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

Joel Robinson

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

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

Sammut secures approval for debut Brisbane apartment development in Toowong

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

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

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

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

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

WM Residences fills gap in Mordialloc townhouse market

Interest Rates

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EXPERT OBSERVATION
Last week was all about interest rates – even though the RBA and the US Fed kept both of their official rates unchanged at their most recent meetings.
But as usual, what’s likely to happen in the future is the interesting question.
In Australia, all eyes will be on how ASIC and APRA respond to the findings of the banking royal commission. Will they be defensive about past mistakes, or move forward with tighter regulations on banks and financial planning? What will the RBA do in this context?
On interest rates the answer is probably “nothing soon”.
<a href="https://www.rba.gov.au/media-releases/2018/mr-18-11" target="_blank">The official statement</a> by RBA Governor Philip Lowe makes one almost physically feel the contortions.
“The Bank’s central forecast for the Australian economy remains for growth to pick up, to average a bit above 3 per cent in 2018 and 2019. This should see some reduction in spare capacity in the economy.”
OK, growth is about to move up strongly.
“Household income has been growing slowly and debt levels are high.”
Well, that sounds concerning, since <a href="https://tradingeconomics.com/australia/household-final-consumption-expenditure-etc-percent-of-gdp-wb-data" target="_blank">household consumption accounts for nearly 60% of GDP</a>.
Unemployment was getting better, but that’s stopped happening.
“Inflation remains low…with both CPI and underlying inflation running marginally below 2 per cent. Inflation is likely to remain low for some time…A gradual pick-up in inflation is, however, expected as the economy strengthens.”
So inflation has been outside the target band of 2-3% for a very long time, but if that courageous GDP growth forecast pans out then we might end up back in the band.
And on, and on. No wonder US President Harry Truman once lamented “Give me a one-handed economist. All my economists say ‘on one hand…’, then ‘but on the other…’”
In any case, for the foreseeable future it is not what the RBA does, but what the big four banks do that will have the biggest impact on the interest rates Australian borrowers face.
Wholesale funding costs have been ticking up, cutting net interest spreads for the banks. And the wash-up of the Royal Commission is likely to lead to a further tightening of underwriting standards. As ANZ CEO Shayne Elliot put it:
“People are still going to buy a home, so it doesn’t change fundamental demand, but it will change the process and will probably make it harder for people to be successful in their applications.”
Those two factors taken together could easily see a 15-20 basis point increase in rates for home loan borrowers. That might be tempered by potential outrage from the public – banks behave badly and then put their prices up – but the banks have a lot of market power, as history has shown in these matters.
Across the pond, the US Federal Reserve left official rates unchanged from March at 1.5% to 1.75%. That ended, for now, a string of six rate hikes since December 2015.
In a <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20180502a.htm" target="_blank">relatively brief statement</a> the Fed noted;
“the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Recent data suggest that growth of household spending moderated from its strong fourth-quarter pace, while business fixed investment continued to grow strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent.”
The leading interpretation of this is that the Fed thinks inflation is ticking up and will likely raise rates another 25 basis points at the next meeting if nothing material changes in the economy.
All this is a reminder that monetary policy is as much art as it is science.
It is also worth remembering that the other key function of central banks is prudential regulation. That is where the real changes could be interesting. Fed Chair Jay Powell is known to be much more amenable to deregulation of the financial sector than his predecessor Janet Yellen. It may not be too long before we see those instincts put into action.
<img src="https://counter.theconversation.com/content/96006/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">Perhaps the regulatory front will be more interesting than interest rates for the remainder of 2018.
Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/vital-signs-fallout-from-banking-crackdown-could-be-worse-than-interest-rate-rises-96006" target="_blank">original article</a>.
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j.ballantyne1990-6AQqhLzZaK

The fallout from banking crackdown could be worse than interest rate rises: Richard Holden

<html><body>The cash rate is likely to remain untouched at the next board meeting tomorrow (01/04/2018), but increased rates from the US Federal Reserve may trigger out-of-cycle rate hikes within the Australian lending market, according to <a href="https://finder.us9.list-manage.com/track/click?u=cc5e9bce699fa1d71a67cf499&amp;id=3dd987276e&amp;e=58cd8ffd03" target="_blank" rel="noopener noreferrer">finder.com.au</a> research. When asked to predict the cash rate decision for May 2018, 97% (29/30) members of the <a href="https://finder.us9.list-manage.com/track/click?u=cc5e9bce699fa1d71a67cf499&amp;id=c608319a35&amp;e=58cd8ffd03" target="_blank" rel="noopener noreferrer">finder.com.au RBA survey</a> forecast no change. Experts and economists believe a mixed economic climate and low inflation are the main catalysts behind this expected monetary policy decision.  Eighty-seven percent of economists who weighed in on the direction of the next rate move believe the Reserve Bank of Australia (RBA) will push the cash rate upwards. Economists were also asked to indicate exactly when the next cash rate change may happen.  Graham Cooke, Insights Manager at finder.com.au, says the estimated time of a rate movement is creeping forward. “Of the seventeen economists who specified a date for an upward rate movement, fourteen of them (82%) don't expect this to happen until 2019.” “We could be looking at a stagnant cash rate for the rest of the year, at least,” he says. An Australian online bank recently lifted interest rates out-of-cycle for owner-occupiers and investors, citing increased funding costs as a result of rising US interest rates. When asked about this, most panellists (14, 78%) from the survey are expecting other banks to follow suit. “Increased international lending costs may force banks to increase rates for home loan customers out-of-cycle, even if the cash rate doesn’t budge. “The days of super-low interest may be over for borrowers sooner than expected. “Brace yourself for out-of-cycle rate hikes, especially if the US Federal Reserve lifts rates again,” Mr Cooke says. When considering the broader economic outlook, household debt was pinpointed as an area of concern in finder’s Economic Sentiment Tracker. Of the 17 panellists who participated, none had a positive outlook for household debt.  In fact, 53% of respondents reported a negative outlook on household debt. “With household debt at an all-time high, this does not bode well for stressed borrowers,” Mr Cooke says. On the other hand, the highest percentage of positive sentiment was given to employment (60%) followed by wage growth (35%) and housing affordability (21%). “This optimism for future employment has likely been fostered by government support. “Employment was a key part of the 2017-18 budget with a focus on helping disadvantaged members of society such as parents, