<p>Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.</p>

<p>Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;</p>

<p>David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;</p>

<p>“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;</p>

<p>[smartcode_project:default project_id=110291 project_image_fid=302785]</p>

<h2>Affordable product leads, premium demand remains resilient</h2>

<p>Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;</p>

<p>Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;</p>

<p>At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.</p>

<p>Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.</p>

<p>Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;</p>

<p>[smartcode_project:default project_id=148957 project_image_fid=364102]</p>

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

<p>Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.</p>

<p>David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.</p>

<p>“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;</p>

<p>Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.</p>

<p>[smartcode_project:default project_id=108869 project_image_fid=317905]</p>

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

<p>While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;</p>

<p>Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;</p>

<p>However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.</p>

<p>Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;</p>


Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<p><a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.</p>

<p>The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.</p>

<p>Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.</p>

<p>“Brisbane was the right step for Sammut,” Sammut said.</p>

<p>“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”</p>

<p><img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" /></p>

<p>Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.</p>

<p>The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.</p>

<p>“We are DA approved now which is very exciting,” Sammut said.</p>

<p>“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”</p>

<p><img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" /></p>

<p>Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.</p>

<p>“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.</p>

<p>The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.</p>

<p>“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”</p>

<p>The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.</p>

<p>The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.</p>


Sammut secures approval for debut Brisbane apartment development in Toowong

<p>Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.</p>

<p>Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.</p>

<p>The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.</p>

<p>“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.</p>

<p>“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.</p>

<p>“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”</p>

<p>The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.</p>

<p>“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”</p>

<p>From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.</p>

<p>“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”</p>

<p>The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.</p>

<p>“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.</p>

<p>Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.</p>

<p>“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.</p>

<p>“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”</p>

<p>The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.</p>

<p>“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.</p>

<p>Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.</p>

<p>&nbsp;</p>


Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

<p>Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.</p>

<p>The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.</p>

<p>It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.</p>

<p>With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.</p>

<p>“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.</p>

<p>“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”</p>

<p><img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" /></p>

<p>GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.</p>

<p>“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”</p>

<p>Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.</p>

<p>“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.</p>

<p><img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" /></p>

<p>&nbsp;</p>

<p>One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.</p>

<p>Green praised local policy settings.</p>

<p>“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”</p>

<p>One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.</p>

<p>“The way we will be able to achieve economies of scale is through size,” Green added.</p>


One Living enters Sydney's new apartment market with Northern Beaches site acquisition

<p>It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.</p>

<p>Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.</p>

<p>Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be</p>

<p data-end="683" data-start="511">"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.</p>

<p data-end="882" data-start="690">"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."</p>

<p data-end="882" data-start="690">[smartcode_project:default project_id=134646 project_image_fid=6109]</p>

<p>The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.</p>

<p>The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.</p>

<p>Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6110]</p>

<p>Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.</p>

<p>The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6116]</p>

<p data-end="247" data-is-last-node="" data-is-only-node="" data-start="0">While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.</p>

<p>WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.</p>

<p>With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.</p>

<p>[smartcode_project_cta:default project_id=134646]</p>


WM Residences fills gap in Mordialloc townhouse market

Mortgages

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<p><span>The Reserve Bank</span><span> of Australia Governor Philip </span><span>Lowe</span><span> has urged households to </span><span>shop around</span><span> for a better home loan deal.</span></p>
<p><span>It was during a speech where <span>Australia’s top central banker played down recent increases in mortgage rates by domestic lenders but highlighted global risks.</span></span></p>
<p>"A much less remarked upon fact is that the average mortgage rate paid in Australia has fallen since August last year, as lenders have increased their discounts," the governor said.</p>
<p>"I encourage anyone with a mortgage to shop around: there are some very good offerings out there.</p>
<p>"We can all play a role in promoting strong competition in our financial sector by shopping around and taking advantage of the good deals that are out there."</p>
<p><span>Lowe said the board was closely monitoring housing markets across the country and trends in housing finance.</span></p>
<p><span>"Housing credit growth has slowed, which, from a medium-term perspective, is a positive development. </span></p>
<p><span>"Our assessment is that this slowing largely reflects reduced demand for credit by investors, although there has been some tightening in the supply of credit as well. With housing prices falling in a number of cities, largely due to a shift in the underlying fundamentals, investors no longer find it as attractive to invest in residential property as they once did. </span></p>
<p><span>"This is a normal part of the cycle. </span></p>
<p><span>"While credit standards have been tightened, mortgage credit remains readily available."</span></p>
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jchancellor-FAypfDUnLy

