Roseville is poised for a wave of new apartment development following the NSW Government's rezoning of land around Roseville Station under its Transport Oriented Development program.

The new planning controls have unlocked significant development potential within walking distance of the station, with a number of sites expected to be amalgamated and redeveloped in the coming years as developers seek to take advantage of the increased density allowances.

One of the more restrained developments in the precinct, and set among the first to be delivered having commenced well before the recent changes, is Hyecorp's Juliet. The boutique apartment project is already well under construction and remains on track to welcome residents by the end of the year, offering a markedly different proposition to many of the larger-scale developments now likely to emerge across the suburb.

[smartcode_project:default project_id=7395 project_image_fid=278194]

<a href="https://www.apartments.com.au/new-apartments/juliet-roseville-64-pacific-highway-roseville-nsw-2069">Juliet</a> will comprise just&nbsp;34 one-, two-, and three-bedroom apartments opposite Roseville Station. For Hyecorp, which has delivered projects across Sydney's Lower North Shore for more than three decades, Roseville presented a rare opportunity to address a growing gap in the market.

"<a href="https://www.apartments.com.au/developments/roseville-nsw-2069">Roseville</a> has long been one of the North Shore's most tightly held and desirable suburbs, offering a unique combination of village charm, established greenery, excellent transport connections, and proximity to some of Sydney's best schools and lifestyle amenities," Hyecorp said.

"We recognised a growing demand from local homeowners seeking to downsize without leaving the community they have built their lives around. The location presented a rare opportunity to create homes that cater specifically to that buyer profile."

[smartcode_project:default project_id=7395 project_image_fid=278196]

The six-level development has been designed by <a href="https://www.apartments.com.au/architects/pbd-architects">PBD Architects</a> as a collection of residences that feel more like homes than apartments. The brief centred generous floorplans, abundant natural light, quality finishes, and strong connections to outdoor space.

PBD Architects drew inspiration from Roseville's established garden suburb character, creating a building that sits comfortably within its surroundings rather than dominating them. The architecture incorporates natural materials, soft forms, layered landscaping, expansive balconies, and generous setbacks to strengthen the connection between residents and the suburb's leafy environment.

"The focus was on designing spacious, house-like residences for discerning owner-occupiers and downsizers who wanted to remain on the North Shore without compromising on comfort, privacy, or design," PBD said.&nbsp;

"Every apartment was to feel considered, timeless, and highly functional."

[smartcode_project:default project_id=7395 project_image_fid=278195]

Inside, residences feature engineered timber flooring, stone kitchen benchtops and splashbacks, integrated Fisher &amp; Paykel appliances, ducted air conditioning, and large outdoor entertaining areas designed to take advantage of district and treetop views.

Residents will also have access to a rooftop barbecue and lounge area, alongside practical amenities including parcel lockers, EV charging capability, bicycle storage, a dog wash bay, and a basement car wash facility.

The majority of purchasers so far have been local owner-occupiers from Roseville, Lindfield, Chatswood, Killara, and the broader Upper North Shore, many of whom are transitioning from larger family homes.

"Buyers are looking for spacious, house-like apartments that allow them to downsize without feeling like they are sacrificing comfort or functionality," Hyecorp noted.

"They value large kitchens, generous living areas, ample storage, quality finishes, secure parking, lift access, and low-maintenance living."

[smartcode_project:default project_id=7395 project_image_fid=278204]

Juliet sits directly opposite Roseville Train Station and within walking distance of Roseville Village, while Chatswood's retail and dining precinct is only minutes away. The development is also surrounded by some of Sydney's most established schools, including Roseville College, Ravenswood, Pymble Ladies' College, and Knox Grammar, as well as nearby parklands and golf courses.

Juliet is currently more than 75 per cent sold ahead of its anticipated completion in late 2026.

[smartcode_project_cta:default project_id=7395]

Joel Robinson

Juliet to sit quietly amid Roseville apartment boom

Sherpa Property Group has unveiled the third instalment of its Flourish series, securing full approval for the two-tower, $500 million Flourish Soleira development in Palm Beach.

<a href="https://www.apartments.com.au/new-apartments/flourish-soleira-1150-1154-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a> will rise from a prominent site in the commercial heart of Palm Beach, the long-time home of Cash Converters and a range of local retailers.

The project will introduce a new retail and dining precinct at ground level, beneath 286 apartments.

[smartcode_project:default project_id=150017 project_image_fid=370959]

“We’re very committed to not only providing affordable residential offerings that are much needed in Palm Beach, but also delivering a vibrant new commercial heart that complements the extraordinary growth of the southern Gold Coast,” Sherpa Property Group founder Christie Leet said.

The development will sit under Sherpa's Flourish brand, which is aimed at providing a pathway into the beachside suburb for locals, first-home buyers and downsizers. In a move designed to assist first-home buyers entering the market, Sherpa has reserved all one and two-bedroom, one-bathroom apartments exclusively for eligible first-home buyers.

[smartcode_project:default project_id=150017 project_image_fid=370964]

“Our vision through Flourish is to create a vibrant retail and lifestyle focal point within the Palm Beach centre zone, delivering thriving communities underpinned by lifestyle-rich locations,” Leet said.

“So far, Flourish has been an incredible success, and we hope to carry this momentum as we progress the next two Flourish projects in Palm Beach.”

[smartcode_project:default project_id=150017 project_image_fid=371430]

Located across 1150-1164 Gold Coast Highway and 3 Sixth Avenue, the development will comprise two towers. The northern tower will deliver 154 apartments, while the southern tower will add a further 132 residences, helping address ongoing demand for new apartments in the tightly held coastal suburb.

Flourish Soleira will also feature the most extensive rooftop amenity offering ever delivered in Palm Beach.

The two towers will be connected by a skybridge, with residents gaining access to a rooftop recreation deck featuring a full-width swimming pool, hot and cold plunge pools, wellness spaces, a gymnasium, private dining facilities, massage treatment rooms, barbecue areas, a basketball court, golf simulator, indoor and outdoor dining spaces, sun lounges and extensive landscaping.

LPS Group is expected to start construction later this year.

