Developer <a href="https://www.apartments.com.au/developers/bottega-property-group">Bottega House</a> has secured council approval for its first Brisbane project - a $270 million luxury residential development on an absolute riverfront site in leafy St Lucia.&nbsp;

The 15-storey project, known as <a href="https://www.apartments.com.au/new-apartments/st-lucia-by-bottega-house-180-macquarie-street-st-lucia-qld-4067">St Lucia by Bottega House</a> , will occupy a prime north-facing site at 178-180 Macquarie Street, directly fronting the Brisbane River in the established inner-west suburb known for its rowing clubs, golf courses and sprawling University of Queensland campus.&nbsp;

St Lucia by Bottega House will feature a suite of amenities including dedicated wellness spaces, a mineral pool and cold plunge. The project has been positioned to attract affluent owner-occupiers seeking high-quality, house-sized apartments.&nbsp;

Bottega House has been set up by co-directors Nick Malloch, Louis Mennes and Craig Marsh.

Malloch said the project drew inspiration from its Brisbane River setting and leafy inner-west surrounds, while responding to the demands of discerning locals looking to transition from freestanding homes into apartment living.&nbsp;

"With an expansive river frontage and lush green surrounds, we knew we had to create something special that reflects the natural beauty of the location while offering residents masterfully crafted homes," said Malloch.&nbsp;

"Our intent was to complement the project's quiet, private setting by introducing residences that offer a calm retreat and sanctuary from the everyday. The result is a harmonious blend of architecture, interiors and amenity that emphasises wellbeing, comfort and beauty without excess."&nbsp;

Malloch added that project consultants had been carefully selected in alignment with Bottega House's commitment to care, quality and attention to detail. The design team includes architects <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a>, interiors practice <a href="https://www.apartments.com.au/interior-designers/mim-design">Mim Design</a> and landscaping by <a href="https://www.apartments.com.au/architects/urbis">Urbis</a>.&nbsp;

Three-bedroom apartments are expected to start around $5 millio. Selling agents Keenan &amp; Byrne said the pricing strategy for the project was anticipated to achieve upwards of $25,500 per square metre.&nbsp;

The project's development approval this week follows the success of Bottega House's inaugural Queensland project - a 22-storey collection of full-floor sky homes at Broadbeach on the Gold Coast which included the sale of a two-storey penthouse at a record price for a beachside residence.&nbsp;

St Lucia by Bottega House is expected to launch to market in November, with construction anticipated to be completed mid 2029.

[smartcode_project_cta:default project_id=151826]

Joel Robinson

Bottega House to make Brisbane debut with St Lucia riverfront apartment development

<a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Property Group</a> is advancing its affordable apartment model into Brisbane with the acquisition of another site at Cordelia Street in South Brisbane for $27 million.

Sherpa, which has a $1.7 billion pipeline across Southeast Queensland, intends to bring a cohort of apartments exclusively for first homebuyers into its proposed 186-apartment project to be built at 2 Cordelia Street.

The Sherpa model has already been incredibly well received from their Gold Coast projects, where Sherpa Group set aside a number of apartments exclusively for first homebuyers.

The new $320 million project marks Sherpa Group's second development in Brisbane, following its $255 million Symphony project, also on Cordelia Street, which is currently under construction.

Symphony will deliver 146 apartments across 28 levels, offering a mix of one, two and three-bedroom apartments. With 114 already sold, construction by <a href="https://www.apartments.com.au/builders/lps-group">LPS Group</a> is scheduled for completion in 2028.

[smartcode_project:default project_id=7574 project_image_fid=351654]

Sherpa Founder, Christie Leet, said the company was excited to be venturing into Brisbane for its second residential project.

“We’re big believers in the future of Brisbane as we lead into the 2032 Olympics and beyond,” Leet said.

“The success of Symphony has guided us into what will be our second project and we look forward to submitting our plans with council soon so we can deliver yet another quality project to the inner city residential market.

“Our Flourish model has been very well received both in Brisbane and the Gold Coast, and we’re excited to be able to offer some of these apartments again exclusively to first homebuyers to help get them into the property market.

“The model has been extraordinarily well received in our previous projects and it is something we are committed to moving forward.”

2 Cordelia Street will be designed by <a href="https://www.apartments.com.au/architects/hal-architects">HAL Architects</a> &amp; Finegrain and will include Sherpa’s signature residential amenities including pool, gym, recreation, wellness and work from home spaces.

The project will feature ground-floor commercial space, creating a vibrant amenity for residents and the surrounding community.

A development application will be lodged with Brisbane City Council in August on the code compliant site and will be launched to the market early 2027.

Sherpa acquires new site for second Brisbane apartment tower

One of North Sydney's best-known commercial buildings could become hundreds of new homes, with insurance giant Zurich Australia lodging a State Significant Development Application (SSDA) to transform 5 Blue Street into a mixed-use residential development above North Sydney Station.

Rather than demolishing the existing building and starting again, Zurich is proposing an adaptive reuse project that would convert the landmark office building into a 15-level residential development delivering 62 apartments, 86 affordable co-living dwellings, activated retail and significant upgrades to the Blue Street Plaza.

The proposal reflects a growing trend of commercial property owners repositioning ageing office assets into residential housing as Sydney grapples with housing supply shortages and changing workplace demand.

<img alt="Zurich" data-entity-type="file" data-entity-uuid="0bba7d12-06dc-4375-aad7-238c94b21ac5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%2010.42.05%E2%80%AFAM.png?VersionId=NJl5oLAEBDGuPmY3RnyliKODjMc8lvRh" />

Located directly above North Sydney Metro and train station, the 3,051 sqm site occupies one of the most strategically positioned parcels of land on Sydney's Lower North Shore.

Designed by fjcstudio, the proposal seeks to retain and adapt much of the existing structure while creating a contemporary residential address that better connects with the public domain surrounding North Sydney Station.

The application proposes two basement levels, ground floor retail, affordable co-living accommodation across the podium levels, and apartments above, while preserving and enhancing the publicly accessible Blue Street Plaza.