RBA Governor Philip Lowe says shop around for a better home loan

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<p>At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.</p>
<p>The global economic expansion is continuing. A number of advanced economies are growing at an above-trend rate and unemployment rates are low. Growth in China has slowed a little, with the authorities easing policy while continuing to pay close attention to the risks in the financial sector. Globally, inflation remains low, although it has increased in some economies and further increases are expected given the tight labour markets. One uncertainty regarding the global outlook stems from the direction of international trade policy in the United States.</p>
<p>Financial conditions remain expansionary, although they are gradually becoming less so in some countries. There has been a broad-based appreciation of the US dollar over recent months. In Australia, money-market interest rates are higher than they were at the start of the year, although they have declined somewhat since the end of June. These higher money-market rates have not fed through into higher interest rates on retail deposits. Some lenders have increased mortgage rates by small amounts, although the average mortgage rate paid is lower than a year ago.</p>
<p>The Bank's central forecast for the Australian economy remains unchanged. GDP growth is expected to average a bit above 3 per cent in 2018 and 2019. This should see some further reduction in spare capacity. Business conditions are positive and non-mining business investment is continuing to increase. Higher levels of public infrastructure investment are also supporting the economy, as is growth in resource exports. One continuing source of uncertainty is the outlook for household consumption. Household income has been growing slowly and debt levels are high. The drought has led to difficult conditions in parts of the farm sector.</p>
<p>Australia's terms of trade have increased over the past couple of years due to rises in some commodity prices. While the terms of trade are expected to decline over time, they are likely to stay at a relatively high level. The Australian dollar remains within the range that it has been in over the past two years.</p>
<p>The outlook for the labour market remains positive. The vacancy rate is high and other forward-looking indicators continue to point to solid growth in employment. Employment growth continues to be faster than growth in the working-age population. A further gradual decline in the unemployment rate is expected over the next couple of years to around 5 per cent. Wages growth remains low. This is likely to continue for a while yet, although the improvement in the economy should see some lift in wages growth over time. Consistent with this, the rate of wages growth appears to have troughed and there are increased reports of skills shortages in some areas.</p>
<p>The latest inflation data were in line with the Bank's expectations. Over the past year, the CPI increased by 2.1 per cent, and in underlying terms, inflation was close to 2 per cent. The central forecast is for inflation to be higher in 2019 and 2020 than it is currently. In the interim, once-off declines in some administered prices in the September quarter are expected to result in headline inflation in 2018 being a little lower than earlier expected, at 1¾ per cent.</p>
<p>Conditions in the Sydney and Melbourne housing markets have continued to ease and nationwide measures of rent inflation remain low. Housing credit growth has declined to an annual rate of 5½ per cent. This is largely due to reduced demand by investors as the dynamics of the housing market have changed. Lending standards are also tighter than they were a few years ago, partly reflecting APRA's earlier supervisory measures to help contain the build-up of risk in household balance sheets. There is competition for borrowers of high credit quality.</p>
<p>The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.</p>
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j.ballantyne1990-6AQqhLzZaK

Banks seeking borrowers with high credit quality: RBA Governor's August 2018 meeting statement

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<p>The decision to keep the official interest rate on hold today marked the two year anniversary of the last change to the cash rate by the RBA.</p>
<p>It is the longest period of interest rate stability on record. </p>
<p>CoreLogic head of research Tim Lawless provides his advance commented that the steady rate setting had a lot to do with stubbornly low inflation, record high household debt, a slack labour market and, more recently, falling dwelling values. </p>
<p>Tim Lawless suggested financial markets continue to expect that the cash rate will remain unchanged until at least 2020.  </p>
<p>He noted while the cash rate has remained stable, mortgage rates have been tweaked, the extent to which depends on the borrower type and loan product.</p>
<p>"Over the same period of cash rate stability, the average standard variable mortgage rate has actually reduced by 5 basis points for owner occupiers and increased by 30 basis points for investors."</p>
<p>Three years fixed rates for investors have increased by ten basis points and discounted variable rates are up 40 basis points for investment loans.  </p>
<p>Meanwhile two of the big four banks, Commonwealth Bank and ANZ, along with 19 other lenders, have slashed interest rates on fixed home loans as competition among lenders heats up.</p>
<p>RateCity.com.au shows lenders have dropped fixed interest rates by up to 72 basis points on more than 120 products. Commonwealth Bank cut its fixed rates by 10 basis points, while ANZ cut some of its fixed rates up to 24 basis points.</p>
<p class="x_MsoNormal">1300HomeLoan Managing Director John Kolenda said it looks unlikely the RBA will make any change over the next 12 months.</p>
<p class="x_MsoNormal">“The circumstances which have prompted the RBA to stay on the interest rate sidelines for a record breaking two years see no signs of change,” Mr Kolenda said.</p>
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Two years since last RBA rate change after August 2018 board meeting decision