Sherpa is already well advanced on construction of its debut Flourish project, Flourish Amargo, located just around the corner from Soleira. Meanwhile, Flourish Oasis, positioned opposite Amargo, recently commenced construction and has nearly sold out its collection of 47 apartments.

[smartcode_project_cta:default project_id=150017]

Sherpa unveils $500m mixed-use Palm Beach precinct, Flourish Soleira

Are mortgage holders set to get a reprieve from the RBA in 2026?

Big Four bank NAB believes so. They are now expecting the next move from the RBA to be a cut, rather than a hike, which they had pencilled in for August. They are unsure of the timing of the cut however, they note in their latest&nbsp;NAB Economics RBA Watch.

NAB Chief Economist, Dr Sally Auld, said recent data suggests the economy has lost momentum and the outlook for rates has shifted, noting that the broader economic backdrop has changed since earlier in the year.

“The next move in the cash rate is likely to be down, but the timing is uncertain," Dr Auld said.

"In February, growth was above trend, the economy was operating above capacity and there was uncertainty over the restrictiveness of rates. None of these conditions exist today,” she outlined.

Dr Auld said recent data pointed to softer momentum across the economy while acknowledging that at the same time, uncertainty remains a key feature of the outlook.

“Both Q1 GDP data and the NAB business survey suggest momentum in the economy has slowed, meaning that growth has likely peaked for the cycle. That said, we are cognisant there is still considerable uncertainty around the outlook, both with respect to activity and inflation.”

Dr Auld said inflation risks and labour market outcomes would be important to watch.

“On the prices side, we are still forecasting above target core inflation through to mid-2027. Margins will compress and weaker labour market outcomes are a risk.”

She said tighter financial conditions are expected to weigh on housing and activity.

“Tighter financial conditions will be reflected in a slowing in house price growth and housing credit growth. In summary, we have greater conviction that the next move in rates is down, but less conviction on the timing.”

Mortgage relief? NAB forecasts RBA rate cut, not hike, after softer economic conditions

A local downsizer has splashed $6.5 million on a penthouse in Perifa's Alex &amp; Willow development in Crows Nest. 
&nbsp; 
The purchaser sold their long-held family home in the area before embarking on a six-month search for the right apartment. After inspecting a range of options across the Lower North Shore, the buyer returned to <a href="https://www.apartments.com.au/new-apartments/alex-willow-crows-nest-82-90-alexander-street-crows-nest-nsw-2065">Alex &amp; Willow</a>. 
&nbsp; 
The buyer profile reflects the project’s broader purchaser mix. <a>Alex &amp; Willow</a> has attracted predominantly local downsizers looking to transition from larger homes without compromising on space or quality, alongside a smaller cohort of upsizers and investors drawn to the project’s location and design credentials. 
&nbsp; 
The milestone sale comes as the project, developed by&nbsp;<a href="https://www.apartments.com.au/developers/perifa">Perifa</a>&nbsp;and delivered by <a href="https://www.apartments.com.au/builders/versatile-made-construction">Versatile Construction</a>, both part of Versatile Group, reaches 60 per cent sold.

[smartcode_project:default project_id=6680 project_image_fid=371325] 
&nbsp; 
Eddie Mansour, Managing Partner of <a href="https://www.apartments.com.au/project-marketer/ray-white-projects">Ray White Projects</a>, said the result demonstrates not only a headline price but also depth of demand. 
&nbsp; 
“This is an exceptional outcome and a clear reflection of sustained buyer demand for premium, well-located downsizer product,” Mansour said.

“We’re seeing a consistent pattern of local homeowners selling family residences and reinvesting into high-quality apartments that allow them to remain within their community. Alex &amp; Willow has resonated strongly with this group because it offers genuine scale, thoughtful design and immediate proximity to the village.” 
&nbsp; 
The sale reflects a broader and consistent trend of local downsizers actively seeking high-quality, low-maintenance residences close to established village centres. Agents report that demand for this product type has remained resilient, particularly where developments offer a rare combination of scale, design quality and walkable amenity. 
&nbsp;&nbsp; 
Fabrizio Perilli, Managing Director of Perifa and Versatile Group, said the sale marks a defining moment for the project. 
&nbsp; 
“The penthouse sale is a strong endorsement of the quality we have delivered, alongside our partners, and the clear demand from local downsizers for premium, boutique residences in this location,” Perilli said.&nbsp; 
&nbsp; 
“Most importantly, we’re proud to see the Alex &amp; Willow community beginning to take shape. As we move closer to completion, we’re looking forward to welcoming residents and seeing the project come to life.”&nbsp;

[smartcode_project:default project_id=6680 project_image_fid=338516] 
&nbsp; 
Designed by <a href="https://www.apartments.com.au/architects/nettletontribe">Nettleton Tribe</a> with interiors by <a href="https://www.apartments.com.au/interior-designers/richards-stanisich">Richards Stanisich</a>, Alex &amp; Willow is a boutique collection of generously sized two- and three-bedroom residences in the heart of Crows Nest village.&nbsp;

Completion is slated for early 2027.

[smartcode_project_cta:default project_id=6680]

Alex & Willow, Crows Nest penthouse sells off the plan for $6.5 million

Fresh from launching the first stage of its Wollongong precinct, <a href="https://www.apartments.com.au/new-apartments/keira-place-wollongong-120-122-smith-street-wollongong-nsw-2500">Keira Place</a>, builder-developer Urban Property Group has unveiled plans for the next phase of the masterplanned community.

Now on public exhibition through the NSW Government's Housing Delivery Authority pathway is a State Significant Development Application for a further 657 homes on the prominent gateway site opposite Beaton Park.

The proposal comprises three buildings, including two build-to-sell towers rising 25 and 30 storeys, delivering 391 apartments, alongside a 12-storey co-living building with 266 residences, making it one of the largest co-living proposals currently planned in regional New South Wales.

Of the apartments proposed in the build-to-sell towers, the majority, 310, are two-bedroom dwellings. The balance comprises 44 one-bedroom apartments and 37 three-bedroom residences. Apartment sizes range from around 50 sqm for one-bedroom homes to approximately 90 sqm for three-bedroom apartments.