Rather than pursuing maximum apartment numbers, Zurich has opted for a housing mix heavily weighted towards larger owner-occupier residences.

The proposal includes 62 build-to-sell apartments comprising 12 one-bedroom, 19 two-bedroom, 29 three-bedroom apartments and two premium penthouses. It also incorporates 86 affordable co-living dwellings, which would be managed in perpetuity by a Community Housing Provider.

That balance between traditional apartments and affordable housing reflects the NSW Government's push to increase housing diversity around major transport infrastructure.

The proposal has been lodged concurrently with a rezoning application, with Zurich arguing the site is ideally positioned to support additional housing given its immediate proximity to public transport, employment and services.

"The proposal aims to respond to the housing challenges facing Sydney through the delivery of diverse housing types in a highly accessible location," the design report by fjcstudio states. It also seeks to improve pedestrian amenity through upgrades to Blue Street Plaza while creating a high-performing residential building that responds to the surrounding context.

<img alt="Zurich" data-entity-type="file" data-entity-uuid="36082e15-c636-4481-bb68-5a5f6443fe39" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%2010.41.36%E2%80%AFAM.png?VersionId=5P6VD.fvmqjQfIG3TWWMRXxQWiQBjeFB" />

Rather than replacing the commercial building, fjcstudio has developed a design that works with the existing structural framework above the rail corridor, an approach that significantly reduces demolition while allowing the site to be repositioned as a mixed-use residential precinct.

The existing structural constraints have informed much of the building's design, including its relationship with Blue Street and surrounding public spaces.

The building has been designed as a slender tower rising above a clearly defined podium, with vertically expressed façades intended to reduce the perceived bulk while reinforcing North Sydney's emerging skyline.

According to fjcstudio, the architectural language responds directly to the surrounding commercial towers while maintaining a finer grain expression more closely aligned with the neighbouring Lavender Bay streetscape.

The tower incorporates articulated façade elements, landscaped podium edges and recessed upper levels to soften its appearance and improve pedestrian amenity below.

A significant component of the proposal is the revitalisation of Blue Street Plaza.

The existing public space has long served as one of the primary pedestrian connections between North Sydney Station, Greenwood Plaza and Blue Street, yet its role is expected to become even more important following the opening of Sydney Metro.

Zurich's proposal seeks to strengthen that role by improving landscaping, introducing new retail frontages, enhancing pedestrian permeability and creating more active edges throughout the day and evening.

Ground floor retail would wrap the plaza, while separate residential and co-living entries have been designed to improve wayfinding without reducing street activation.

Landscape design has been integrated throughout the podium and public realm, softening what is currently one of the most heavily urbanised parts of North Sydney.

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fjcstudio has carefully oriented apartments towards Sydney Harbour and the CBD while using privacy blades and articulated façades to minimise overlooking between neighbouring buildings.

Large framed openings along the western elevation maximise harbour outlooks, while the eastern apartments have been angled towards the south-east to improve privacy from neighbouring development.

The project forms part of the continuing transformation of North Sydney from a predominantly commercial CBD into a genuine mixed-use city centre.

Since the completion of Victoria Cross Metro Station, developers have increasingly shifted their attention towards residential projects capable of leveraging the area's unparalleled transport connectivity.

&nbsp;

FiveX recently lodged plans for a 61-storey, 490-apartment tower that would become one of the tallest residential buildings in North Sydney if approved.

Aqualand continues to expand its Lower North Shore presence following the completion of AURA on Walker Street and its recent St Leonards and Roseville proposals.

Developers are also progressing projects throughout Walker Street, Miller Street and the Victoria Cross precinct as demand for well-located owner-occupier apartments continues to strengthen.

First look: Zurich targets North Sydney office conversion with 148-unit proposal above Metro station

Busy developer Aqualand Prestige has formally taken the next step in its expansion across Sydney's Lower North Shore, lodging a State Significant Development Application (SSDA) for its long-held Archer Street site in Chatswood.

The application covers <a href="https://www.apartments.com.au/new-apartments/51-55-archer-street-chatswood-nsw-2067">51-55 Archer Street</a>, a 1,767 sqm amalgamated site on the eastern edge of the Chatswood CBD, where the developer is seeking approval for a 45-level mixed-use tower delivering 114 apartments, including a significant affordable housing component, alongside retail, commercial space and six basement levels of parking.

The SSDA marks the latest milestone for a project Aqualand has been quietly progressing over the past two years. The developer first secured the site for its Aqualand Prestige platform before undertaking an alternative design excellence process with PTW Architects, ultimately avoiding a formal design competition through the Housing Delivery Authority pathway.

The proposal has evolved considerably from Aqualand's original concept. The revised scheme has been designed around larger owner-occupier product, with an unusually high proportion of three and four-bedroom apartments, targeting the more affluent buyer profile, and downsizer, emerging across the North Shore.

<img alt="Archer St" data-entity-type="file" data-entity-uuid="0171204c-5811-41b5-9b09-2335d1b7c3d0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-22%20at%208.52.48%E2%80%AFAM.png?VersionId=6YTuxfq.puZo7k2wbfgemcO5K3QfXYGQ" />

The 114-apartment mix comprises six studios, 27 one-bedroom apartments, 18 two-bedroom apartments, 50 three-bedroom residences and 13 four-bedroom homes. A quarter of the building will be dedicated to affordable housing, well above the mandated 15 per cent&nbsp;

PTW has structured the building vertically, with affordable housing across levels one to six, premium apartments through levels seven to 31, duplex skyhomes on klevels 32 to 43, a penthouse on level 44, and a rooftop plant level above. Six basement levels will provide resident parking and servicing.

The tower is proposed to reach approximately 154 metres, placing it among a growing collection of residential high-rises transforming Chatswood's skyline.

Rather than competing purely on height, PTW says the design has been driven by creating a slimmer tower capable of delivering significantly larger apartments.