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<p><span>EXPERT OBSERVER</span></p>
<p><span>Markets are now broadly pricing in Westpac’s view on the outlook for the RBA cash rate with only around a 50% chance of a rate hike by the end of 2019. That is in stark contrast to a year ago when our call that rates would remain on hold in 2018 and 2019 was well out of market with markets anticipating around 75 basis points of tightening by the end of 2019.</span></p>
<p>A weakening housing market; soft inflation and wages growth; an uncertain consumer and pressures on funding have all conspired to cool markets’ expectations. That key dynamic around an uncertain consumer facing constraints on income growth with a falling savings rate always stood out as a key constraint on the ability of the household sector to lift spending in the way anticipated by the markets.</p>
<p>While markets have moved largely to embrace our view, the Reserve Bank still expects to be raising rates over the course of 2018 and 2019. I think that is apparent in their ongoing above trend growth forecasts for 2018 and 2019. But, as we have argued before, the Bank does not have a perfect track record with its forecasts (as none of us in the economics community do) and it will react to any differences between its forecasts and “reality” in a timely fashion.</p>
<p>On the other hand our forecasts for the US Federal Funds rate have been consistently above market expectations. Our analysis of the current market pricing is for around 65 basis points of further tightening through 2018 and 2019. We have expected a total of 75 basis points over that period with one 25 bps hike in September, followed by a pause, and then 25 bps hikes in March and June with the rate peaking at 2.625% in mid–2019.</p>
<p>We have expected that signs of the US economy slowing into the second half of 2019 (partly under the weight of a sharp slowdown in government spending) would see the FED curtailing its tightening cycle in anticipation of eventually cutting rates from 2021.</p>
<p>Under that scenario we had been arguing for a weakening AUD/USD which had subsequently peaked around 0.81 in late January this year.</p>
<p>Under our relative rate profile the AUD/USD cash rate differential would sink to an unprecedented –112.5 basis points by June 2019 (previous mark in the post stagflation history was –50 basis points in the late 1990s).</p>
<p>That was likely to take a heavy toll on the AUD/USD with our target being 0.72 by next June.</p>
<p>That sum of 75 basis points of hikes from the FED was still slightly above market expectations but we now believe we need to be even more bold on the FED forecasts.<br>Trends in core inflation; wages; and employment are increasingly casting doubt on a FED pause between September and March.</p>
<p>On a six month annualised basis, the core PCE is now running at 2.3% (to May) and the Employment Cost Index is rising at 2.9% (to March). This pace is somewhat faster than we had expected providing the FED with ample justification for not pausing. In that regard we note that the FED has emphasised the symmetrical nature of its inflation objective and therefore not indicating any immediate concern that the momentum in the core PCE is running above the 2% target. As such, we are still expecting the gradual (3 month intervals) approach to the tightening cycle.</p>
<p><em>Bill Evans is economic spokesman for Westpac and is head of economic research</em></p>
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The latest outlook from Westpac's interest rate whisperer: Bill Evans

