The residential transformation of St Kilda Road is set to continue into with more new apartment plans for the sought-after boulevard.

Wing Tai Asia has lodged plans for a major residential tower at 464-466 St Kilda Road, replacing the former VACC House with an 18-storey mixed-use development designed around a retained heritage podium and a sculpted contemporary tower.

The proposal, prepared under Victoria’s Significant Residential Development with Affordable Housing pathway, would deliver 325 apartments and ground-floor retail across the prominent 4,653 sqm boulevard site in Melbourne’s St Kilda Road North Precinct.

The project centres on the adaptive reuse of the site’s heritage-listed VACC Building, an eight-storey office designed by Bernard Evans that has occupied the address for decades. Planning documents state the development would involve “carefully dismantling and conserving off-site the original metal fabric of the podium visible from St Kilda Road,” before reinstating it as the defining frontage of the new scheme.

Above the restored podium, Wing Tai is proposing a curvilinear residential tower. The scheme includes 172 one-bedroom apartments, 63 two-bedroom apartments, 66 three-bedroom apartments, and 24 four-bedroom apartments, alongside two ground-floor food and beverage tenancies fronting St Kilda Road.

The tower has been designed with substantial articulation and variable setbacks to minimise perceived bulk and maintain view corridors along the boulevard. Urbis, which prepared the planning report, said the design “has been significantly articulated through a curvilinear design” with “an interplay with materials, façade expression and depth” to create visual separation and visual interest.

The proposal also includes 254 basement car spaces, landscaped pedestrian links connecting St Kilda Road and Queens Lane, and a biophilic landscape strategy featuring canopy trees, raised planters, cascading greenery and a glass oculus pool overlooking the eastern frontage.

Planning documents confirm the $270.1 million development will contribute 3 per cent of project costs to the Social Housing Growth Fund as part of the application process.

Wing Tai acquired the St Kilda Road property in 2018 alongside Abacus Property Group for $95.38 million, before later consolidating ownership of the site. The property previously served as the Victorian Automobile Chamber of Commerce headquarters for around 60 years.

The transformation of the St Kilda Rd boulevard is already beginning to materialise, with a number of high-profile projects recently completed, launched, or approaching launch as developers continue to back the long-term appeal of the precinct.

Among the most notable recent completions is Louise by Samuel Property Group, just off the strip on Queens Lane, the same pocket Hirsch &amp; Faigen recently launched The Queensbury. Mirvac is too on the same street with The Albertine, which is approaching completion.

Dexus recently secured approval for its slice of St Kilda Road, while Gurner also has approved plans for the precinct.

Joel Robinson

Wing Tai unveils 325-apartment St Kilda Road tower on former VACC House site

Malaysian developer <a href="https://www.apartments.com.au/developers/s-p-setia">SP Setia</a> is the latest to jump into St Leonards booming Transport Oriented Development precinct.

The developer, which has previously delivered Sapphire by the Gardens apartment development in Melbourne, identified the Atchison Street site in 2023. It filed a Scoping Report around 12 months ago, and now has revealed the designs for the new&nbsp;40-storey mixed-use tower.

The State Significant Development Application covers <a href="https://next-portal.urban.com.au/projects/14650/summary">20-22 Atchison Street</a>, a 1,374 sqm site positioned between St Leonards Station and the new Crows Nest Metro station.

Designed by <a href="https://www.apartments.com.au/architects/cox-architecture">COX Architecture</a>, the project would deliver 181 apartments, above a four-storey commercial podium, five basement levels, and new public domain works along Mitchell Street. The apartment mix comprises 35 one-bedroom apartments, 39 one-bedroom-plus-study apartments, 85 two-bedroom apartments, and 22 three-bedroom residences.

The proposal has been lodged as a shop-top housing development under the NSW Government’s TOD planning pathway, which allows increased density around key transport infrastructure. The site sits within the recently rezoned Crows Nest Accelerated TOD Precinct.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b799673d-48e2-46b0-801a-0e33a9330100" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20site.png?VersionId=dPh0UfwfaHpbFL1R7H1cbZNbIW0CHbCC" />

SP Setia acquired the Atchison Street site as part of its continued expansion into the Australian apartment market. In comments made to City &amp; Country (The Edge Malaysia) in 2023, SP Setia President and CEO Datuk Choong Kai Wai described the acquisition as “a strategic move” aligned with the group’s post-pandemic market recovery strategy.

“Our target for this exceptional development is local and overseas buyers, including first-home buyers, downsizers and investors,” Choong said.

The tower has been designed as a slender vertical form rising from a mixed-use podium, with COX Architecture positioning the development as a response to the evolving St Leonards and Crows Nest skyline.

“The purpose of the project is to facilitate the delivery of high-quality housing at a strategically located site and deliver a built tower outcome that is consistent with the desired future character of St Leonards and aligns with the TOD controls,” the design report stated.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b1a85eee-76f7-436c-a6da-73ba827b9b13" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20entry.png?VersionId=dA9jHGPMcm.dDbwk4QfxqWiY5bfh3UVt" />

The podium would incorporate retail uses fronting Atchison Street, commercial tenancies, landscaped communal areas, and pedestrian improvements along Mitchell Street. Vehicle access and loading would be consolidated via Atchison Lane.

Residents would have access to more than 665 sqm of communal indoor and outdoor spaces, while the development proposes 96 parking spaces across five basement levels.

The proposal also includes a commitment for 10 per cent of residential floor space to be allocated toward affordable housing through a monetary contribution.

COX said the tower form responds directly to the emerging high-density character of the precinct while seeking to maximise solar access, cross ventilation, and outlook from apartments.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="2163f85c-f63b-4be3-aafa-f8763976cec5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Article%20Feature%20Image%20%28Grid%29_5.png?VersionId=WiAmtIKJ6.ZQ41EtYEQ1fol7AeorKBlL" />

“The building is orientated towards north,” the Apartment Design Guide compliance report noted, adding that the tower’s slim form was driven by the constrained inner-urban site dimensions.

The design also incorporates landscaped setbacks and communal open space at podium level, intended to soften the interface with surrounding streets and improve pedestrian amenity.

The project adds to a growing wave of redevelopment proposals reshaping St Leonards and Crows Nest following the opening of the Sydney Metro City line and the NSW Government’s push for higher-density housing around major transport nodes.

Last week Stockland filed plans just down the road. They want to build a <a href="https://www.apartments.com.au/new-apartments/601-pacific-highway-st-leonards-nsw-2065">52-storey tower on Pacific Highway</a>.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">First look: Stockland plans 52-storey, 538-apartment St Leonards tower&nbsp;</a>

First look: SP Setia targets St Leonards skyline with 40-storey TOD tower

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> has revealed plans for a new mixed-use tower at 10 Dangar Street, Wickham, advancing a proposal that would reshape the southern gateway to Newcastle’s city centre with one of the city’s tallest residential buildings.