"The primary objective of this project was to create a distinctive building that stands out from the recently approved or built structures in the Chatswood area," the design report states, noting the structural efficiency allows greater investment into apartment quality and resident amenity.

Residents would have access to more than 450 sqm of communal open space including landscaped gardens, swimming pool, rooftop entertaining areas, fitness spaces, community gardens, children's play areas and barbecue facilities.

A major focus of the design has been the public domain.

The ground plane has been opened up through landscaped terraces inspired by Willoughby's sandstone ridges, with native planting, public seating, artwork, retail activation and a series of gathering spaces intended to soften what has traditionally been a hard commercial streetscape.

The landscape strategy references Blue Gum forests once common throughout the area, while incorporating Indigenous storytelling, public art and lighting installations to strengthen the connection to Country.

Chatswood has been one of Sydney's busiest apartment markets over the past 12 months, with a steady pipeline of both new project launches and fresh development applications.

Hyecorp recently launched Celine, a 122-apartment development just along Archer Street, while Changfa and Huirong Group are progressing The Anderson, an 84-apartment project on Anderson Street.

Develotek recently secured approval for a 101-apartment tower on Pacific Highway, while Tian An LFD received the green light for Hammond Greens, its apartment development on the edge of the Chatswood Bowling Club.

Commercial property developer FiveX is also making its move into the residential market. Last month it lodged plans for a 61-storey tower with 490 apartments, which, if approved, would become one of the tallest residential buildings in Chatswood.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-fivex-targets-chatswood-skyline-with-61-storey-tower-after-north-sydney-plans">First look: FiveX targets Chatswood skyline with 61-storey tower after North Sydney plans</a>

Aqualand is also expanding its development pipeline following the launch of its luxury residential brand, Aqualand Prestige. The developer has delivered a string of high-end apartment projects across Sydney's affluent suburbs over the past decade, most recently AURA by Aqualand on Walker Street in North Sydney.

[smartcode_project:default project_id=30959 project_image_fid=292863]

It has since quietly assembled its next wave of projects.

Earlier this year Aqualand launched Boronia in Roseville, a boutique 111-apartment development on Larkin Street. The project is one of the first significant apartment developments to launch in the suburb ahead of what is expected to become one of Sydney's most active new housing precincts under the NSW Government's Low and Mid-Rise Housing reforms, which allow greater density around train stations.

[smartcode_project:default project_id=152095 project_image_fid=373685]

The developer has also lodged plans for a two-tower, 413-apartment development on Herbert Street in nearby St Leonards, further strengthening its presence across the Lower North Shore.

Beyond that, Aqualand remains behind the final stage of Barangaroo, where plans will deliver a five-hectare mixed-use precinct comprising new homes, retail, hospitality and community facilities, alongside a new Metro entrance and more than two hectares of public open space, completing the Barangaroo precinct.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/central-barangaroo-development-takes-big-step-with-concept-proposal-approval">Central Barangaroo development takes big step with concept proposal approval</a>

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-aqualand-joins-st-leonards-apartment-party">First look: Aqualand joins St Leonards apartment party</a> 
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First look: Aqualand pushes ahead with Chatswood apartment tower as SSDA lodged for Archer Street

Mass timber is becoming an increasingly popular construction material in apartment developments, but Adelaide developer <a href="https://www.apartments.com.au/developers/otello">Otello</a> is taking the approach a step further.

At its new <a href="https://www.apartments.com.au/new-apartments/flowe-bowden-18-gibson-street-bowden-sa-5007">Flowe Bowden</a> development, the exposed cross-laminated timber (CLT) structure isn't just about reducing the building's environmental footprint. It also forms the foundation of a broader wellness strategy, influencing everything from indoor air quality and natural materials to the way residents move through and experience the building.

The 115-apartment mixed-use development, designed by Melbourne-based architecture practice Fieldwork, will occupy a prominent island site opposite Bowden Village Reserve, combining one, two and three-bedroom apartments with retail and a dedicated wellness destination.

[smartcode_project:default project_id=152022 project_image_fid=375528]

Wellness isn't confined to a gym or shared resident facility at Flowe. Instead, Fieldwork embedded the concept into the building itself.

The development has been split into two residential wings connected by a naturally ventilated central breezeway, replacing traditional enclosed corridors with open-air walkways that improve natural light, encourage cross ventilation and create more opportunities for neighbourly interaction.

"Rather than treating wellness as something that only happens on the ground floor, our response integrates it throughout the building, which led us to ask what it really means to design a healthy building," Fieldwork Director Quino Holland said.

[smartcode_project:default project_id=152022 project_image_fid=375531]

The building's architecture also reflects Bowden's industrial heritage. The lower podium references the area's historic brick and sandstone buildings, while the upper levels transition to exposed CLT, allowing the timber structure to become a defining feature throughout the apartments and shared spaces.

The use of mass timber sits alongside a range of sustainability initiatives, including a fully electric, gas-free design, rooftop solar and a targeted 5 Star Green Star rating.

[smartcode_project:default project_id=152022 project_image_fid=375524]

Inside the residences, the focus remains on natural, durable materials. Blackbutt engineered timber flooring, exposed CLT ceilings, porcelain surfaces and warm timber joinery create a calming interior palette, while low-VOC finishes and responsibly sourced materials have been selected to improve indoor air quality.

Kitchens have been designed as the centrepiece of each apartment, featuring porcelain island benchtops, timber-look cabinetry and brushed steel tapware, with layouts that maximise natural light and ventilation.

[smartcode_project:default project_id=152022 project_image_fid=375530]

The more traditional interpretation of wellness comes in the form of Level Eleven, a two-storey wellness club spanning the ground floor, mezzanine and first floor.

The facility will include a gym, yoga and reformer Pilates studios, Finnish and infrared saunas, magnesium hot and cold plunge pools, and dedicated recovery spaces. Unlike many residential wellness facilities, Level Eleven will also operate commercially, allowing the broader Bowden community to access the venue while giving residents exclusive membership benefits.