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<div>EXPERT OBSERVER</div>
<div> </div>
<div>As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 1.5% at its July policy meeting. </div>
<div> </div>
<div>The Governor’s decision statement was a little less positive on the global front, and acknowledged uncertainty around the rise in Australia’s short term wholesale interest rates, but retained the core view of growth averaging a bit above 3% a year and an eventual lift in inflation.</div>
<div> </div>
<div>The closing paragraph of the statement was unchanged, retaining the key line that, “Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.”</div>
<div> </div>
<div>Commentary on the global economy was a little more mixed.</div>
<div> </div>
<div>Last month’s assessment that “The global economy has strengthened over the past year” was replaced with “The global economic expansion is continuing” – suggesting the pace is no longer accelerating.</div>
<div> </div>
<div>The picture is still broadly positive although uncertainties around trade policy and strains in a few emerging markets were again noted.</div>
<div> </div>
<div>The Governor’s comments on short term interest rates were amended as expected.</div>
<div> </div>
<div>Whereas last month the rise in Australian short term rates was ascribed to conditions in the US, this month’s statement acknowledges it is now only partly due to developments in the US with “other factors at work as well” and that “it remains to be seen the extent to which these factors persist”.</div>
<div> </div>
<div>The statement clearly needed to comment on this issue but has done so in a way that reveals very little about the Board’s thinking.</div>
<div> </div>
<div>If anything, the wording, position of the comment in the statement, and other comments about wider financial conditions (“Australian dollar has depreciated a little”; “the average mortgage interest rates on outstanding loans has been declining”) imply it is not overly concerned (at this stage).</div>
<div> </div>
<div>The local data flow continues to be in line with the RBA’s growth view, the strong March quarter GDP result and continued pick up in non-mining business investment noted, as well as the strength in public infrastructure.</div>
<div> </div>
<div>Households are again cited as a source of uncertainty.</div>
<div> </div>
<div>The Governor’s statement was more forthright about prospects for jobs and wages growth, asserting up front that “the outlook for the labour market remains positive”.</div>
<div> </div>
<div>That compares to the more nuanced, and seemingly tentative, discussion in the June decision statement although the observations in both are broadly the same (“forward looking indicators continue to point to solid growth in employment”; “unemployment steady at around 5½% for much of the past year”; “wages growth remains low” but “appears to have troughed”).</div>
<div> </div>
<div>The wording around skill shortages was a little firmer ("increasing reports ... in some areas").</div>
<div> </div>
<div>There was a notable, but secondary, shift in the language about the exchange rate with the July statement dropping the comment that “an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.”</div>
<div> </div>
<div>This line has been included in some shape or form in every Governor’s statement since March 2016. The implication is that the Bank is less wary of a rising Australian dollar disrupting the outlook with the currency at 74c vs 80c at the start of the year.</div>
<div> </div>
<div>Notably the comment was first introduced in the context of the economy’s wider transition through the wind down in the mining investment boom, a transition the RBA may now view as largely complete.</div>
<div> </div>
<div>On housing the Governor’s statement notes prices are declining in both the Sydney and Melbourne markets but with national measures "little changed" over the last six months.</div>
<div> </div>
<div>APRA’s supervisory measures are again seen as having helped contain the build-up of risk.</div>
<div> </div>
<div>The Governor seems a little less concerned about a further tightening of lending standards by banks, which is viewed as “possible” and set against the observation that average mortgage rates on outstanding loans have declined.</div>
<div> </div>
<div>Again, this remains a 'watch this space' issue.</div>
<div><strong> </strong></div>
<div>Concluding, while there were again several points of interest, the July decision statement showed little substantive change.</div>
<div> </div>
<div>The RBA still looks to be firmly on hold and prepared for a long wait.</div>
<div> </div>
<div>The minutes should reveal more about the Board’s deliberations, the discussion of short term wholesale interest rates will be of particular interest as well as the risks around a further tightening in lending standards.</div>
<div> </div>
<div>However, there’s unlikely to be any shift in rhetoric from the RBA any time soon.</div>
<div> </div>
<div>We at Westpac confirm our long held view that the official cash rate will remain unchanged throughout 2018 and 2019.</div>
<div> </div>
<div><em>Matthew Hassan is a senior economist with Westpac</em></div>
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RBA Governor foresees further tightening of lending standards by banks: Matthew Hassan