The State Significant Development proposal, now on exhibition, seeks approval for a <a href="https://www.apartments.com.au/new-apartments/bowline-10-dangar-street-wickham-nsw-2293">43-storey tower</a> immediately adjacent to the Newcastle Interchange. The project would deliver around 200 apartments, including 42 affordable housing dwellings, alongside 99 co-living units, a 171-room hotel, retail space, and new public domain integrated through the site.

The scheme marks a significant escalation of plans previously approved for the site. Urban Property Group took over the prominent 2,904 sqm parcel, where excavation and demolition had already commenced under an earlier consent for a 14-storey mixed-use development.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="58a96dd9-407f-4d20-86b4-94e4bfeef74b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20podium.png?VersionId=LGlf08pdFGAZDzvx_CXC4XakHNZRuEE0" />

Designed by <a href="https://www.apartments.com.au/architects/sjb-architects">SJB</a>, the tower has been conceived as a landmark transit-oriented development anchored to the Newcastle Interchange precinct. The proposal includes 245 build-to-sell apartments across a mix of one, two, and three-bedroom residences, as well as two penthouses. Fifteen apartments and one operational unit are earmarked for NDIS housing. The co-living component would add a further 99 units, while the podium would accommodate retail uses and hotel facilities.

SJB said the site presents “a valuable opportunity to anchor the precinct by setting the standard for design, active ground planes and character at the key southern gateway.”

The architecture responds directly to the site’s position beside major transport infrastructure and within one of Newcastle’s fastest-evolving urban renewal precincts. The tower form sits above a sculpted podium designed to frame new public spaces, including a through-site pedestrian link connecting Station Street to Hannell Street, landscaped plazas, and activated retail edges.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="a7bd6ff0-f7db-4ce8-a6dc-ea56e72c6149" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20lanne.png?VersionId=xzf39VADyhj7zBQY2I9fx9vI62u2tuSb" />

The design report describes the project as part of the broader transition of Wickham into “a vibrant, high-quality mixed-use urban precinct” that leverages proximity to the station, open space, and regional connectivity.

A detailed public art strategy has also been prepared for the development. The strategy positions the project as “a transit-oriented development of state significance at the gateway to Newcastle’s city centre” and outlines a series of integrated artworks responding to Newcastle’s industrial and transport heritage.

Creative Road’s curatorial framework for the project, titled Unveil, draws on “stratified surfaces, carved volumes, and light-filled apertures” while referencing Newcastle’s transformation from an industrial city into a contemporary education and technology hub.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="77a882bb-14b1-4d28-99ff-9438e39508c0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20site.png?VersionId=cevgo_vN0eKPK78P8YcEu3mKPLkpFqE7" />

The proposal is being advanced through the NSW Housing Delivery Authority pathway after being declared State Significant Development in June 2025. The accompanying scoping report states the development aims to “maximise the site’s proximity to the Newcastle Interchange by delivering transit-oriented development” while increasing housing supply and affordable housing provision within the Newcastle LGA.

Urban Property Group’s plans align with the long-term strategic vision established under the Wickham Master Plan, which identified the interchange precinct as suitable for substantial uplift in height and density. The current proposal would significantly intensify that vision, positioning the tower among the tallest developments proposed for Newcastle.

The site sits immediately north of the Newcastle Interchange, bounded by Dangar Street, Hannell Street, and Charles Street. It is surrounded by a rapidly growing cluster of residential towers and mixed-use projects that have emerged following the completion of the light rail and transport interchange.

First look: Urban Property Group unveils Newcastle’s latest tower at Wickham interchange

Bottega House has completed settlement of a landmark riverfront site in Macquarie Street, St Lucia, representing its first major Brisbane development.&nbsp;

Positioned on the banks of the Brisbane River, the <a href="https://www.apartments.com.au/new-apartments/180-macquarie-street-st-lucia-qld-4067">premium site at 180 Macquarie Street</a> features uninterrupted river frontage in one of Brisbane’s most tightly held residential precincts.&nbsp;

The proposed development, currently under assessment with Brisbane City Council, has been designed by <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a> with interiors by <a href="https://www.apartments.com.au/interior-designers/mim-design">Mim Design</a> and will deliver a boutique collection of premium residences positioned specifically for owner occupiers and downsizers.&nbsp;

The residences are set to redefine luxury apartment living in the area, with a focus on architectural quality, refined finishes, landscape integration and elevated amenities including curated wellness facilities, resort-style pools and recreation spaces rarely seen in the local market.&nbsp;

Exclusive sales for the project will be led by Keenan &amp; Byrne, ahead of an anticipated launch later this year.&nbsp;

Bottega House Managing Director Nick Malloch said the project reflects the group’s ambition to deliver a highly curated residential offering within one of Brisbane’s most tightly held precincts.&nbsp;

“This is an incredibly rare riverfront opportunity and one we have approached with a long-term perspective,” Malloch said.&nbsp;

“Our vision from the outset was to create a boutique collection of residences that feel more like private homes than traditional apartments, with generous proportions, refined finishes and exceptional amenity throughout."

Malloch says there is a&nbsp;lack of premium owner-occupier stock of this quality in the market, particularly for downsizers wanting space, privacy and a true lifestyle offering without compromise.&nbsp;

"Demand is expected to be strong given the scarcity of premium riverfront opportunities of this nature within Brisbane’s inner-west."&nbsp;

Bottega House secures landmark riverfront site in St Lucia 

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The arrival of the first piling rig officially marks the commencement of construction at SIERA’s new beachside apartment development, Exhale, in Northcliffe.

<a href="https://www.apartments.com.au/new-apartments/exhale-surfers-paradise-8-enderley-avenue-surfers-paradise-qld-4217">Exhale</a>, a glass-encased tower featuring 54 large-scale apartments at 8 Enderley Avenue, is SIERA’s third Gold Coast development. It follows the recently completed PIPIS Bilinga beachfront project, which achieved suburb-record prices, and the soon-to-be-completed Chevron Island development, Tapestry.

[smartcode_project:default project_id=112661 project_image_fid=359603]

<a href="https://www.apartments.com.au/developers/siera">SIERA</a> Founder and Managing Director Brent Thompson said the arrival of the piling rig represented a significant milestone for the development, which is scheduled for completion in late 2028.

Over the next month, around 260 piles are expected to be installed as work progresses on the basement structure. The building is anticipated to rise above ground level early next year, before unveiling its sculptural glass curtain wall, developed in collaboration with specialist façade engineers.

“The façade was designed to maximise panoramic coastal views while creating a distinctive architectural identity,” Thompson said.