<img alt="Smith St" data-entity-type="file" data-entity-uuid="19347059-1612-41a0-9c74-b86a657237f8" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-10%20at%2010.02.18%E2%80%AFAM.png?VersionId=sWXnaCcA.cIC6N8YT1dg5pJ2e1V3Z6z7" />

The submission says the proposal has evolved significantly from its original Housing Delivery Authority application following extensive consultation with the State Design Review Panel and Wollongong City Council.

The final scheme has been designed to align with the emerging vision for the Flinders Street Precinct, an area identified by Council as a future high-density mixed-use neighbourhood capable of accommodating substantial housing growth close to transport, employment and community infrastructure.

According to the design report prepared by COX Architecture, the development aims to "deliver a built outcome consistent with the future character of the Wollongong CBD while responding to the site's unique constraints and opportunities."

"Our vision for the next phase of the site evolution in Wollongong is grounded in three design pillars that guide the design response: place, natural environment and celebration," COX said.

"Inspired by its surroundings and grounded in the stories of place on Wodi Wodi Country, the design proposal acknowledges the established character of its setting while creating a unique and timeless identity that sits harmoniously within it.

"The design proposal responds to its specific site conditions, acknowledging the vegetation, climate, wind conditions and solar access of the site."

The architecture responds directly to the site's position between Wollongong's urban core and its natural landscape setting.

COX identified views towards Mount Keira and the Illawarra Escarpment as defining features of the site, while the upper levels of the towers will also capture expansive views across the city and out to the Pacific Ocean.

The design team has positioned the tallest buildings closer to the rail corridor, where overshadowing impacts can be better managed while establishing a landmark built form on the northern approach into the city.

<img alt="Smith St" data-entity-type="file" data-entity-uuid="79580d5b-500c-4ebf-9629-797146a4a694" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-10%20at%209.51.59%E2%80%AFAM.png?VersionId=WbTB1EKSG.KDfsfz0F3wp1QVa2oCMGR5" />

Urban Property Group secured the 11,000 sqm Smith Street site in 2022 and has since progressed plans for the broader Keira Place precinct.

Construction recently commenced on the first stage of Keira Place, which will deliver 150 apartments across two residential buildings, including 27 affordable housing apartments and 18 specialist disability accommodation dwellings, alongside activated ground-floor retail and commercial space.

Urban Co-CEO Patrick Elias said the commencement of construction marked a significant milestone for Wollongong and reflected the developer's long-term commitment to regional cities.

"Today's groundbreaking is about turning approvals into homes and moving quickly to deliver much-needed housing in Wollongong's city centre," Elias said.

"Keira Place will provide a diverse mix of homes close to jobs, transport and services, while setting a high benchmark for quality, durability and consumer protection."

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/groundbreaking-marks-start-of-construction-at-keira-place-in-wollongong-cbd">Groundbreaking marks start of construction at Keira Place in Wollongong CBD</a>

&nbsp;

&nbsp;

&nbsp;

Urban Property Group unveils trio of towers for next stage of new Wollongong precinct, Keira Place

Bill Evans

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GUEST OBSERVER
The Westpac Melbourne Institute Index of Consumer Sentiment fell by 2.3% to 102.7 in February from 105.1 in January.
The survey was conducted over the week of February 5 – February 11. That week was marked by a wave of volatility in global share markets.
The Australian market, which was more stable than most, still experienced some significant swings, being down a net 4.6% for the week while the US market (S&amp;P 500) was down by a net 7.2%.
Extensive media coverage of these developments would have unnerved respondents on two fronts – the impact on their own financial position and concerns for general global stability.
These concerns appear to have been acutely felt by retirees whose confidence fell by 13.5%.
In those circumstances the 2.3% fall in the Index is a decent result and is now registering a fourth consecutive month where optimists outnumber pessimists. Recall that this sequence follows 12 consecutive months where pessimists were in the ascendency for all but one month.
Having said that the level of the Index is still well below levels typically associated with a robust consumer.
Every six months we gauge respondents’ outlook for interest rates. In August last year 61% of respondents expected interest rates to rise over the next year. That was an uplift from 54% in February 2017. The proportion has fallen back to 58%, partly explaining the boost to confidence since the middle of last year.
Developments in the components of the Index are consistent with the likely impact from last week’s market volatility. In particular respondents’ assessments of their own finances suffered, the ‘finances vs a year ago’ sub-index fell by 4.5%; and the ‘finances, next 12 months’ sub-index fell by 3.1%. We assume that these components have suffered temporary set- backs associated with market volatility. On face value the ‘year ago’ component is sending a very weak signal about likely spending prospects.
Not surprisingly the ‘economic conditions, next 12 months’ component fell sharply by 4.7% while the ‘economic conditions, next 5 years’ component was stable.
The ‘time to buy a major Item’ sub-index increased by a modest 0.9%. Despite the overall Index still being 3.1% higher than a year ago this component is only up by 0.6% over the year – signalling ongoing reluctance from households to commit to large purchases”.
<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/2018/2/14/consumer.jpg" alt="">
Consumers continue to become more comfortable about the outlook for jobs. The Westpac Melbourne Institute Unemployment Expectations Index declined 1.8% to 120.6 in February to a new cycle low (recall that lower reads mean more consumers expect unemployment to fall in the year ahead).
The Index, which can be viewed as a measure of consumers’ sense of job security, is down 15.2% on this time last year and well below its long run average of 130. The state detail shows the improvement has become more broadly based as well with all state indexes now comfortably below their long run averages.
Consumer views around housing showed mixed moves with buyer sentiment softening but price expectations improving.
The ‘time to buy a dwelling’ index declined 2.7% to 103.8 in February but was coming off an 18 month high in January. The index is still showing a clear improvement on last year’s very weak reads (an average of 95.7 for 2017) but is well below the positive long run average of 120.
The state detail shows a significant pull-back in Victoria (down 12.7% to 93). In contrast, there was a notable lift in NSW buyer sentiment (up 7% to 96) having been at much weaker levels through 2017 (an average of 82).
The Westpac Melbourne Institute Index of House Price Expectations rose 4.8% to 135.3, reversing all of last month’s decline to be back comfortably above its long run average. The biggest gain in February was in NSW although price expectations in the state are coming from a weaker starting point and still show the biggest pull back on this time last year.
The Reserve Bank Board next meets on March 6. In a speech on February 8 the Governor concluded, “the Reserve Bank Board does not see a strong case for a near-term adjustment in monetary policy”.
Clearly there will be no policy change at the March meeting.
<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/2018/2/14/consumer%202.jpg" alt="">
Through 2017 Westpac has argued for rates to remain steady in 2017–2019. The Bank expects to make some progress in reducing unemployment and having inflation return to the midpoint of the target range. However, based on its recent forecasts that were released on February 9 that progress is expected to be painfully slow. Underlying inflation is expected to reach only 2%, the bottom of target range, through 2019 and the unemployment rate is expected to fall from 5.5% to 5.25% (compared to an estimated full employment rate of 5.0%) by end 2019.
While we are less optimistic about the unemployment rate and the growth outlook the Bank’s forecasts are not entirely out of line with our own view and, arguably, consistent with steady rates over the next few years.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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j.ballantyne1990-6AQqhLzZaK