The ground floor has also been designed around everyday living. A café overlooking Bowden Village Reserve will activate the street frontage, while a bike workshop with tool storage, co-working space and dog wash has been incorporated to support daily routines and encourage interaction between residents.

"Flowe brings together my two biggest passions, creating places and creating healthier lives," Otello founder Daniel Harris said.

"We wanted to create something Adelaide hasn't seen before, a genuinely healthy building, where the way you live is lifted without even trying."

Flowe is positioned directly opposite Bowden Village Reserve and within walking distance of Bowden Railway Station and the Adelaide Entertainment Centre, placing future residents just minutes from the Adelaide CBD while remaining connected to one of the city's most established urban renewal precincts.

[smartcode_project_cta:default project_id=152022]

Otello launches wellness-focused Flowe Bowden with Adelaide-first mass timber apartment design

Bill Evans

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EXPERT OBSERVER
The Westpac-Melbourne Institute Index of Consumer Sentiment plunged 17.7% to 75.6 in April from 91.9 in March.
This is the single biggest monthly decline in the forty seven year history of the survey, taking the Index beyond GFC lows to levels only seen during the deep recessions of the early 1990s (64.6) and early 1980s (75.5).
However, it is pertinent to note that the lows in previous recessions were reached after one to two years of continuous deterioration compared to the one month collapse we have seen here. Certainly we cannot rule out the Index dropping below the historic low of 64.6 we saw in November 1990.
The details of the survey which are discussed below are all very disturbing and reflect the large shocks to jobs and spending. However the most surprising message is the collapse in confidence in the housing market.
The survey comes after an extremely turbulent month in which the Coronavirus outbreak has evolved from serious concern to full-blown pandemic. Confirmed cases globally have soared from around one hundred thousand at the time of the last survey to nearly two million currently. In Australia, the number of cases has surged from just 76 a month ago to around 6,500.
Australian governments have instituted widespread shutdowns on movement and social activity that have effectively banned many forms of economic activity.
While the drop in confidence this month is severe, it could well have been worse. Despite the bleak and threatening backdrop, Australia’s pandemic experience to date has been much less debilitating than that of the hardest hit areas abroad.
The number of cases is high but has not overwhelmed Australia’s health system, with recent evidence showing a clear slowing in new cases that indicates policy measures are working to contain the spread.
These developments give some support to our view that the Australian economy will lift in the December quarter following three consecutive quarters of economic contraction.
We have also seen a swift and effective response from governments, highlighted by the Federal government’s $130 billion JobKeeper Payment scheme.
Westpac has estimated that without the Payment the unemployment rate would have soared to 17% by the end of June compared to a peak of 9% with the Payment scheme.
Note that previous recessions saw the unemployment rate peak at 11.2% (early 1990s) and 10.4% (early 1980s).
All five component sub-indexes fell in April. By far the biggest falls were in the near term outlook for the economy and in attitudes towards spending – reflecting the immediate effects of the shut-down.
The ‘economy, next 12 months’ sub-index recorded a spectacular 31% drop (the biggest monthly fall on record), taking it to 53.7. That compares to a low of 53.2 during the GFC and lows during previous recessions of 34.2 (early 1990s) and 42.1 (early 1980s).
Bill Evans is the Chief Economist at Westpac Banking Corporation
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bevans-rYk9SxEa4r

Consumer sentiment plunges in April: Bill Evans

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EXPERT OBSERVER
The Governor of the Reserve Bank has announced a number of important initiatives to support the Australian economy and the financial system. Most of these initiatives come as no surprise. Westpac released a note on March 16 which set out its expectation for these initiatives.
<ol>
<li>The cash rate target has been reduced from 0.5% to 0.25%. Furthermore, it will not be increased until the Board believes that progress has been made towards full employment and inflation is sustainably within the 2–3% target band. Since exchange settlement balances are remunerated at the cash rate minus 0.25%, the Reserve Bank has committed to increase the remuneration to 0.10% in recognition that exchange settlement balances are likely to increase significantly as a result of this policy package. 
</li>
<li>The RBA has now adopted Quantitative Easing. However, instead of nominating a volume of bond purchases, it has nominated a target yield for the three year Australian government bond rate of “around 0.25%”. This is a bold move given that, in admittedly light trading, the yield on these bonds had been around 0.6% up until the announcement. Since the announcement, the rate has fallen to around 0.4%, and further adjustments to market rates may occur. Of considerable interest has been the reaction of the bond market in longer term securities, where the rate has increased to a volatile 1.6%, indicating a very steep yield curve. This yield objective is expected to be achieved through purchases of government bonds and semi government bonds, with the purchases to occur across the yield curve. These will commence tomorrow. 
</li>
<li>Westpac is particularly pleased to see that the RBA is offering a term funding facility for the banking system. This facility will be provided for three years to authorised deposit taking institutions (ADI’s) at a fixed rate of 0.25%. ADIs will be able to obtain funding for up to 3% of existing outstanding credit. The objective is to support small and medium sized business. ADIs will still be required to take on the credit risk associated with these facilities, but may consider switching more expensive facilities for existing borrowers into these facilities, providing a cash flow boost to small and medium sized businesses. 
</li>
<li>These initiatives will not affect the Bank’s ongoing provision of liquidity to Australian financial markets through repo operations which have recently been extended to six month maturities or longer.</li>
</ol>
In addition to these initiatives announced by the RBA, the Treasurer’s Office has announced that the Australian Office of Financial Management (AOFM) will be provided with an investment capacity of $15 billion to invest in wholesale funding markets used by small ADIs and non-ADI lenders. As signalled in Westpac’s note of March 16,  this initiative parallels a similar initiative by the AOFM  during the Global Financial Crisis. It will be of particular support to issuers of Mortgage Backed Securities.
Comment
The Bank is adopting a bold policy response to target the three year bond rate at well below current market pricing. This means that they are using their balance sheet to make a significant difference to the risk-free yield curve and therefore providing support to the financial system.
The market will no doubt take full advantage of this policy decision, and it will be interesting to see the volume of required purchases to achieve the interest rate target.
Westpac has been promoting the use of term funding facilities since around July last year, and we are particularly supportive of this initiative.
This article was <a href="https://westpaciq.westpac.com.au/Article/42641/14186/" target="_blank">first published on WestpacIQ</a>
<div>
BILL EVANS is the <a href="https://www.westpac.com.au/news/authors/bill-evans/" target="_blank">chief economist at Westpac</a>.
</div>
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RBA and Commonwealth Treasury announce initiatives to support financial system: Bill Evans