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<p>EXPERT OBSERVATION</p>
<p>As expected, the Reserve Bank Board decided to leave the cash rate at 1.5% at its June policy meeting.</p>
<p>The Governor’s decision statement also showed little substantive change although there were some notable shifts in the discussion around housing and labour markets.</p>
<p>A subsequent speech by the RBA Governor added more colour, indicating that while the economy was still moving in the right direction, the outlook for consumers, labour markets and wages growth remained uncertain and progress towards the Bank’s expected lift in incomes and inflation would be slow.</p>
<p>With labour market updates continuing to show job gains moderating and the economy’s ‘full employment’ unemployment rate likely to have moved lower, progress could be very slow indeed – more ‘glacial’ than ‘gradual’.</p>
<p>The key parts of the June decision statement were unchanged from May.</p>
<p>The closing paragraph was identical, retaining the line that “Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.” The core narrative of the statement was also essentially unchanged: a strengthening global economy with financial conditions expansionary (notwithstanding recent events and some increase in short term rates); an Australian economy tracking towards growth a little above 3%; consumers a continuing source of uncertainty but indicators pointing to a gradual reduction in unemployment and the outlook pointing to a gradual pick-up in inflation.</p>
<p>Where there were changes, these tended to be mainly ‘housekeeping’ in nature, either incorporating recent developments, rolling commentary to reflect the local data calendar or simply the passage of time.</p>
<p>Where shifts went a little further was around housing and labour markets.</p>
<p>The housing slowdown in Sydney and Melbourne was noted, as per May. More significantly, the statement notes a slowdown in investor housing credit, retaining a line that “APRA’s supervisory measures and tighter credit standards have been helpful in containing the build-up of risk in household balance sheets” but adding that “while there may be some further tightening of lending standards, the average mortgage interest rate on outstanding loans is continuing to decline.”</p>
<p>Together this is a strong indication that, to the extent that we are seeing an additional tightening in lending standards weigh on housing markets, the Bank views this as part of an important ‘de-risking’ exercise that is likely to have few material spillover effects to the wider economy.</p>
<p>That looks to be an optimistic assessment in our view. Firstly, rates and conditions on the ‘marginal’ loan are more important for market conditions.</p>
<p>Secondly, the slight decline in the average mortgage rate ignores a likely rise in average repayments as borrowers shift from ‘interest only’ to ‘principal and interest’ loans.</p>
<p>And thirdly, the discussion ignores potential negative spillovers via confidence and wealth effects (see the ‘Aus consumer incomes, wealth and demand’ article in our latest monthly Market Outlook report for a more detailed discussion).</p>
<p>The Governor’s statement carried a little less conviction around the labour market, the unemployment rate described as “little changed at around 5½ per cent for much of the past year” compared to last month when it was described as having “declined over the last year but … been steady … for some months” with a comment contrasting the improving labour market with low wages growth cut back to simply observe “wages growth remains low”.</p>
<p>While we warn against ‘over-reading’ these sorts of language changes we note that the RBA’s official forecasts currently have only a modest decline in the unemployment rate – down 0.25% to 5.25% by mid 2020 – and that the ‘full employment’ level below which conditions would be expected to see wage inflation pick up is thought to be somewhat lower.</p>
<p>This more circumspect assessment of prospective labour market conditions showed through in a more recent speech from the Governor on June 13. This reiterated the Bank’s general view that the economy is moving in the right direction, noting the slightly stronger than expected March quarter GDP result.</p>
<p>The Governor also repeated the broad expectation that “the next move in interest rates will be up, not down”. However, that line was more heavily qualified, with particular respect to the focus of the speech: uncertainties around labour markets and wages. Many conditions need to be met before the Bank would contemplate a move: the economy would need to continue “moving in the right direction”; household incomes would need to be “growing more quickly than they are now”; labour market slack would need to be lessening; and the Bank would need to be reasonably confident that inflation is moving back towards target. Most of this would require wages growth faster than the 2% pace we are current experiencing.</p>
<p>The RBA is likely uneasy about the latest labour market data.</p>
<p>Official figures continue to show a loss of momentum in jobs growth with utilisation flattening at levels indicating significant slack. Private business surveys suggest hiring should hold up but the latest Westpac Consumer Sentiment survey showed a notable weakening in unemployment expectations.</p>
<p>On wages, growth may have troughed but evidence of a meaningful lift remains scant. Certainly, a return to 3% wage growth looks a long way off.</p>
<p>We continue to expect policy to be unchanged in 2018 and 2019 and suspect the Governor’s resolve will be sorely tested by a return to sub-par growth against a backdrop of little or no progress towards its labour market, wage and inflation goals. </p>
<p>Matthew Hassan is senior economist with <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.</p>
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RBA is optimistic about the spillover effects of tightening in housing lending standards: Westpac's Matt Hassan