[smartcode_project:default project_id=112661 project_image_fid=355935]

Designed by BDA Architecture, Exhale will comprise just 54 two- and three-bedroom residences across 26 levels, a level of low-density living rarely delivered in this beachside pocket between Surfers Paradise and Broadbeach.

The project has been conceived as a resident-only building, with no short-stay accommodation permitted. SIERA says the model is intended to appeal to long-term owner-occupiers rather than transient holiday demand.

[smartcode_project:default project_id=112661 project_image_fid=361052]

Residences have been designed with large-format layouts and expansive glazing, with most apartments featuring more than 30 metres of glass frontage to maximise natural light and ocean views.

The amenity offering spans two levels and centres on wellness and lifestyle, including a heated magnesium pool, sauna, yoga and Pilates studio, gymnasium, private dining facilities, cinema lounge, and dedicated surfcraft storage.

[smartcode_project:default project_id=112661 project_image_fid=359607]

More than half of the apartments have already sold. SIERA has also opened a sales gallery for Exhale at its Chevron Island commercial premises, near its Tapestry tower and the site of its second Chevron Island apartment development, which is slated to launch in early 2027.
</section>
</section>

[smartcode_project_cta:default project_id=112661]

SIERA kicks off construction at Northcliffe tower Exhale

Consumer Sentiment

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Confidence in the Sydney property market has continued to grow, according to a survey from ME Bank
ME Bank's latest Quarterly Property Sentiment Report, which survey's 1,000 Australians already in the property market, has seen sentiment in the NSW capital soar over the last few quarters.
In the second quarter 2019, only 24 per cent of respondents thought values in the NSW metro area would increase in the next 12 months.
There was a sentiment spike in Q3, but the biggest jump was between Q3 and Q4. Now 57 per cent think values will rise.
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There's similar confidence in the Melbourne area too. 57 per cent of survey participants believe values will rise in the next 12 months.
Andrew Bartolo, ME's general manager home loans, said the past three months have been a critical time for the property market.
“After a period of price declines in Australia’s key property markets, consistent house price increases over the past three months have created a much-needed period of stability, providing more certainty that early price increases weren’t simply a blip in the data.
There wasn't a large spike in sentiment from the first home buyer camp, which Bartolo says suggests the recent house price movements may have marked the end of a unique opportunity to buy ‘at the bottom’.
"The recent uptick in first home buyer activity recorded by the ABS may represent the scramble to get in while they can due to renewed affordability pressures as prices rise," Bartolo noted. 
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“The surge in optimism about houses prices over the past six months reflects just how much the external environment has changed since ME launched its first Quarterly Property Sentiment Report in April. 
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“With a relatively solid spring selling season and a number of months’ worth of house value growth under the belt - according to CoreLogic data - there’s more confidence that the upward trajectory of prices will continue, albeit modest increases.”
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jrobinson-rf4aSBido9

Sydney real estate sentiment continues to rise: ME Bank survey

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EXPERT OBSERVER
This is the lowest level of the Index since July 2015. The Index has fallen by 8.4% since the Reserve Bank started cutting rates in June and is down by 8.6% over the last year.
The fall comes despite a further 25bp cash rate cut from the RBA at its October meeting – the third rate cut since June taking the cash rate to a new historical low of 0.75%.
This result will be of some concern to the monetary authorities. Typically, an interest rate cut boosts confidence particularly around consumers’ expectations for and assessments of their own finances. In this survey these components of the Index fell by 3.7% and 4.9% respectively. This may be because, despite the rate cut, assessments for the economy overall plunged by 6% (the twelve month outlook) and 9.1% (the five year outlook).
Consumers are looking behind the reason for the rate cut and, arguably, the absolute level of rates and getting nervous.
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The Index has now been in the range where pessimists outnumber optimists for three of the last four months. As discussed, the October update marks the lowest read since July 2015, when a sudden 30% plunge in the Chinese share market sparked concerns around the Chinese economy and resulted in a 3.3% fall in the Index. However this was more than reversed by an 8% recovery in the Index in the following month.
Global events have, again, contributed to the weak result in October with the deterioration in US-China trade relations weighing on the global economy amid speculation of a recession in the US. In fact, during the week of the survey the US share market fell by 2.6% and the Australian market was down by 3%.
But these events are unlikely to fully explain the sharp fall in the Index. Issues that may also be unnerving consumers include the debate around the lack of response of fiscal policy to the deteriorating outlook; the banks’ partial (13 to 15 basis points) pass through to the standard variable mortgage rate of the recent official rate cut; and the realisation amongst Australians that wages growth is likely to remain ‘stuck’ at a modest 2%yr or less for the foreseeable future.
All index components recorded material declines in October. Consumer expectations for the economy recorded the biggest falls – the ‘economy, next 5 years’ sub-index plunged 9.1% and the ‘economy, next 12 months’ sub-index dropped by 6%. October marks the first month both sub-indexes have been below their long run average levels since April 2016.
Assessments of family finances also took a heavy knock, the ‘finances vs a year ago’ sub-index was down by 4.9% and the ‘finances, next 12 months’ sub-index was down by 3.7%, the latter hitting a five year low. Both moves came despite the series of interest rate cuts since June and the LMITO tax relief rolled out since July. Note that despite the cut in the official cash rate confidence amongst respondents with a mortgage dropped by 4%.
While the biggest falls this month were around consumer views on the economy, it is consumer views around family finances that remain the clear weak spot with the combined reading across these two indexes 12 points below its long run average compared to a combined reading across economic sub-indexes that is 3 points below average.
Consumer attitudes towards spending also deteriorated in October. The ‘time to buy a major household item’ sub-index declined 4.2%, also moving to a four year low. Spending on discretionary and big ticket durable items has been particularly weak over the last year.
Despite the loss of confidence this month, consumers’ job loss fears improved slightly. The Westpac-Melbourne Institute Unemployment Expectations Index declined 1.3% to 131.8 in October, holding slightly above the long run average of 130 (recall that lower readings indicate that more consumers expect unemployment to fall in the year ahead). However, the state detail shows the improvement overall was due to sharply improved reads in Queensland and WA offsetting slight deteriorations in NSW and Victoria. Even with the slight improvement the index nationally has still deteriorated by 9% since the middle of the year, consistent with a slowdown in jobs growth and steady increases in unemployment and underemployment rates.
Housing-related sentiment continues to show more mixed results with softer reads on ‘time to buy’ but more bullish expectations for prices suggesting affordability constraints may be starting to re-emerge.
The ‘time to buy a dwelling’ index declined a further 5.4% in October to be down 8.1% from its August peak (a five year high). At 116.6, the index is now below its long run average of 120. NSW and Victoria have shown particularly sharp deterioration, down 12% and 14% respectively since August.
In contrast, the Westpac-Melbourne Institute Index of House Price Expectations Index posted a further 5.9% rise in October following the 3.9% rise in September to be up a spectacular 54.4% since May.
Not surprisingly, the state detail on price expectations is the mirror image of the picture from assessments of ‘time to buy’ with the biggest gains over the last two months again coming in NSW (+12.5%) and Vic (+16.6%). More consumers nationally now expect prices to rise than fall – the first ‘net positive’ consensus since mid-2018.
The Reserve Bank Board next meets on November 5. Westpac expects the Board will decide to keep the cash rate on hold. Despite this unexpected plunge in the Index the Board is likely to take some time to assess the impact of the three rate cuts before deciding to move again. As we discussed in this report, they will also be alerted to the impact that reductions in the cash rate to well below historical lows may be having on consumers’ assessments of the economy.
In particular, the signals around how consumers are assessing their own finances are worthy of detailed consideration before the Board embarks on its next move.
Westpac expects that next move will be a further cut in the cash rate to 0.5% in February next year although a case can be made for an earlier cut in December depending on developments in the labour market and the global economy.
While we expect the Bank will also be studying various types of unconventional monetary policy measures it is to be hoped that the signals from this survey highlight the possible unintended consequences that may result from the option of resorting to negative interest rates.
BILL EVANS is the Chief Economist at Westpac.
This article was first published on <a href="https://westpaciq.westpac.com.au/Article/40598/14186/" target="_blank">Westpac IQ</a>.
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bevans-rYk9SxEa4r