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EXPERT OBSERVER
On Monday, March 9, we forecast that the Australian economy would experience a recession in 2020 with the economy contracting by 0.6% in the first half although we expected growth in the second half of 2.2% as the economy recovered from the disruption associated with COVID-19.
Our central assumption was that the COVID-19 threat would peak in the June quarter and by quarter’s end confidence and activity would begin to recover.
We described 2020 as a severe disruption or technical recession to differentiate from the last two recessions in Australia when the unemployment rate spiralled from 6% to 11%.
Our figuring last week set the forecast peak in the unemployment rate at around 5.8%- 6%, up from the current level of 5.3%.
The relatively modest increase in the unemployment rate was particularly reflective of the expectation that the disruption would be relatively short when compared to earlier recessions and viewed as such by business that there would be a degree of labour hoarding.
Later in the week we analysed the Government’s $17.6 billion Stimulus Package and concluded that the Package would not be sufficiently stimulative to avert a recession in 2020.
Our key assumptions around the Package focussed on the likely impact on spending from the $4.76 billion payments to pensioners and social security recipients and the instant asset write off provisions.
We assessed that pensioners would save around 75% of payments and social security recipients would save around 60%.
Pensioners are likely to be cautious given the collapse in bank deposit rates and health concerns. In that regard the 13.8% collapse in confidence amongst the over 65 year olds in the latest Westpac MI Consumer Sentiment Survey signals caution. Social security recipients will be unnerved by the COVID -19 threats and discouraged by the “one off” nature of the income boost.
We differed with the Government’s figuring around the lift in business investment associated with the “instant asset write off” package assuming around $2 billion compared to the Government’s estimate of $5-6 billion. With business confidence fragile going into the COVID-19 shock and weakening further we expect businesses will be cautious around boosting spending.
Nevertheless, we noted that the Package was likely to boost activity in the June quarter by 0.4% of GDP largely offsetting the estimated contraction. However we noted that conditions had deteriorated over the week and the “pre-package” contraction was now likely to be larger than estimated early last week.
In that regard our revised estimates of GDP growth in the March and June quarters, after adjusting for the Stimulus Package, are minus 0.7% and minus 0.3% respectively - a total contraction of 1% of GDP.
Recall that our estimate early last week was a total contraction of 0.6%, before adjusting for the Stimulus Package.
So what has changed?
Most notably we have seen mandatory quarantine requirements for international travellers; restrictions on large public gatherings; a brutal sell off in the global equity markets; and reports of limited liquidity in government and corporate debt markets.
Not surprisingly, as these events have moved quickly, we have made some major changes to our estimates of the impact of COVID-19 in both the March quarter and the June quarter.
We have increased our estimate of the shock to the most exposed component of consumer spending (hotels; restaurants and cafes; recreational services; and air travel) to minus 40% over the two quarters from minus 25%.
We have increased the expected shock to consumer durables to minus 7% and revised up the negative impact on home renovations and additions.
We expect outbound and inbound tourism to contract by 80% over the two quarters.
Overall we now see consumer spending contracting by 0.1% (March quarter) and 2.8% (June quarter) before recovering by 1.9% in the September quarter and 1.0% in the December quarter.
We have also made adjustments to inventories; government spending (lifting health expenditure further).
Growth through 2020 is now estimated at 1.5% with minus 1% in the first half and 2.5% in the second half.
The unemployment rate is now forecast to reach 7% by October 2020 (up from the previous estimate of 5.8%-6.0%) due to the larger negative shocks to the labour intensive sectors such as recreation; tourism; education; renovations and additions; and dwelling construction. This lift in the unemployment rate is despite reducing the participation rate from 66.1% to 65.4% as a discouraged worker effect – that is, as workers respond to a deteriorating labour market the participation rate is likely to decline.
Please note that these forecasts are not based on Australia following a European style full lock down. Not surprisingly, the forecasts are subject to downward revision in the event of such an occurrence.
This article was <a href="https://www.propertyobserver.com.au/https://westpaciq.westpac.com.au/Article/42362" target="_blank">first published on WestpacIQ</a>
<div>
BILL EVANS is the <a href="https://www.westpac.com.au/news/authors/bill-evans/" target="_blank">chief economist at Westpac</a>.
</div>
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Westpac revise 2020 forecasts, deeper recession and 7% unemployment: Bill Evans