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<p>Conditions in the established housing market have cooled in recent months, the RBA has noted in its statement of monetary policy issued this morning.</p>
<p>Housing prices in Sydney have declined a little, conditions in Melbourne have eased following several years of strong price growth and conditions in most other capital cities remain subdued.</p>
<div class="page" title="Page 5">
<div class="layoutArea">
<div class="column">
<p><span>In Perth, housing prices were flat in the last quarter of 2017. In Brisbane, apartment prices have been relatively stable, </span>following earlier price falls, while detached house prices have increased slightly.</p>
<div class="page" title="Page 5">
<div class="layoutArea">
<div class="column">
<p><span>Conditions in established housing markets continued to ease in the second half of 2017. </span></p>
<p><span>"This was most evident in Sydney, where housing prices have declined and auction clearance rates are below their decade average (Graph 3.12).</span></p>
<p> </p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/2/9/Graph_12.jpg" target="_blank">to enlarge.</a></p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/2/9/Graph_12.jpg" alt=""></span></p>
<p><span>"In Melbourne, housing price growth has declined and auction clearance rates have trended lower in recent months."<br></span></p>
</div>
</div>
</div>
<div class="page" title="Page 6">
<div class="layoutArea">
<div class="column">
<p><span>It suggested in Sydney and Melbourne, the decline in established housing price growth has been most pronounced for detached houses and for the most expensive properties; prices in both of these categories tend to have larger cycles than other market segments (Graph 3.13). </span></p>
<p><span>The increased supply of housing and an apparent reduction in demand from foreign buyers for newly built properties are likely to be placing downward pressure on prices in Sydney, Melbourne and Brisbane though this is being offset to some extent by increased population growth, especially in Melbourne.</span></p>
<p><span> The value of housing loan approvals has been broadly stable in aggregate since the end of 2016, though the composition has shifted towards owner-occupiers and away from investors, it noted.</span></p>
<p> </p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/2/9/graph13.jpg" target="_blank">to enlarge.</a></p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/2/9/graph13.jpg" alt=""></span></p>
<p><span>Overall, growth in advertised rents picked up in the second half of 2017 due to increases in Sydney and Melbourne. </span></p>
<p><span>Rents in Brisbane appear to have stabilised following earlier declines. Advertised rents in Perth have continued to decline, consistent with the ongoing high vacancy rate, but to a lesser extent than previously. </span></p>
</div>
</div>
</div>
</div>
</div>
</div>
<p>"If housing prices were to fall significantly, households might respond by curtailing their consumption expenditure and dwelling investment," it reported.</p>
<p>"Employment in the construction sector would also be weaker.</p>
<p>"Lower housing market activity would affect state government revenues, which may affect decisions about expenditure on activities such as infrastructure projects."</p>
<p>It noted however if, on the other hand, population growth were to pick up or the reported reduction in foreign demand for newly constructed properties turns out to be temporary, housing prices may be stronger than expected.</p>
<p>"In such a scenario, dwelling investment could increase, rather than broadly stabilise, or stay higher for longer than currently forecast.</p>
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<div>
<div>
<p>Household indebtedness is high and debt levels relative to income have edged higher because household credit growth has continued to outpace weak income growth.</p>
<p>"Steps taken by regulators to address the risks in household balance sheets have seen the growth in riskier types of lending to households moderate, but risks remain," it noted adding a highly indebted household sector is likely to be more sensitive to changes in income, wealth or interest rates. </p>
</div>
</div>
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Sydney prices have declined a little: RBA statement of monetary policy 

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<p>The Reserve Bank Board does not see a strong case for a near-term adjustment in monetary policy, the Reserve Bank of Australia governor Philip Lowe says.</p>
<p>After noting this week's global financial market turmoil hadn't shaken his optimism that Australia's economy will rebound this year, Dr Lowe said the next move in official Australian interest rates "will be up, not down."</p>
<p>But Dr Lowe indicated that the Reserve Bank was unlikely to follow in lock-step with international moves to tighten monetary policy across global central banks.</p>
<div class="cq-article-content-paras section">
<p>"Just as we did not move in lock-step on the way down, we don't need to do so in the other direction," he told the A50 Australian Economic Forum gathering of global investors hosted by Citigroup in Sydney last night.</p>
<div>
<p>Dr Lowe said he expects there to be "only gradual" progress in reducing the jobless rate and having inflation return to the mid-point of his 2-3 per cent target range.</p>
<p>"If we do make that progress, at some point it will be appropriate for interest rates in Australia to also start moving up.</p>
<p>"If this is how things play out, the likely timing will depend upon the extent and pace of the progress that we make.</p>
</div>
<div>"While we do expect steady progress, that progress is likely to be only gradual.</div>
<div> </div>
<div>"Given this, the Reserve Bank board does not see a strong case for a near-term adjustment in monetary policy."</div>
<div class="cq-article-content-paras section">
<p>The speech included a suggestion that wages growth would eventually pick-up.</p>
<p>"Stronger growth in real wages would also boost household incomes and create a stronger sense of shared prosperity."</p>
<p>On the housing market, he said that prices are up by only around 3 per cent over the past year, with investors reducing borrowing in interest-only loans. <cite><br></cite></p>
<p>"A while back we had become quite concerned about some of the trends in household borrowing, including very fast growth in lending to investors and the high share of loans being made that did not require regular repayment of principal.</p>
<p>"Our concern was not that developments in household balance sheets posed a risk to the stability of the banking system.</p>
<p>"Rather, it was more that they posed a broader macro stability risk – that is, the day might come, when faced with bad economic news, households feel they have borrowed too much and respond by cutting their spending sharply, damaging the overall economy.</p>
<p>"We have worked closely with APRA, including through the Council of Financial Regulators, to address these issues.</p>
<p>"This work, together with other steps taken by APRA, has helped improve the quality of lending in Australia."</p>
<p>In the housing market, dr Lowe said there has also been a change.</p>
<p>"National measures of housing prices are up by only around 3% over the past year, a marked change from the situation a couple of years ago.</p>
<p>"This change is most pronounced in Sydney, where prices are no longer rising and conditions have also cooled in Melbourne.</p>
<p>"These changes in the housing market have reduced the incentive to borrow at low interest rates to invest in an asset whose price is increasing quickly.'</p>
</div>
</div>
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No near-term rate hike foreseen by RBA governor Phillip Lowe