Consumer sentiment drops to four year low: Westpac's Bill Evans

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EXPERT OBSERVER
In Australia we saw the release of consumer and business surveys for August/September. Offshore, the ECB’s well telegraphed announcement of new stimulus largely met expectations.
As we saw in last week’s June quarter GDP report, the Australian economy is navigating a period of cyclical weakness. The question going forward is to what extent recent RBA rate cuts and tax offset receipts support the economy in the second half of 2019 and into 2020. Disappointingly, the private sector surveys released this week are yet to show any response.
Starting with the NAB Business Survey, not only was there an absence of a bounce, both conditions and confidence slipped further in August and remain at below average levels. Conditions declined 2pts to +1 – the softest result since 2014 – and confidence was down 3pts to +1. While employment conditions rose 2pts to +2 in the month, the trend is clearly moving lower. That stands in contrast to ABS employment growth figures which have held robust to July – the August update to be released next week.
Dour business sentiment was also echoed in the Q3 release of our Australian Chamber-Westpac survey of industrial trends. The Westpac–AusChamber Actual Composite index fell sharply to 52.9 in September from 61.5 in June, continuing the weakening trend seen since mid-2018.
Similarly for the household sector, our Westpac-MI Consumer Sentiment survey lapsed back into slight negative territory again, down to 98.2 in September from 100 in August. The survey contained additional questions on the new tax offset payments received from July 1 for the 2018/19 financial year. Just over 16% of consumers reported receiving a payment. Amongst that cohort, 29% planned to spend it all, and a further 16% planned to spend over half. The remainder (53%) planned to spend less than half including around 25% who planned to save the full payment. Yet, perhaps the most telling indicator of the impact of the new stimulus (or lack thereof) is our regular ‘finances vs a year ago’ sub-index which declined 2.5% to a well below average 84.3.
The sombre consumer mood stands in contrast to further affirmation that the residential property market is stabilising. This week’s release of July housing finance approvals showed the total value of finance up 5.1%. That is broadly consistent with the improvement in auction activity and prices seen through June to August.
It therefore appears that concerns about the state of the domestic economy, broader international conditions and employment are having a more dominant effect on the consumer mindset. New stimulus measures may need more time to have an effect, but at this stage, overall data are still painting a soft economic backdrop.
As such, we continue to believe the RBA is set to deliver 25bp cuts in October and February. Our RBA forecast is explained in our September Market Outlook released this week which covers our broader view on Australian and global economies, FX, rates and commodities.
Of note in this month’s edition is an update to our US forecast. As announced last Friday, we now expect in addition to our previous forecast of FOMC cuts in September, October and December, a further two cuts in March and June, taking the federal funds rate to 0.875%.
In that respect, Thursday’s ECB meeting offered an interesting prelude to next week’s FOMC meeting.
The ECB cut the deposit rate 10bps to -0.5%, moved to a tiered reserve system (for each bank, a multiple of six times minimum reserves will be exempt from the deposit rate charge and instead receive a juicy 0.0%), restarted asset purchases (€20bn per month pace and will persist for as long as necessary), repriced TLTRO's (cheap bank loans incentive rate 10bps cheaper at -0.5%), and strengthened forward guidance.
All up, the stimulus package broadly came in line with our own expectation. We did not anticipate the repricing of TLTRO-III but had expected a larger €40bn per month asset purchase program. We continue to believe the program will be lifted to that pace in 2020 and the deposit rate will be reduced to a low of -0.7%.
As we had seen going into the meeting, not all ECB members agree with the new stimulus, with some of the opinion that economic conditions were not weak enough to warrant restarting asset purchases. Draghi’s time as ECB president has faced significant criticism from within the ECB, and more recently, ire from US President Trump (who once again reiterated his belief that the ECB are targeting the exchange rate). But at his last meeting, Draghi did get a unanimous agreement that fiscal policy should be the main instrument going forward.
Finally, to finish on a more upbeat note, we did at least see some tentative positive developments this week in regards to the US-China trade war and, to some extent, Brexit.
The trade situation calmed down a notch after China released a list of goods that will be exempted from the retaliatory tariff on US imports. In return, the US offered a good will gesture by delaying the scheduled 25% to 30% tariff increase on $250bn of imports by two weeks to October 15.
With Brexit, we saw the Benn bill become law. This will effectively force PM Johnson to request a three month extension to the exit deadline unless a deal is found before October 19. Following that, the Government made a second attempt to call a general election, but once again, failed. Parliament is now suspended to October 14.
ELLIOT CLARKE is a senior economist at Westpac.
SIMON MURRAY is an economist at Westpac
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No signs yet of a rebound in consumer or business sentiment: Westpac 

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EXPERT OBSERVATION
The consumer mood has lapsed back into slight negative territory again with continued pressure on family finances and concerns about the near term outlook weighing on sentiment.
The September survey included additional questions on the tax offset payments the Federal government began making with tax refunds from July 1. Just over 16% of consumers reported receiving a payment.
We estimate that around 30% of households are likely to receive a meaningful rebate so this survey indicates that about half of eligible consumers have already received a payment.
Amongst those that had received a payment, 29% planned to spend it all, and a further 16% planned to spend over half. The remainder (53%) planned to spend less than half including around 25% who planned to save the full payment.
Responses to additional questions on news recall show rising concerns about the economy and the global backdrop. The highest recall for the month was news on ‘economic conditions’ (33%) and ‘international conditions’ (19.8%) – the latter hitting a four year high.
<a href="https://www.propertyobserver.com.au/images/2019/9/11/consumer%20sentiment%201.jpg" target="_blank">Click here</a> to enlarge: 
<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/2019/9/11/consumer%20sentiment%201.jpg" alt="">
 