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Westpac's chief economist Bill Evans, dubbed the rate whisperer for his consistently accurate forecasts on the RBA's cash rate calls, has predicted a 2020 recession in Australia.
"On a quarterly basis we expect the economy will contract in both the first and second quarters by 0.3% and 0.3% respectively", Evans said.
Evans however noted Australia won't come out of 2020 in negative growth.
"[The decline will be] followed by a rebound of 1.4% and 0.8% respectively in the third and fourth quarters", Evans continued, which would put the economic growth in 2020 at 1.6 per cent.
Evans says it will technically be a recession, which is defined as back to back quarters of negative growth, however he says given the forecasted second half of the year pick up it should be characterised as a "major disruption".
Evans says they expect the unemployment rate to hold below six per cent over the period. Australia's last two recessions saw the unemployment rate rise from six per cent to 11 per cent.
The veteran chief economist also says there's a great level of uncertainty surrounding the forecasts due to the unpredictable course of the coronavirus outbreak.
"The economy will be dealing with the impact of the virus when it is in a relatively fragile state with growth in 2019 at 2.2% compared to potential of 2.75%", Evans said.
<iframe src="https://www.youtube.com/embed/UTZSyY8Ef-o" frameborder="0" width="360" height="315"></iframe> Evans speaking on the prospect of a recession. Source: Westpac
He believes the 0.3 per cent contraction in the March quarter will be driven by a 10 per cent decline in services exports such as education, tourism and transport, as well as a 3.5 per cent decline in goods exports.
Evans says of most importance in the 0.3 per cent forecast decline in the June quarter will be a 1.2 per cent contraction in consumer spending.
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"The most vulnerable components of consumer spending (hotels; restaurants and cafes; recreational services; and air travel) are forecast to contract by two per cent in the March quarter to be followed by a 13 per cent contraction in the June quarter."
Evans did however add that consumer spending on products such as food and other essentials will be up 3.4 per cent.
But by the September quarter the contraction will have ended.
“Our figuring is on the basis that by the September quarter the direct impact of the virus and the policies required to contain it will have eased significantly. We expect that development on a global basis providing a significant boost to financial markets.”
The third quarter would show a 1.4 per cent increase in GDP, which would be followed by a 0.8 per cent increase in the final quarter of 2020.
“Based on this growth profile we expect that the unemployment rate will increase to a peak of 5.8 per cent in the second half of 2020; that will be marked by a period of no new jobs growth, followed by outright job losses, to be followed by a sequence of months with jobs growth beginning to recover in the fourth quarter,” Evans said.
“Partly easing the pressure on the unemployment rate will be a fall in the participation rate as workers become discouraged by the deteriorating jobs market.”
 
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Westpac's Bill Evans tips 2020 recession

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EXPERT OBSERVER
Westpac has revised its growth forecasts for the Australian economy in 2020 to take into account the expected impact from the Coronavirus. The numbers are based on a "no fiscal stimulus package" basis. The Government is set to announce its policy response later in the week and it will be necessary to adjust the numbers according to our assessment of the impact of the policies.
We expect the Australian economy will grow by 1.6% (in the year to the December quarter 2020) although growth momentum will be in two halves with the first half showing a contraction of 0.6% and the second half growing by 2.2%.
On a quarterly basis we expect the economy will contract in both the first and second quarters by 0.3% and 0.3% respectively to be followed by a rebound of 1.4% and 0.8% respectively in the third and fourth quarters.
That growth profile constitutes a technical recession but given the expected recovery in the second half of the year it is much more realistic to characterise the situation as a "major disruption" to growth rather than the style of recession that Australia has experienced in the past. Indeed, recall that in Australia’s last two recessions the unemployment rate lifted from 6% to around 11%.
We expect the unemployment rate to hold below 6% through this period.
Furthermore, there is much greater uncertainty around these forecasts due to the unpredictable course of the outbreak.
In discussing this profile it is probably best to consider the growth dynamics through each of the quarters in 2020.
The first point to note is that the economy will be dealing with the impact of the virus when it is in a relatively fragile state with growth in 2019 at 2.2% compared to potential of 2.75%.
In particular, consumer spending has been insipid with the annualised pace running at only 1% in the second half of 2020.This means that consumer spending is likely to be less resilient to shocks than if momentum had been robust.
Whereas exports (tourism; foreign students; agriculture; resources) and inventories (disrupted supply chains) will explain the major shocks in the March quarter given their exposure to the Chinese economy, the June quarter contraction will be dominated by Australia’s and the rest of the world’s exposure to the virus and the lagged effect of China’s recession in the March quarter. In particular the impact on the rest of the world has already been affecting financial markets which is likely to puncture confidence more widely.
BILL EVANS is <a href="https://www.westpac.com.au/news/authors/bill-evans/" target="_blank">chief economist of Westpac</a>. 
This article was <a href="https://westpaciq.westpac.com.au/Article/42476/14186/" target="_blank">first published on WestpacIQ</a>.
 
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Westpac cuts growth forecasts for 2020

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EXPERT OBSERVER
As Westpac predicted yesterday, the Reserve Bank Board decided to lower the cash rate by 25 basis points to 0.50 per cent at its March meeting.
In discussing the reasons behind the decision, the Governor highlighted three themes that are all linked to the coronavirus.
Firstly, “In most economies, including the United States, there is an expectation of further monetary stimulus over coming months”.
Secondly, “the Australian Government has also indicated that it will assist areas of the economy most affected by the coronavirus”.
And finally “The uncertainty that it is creating is also likely to affect domestic spending. As a result, GDP growth in the March quarter is likely to be noticeably weaker than earlier expected”.
In fact, around two thirds of the statement  are devoted to the theme of the coronavirus, while the “usual themes” around unemployment; wages; and the housing market attract only limited attention with no real change from previous statements.
The final sentences of the statement are important: “It (the Board) will continue to monitor developments closely and to assess the implications of the coronavirus for the economy. The Board is prepared to ease monetary policy further to support the Australian economy”.
With the virus impacting an economy that was already weak it was absolutely necessary to provide more support although the Reserve Bank does not recognise that risk in the Governor’s Statement.
Conclusion 
It has been Westpac’s forecast that the RBA will act again in April for much the same reasons that we have seen today – helping to assist the Australian economy to deal with the shocks associated with the virus; falling into line with other central banks’ stimulatory policies, particularly to ensure that the Australian dollar remains competitive and working in conjunction with the Australian Government to deal with the issues.
It seems that the coronavirus has brought the Government and the Reserve Bank together to address the risks with complementary policies. That “partnership” is unlikely to end with this single move by the RBA.
This article was <a href="https://www.propertyobserver.com.au/https://westpaciq.westpac.com.au/Article/42362" target="_blank">first published on WestpacIQ</a>
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BILL EVANS is the <a href="https://www.westpac.com.au/news/authors/bill-evans/" target="_blank">chief economist at Westpac</a>.
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RBA will cut again in April for the same reason as March cut: Westpac's Bill Evans