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<p>The minutes of the monetary policy meeting of the Reserve bank Board on 5 December contains some noteworthy changes in the wording relative to the November minutes.</p>
<p>In describing the key issue for the Board, the following sentence was used in the concluding paragraph: “how far, and when, stronger conditions in the economy and labour market might feed through into higher wage growth and inflation remained important considerations shaping the outlook”.</p>
<p>The sentence was used “the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time”. This is the same wording that was used at the conclusion of the minutes to the October meeting, whereas in November “at this meeting” was excluded. A reasonable person might interpret the decision to include “at this meeting” as indicating a greater urgency about moving policy. However, we notice that this term has been used intermittently over the course of 2017 (March, June, July and October). Consequently it would be inappropriate to read anything into the use of this term.</p>
<p>The Board maintains its forecast that wage growth will “increase gradually over the next year or so”. But, of course, we are aware of the official forecasts that underlying inflation will hold at 1.75% in 2018, only lifting to 2% in 2019. As we have seen in recent speeches from the Governor, much store is being given to surveys which indicate that “more firms had been reporting difficulty in finding suitable labour”. This is not surprising given that full-time employment is currently growing at around its fastest pace in a decade although this is partly offset by the rise in the participation rate, leaving the unemployment rate at 5.4%, still well-above the generally accepted full-employment level of 5%.</p>
<p>The Bank seems somewhat tentative that the current strong labour market will continue with the outlook indicating that “employment growth would be somewhat above average over the next few quarters”.</p>
<p>Other encouraging signals from the economy continue around business investment with “investment intentions had been revised higher, particularly for the business services sector."</p>
<p>At the meeting the Board was also presented with scenarios under which public investment was higher than currently forecast over the following three years. These scenarios were encouraging, particularly around higher profits; worker’s incomes; productivity; and private investment prospects. With housing markets slowing substantially, the finances of state governments are likely to come under some pressure with the expected result that scenarios for public investment lifting even further than currently expected seem unlikely to prove accurate.</p>
<p>Of course, the source of concern remains the consumer. The meeting occurred the day before the release of the September quarter national accounts which showed that consumer spending growth slowed to the weakest we have seen since the December quarter 2008. The minutes report that “household consumption continued to be a significant risk, given that household incomes were growing slowly and debt levels were high”. This is a more concerning description of the outlook compared to November which used the term “uncertain.”</p>
<p>The slowdown in the Sydney housing market is recognised with prices declining. House price growth was reported as easing in Melbourne, while prices in Perth and Brisbane had been unchanged. The minutes note that “growth in household credit had slowed somewhat, but members agreed that household balance sheets still warranted careful monitoring”. It is worth noting that in response to a question around household leverage which I asked the Governor at a public dinner on November 21, he noted that household credit growth of around 6% was “okay”.</p>
<p>The developments described in the minutes are consistent with our own view that household credit growth will slow to around 4½% in 2018, still modestly boosting household leverage due to ongoing weak income growth but not representing any threat to financial stability.</p>
<p>In the Governor’s statement following the December 5 Board meeting, he changed the wording around the Australian dollar to indicate that there was no longer any official sensitivity around the level of the AUD; “the Australian dollar remains within the range that it has been in over the past few years”. The minutes provide a little more colour on this issue, noting that “members noted that while the Australian dollar had depreciated by around 5% in trade weighted terms over this period (November) it had moved within a relatively narrow range over the previous 2½ years and was a little higher than the level of early 2016”. This confirms the reasonable view that the Bank is relatively comfortable with the current level of the AUD.<br><br>Despite a generally upbeat assessment of the world economy, the minutes confirm that the Bank still expects Australia’s terms of trade to fall over the forecast period. No doubt the Bank’s ongoing caution around China is a factor here. The minutes point out a tightening in financial market conditions in direct response to managing risks in the shadow banking sector. These concerns around China’s financial stability have been a consistent theme from the Bank for some time.<br><br>Conclusion:<br>The concluding paragraph in the minutes clearly lays out the compass for policy. Strength in the labour market and expected associated spill-over effects is expected to continue, although policy will only be adjusted when it is clear that wage and price pressures return.</p>
<p>Westpac has a more cautious view on the sustainability of the current jobs and business environment while expecting that soft income growth and high debt levels will continue to constrain the consumer. We note that even the RBA now describes household consumption as  a “significant risk”. Accordingly, we do not expect to see the necessary conditions which are outlined by the RBA to emerge over the course of 2018.</p>
<p>We retain our view that the overnight cash rate will remain on hold in 2018 and 2019.</p>
<p><em>BILL EVANS</em><em> is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.</em></p>
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Cash rate will remain on hold in 2018 and 2019: Westpac's Bill Evans