Consumer sentiment falls in response to stock market turmoil: Westpac's Bill Evans

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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.
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”.
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.
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%.
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”.
Other encouraging signals from the economy continue around business investment with “investment intentions had been revised higher, particularly for the business services sector."
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.
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.”
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”.
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.
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. 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. Conclusion: 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.
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.
We retain our view that the overnight cash rate will remain on hold in 2018 and 2019.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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bevans-rYk9SxEa4r

Cash rate will remain on hold in 2018 and 2019: Westpac's Bill Evans

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The minutes of the monetary policy meeting of the Reserve Bank Board emphasised some positive developments in the economic data but provided a strong statement around the Bank’s policy guidelines.
However in these minutes, the Board has chosen to emphasise its independence. “Members observed that moves towards higher interest rates in other economies were a welcome development but did not have mechanical implications for the setting of policy in Australia, where the timing of any changes in interest rates would be dependent, as always, on developments in domestic economic conditions. Members also noted that monetary conditions in other advanced economies had been eased significantly more than in Australia since the onset of the financial crisis”.
In that regard, the minutes noted that the Bank of Canada had increased its policy rate “in response to stronger than expected economic growth”. The Bank of England had indicated some tightening presumably in response to a lift in inflation associated with the weak sterling ( in my view a potential policy mistake). Markets also expected the ECB to begin reducing the pace of asset purchases in 2018.
Commentary around the domestic economy was generally upbeat:
“There had been a pick-up in household consumption growth in the June quarter”. That comment came before the release of the August retail sales data showing the weakest growth in retail sales since 2013.
Employment growth “had been well above that required to absorb increases in the labour force”, although the Board did note that growth in jobs had been  based in household services (particularly health care &amp; education) and construction. Our reading is that outside those areas growth has generally been modest. Indeed the outlook for jobs growth was somewhat more subdued than we have seen in the past, “slightly above average growth in employment over the remainder of 2017”.
Residential construction, which has plateaued, is expected to hold around current levels “over the subsequent year or so” – a little vague from my perspective, although presumably meaning all of 2018. Westpac has a more pessimistic view around that cycle than appears to be the Board’s thinking.
Private non-mining business investment has increased to be almost 10% higher than at the start of 2016 – the outlook remained positive and firm’s estimates of future capital spending has increased.
“Public investment was expected to continue to be supporting economic activity”.
On the other hand, subdued price pressures continue across the economy and  retail electricity prices are expected to increase significantly in the September quarter. (Westpac’s estimate is 13%) . It is of some interest that business liaison indicates that retail and manufacturing businesses were largely absorbing increases in energy costs into margins.
Every six months, the Board reviews the Bank’s Financial Stability Review. These minutes help us understand the key issues from the Review that were presented to the Board. In that regard, concerns around China financial risks “remained pronounced” with excessive growth through the less regulated channels including banks off balance sheet activities.
Domestically, attention always turns to household indebtedness. While the Board noted that indebtedness had edged higher, it also highlighted the strength of household’s balance sheets, noting in particular “household assets far exceeded debt with non-housing assets alone being over two times larger than total household debt”.
The concluding paragraphs in the minutes continue to emphasise the Bank’s key views, firstly that growth would increase gradually over the coming year; strong employment growth and increasing wage growth would boost income growth and household spending; and the importance to continue to assess the various risks in the housing markets and household balance sheets.
<h3>Conclusion </h3>
We have always argued that the policy process next year will be dependent on the strength of the domestic economy and not be dictated by any global trend to higher interest rates. It is interesting that the Board has chosen to emphasise this strategy in its minutes.
While the RBA does not release the detailed forecasts behind its general view that growth will be comfortably above trend next year, we can discern from the rhetoric that the Board, to date, has a more upbeat outlook for incomes; consumer spending; jobs growth; wages growth and the construction cycle than is our own view.
We have been encouraged by these minutes to expect that if the economy evolves in the way we anticipate, the Board will see no need to raise rates in 2018.
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The RBA Board ties policy to domestic economic developments - remains generally upbeat