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EXPERT OBSERVER
After the developments of the weekend we now expect the RBA to cut the cash rate by 0.25% at its meeting on March 3 and the FOMC to cut by 0.50% at its meeting on March 17/18.
On Friday we published our outlook for RBA and FOMC policy.
We confirmed our forecast for an April cut from the RBA and moved forward our first cut from the FOMC from June to March.
Over the weekend there have been major developments:
<ul>
<li>Following a further 900 point sell off in the US share market on Friday FED Chair Powell made a highly unusual unscheduled intervention, near the close of trading, noting that: “We will use our tools and act as appropriate to support the economy”.</li>
<li>This statement is likely to be seen as a “call to action” for other central banks around the world.</li>
<li>The Chinese PMI’s were released for February showing a plunge to 35.7 (from 50 in January) in the manufacturing PMI (even lower than the previous record low of 38.8 in November 2008 – during the GFC); the non-manufacturing PMI fell from 54.1 to 29.6. Both these levels were significantly below formal market expectations.</li>
<li>Reports of meetings over the weekend of Government and Financial Regulators to prepare Australia’s economic defences.</li>
<li>Market pricing for a 25 basis point cut from the RBA on March 2 has increased from 18% (Australia 5 pm Friday) to 120%.</li>
<li>Market pricing for a 50 basis point cut from the FOMC in March has moved from 50% (Australia 5pm Friday) to 75%.</li>
<li>There is reasonable speculation that the confidence hit to the share market and the overall economy we have seen over the last week may impact confidence in the housing market – particularly at the top end of the market.</li>
<li>Developments outside China around the Coronavirus continue to alarm. (Last five days we have seen cases reported in 20 new countries, with 20 countries now reporting local transmission).</li>
</ul>
All these developments in this very volatile time mean that we have reviewed our forecasts for the RBA and the FOMC.
We now expect the RBA to cut the cash rate by 0.25%  to 0.5% at tomorrow’s meeting.
That is likely to be followed up by a second cut to 0.25% at the April board meeting.
The Governor has previously indicated that he would consider quantitative easing once the cash rate reached 0.25%.
QE has always been part of Westpac’s forecasts but we envisaged the policy starting in the fourth quarter of 2020. These developments are likely to bring that timetable forward to mid year.
We have long argued that the FOMC would cut by 75 basis points over 2020. That reflected our view about a slowing economy coupled with consistent under shoot on inflation.
We now see that 75 basis points being made up of 50 in March and 25 in April.
We expect that given the FOMC's focus on market liquidity these rate cuts will be supplemented by specific liquidity policies. 
A key driver of the more aggressive stance from the RBA will be to ensure the AUD remains competitive. Since the advent of the Corona Virus the AUD has fallen from USD 0.69 to USD 0.65. With the RBA now likely to be more aggressive and the recovery in China likely to be delayed (and coming from an even weaker position, based on the recent PMI’s) we have also lowered our near term (March) forecast for the AUD from USD0.65 to USD 0.63.
I am primarily responsible for the content of this research report and I certify that:
<ol class="d">
<li>to the best of my knowledge, I am not in receipt of inside information and the research does not contain inside information; and</li>
<li>no other part of the licensee has made any attempt to influence the research.</li>
</ol>
This article was <a href="https://www.propertyobserver.com.au/https://westpaciq.westpac.com.au/Article/42362" target="_blank">first published on WestpacIQ</a>
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BILL EVANS is the <a href="https://www.westpac.com.au/news/authors/bill-evans/" target="_blank">chief economist at Westpac</a>.
 
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RBA to cut rates at March and April meetings: Westpac's Bill Evans

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EXPERT OBSERVER
Despite the lift, the Leading Index growth rate remains below zero, indicating momentum tracking well below trend.
<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/2020/1/29/10_NEWS_BILL%20EVANS.jpg" alt="" width="536" height="359">
In fact the December print represents the thirteenth straight month where the Index growth rate has been negative.
This has been consistent with the persistent below trend growth we have seen for the Australian economy.
The latest update points to weak economic momentum continuing in the first half of 2020 and is consistent with Westpac’s view that growth will remain around a two per cent pace in the first half of 2020.
The Leading Index growth rate deteriorated over the second half of 2019, moving from –0.03 per cent in July to –0.32 per cent in December.
The main components driving the 0.28ppt shift have been a sell-off in commodity prices (–0.61ppts) and a more mixed performance on the Australian share market (–0.42ppts).
This has been partially offset by a stabilisation in the Westpac-MI Unemployment Expectations Index (+0.25ppts) a reduced drag from declining US industrial production (+0.21ppts), a modest lift in aggregate hours worked (+0.13ppts) and a widening yield spread as the RBA’s cuts in the cash rate have lowered short term rates (+0.10ppts).
The Reserve Bank Board next meets on February 4. Westpac expects that the Board will decide to hold the cash rate steady at its February meeting. That decision will be in response to the surprise fall in the unemployment rate from 5.3 per cent to 5.1 per cent since the last Board meeting in December.
However, we expect that decision to be a temporary pause in the rate cut cycle. The recent falls in the unemployment rate are expected to be unsustainable with this becoming apparent by the April meeting when we expect the next cut.
It is clear that the Board is confident that lower rates will boost the economy through a more competitive exchange rate; improved cash flows to households; and rising asset prices. However, the policy debate should not be around ‘either monetary policy or fiscal policy’.
The policies are not mutually exclusive and while Westpac expects a second rate cut in August we also support the use of fiscal policy to boost demand.
Our preference is to lift household incomes through bringing forward the stage two tax cuts phased over two years. A rise in expected demand should be more effective in boosting business investment than tax incentives.
BILL EVANS is the Chief Economist at Westpac
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Westpac leading index remains negative for over a year: Bill Evans 