These proportions are up significantly from a year ago (20.5% and 8.3% respectively). News on both was widely assessed as more unfavourable, with the proportion reporting ‘unfavourable’ doubling over the year. There was a comparable lift in the proportion reporting employment news as ‘unfavourable’ as well.
These concerns about the state of the economy; the international backdrop; and employment are seeing consumers become more cautious about their finances. The sub-index tracking expectations for ‘finances, next 12 months’ declined 2.2% to be down 9.4% since June and at a four year low.
The sub-group detail suggests a range of factors may be contributing including concerns around jobs, persistent weak wages growth and low returns on financial assets weighing on sentiment amongst those at or nearing retirement age.
Consumer assessments of current finances also deteriorated slightly. The ‘finances vs a year ago’ sub-index declined 2.5% to 84.3. While that is above the low of 80.2 registered back in April, it is still a weak read, below long run averages.
It is particularly disappointing given the support that should be coming from the combined effect of policy – interest rate cuts and tax relief – and from stabilising housing markets.
A weaker near term outlook for the economy has also weighed on sentiment. The ‘economy, next 12 months’ sub-index is down 3.1% The disappointing June quarter national accounts update – released in the middle of the survey week – undoubtedly had an effect.
The report showed annual growth slowing to just 1.4%yr, the weakest pace since the GFC. Despite this, expectations for the economy are still comfortably above their July low, when the RBA’s back to back rate cuts appear to have badly rattled consumers.
Interestingly, consumers’ longer term expectations for the economy have been both steadier and more positive.
The ‘economy, next 5 years’ sub-index was the only component to post a rise this month, up 2.1% and up 6.7% since July to a level still comfortably above its long run average. That may be an indication that some of the difficulties currently facing the economy are expected to dissipate over time.
Consumer attitudes towards spending dipped in September. The ‘time to buy a major household item’ sub-index declined 2.8%, unwinding all of last month’s modest gain and taking the sub-index well below its long run average again. Spending on discretionary and big ticket durable items has been particularly weak over the last year.
Consumers’ job loss fears remained slightly elevated. The Westpac-Melbourne Institute Unemployment Expectations Index was essentially unchanged, holding at 133.5 in September, a touch above the long run average of 130 (recall that higher readings indicate that more consumers expect unemployment to rise in the year ahead).
The Index remains about 10% above the levels prevailing late last year, a clear sign of cooling conditions in the labour market.
Housing-related sentiment recorded a more mixed month after the clear positive response to interest rate cuts seen in June-July-August.
The ‘time to buy a dwelling’ index declined 2.9%, reversing most of last month’s gain. At 123.3, the index is still above its long run average of 120 and near a five year high. That said, the sizeable 7-8% declines in Sydney and Melbourne suggest the nascent recovery in prices in these markets may already be starting to dampen buyer enthusiasm.
In contrast, consumers’ house price expectations have continued to firm. The Westpac-Melbourne Institute Index of House Price Expectations Index posted a further 3.9% in September to be up a spectacular 45.8% since May. All major states recorded a lift in price expectations this month. Expectations posted a particularly strong 6.7% gain in NSW.
Responses to additional questions on the ‘wisest place for savings’ show a slight easing in risk aversion although it remains very high by historical standards. Consumers still heavily favour ‘safe options’, 61% nominating deposits, superannuation or paying down debt as the best place for savings, compared to 64% in June.
The proportion favouring real estate nudged up, but only slightly from 10% to 12% and the proportion favouring shares dipped slightly from 10% to 9%. Perhaps most tellingly, some 9% of consumers simply nominated ‘don’t know’ – the highest reading on records going back to 1974.
The Reserve Bank Board next meets on October 1. Westpac expects the Board will decide to cut the cash rate by a further 0.25% from 1% to 0.75%.
In August the Reserve Bank released a revised set of forecasts which showed a downgraded outlook for the unemployment rate; a further extension to the time when the inflation rate is expected to move into the 2-3% band; and a downward revision to the outlook for wages growth.
All of these forecasts were based on ‘market pricing’ for the interest rate path at the time which included one more rate cut in 2019 and a second move in early 2020.
Month to month timing of RBA moves is imprecise but with the case for lower rates quite clear and both US Federal Reserve and European Central Bank likely to be easing policy in the next week or so the next meeting in October seems a sensible time for the Reserve Bank to deliver the next rate cut.
Westpac expects a second cut in February 2020, which we believe will follow further cuts from the Federal Reserve by year’s end.
<a href="https://www.propertyobserver.com.au/images/2019/9/11/consumer%20sentiment%202.jpg" target="_blank">Click here </a>to enlarge: 
<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/2019/9/11/consumer%20sentiment%202.jpg" alt="">
Read full report '<a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/September/er20190911BullConsumerSentiment.pdf" target="_blank">Westpac-MI Consumer Sentiment September' (PDF 128klb)</a>
BILL EVANS is Chief Economist for Westpac
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Sydney and Melbourne's nascent recovery may already be starting to dampen buyer enthusiasm: Bill Evans 

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EXPERT OBSERVER
Housing-related sentiment has improved but part of the gain looks to be based on an expected further lowering in rates.
Our <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/August/WestpacHousingPulseAugust2019.pdf" target="_blank">latest Housing Pulse report</a> finds sentiment-based measures giving the most positive signal in over five years. However, a sustained lift in demand has yet to be confirmed and there remain important caveats. In particular much of the lift looks to be based on an expected further improvement in affordability that may not materialise if prices start rising again or if the RBA disappoints on expected rate cuts.
Interest rate expectations have seen a big shift over the last year. Back in Aug 2018 most consumers expected rates to be higher by now. That hawkishness evaporated in Feb following a clear signal from the RBA that rates were more likely to fall than rise. The Bank followed up with two 25bp cuts in June and July, indicating that it is prepared to cut further “if needed”. Accordingly, most consumers now expect rates to be the same or lower in a year’s time with markets and economists expecting rates to be about 50bps lower.
Our August update of an additional question on consumer expectations for mortgage rates. The simplest summary measure – the net % expecting rates to rise – declined to 9.8 from 38.7 in Feb, 50.4 in Aug last year and a peak of 68.2 in Aug 2017. The latest read is a touch below the 9.9 in Aug 2016 and the least hawkish/most dovish since late 2011.
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The history of this question, which has been run since 2010, shows a clear ‘upward bias’. Adjusting for this the latest reading looks to be consistent with about a 45bp decline in rates over the next year. That would place the consumer reading as slightly less dovish than current market pricing which has 60bps in RBA cuts priced in by this time next year but more in line with that of economists. For the record, Westpac expects the RBA to cut rates by 50bps over the next year, with two moves likely coming in Oct and Feb (see <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/July/er20190724BullRBACashRate.pdf">here</a> for more).
MATTHEW HASSAN is a Senior Economist for Westpac
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Housing sentiment at its most positive in over 5 years: Matthew Hassan