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This is the first time since November last year that optimists have outnumbered pessimists and represents the highest level of the Index since October last year.
Consistent reports of an improving global economy may have been a factor behind this lift in confidence. It is also likely that concerns about rising interest rates associated with overheated housing markets have eased.
Ongoing improvements in the labour market are also boosting confidence. Confidence showed stronger gains amongst those employed as tradies, ‘paraprofessionals’ (typically in the health and education sectors), or labourers. The rise in confidence was particularly strong for ‘trade’ workers, up 22% in the month, suggesting the continued strength in residential building was a positive factor.
However, confidence is still not particularly strong, with views on family finances a clear weak spot. Whereas the overall Index is down 1% on a year ago respondents’ assessments of their own finances relative to a year ago have fallen by 6.1% and the outlook for finances over the next 12 months is down by 2.6%. Offsetting that ongoing weakness in respondents’ assessments of their own finances is a lift in the 12 month economic outlook of 6.9% relative to last October.
All sub-indexes recorded a lift in October.
The ‘economic conditions, next 12 months’ sub-index posted the strongest gain, rising 7.1% to a four year high. Some of this likely stems from consistent coverage of the continuing improvement in the global economy with, in particular, improved confidence in the US growth outlook. Longer term economic prospects showed a more muted rise. The ‘economic outlook over the next 5years’ sub-index rose just 1.4%.
Consumers’ views on family finances also improved but the gains were more mixed with readings still weak overall. The sub-index tracking expectations for ‘finances over the next 12 months’ posted a solid 4.2% gain. An easing in concerns about potential interest rate rises was a likely factor. The ‘finances vs a year ago’ sub-index posted a more muted 1% rise.
Consumers were more positive about making major purchases, the ‘time to buy a major household item’ sub-index rose 3.5% in October after a 2.1% lift in September. However, the sub-index remains well below its long run average (down 2.9% over the year), suggesting that the sluggish spending evident through most of 2017 is likely to extend into year-end. Expectations for the labour market continue to improve. The Westpac Melbourne Institute Unemployment Expectations Index fell 3.3% to 129.2 in October, marking the lowest reading since June 2011 (recall that lower reads mean more consumers expect unemployment to fall in the year ahead).
The Westpac Melbourne Institute Index of Consumer Sentiment rose 3.6% to 101.4 in October from 97.9 in September. The move is broadly based with expectations improving across all the major states.
<a href="https://www.propertyobserver.com.au/images/2017/10/11/WestpacIndex1.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/10/11/WestpacIndex1.png" alt="">
<a href="https://www.propertyobserver.com.au/images/2017/10/11/WestpacIndex2.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/10/11/WestpacIndex2.png" alt="">
Consumer views around housing remained downbeat. The ‘time to buy a dwelling’ index dipped 0.2% to 95.1, well below the long run average of 120. State indexes continue to vary widely, ranging from very weak reads in NSW (77) and Vic (88) to a strongly positive result in WA (135.4).
Consumer expectations for house prices also softened in the month. The Westpac Melbourne Institute Index of House Price Expectations dipped 1% to 140.5. The index still shows positive price expectations nationally although the state breakdown showed a sharp 8% decline in New South Wales (to the lowest level since June last year) partially offset by stronger price expectations in Queensland and Western Australia. Evidence that house price expectations in the overheated Sydney market are cooling is likely to be encouraging for policymakers.
The Reserve Bank Board next meets on November 7. The Board is certain to keep rates on hold. In fact Westpac does not expect rates to rise at all over the next year despite market pricing and general commentary.
The key to the interest rate outlook remains the consumer and the housing market. While today’s report shows a welcome boost in consumer confidence most of the strength is centred on the one year economic outlook. Respondents remain concerned about their own finances despite an expectation that the economy over all will improve. As we saw in the data for retail sales in August, consumer assessments of family finances, which have been downbeat for some time, are likely to be a more reliable indicator of actual spending than their views on the general economic outlook.
Furthermore, the survey continues to point to an easing in sentiment in the housing markets in the major states. Interest rate increases aimed at cooling over heated housing markets appear to be becoming unnecessary as macro prudential policy tools are achieving the same purpose.
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House price expectations cooling: Bill Evans

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GUEST OBSERVER
As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 1.50%.
Relative to the last meeting in September, there were no significant changes in the Governor’s associated statement. On balance however, it is reasonable to conclude that the statement is a little more optimistic than we saw last month.
In particular, the commentary around non-mining business investment strengthened. In September, he noted “the outlook for non-mining investment has improved recently”. This time, “consistent signs that non-mining business investment is picking up"; “capacity utilisation has risen” and “a large pipeline of infrastructure investment is also supporting the outlook”. Curiously,  prospects for the residential housing investment cycle have dimmed further in the last month, yet, whereas in September he notes “little further growth is expected”, there is no discussion about this cycle in the October statement.
Significantly, the key drag on the economy from our perspective – a constrained household sector – still bothers the RBA, “slow growth in real wages and high levels of household debt are likely to constrain growth in household spending”.
The Bank, while noting recent strong employment growth, remains cautious about the unemployment rate, noting “the unemployment rate is expected to decline only gradually over the next couple of years”.
As expected, despite the fall in the Australian dollar from around USD 0.80 to USD 0.782 since the last meeting, the commentary around the AUD is unchanged, “the higher exchange rate… is weighing on the outlook for output and employment”.
Recently, RBA speakers have been emphasising their concern around the buoyant housing market as relating to housing debt outpacing growth in household incomes. In the paragraph on the housing market, the Governor’s statement leads with that concern, whereas in previous statements he has led with a discussion on  housing market conditions. The statement emphasises that recent macroprudential policies introduced by the regulator APRA are targeted at the medium-term risks associated with rising household debt. Having noted that, he does confirm that the signs that conditions were easing in Sydney which he noted in September have intensified – “further signs that conditions are easing”.
It remains our view that the RBA and APRA (the regulator) will continue to target macroprudential policies at the household debt issue rather than use interest rates in the context of a fragile economy.
Conclusion
As we have consistently argued, it appears that the Bank is expecting to raise rates sometime in 2018. With conditions in the housing market easing, and inflation and growth remaining sub-trend, there is no immediate urgency to move any sooner. However, we expect that as 2018 unfolds, the Bank will deem it necessary to revise down its growth assessments and continue to rely upon macroprudential policies to contain any further lift in the household debt to income ratio.
We continue to expect that rates will remain on hold in 2018 and 2019.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>. 
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RBA keeps rates on hold - asserts that recent developments are in line with outlook