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EXPERT OBSERVER
As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 0.75%.
The key themes around the policy outlook which have been consistently promoted in these RBA statements in recent months have been repeated.
Firstly, the Board “continues to monitor developments, including in the labour market”, and secondly, “the Board is prepared to ease monetary policy further if needed”.
However, an additional theme appears in today’s Decision Statement, “long and variable lags in the transmission of monetary policy”. This is not a new observation, given that it has appeared in Board minutes in the past but being elevated to the more succinct Decision Statement gives it some enhanced prominence.
The recent surge in established house prices, particularly in Sydney and Melbourne, has attracted further interest. The Governor now notes that the lower cash rate “has also boosted asset prices, which in time should lead to increased spending, including on residential construction”.
The relevance of house prices per se, and their impact on the real economy, will be a major source of policy discussion in the first half of 2020. The only other significant change to the Decision Statement in November is a more balanced outlook for the global economy – “while the risks are still tilted to the downside, some of these risks have lessened recently”.
Other consistent themes are: “economy appears to have reached a gentle turning point”, “the main domestic uncertainty continues to be the outlook for consumption”, and “the unemployment rate… is expected to remain around this level [5¼ per cent] for some time”.
However, in a direct reference to the need for further policy stimulus, the theme that “the Australian economy can sustain lower rates of unemployment and underemployment” stands out.
Finally, in reference to the turnaround in established housing markets, the Decision Statement still notes that “new dwelling activity is still declining and growth in housing credit remains low”.
Conclusion
This Decision Statement is a little more positive than we have seen in the past, mainly through the linking of rising house prices to a potential lift in spending and residential construction. It also continues to emphasise that the Board is prepared to be patient, is monitoring developments, that policy has long and variable lags, and is prepared to ease  "if necessary”.
If we were expecting a policy move over the next month, then this Decision Statement would raise some questions. However, our forecast that there will be a cut at the February meeting looks much safer. Over the course of the next few months, there will be a clear test of the RBA’s view that the unemployment rate will hold steady. There will also be further evidence around the strength of the consumer with the national accounts to be released tomorrow as well as two more retail sales reports.
The response of the Australian dollar to any confidence that the RBA will be on hold in February will also be important. We assess that one of the factors behind the consistently low AUD is the expectation that the RBA will continue down its easing path.
Overall, despite this emphasis on “monitoring” and the slightly more upbeat discussion on the Australian economy, we still feel confident that the rate cut in February will be delivered.
Furthermore, we argue that the growth, the unemployment rate, and inflation developments through 2020 will require further attention from the RBA culminating in a final rate cut to 0.25% in June. From that point, with further easing still required, the RBA will need to move to a form of Quantitative Easing, based on the regular monthly purchase of around AUD 2-3 billion of government securities.
BILL EVANS is Chief Economist for Westpac. 
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RBA holds the cash rate steady; emphasises scope to ease further: Bill Evans

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EXPERT OBSERVER
The recent Retail Sales Report for September has highlighted the state of demand in the Australian economy.
Real retail sales fell by 0.1% in the September quarter to be down by 0.2% over the year – the weakest result since 1991, when Australia was last in recession.
This Report is also consistent with the contraction in private domestic demand which we saw in the national accounts for the year to the June quarter.
That is despite consecutive rate cuts from the Reserve Bank in June and July and a $7.7 billion income tax cut for households (in the form of adjusting the tax offset, with a one-off lump sum payment) which started to become available from late in July.
A notable headwind to household spending is the fragility of Consumer Confidence. The Westpac MI Index of Consumer Sentiment slumped by 4.1% in July to 96.5. A rebound in August was short-lived. The latest print, for October, has the index down by 5.5% to a four year low of 92.5.
This weakness in Consumer Confidence is mirrored by weakness in Business Confidence and Conditions, which has extended throughout the September quarter, as evident in the NAB Survey.
We assess that the very low interest rates which the Reserve Bank has had to implement are now impacting confidence as consumers equate low interest rates with disturbing weakness in the economy.
The Reserve Bank has recognised that issue and is trying to balance the impact of lower rates on confidence with the benefits of lower rates through the traditional channels of lowering the AUD and boosting households’ disposable income.
A lift in spending through that second channel is being impacted by the confidence effect and the policies of some banks to adjust mortgage repayments with a lag – meaning that initially households pay down debt more rapidly rather than benefitting from improved cash flows.
We expect the RBA will persist with lower rates with one more cut to the cash rate next February. That decision may be represented as a package with additional stimulus taking the form of quantitative easing through a program of purchases of CGS; RMBS and other corporate securities and, possibly, long term funding for financial institutions.
It will be necessary to signal further stimulus through a program to maintain downward pressure on the AUD. With other central banks including the Federal Reserve; the ECB; the BOJ and the PBOC continuing to ease financial conditions the AUD will be at risk of unwelcome upward pressure if the RBA signals an end to its easing cycle.
Those monetary policies will reflect a difficult year in 2020 for the world economy as trade disputes, complemented by uncertainty around the US Presidential election, continue to impact investment and confidence.
However, as the RBA and other commentators have been highlighting, this need to boost demand also requires some support from fiscal policy.
Westpac acknowledges that there are supply constraints, particularly in Sydney and Melbourne, for new large infrastructure projects. Boosting productivity of existing infrastructure through repairs and maintenance should be considered by the authorities as well as bringing forward appropriate projects in the Commonwealth Government’s current infrastructure plans.
The Federal Government’s mid-year budget update to be released in December, the MYEFO, is also likely to include further commitments to drought relief and aged care.
We are less supportive of further business investment allowances which have been mooted for the 2020 Budget. The instant write-off threshold has already been boosted to $30,000 and extended to companies with turnover of up to $50 million, covering 3.4 million businesses, employing around 7.7 million workers.
Business investment, particularly for big business, is being held back by concerns around the global economy; weak domestic demand and, in some cases, credit availability. Boosting investment allowances is unlikely to make a marked difference to investment given these ongoing constraints.
BILL EVANS is the Chief Economist at Westpac.
This article was first published on <a href="https://westpaciq.westpac.com.au/Article/41000/14186/" target="_blank">Westpac IQ</a>.
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