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EXPERT OBSERVATION
The most recent consumer sentiment result comes as somewhat of a surprise given that the survey was conducted against a turbulent backdrop with global financial markets roiled by escalating trade tensions between the US and China, the ASX down 3.4% and the AUD off 3c US since the July survey.
However, the result does come in the aftermath of an unexpected 4.7% fall in the Index in June/July that came despite consecutive rate cuts from the RBA and the restoration of political certainty following the May Federal election.
At the time, particularly following the July fall of 4%, we speculated that households may have been unnerved by the unusual sequence of consecutive rate reductions, implying that there might be some alarming drop in confidence in official circles around the economic outlook.
Realising that lower rates are in the offing but that there is no need for further consecutive changes might be a more encouraging signal for households than a rapid sequence of rate cuts.
Indeed part of the gain is consistent with firming expectations for additional interest rate cuts. The RBA left rates on hold at its August meeting, pausing after the two cuts in June and July but retained a clear easing bias.
The media and economic forecasters now expect a further lowering in the official cash rate in coming months.
This is influencing consumer views. Responses to an additional question on expectations for mortgage interest rates, run every six months, show just 31% expect rates to be higher in a year’s time compared to 43% when the question was last run in February and 50% this time a year ago.
This is the most dovish mix of responses seen since mid-2012 when the RBA was moving through a significant policy easing cycle.
This less alarmist but nevertheless confident view on interest rates appears to have calmed expectations for the economic outlook.
The sub-index tracking expectations for the ‘economy, next 12 months’ rallied 9.6% in August, reversing most of last month’s 12.3% slump but still down 8.3% since May.
Longer term expectations for the economy also recovered, the ‘economy, next 5 years’ sub-index rising 4.5% after recording a 6.7% fall last month.
<a href="https://www.propertyobserver.com.au/images/2019/8/14/consumer%20sentiment%20.jpg" target="_blank">Click here</a> to enlarge: 
<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/2019/8/14/consumer%20sentiment%20.jpg" alt="">
Views around family finances have shown a more muted improvement. The sub-index tracking consumers’ expectations for ‘finances, next 12 months’ rose 0.7% but remained in slightly pessimistic territory.
The ‘finances vs a year ago’ sub-index lifted 0.9% to a five month high, although at 86.5, the sub-index remains at weak levels overall.
The muted gains are despite further signs of improvement in Australia’s housing market and the “Federal government’s tax relief which may be starting to see cash flow to some households.
Spending attitudes showed a firmer gain, the ‘time to buy a major household item’ sub-index is up 2.8% in August to the highest level in over a year.
A major influence on the near term economic outlook is going to be the mix between spending and saving as households receive their increased tax rebates. With sentiment flat and households remaining risk averse we expect consumers to favour saving over spending so this lift in ‘time to buy’ is an encouraging sign for retailers.
Consumers’ job loss fears eased slightly in August. The Westpac-Melbourne Institute Unemployment Expectations Index improved slightly recording a 0.8% decline to 133.3 (recall that lower readings indicate that more consumers expect unemployment to fall in the year ahead).
While the Index is around its long run average level, it has risen 10.3% since May, a significant deterioration from what were consistently better than average readings seen over the six months to February.
Housing-related sentiment continues to show a clear positive response to lower interest rates with assessments of both ‘time to buy’ and house price expectations recording further gains in August.
The ‘time to buy a dwelling’ index rose 3.0% to 126.9, comfortably above the long run average of 120 and the highest level since early 2014.
Sydney and Melbourne continue to lead the turnaround although buyer sentiment posted particularly strong gains in WA and SA this month.
Buyer sentiment has been notably softer in Queensland, the state index down 6.4% this month and down 11.6% on a year ago.
The Westpac-Melbourne Institute Index of House Price Expectations Index posted a solid 5.1% increase. At 125.4, the Index is up 40% since May and back on a par with levels in mid-2018, although still 18% below its previous peak in March 2017. All major states recorded a lift in price expectations this month.
The Reserve Bank Board next meets on September 3. Westpac expects that the Board will decide to keep rates on hold in September before cutting rates by another 25bps at the October meeting with a final 25bp move taking the cash rate to 0.5% in February.
Signals from the RBA are quite clear. In its recent Statement on Monetary Policy the RBA lowered its forecasts for inflation, wages and growth, while lifting its forecasts for the unemployment rate. Those forecasts were despite basing them on the technical assumption of adopting market pricing, which anticipates two more rate cuts.
Accordingly we feel reasonably comfortable that the RBA Board will be cutting rates at least twice more in this cycle.
<a href="https://www.propertyobserver.com.au/images/2019/8/14/consumer%20sentiment%20aug%20.jpg" target="_blank">Click here</a> to enlarge: 
<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/2019/8/14/consumer%20sentiment%20aug%20.jpg" alt="">
BILL EVANS is Chief Economist for Westpac.
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August house price and consumer sentiment bounce back: Bill Evans 