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GUEST OBSERVER
As expected, the minutes of the monetary policy meeting of the Reserve Bank Board showed that the Bank has been somewhat encouraged by recent developments in the economy.
In particular, conditions in the labour market have continued to improve with employment growth being described as “broadly based across the states”.
Solid employment growth is expected to continue given the current forward indicators in the labour market, although “spare capacity remains”.
On the other hand, the Board continues to be concerned about wages.
Wage growth is described as stable at a low rate, and the forecast is for “growth in wages to remain low for some time, before picking up gradually in response to a strengthening labour market”.
Evidence to support that view is that those industries with stronger employment growth are showing higher wage outcomes.
Another encouraging sign is around non-mining business investment, where forward looking indicators such as capacity utilisation and investment intentions from business surveys suggest a further pick-up.
The Bank is reasonably cautious on this, forecasting that non-mining investment will “strengthen gradually”.
It notes that non-residential investment is also improving although the data from the capex survey still pointed to modest growth at best, with sectors not covered by capex such as education and health looking stronger.
The dark side of the construction cycle centres around residential construction.
The Bank appears to be considerably more optimistic here than Westpac.
It accepts that construction has passed its peak but is still expecting a strong pipeline while continuing to note that “a considerable number of new apartments were scheduled to be completed in the period ahead”.
In the Governor’s statement following this board meeting, he pointed out that conditions in the housing market had eased, notably in Sydney.
The minutes flesh out this point, and in particular note that conditions “had remained strong in Melbourne”.
Overall, the minutes indicate a less comfortable assessment of developments in the housing market than was implied in the statement.
The issue of concern for the Bank is growth in housing debt continuing to outpace income growth.
That summarises why the Bank is most concerned about wages, employment and house price growth.
As with the Governor’s statement, there is no attempt to “jawbone” the Australian dollar.
It is accepted that weakness in the US dollar is a key contributor to AUD strength, but it also noted that the rise in the AUD “was weighing on domestic growth and contributing to subdued inflationary pressure”.
The warning from the minutes in August is repeated, “a further appreciation of the Australian dollar would be expected to result in a slower pick-up in growth and inflation”.
The discussion on international economic conditions once again centres on China.
It appears apparent that the Bank expects growth in the Chinese economy to slow over the course of the next few years, with the key challenge being balancing a commitment to short-term growth targets with the need to address high debt levels.
The implication is that Australia’s commodity prices can be expected to fall over the course of the next few years.
Commentary around the US Federal Reserve has changed somewhat.
In previous minutes, the Board seemed to accept that the Federal Reserve would continue its tightening program.
In these minutes, market pricing is noted to indicate that a rate hike was not expected until the second half of 2018.
Given the Bank’s clear comfort with a lower AUD, this observation might indicate recognition of AUD holding higher for longer than had been anticipated previously.
The minutes are not quite as upbeat as the Governor’s statement indicated.
The improved labour market conditions are recognised but clearly qualified by an expected slow response from wages and ongoing spare capacity.
Improving prospects for non-mining investment are noted, but the peak in the residential construction cycle has been reached, and prospects for non-residential investment are mixed.
The easing of conditions in the housing market, especially in Sydney, are noted, but the qualification that the Melbourne market remains strong is added.
The policy conundrum of rising household debt in an environment of low inflation is emphasised.
While, the commentary notes that financial markets are giving “some expectation of an increase in the cash rate by mid-2018”, there is no signal in these minutes to suggest that the Board sees any urgency around interest rates.
Westpac expects that concerns with weak income growth weighing on consumer spending and eventually the jobs market will dominate the policy debate in 2018.
The sustained application of macro-prudential policies is likely to continue to ease conditions in housing markets precluding any need for the Bank to raise rates next year.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Housing debt continuing to outpace income growth: Bill Evans

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GUEST OBSERVER
The minutes of the monetary policy meeting of the Reserve Bank Board on August 1 show a change in the balance of risks on which the Bank is clearly focussed.
In July, the key concluding paragraph noted “developments in the labour and housing markets continued to warrant careful monitoring”.
In August, “members regarded conditions in the housing market and household balance sheets as continuing to warrant careful monitoring”.
In addition, the August minutes refer to “the need to balance risks associated with higher household debt in a low inflation environment”.
A reasonable conclusion from this change in emphasis is that the Bank is certainly more comfortable with the outlook for the labour market - “indicators of labour demand have pointed to further employment growth”, and by the end of the forecast period, “the unemployment rate was expected to be just below 5 ½ per cent, slightly lower than forecast in May”.
There was also the hint of more confidence around a lift in wage inflation, “information from liaison indicated that some employers were finding it harder to attract workers with particular skills”.
On the other hand, commentary around inflation seemed to be more downbeat.
In particular, it was pointed out that” the Australian Bureau of Statistics intends to update the weights in the CPI in the December quarter 2017 CPI release … this was expected to lead to lower reported CPI inflation because the weights of items whose prices have fallen were likely to be higher”.
The additional commentary on inflation highlights the Bank’s dilemma with regards to achieving its underlying target.
“The inflation forecast partly reflected an expectation of a modest increase in wage growth … working in the opposite direction were the effects of additional competition in the retail industry; the dampening effect of housing supply on rents; and recent exchange rate appreciation”.
While we can be extremely confident about the three latter dampening factors, the expectation of rising wages is tenuous.
Even the minutes refer to international experience where labour markets with much less spare capacity than Australia have been unable to generate wage pressures.
As discussed, the minutes highlight household balance sheets as warranting careful monitoring.
It is pointed out that housing credit growth has been growing at a much faster pace than incomes, exacerbating this imbalance.
Whereas the July minutes indicated that the impact of the macroprudential policies were yet to have their full effect, the August minutes do not continue that theme.
Commentary on the Sydney and Melbourne housing markets pointed out that conditions have eased somewhat although price growth remained relatively strong, this was despite the observation that Banks had now broadly achieved the lending guidelines around interest-only loans that were announced earlier in the year.
It was not clear that the Bank expects a further softening in house prices in Sydney and Melbourne (and an associated slowdown in credit growth) given that the regulatory guidelines had now been enacted.
Sensibly, the Bank has not tried to “jawbone” the Australian Dollar.
That can only be effective if the market believes that the Bank is prepared to take some action.
Given concerns around household balance sheets and a well-known reluctance to intervene, markets are totally confident that the Bank will not take any action to deal with the high Australian Dollar.
We saw in the Statement on Monetary Policy that despite the 3% appreciation in the TWI between May and August, the Bank chose not to adjust its growth and inflation forecasts in 2018 and 2019.
However, it now specifically states in the minutes “a further appreciation of the exchange rate would be respected to result in a slower pick-up in inflation and economic activity than currently forecast”.
It is our view that the AUD will drift back down to USD 0.76 by the time of the next forecast review (November), so the AUD will not represent a risk to the forecasts.
On the other hand, if we are wrong, we should take this comment on face value and expect an even lower forecast for inflation and economic activity.
In particular, the current inflation forecast sits at 2% for 2018, the bottom of the target band.
Most central banks would be uncomfortable forecasting a further miss in the inflation target in 2018.
Commentary around the international economy is mainly pertinent for the Bank’s China view.
In that regard, despite better than expected conditions in 2017, the Bank continues to assert that “growth in China was expected to ease in 2018 and 2019 because of structural factors such as a declining working-age population as well as policies to address financial risks”.
These minutes contained a few more surprises than we had originally expected – a clear lift in confidence around the labour market but a stronger emphasis on the risks associated with household debt.
The extensive discussion around inflation also implies less certainty around the current view that inflation will lift through 2018 and 2019.
Key to much of this discussion is around wages growth.
This will impact incomes and potential household debt ratios; inflation conditions; and the capacity of the household sector to lift its spending, thereby signalling a better environment for businesses and lifting employment and investment.
Given the evidence overseas, for countries with less spare capacity in their labour markets than Australia, we are much more cautious about the wages outlook and therefore expect that the case for higher rates next year will gradually fade.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Renewed concern around household debt as labour market gains more confidence: Bill Evans

