argued quantitative easing was unlikely to be needed in future.
The cash rate is at present 0.75%. Setting 0.25% as the effective lower bound gives the Governor 0.5 percentage points left to cut before implementing quantitative easing.
Implicitly, Governor Lowe is saying that those cuts of 0.5 percentage points will be enough to stabilise the economy.
A pause for a breath at 0.25%
Lowe also indicated the bank would not seamlessly transition to quantitative easing.
He implied there was an additional hurdle or threshold that would need to be crossed, suggesting he would be reluctant to make the transition.
His big problem is that neither inflation nor the unemployment rate are moving in the right direction.
The bank has undershot its inflation target since the end of 2014, giving the economy a weak starting point going into an emerging global downturn.
My <a href="https://www.ussc.edu.au/analysis/lessons-from-quantitative-easing-in-the-united-states-a-guide-for-australian-policymakers" target="_blank">research</a> on the US experience for the United States Studies Centre shows that the main problem with is quantitative easing was that it was not done soon enough or aggressively enough.
It might be better to be bold
While quantitative easing was effective, it could have been made more so had what was going to happen been made clearer.
The Fed went out of its way to limit the transmission of quantitative easing to the rest of the economy, fearful it would be too potent and lead to excessive inflation.
Those concerns proved misplaced. By pulling its punches, the Fed ended up being less effective and having to pursue quantitative easing for longer than if it had used it more aggressively.
Governor Lowe’s very obvious reluctance to go down the quantitative easing route suggests the Reserve Bank is in danger of making the same mistake, but it is not too late to learn from what happened in the US.<img src="https://counter.theconversation.com/content/127697/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
Stephen Kirchner, Program Director, Trade and Investment, United States Studies Centre, University of Sydney.
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/now-we-know-the-reserve-bank-has-spelled-out-what-it-will-do-when-rates-approach-zero-127697" target="_blank">original article</a>.
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