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<p>As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 1.5% at its February Board meeting. The Governor’s decision statement indicates that the Bank’s central forecasts for growth and inflation remain unchanged and emphasises that the Board will be patient in assessing progress. Policy is firmly on hold.</p>
<p>The most substantive change is an additional line given prominence in the concluding paragraph stating that: “Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.” The clear message is that the Bank will not pre-empt things – it is prepared to wait for an improvement in actual conditions to come through before contemplating any changes.</p>
<p>Elsewhere in the statement, the Bank indicates its forecasts are unchanged with growth “to average a bit above 3 per cent” and CPI inflation “to be a bit above 2 per cent in 2018”. Note that the Bank’s current forecasts, from the November Statement on Monetary, have real GDP growth lifting to 3¼% in 2018 and headline CPI inflation lifting to 2¼% (but underlying inflation holding at 1¾%). The Bank will release updated forecasts with the February Statement on Monetary Policy on Friday.</p>
<p>As expected, the Governor’s statement acknowledged the more positive tone from abroad and from some of the domestic data. The global backdrop is now described as a “broad-based pick-up”. China’s growth is described as solid with what seems to be a more positive take on risks (“authorities paying increased attention to the risks in the financial sector and the sustainability of growth”). Global inflation remains low but is now viewed as likely to “increase over the next couple of years”.</p>
<p>On the domestic economy, comments are more mixed with data over the summer viewed as consistent with the Bank’s forecast for growth to pick up but household consumption a “continuing source of uncertainty” given weak growth in household incomes and high debt levels. Commentary around the labour market is largely unchanged from December – strong job gains in 2017 and indicators pointing to solid growth ahead but wages growth low and likely to stay low for a while yet. A new comment that the Bank expects “a further gradual reduction in the unemployment rate” is consistent with its November forecasts but again places the emphasis on shifts being slow to come through.</p>
<p>This slowness is also emphasised in an additional comment on inflation, which is seen as “likely to remain low for some time, reflecting low growth in labour costs and strong competition in retailing”.</p>
<p>Wording on the Australian dollar was unchanged except for a slight qualifier that the view “it remains within the range that it has been in over the past two years” is on a trade-weighted basis. With the AUD/USD cross retracing sharply in recent sessions (currently back to 0.786 USD from well over 0.800 USD) the need to bolster their rhetoric has faded.</p>
<p>Lastly, the Bank again notes that “housing prices are little changed over the past six months” but adds that prices have “recorded falls in some areas” – a slight contrast to the December statement which instead noted “conditions have eased in Sydney” and gave a little less prominence to the observation.</p>
<p>Conclusion</p>
<p>Overall, the February decision and Governor’s statement contained few surprises. The Bank continues to expect a lift in growth and inflation over coming years and, with the improvement expected to be gradual, is signalling that it is prepared to be patient in assessing how conditions are evolving.</p>
<p>The RBA’s ‘patient approach’ ensures policy will remain on hold over the first half of 2018. Westpac continues to see a more challenging year ahead for the Australian consumer and another sub-par year for wider economic growth. As such we continue to expect rates to stay on hold through the remainder of 2018 and in 2019.</p>
<p>Matthew Hassan is senior economist with <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.</p>
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