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GUEST OBSERVER
The most important result from the minutes of the monetary policy meeting of the RBA Board was to finally nominate the Bank’s estimate of the “new neutral real interest rate for Australia”.
In other countries it has been recognised for some time that the neutral rate has fallen particularly since the global financial crisis in 2007.
Prior to that, it had generally been accepted that the neutral nominal cash rate was around 5%.
The minutes highlight that the Bank now believes that the neutral nominal cash rate is around 3.5% indicating a neutral real rate of 1% on the basis that medium term inflation expectations are around 2.5%.
Consequently any move back to neutral would involve around 200 basis points in tightening.
Note that the analysis refers to the “neutral nominal cash rate”.
So, for instance, the increases in mortgage rates that we have recently seen (average of 0.28% across the whole book including 0.76% for interest-only investors) would not be taken into account as part of the 200 basis points in tightening.
If the mortgage rate increased by a further 200bps, the evidence of 2011 suggests that house prices would likely fall – hardly what one might assess as a neutral policy stance.
Overall, in the current circumstances, this neutral rate, looks too high.
Arguably, the discussion around the neutral rate can be interpreted as laying the foundation for a tightening cycle.
However with uncertainty around wages and inflation; the consumer; and, of course, the labour market and housing it would be inappropriate to over interpret this signal.
Our specific  interest in the minutes is around the revised assessment of the housing market; the labour market and possibly the exchange rate.
Certainly the final paragraph in the “Considerations for Monetary Policy” section notes that “nevertheless they assess that current economic conditions in Australia and the outlook for growth and inflation meant that developments in the labour and housing markets continued to warrant careful monitoring”.
The commentary around the labour market is definitely more confident.
Not only do the minutes refer to “employment growth had been strong in May for the third consecutive month” but it is also noted that “forward looking indicators of labour demand … had remained positive and generally consistent with the patterns of employment across states and industries”.
This commentary suggests that the Board is reasonably comfortable that the recent upswing in employment can be sustained.
The only note of caution around the recent developments is that “the underemployment rate … had remained elevated”.
We are aware that subdued wages growth is a significant concern for the Bank.
That remains a consideration.
However, the minutes did point out that the recent Fair Work Commission decision to increase award wages and the national minimum wage by 3.3% (affecting around 40% of workers) was markedly higher than the 2.4% awarded in 2016.
Commentary around the housing market continued to note that conditions vary across the country, although the “auction clearance rates in Sydney and Melbourne had softened recently suggesting that conditions in these markets had eased somewhat”.
It was also noted that the impact of the prudential supervision measures were yet to have their full effect.
At the time of the board meeting, the Australian Dollar was trading at around USD 0.76.
Not surprisingly, the minutes therefore retain the standard terminology “an appreciating exchange rate would complicate this adjustment”.
With the currency now at USD 0.78, the Board is likely to be more concerned about its impact on the rebalancing process.
As the minutes point out, financial market pricing for RBA policy has “shifted to indicate some probability of an increase in the cash rate by mid-2018”.
The most important development behind this outlook is the improved conditions in the labour market.
As noted, the Bank is encouraged that lead indicators continue to point to further improvements in conditions.
The unemployment rate is now only 0.5% above the generally accepted full employment rate for Australia.
A sustained move towards 5% would certainly encourage the Bank to consider higher rates.
However, there would need to be some evidence that wage pressures were also responding since underlying inflation remains anchored below 2%.
The implications for policy from the housing market are less clear.
The macroprudential policies have already resulted in higher mortgage rates, and as noted in the minutes, pressures in the housing market appear to be easing.
However, until the full impact of the macroprudential policies can be assessed, raising interest rates might prove to be premature.
Recall that the Bank’s current forecasts for GDP growth in 2018 are an above trend 3.25%. That contrasts with our own forecast of only 2.5%.
Our forecasts envisage ongoing caution from the consumer; no significant recovery in non-mining investment and detraction in growth from housing construction.
Today’s minutes do not really indicate that the Bank is sufficiently confident that this profile will be averted .It will need a lot more time to confidently make that assessment.
Furthermore, the growth profile which we described is unlikely to be consistent with sustained improvement in the labour market.
While the short-term outlook may be positive, we expect that the unemployment rate will edge back towards 6% over the course of 2018.
The Bank will be cautious to confirm its positive outlook before the need to raise rates.
Despite a more confident Bank and its decision to set out its new so-called “neutral target”, our forecasts remain consistent with the cash rate staying on hold throughout 2017 and 2018.
Bill Evans is the chief economist at <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
<a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2017/2017-07-04" target="_blank">Link to minutes</a>
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Reserve Bank's estimate of the 'new neutral real interest rate for Australia': Bill Evans