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EXPERT OBSERVER
While the month to month rise in sentiment is fairly muted, the survey detail suggests the Budget was well-received.
Sentiment over the course of the week showed a clear boost, with sentiment amongst those surveyed post-Budget 7.7% higher than sentiment amongst those surveyed prebudget – the most positive turnaround since we began tracking pre and post Budget responses in 2011.
The key issue will be whether this boost from the Budget is sustained. Certainly the ‘pre Budget’ print of 96.8 showed a further deterioration in sentiment from the previous print of 98.8, despite what was already quite a sharp 4.8% fall in March.
Persistent weak wages growth; falling house prices; and the perceived rising cost of living are all weighing on consumers.
This is best captured in the component of the Index – ‘family finances compared to a year ago’ – which declined 4.9% in April (showing little movement between pre and post Budget responses) and is down 9.6% on a year ago.
Click here <a href="https://www.propertyobserver.com.au/images/2019/4/10/Sent1.jpg" target="_blank">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/2019/4/10/Sent1.jpg" alt="">
That compares to the headline Index which is only down by 1.6% over the same period. The month’s survey included an additional question asking consumers about the impact they expect the Budget to have on their finances over the next 12 months. Responses again suggest the 2019 Budget was well-received. Around 15% of consumers expected it to improve their finances; 51% expected no change; and 22% expected it to worsen their finances.
While the overall balance is negative, consumers appear to carry a consistent negative view around budget assessments. At –8.5% the net improve/worsen reading is less negative than last year’s net –10.4% and easily the ‘best’ response we have seen since we began running this question in 2010 (the average reading being –26.6%).
Tax relief was again a key feature of this year’s Federal Budget with new measures building on the seven–year personal income tax plan announced last year.
The main near term measures are clearly targeted at ‘low and middle income earners’. Accordingly it is no surprise that sentiment showed more positive responses amongst consumers in these income groups – both the post-Budget lift and assessed impact on family finances were markedly more positive amongst consumers with incomes in the $60–100k a year range.
Click here <a href="https://www.propertyobserver.com.au/images/2019/4/10/Sent2.jpg" target="_blank">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/2019/4/10/Sent2.jpg" alt="">
Other factors that may have impacted sentiment in April include: a continued lift in the ASX, now up nearly 10% from its late 2018 levels; but negatives around petrol prices (average pump prices nationally up 18¢/litre since early February) and continued declines in house prices.
The month to month gain in sentiment was driven by a solid rise in expectations for the economy and family finances with some offsetting drag from weaker assessments around current finances and ‘time to buy a major household item’. 10 April 2019 
The Budget appeared to shore up confidence around the economy, which has had a shaky start to the year with choppy reads in the previous three months.
The ‘economic outlook, next 12 months’ sub-index rose 6.2% in April, regaining most of the ground lost in March.
The ‘economic outlook, next five years’ sub-index also rose 5.9%, retracing all of the previous month’s decline. Both sub-indexes are again in net positive territory above 100 and well above long run averages. Consumer views on family finances were much more mixed.
The ‘finances next 12 months’ sub-index posted a solid 4.1% lift, no doubt reflecting the tax measures at the centre of this year’s Budget. However, as discussed, the sub-index tracking assessments of ‘finances vs a year ago’ posted a sharp 4.9% decline in April to be down 9.6% on a year ago and at its lowest level since August 2017.
Attitudes towards spending also cooled notably with the ‘time to buy a major household item’ sub-index declining 2.0% to 115.5 in April (despite a 10.5% post-Budget lift). While that is still a positive read, it is below the levels seen a year ago and well below the long run average of 127. The readings around both current finances and ‘time to buy a major item’ remain consistent with the weak consumer spending growth seen through the second half of 2018.
Renewed confidence around the economy eased job loss fears a little in April. The Westpac-Melbourne Institute Unemployment Expectations Index recorded a 2.5% decline, retracing part of last month’s sharp 8.9% jump. Recall that lower readings indicate that fewer consumers expect unemployment to rise in the year ahead. At 127.4 the index is back below the long run average of 130”. Sentiment around housing improved in April. The ‘time to buy a dwelling’ index rose a further 2.4% to 119.4 in April, a four year high.
The index has now risen 33% from its mid-2017 low and is back around its long run average of 120. Improving affordability continues to see a lift in buyer sentiment in NSW and Victoria although in both cases there is still some way to go before buyer sentiment returns to long run average levels.
More surprisingly, the Westpac-Melbourne Institute Index of House Price Expectations posted a strong 11.9% rise to 95.6 in April, boosted by a sharp increase in New South Wales.
The Index is coming off a March reading that was the lowest level since we began compiling this index in 2009. The Reserve Bank Board next meets on May 7.
The Governor’s Statement following the April meeting saw a change in the wording of the key final paragraph. From our perspective, that change indicated a more flexible approach to interest rate policy than the ‘on hold’ stance we have seen since September 2016. The Board meeting in May will consider the staff’s revised growth forecasts for 2019 and 2020.
We expect these to be markedly lower than when last reported in February with growth tracking around or below potential. In those circumstances it is reasonable to expect the Board to move to a more formal easing bias in preparation for the first rate cut, which we expect to be delivered in August.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
 
 
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Westpac consumer sentiment shows the Budget has been well received

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EXPERT OBSERVATION 
The deepening market downturn is starting to weigh more heavily on consumer sentiment towards housing. Both the complexion of this impact and the extent to which market weakening has outstripped weakness in housing-related sentiment provide important clues about some of the dynamics at play.
Consumers’ housing-related sentiment has deteriorated since November with negatives around price expectations and elevated risk aversion more than offsetting the boost from improving affordability. While sentiment overall is downbeat, the market performance has been markedly weaker than sentiment over the last year, suggesting that other factors are impacting. In particular, a tightening in loan standards from some lenders may have compounded what were already negative market dynamics following a drop in investor activity and initial price correction.
Nationally, the Westpac Melbourne Institute ‘time to buy a dwelling’ index has slipped 1.8% since November but is still up 8.6% year on year. Improving affordability continues to see a lift in NSW and Vic, the latter reaching a five year high in Feb. However buyer sentiment is still sub-par in these states while it has become a little more unsettled in other states.
Price expectations have been the big mover. The Westpac–MI Consumer House Price Expectations Index posted a sharp 11% drop over the three months to February, hitting a new historical low since we began compiling the index in May 2009. Weakness remains more pronounced in NSW and Vic, with just over half of consumers in these states expecting prices to be lower in a year’s time. That said, the more positive views in other states are also starting to show signs of softening with notable pull backs in Qld and WA.
These two aspects of housing-related sentiment highlight the ‘dynamics’ of the housing cycle. Price declines are currently dominating with negative expectations around prices likely to continue feeding into investor weakness and encourage buyers to delay purchases. At some point though, improving affordability should generate a bigger lift in buyer sentiment and a pick-up in demand that stabilises the market – exactly where that point is and how we get there remain more open questions.
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/Housing_Pulse/Housing_Pulse_Bites/2019-02/Housing-pulse-bite-2019-02-1.jpg" alt="">
Matthew Hassan is senior economist at Westpac. 
Read the full report: <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/February/WestpacHousingPulseFebruary2019.pdf" target="_blank">Westpac Housing Pulse</a>. 
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What consumer sentiment is telling us about the housing downturn: Westpac's Matthew Hassan