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This is the eighth consecutive month where the Index has printed below 100 indicating that pessimists continue to outnumber optimists.
The Index is not sending encouraging signals about the outlook for consumer spending.
Having said that, developments around interest rates during the month could have been much more damaging for confidence than turned out to be the case.
Banks increased rates on ‘interest only’ mortgages while there was considerable media speculation about prospects for rising rates overall.
In the event confidence amongst respondents with mortgages actually rose by 4.8%.
However, the interest rate increases may have contributed to softer reads in some sub-groups with higher exposure to investor housing – sentiment down about 10% in the month for those aged over 55.
The key components of the Index gauging respondents’ assessments of their own financial position were mixed.
The component measuring assessments for family finances relative to a year ago lifted slightly by 1.2% while the component tracking assessments of the outlook for finances over the next 12 months fell by 4.2%.
<a href="https://www.propertyobserver.com.au/images/2017/07/12/Screen%20Shot%202017-07-12%20at%2010.48.43%20am.jpg" target="_blank">Click to enlarge</a>
<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/2017/07/12/Screen%20Shot%202017-07-12%20at%2010.48.43%20am.jpg" alt="">
Overall however both of these components are down significantly over the year by around 4%. While-ever respondents remain concerned about their own finances prospects for a marked lift in spending patterns will remain remote.
On the other hand there was an improvement in how respondents assess conditions in the labour market.
The Westpac Melbourne Institute Index of Unemployment Expectations fell by 3.1% (a lower number indicates that fewer consumers expect unemployment to rise) but really only recouped the increase we saw in the last month.
Over the last year this Index has remained fairly steady despite the encouraging developments in the stunning employment reports which indicate that 141,000 jobs were added in the three months to May.
Other components of the Index were also mixed.
The ‘economic conditions over the next 12 months’ sub-index increased by 1.8% while the ‘economic conditions over the next five years’ sub- index fell by 1.5%.
Over the last year, 12 month prospects have increased by a modest 1.1% while 5 year prospects have fallen by 8%.
The ‘time to buy a major household item’ sub-index improved by 4.2% to be up 1.0% over the year.
Conditions in the housing market appear to be stabilising, at least for the time being. The ‘time to buy a dwelling’ index lifted by 3.1% in the month – the first significant increase we have seen for this year.
Recall that in the first half of 2017 this indicator fell consistently by just over 10%.
<a href="https://www.propertyobserver.com.au/images/2017/07/12/Screen%20Shot%202017-07-12%20at%2010.48.56%20am.jpg" target="_blank">Click to enlarge</a>
<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/2017/07/12/Screen%20Shot%202017-07-12%20at%2010.48.56%20am.jpg" alt="">
Recent increases in state government assistance for first home buyers appears to have been a big factor in the July rise with the ‘time to buy a dwelling’ sub-index for 25–34 year olds surging 36% in the month.
The outlook for house prices also partially reversed the recent deterioration.
The Westpac Melbourne Institute Index of House Price Expectations increased by 8.6% following the cumulative 11.8% fall we saw in the previous two months.
With banks raising some mortgage rates and overall confidence soft it is too early to call a recovery in confidence in the housing market.
The Reserve Bank Board next meets on August 1.
Rates will remain on hold.
We continue to predict that the Reserve Bank cash rate will remain on hold throughout the remainder of 2017.
A cautious consumer; a slowing housing market; and a weakening in the labour market with limited prospects of any boost to wages growth all point to another year of steady policy.
Bill Evans is the chief economist at <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Consumer sentiment remains soft: Bill Evans

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GUEST OBSERVER
As expected the Reserve Bank Board decided to hold the overnight cash rate unchanged at 1.5 percent.
The commentary in the Governor’s statement was a little more upbeat than had been the case in December.
In particular the global view has been lifted from global growth “lower than average” to “growth above trend in a number of developed economies.”
Another aspect of the importance of global growth has been the ongoing strength in commodity prices.
This statement notes that the terms of trade have risen and this will boost national incomes.
The Bank confirms its forecast in November that growth in 2017 and 2018 will be around 3 percent.
In fact the 2018 forecast is 3.5 percent and given the more recent official forecasts we saw from the Government in the December Mid Year Economic and Fiscal Outlook that 2018 number is likely to be shaved a little to 3.25 percent.
Nevertheless 3 percent is considered to be above the Bank’s assessment of trend (2.75 percent) and therefore implies a gradually strengthening labour market.
The statement directly addresses the reported contraction in the economy in the September quarter attributing it to “temporary factors” with the RBA expecting a return to reasonable growth in the December quarter.
In that regard while consumption is expected to remain moderate, non mining investment is anticipated to show “some pick up”.
Specific commentary on the labour market is largely unchanged with conditions described as mixed although the Bank notes that leading indicators are pointing to continued expansion.
Commentary on the housing market is also largely in line with the December statement with the market described as strengthening overall and prices rising briskly in some cities.
In fact in December the statement pointed out that turnover had been lower and this comment is absent in this statement.
There is also some emphasis on the tightening in lending conditions from the banks that will give the RBA some comfort with respect to any financial stability risks.
Commentary around inflation remains confident pointing out that the most recent inflation report was in line with expectations and both headline and underlying inflation were expected to rise above 2 percent over the Bank’s forecast period.
This statement clearly sets out the Bank’s current policy approach.
That is, to hold rates steady in anticipation of a gradual lift in growth and inflation while imbalances in the housing market remain contained.
We expect this thinking will be sustained throughout 2017 being supported by a rising terms of trade, a peaking construction cycle and a gradually falling unemployment rate with rates remaining on hold.
Our central view for 2018 would be a similar policy stance despite clear preferences in the market for the beginning of a tightening cycle.
Westpac’s view on growth in 2018 is that is it will slow down to a below trend 2.5 percent with housing construction contracting, the terms of trade falling, and ongoing moderation in consumer spending and business investment.
This pitches the risks to the “on hold” call in 2018 to the downside in clear contrast to current market views.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/">Westpac</a>
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