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EXPERT OBSERVER
In the latest March quarter survey only 8.8 per cent of respondents thought the ‘wisest’ place to put new savings was in ‘real estate’ – a record 46-year low.
The ‘wisest’ place for savings remains bank deposits (28.8 per cent of respondents) from ‘pay debt’ (26.3 per cent).
 Consumer confidence: The Westpac/Melbourne Institute survey of consumer sentiment index fell by 4.8 per cent to 98.8 in March after rising by 4.3 per cent to 103.8 points in February.
The sentiment index is back below its long-term average of 101.3.The consumer confidence figures have implications for retailers, and other consumer-focused businesses.
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What does it all mean?
Aussie consumers remain super-conservative. When asked what was the wisest place to put new savings, ‘bank deposits’ and ‘paying-off debt’ were ranked number one and two. Understandably with home prices falling, real estate didn’t feature in the top places for new savings. In fact the result for ‘real estate’ was the lowest since the survey began in 1973.
Aussie consumers aren’t confronted with a lot of financial news in the mainstream media nowadays. But when it is published it tends to be bad news. Last week consumers would have heard that the Australian economy slowed in the December quarter, that the Australian dollar had fallen to US70 cents, and that retail sales rose modestly in January. 
There was speculation about rate cuts. Understandably this was picked up in the ANZ-Roy Morgan confidence index yesterday and today’s Westpac-Melbourne Institute survey. Confidence does bounce from week-to-week and month-to-month. Before the latest drop, Aussie confidence levels were actually above longer-term averages.
Westpac noted: “Responses over the survey week show a marked drop-off after the national accounts update. Those collected before the March 6 release had a combined index read of 100.7. Those collected after the release had a combined read of 92.7, an 8 per cent fall.”
If consumers are pessimistic, they may reduce spending. But much depends on the strength of the job market (at present, it is quite strong) and consumer prices (inflation rate is low). So it is a case of being alert and not alarmed.
The good news is that more homebuyers believe that now is a good time to buy a home. The index is at 5-year highs, up 30 per cent from the mid 2017 low.
What do the figures show?
The Westpac/Melbourne Institute survey of consumer sentiment index fell by 4.8 per cent to 98.8 in March after rising by 4.3 per cent to 103.8 points in February. The sentiment index is back below its long-term average of 101.3. A reading above 100 denotes optimism. The survey of 1,200 people was conducted from March 4-8.
The current conditions index fell by 2.8 per cent and the expectations index fell by 6.2 per cent.
All five of the components of the index fell in March after all rose in February:
<ul>
<li>The estimate of family finances compared with a year ago fell by 5.6 per cent to 84.4;</li>
<li>The estimate of family finances over the next year fell by 5.9 per cent to 107.8;</li>
<li>Economic conditions over the next 12 months fell by 7.0 per cent to 101.4;</li>
<li>Economic conditions over the next 5 years fell by 5.5 per cent to 94.6;</li>
<li>The measure on whether it was a good time to buy a major household item fell by 0.6 per cent to 117.9.</li>
</ul>
Housing outlook: A good time to buy a dwelling? The index rose 3.5 per cent to 112.7, and was up 11.5 per cent on the year. House price expectations fell by 2.7 per cent to 85.4 and were down by 34.1 per cent on a year ago.
Unemployment expectations: Unemployment expectations rose by 8.9 per cent to 130.6 in March to be up by 7.2 per cent over the year.
Wisest place for savings: On the question of the ‘wisest place for savings’, banks (28.8 per cent) led the way from paying down debt (26.3 per cent). Only 8.8 per cent of respondents selected real estate while 7.5 per cent nominated shares. Overall a record 51.7 per cent suggested choices for putting savings other than traditional real estate, bank deposits, building society deposits, bonds or shares.
What is the importance of the economic data?
Westpac and the Melbourne Institute release the Index of Consumer Sentiment each month. According to Melbourne Institute: “The survey of consumer sentiment was first undertaken in 1973 and was conducted on a quarterly basis until 1976, a six-weekly basis from 1976 to 1986, and has been conducted monthly ever since.” Confident consumers may be more inclined to spend, especially on major items.
What are the implications for interest rates and investors?
Consumer confidence ebbs and flows over time, but the job market remains in strong shape. Provided unemployment remains low, job opportunities abound and wages tilt higher then consumers will continue to embrace ‘retail therapy’.
Consumers may currently prefer to put savings in other places than real estate but that could be about to change. The reading on whether it was a good time to buy a home has lifted to 4-year highs. Low interest rates, softer home prices and a strong job market are a heady mix of positive influences, balanced against a raft of new housing supply in the process of hitting markets.
CommSec doesn’t expect a change in official interest rates for the foreseeable future.
CRAIG JAMES is the Chief Economist at CommSec
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Real estate sentiment hits 46-year low: CommSec's Craig James

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EXPERT OBSERVER
Despite the material correction in housing markets, residential property investors remain markedly more optimistic than non-investors.
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Investors sit front and centre in the housing market correction currently unfolding in Australia. For the first time, the Westpac Melbourne Institute Consumer Sentiment survey provides some insight into who this segment is and how they are assessing things.
An additional classification question added to the survey in Dec now allows us to separately identify consumers that own residential investment properties. The first results show an interesting breakdown on both the characteristics of this sub-group and their sentiment – the latter of particular interest given both the investor-driven housing market downturn and associated concerns about potential ‘wealth effect’ spillovers to demand.
At the aggregate level, 18.7% of respondents reported owning a residential investment property, broadly in line with official statistics.
Consumers in NSW, WA and Vic were slightly more likely to be housing investors while those in Qld showed the lowest incidence (15%). Not surprisingly the share of investors rises steadily across age groups, peaking at 27% for those aged 55-64, dropping back sharply to 14% for those over 65 (noting that this group is less likely to be accessing the tax benefits of negative gearing).
Again in line with the official statistics, the incidence of investor housing ownership is higher for those on high incomes (31%) and amongst consumers that are owner occupiers (24%). So-called ‘rentvesters’ account for just 7% of tenants.
Turning to the sentiment readings, housing investors are markedly more optimistic than non investors with an average sentiment read over Dec-Jan of 114.7 vs 101 for non investors and 103.7 for all consumers.
Note that this does not appear to be a by-product of income differences – across every income band, housing investors have more positive sentiment reads than non investors.
The positive spread is across all index components but is most pronounced for ‘finances vs a year ago’ (+16pts) and least pronounced for ‘finances, next 12mths’ (+6pts) – an intriguing mix that suggests investors have been unperturbed by price falls over the last year but that expectations of further declines may be curbing optimism for the year ahead.
On housing, investors are more positive on ‘time to buy’ but more negative on the price outlook. They also view ‘real estate’ more favourably as the ‘wisest place for savings’, particularly compared to ‘deposits’, but are slightly more inclined towards repaying debt than non investors.
Read the full report: <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/January/WestpacRedBookJanuary2019.pdf" target="_blank">'Red Book January 2019' (PDF 453kb)</a>
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/The_Red_Book/Red_Book_bites/Redbook-bite-20190131-2.jpg" alt="">
MATTHEW HASSAN is a Senior Economist for Westpac
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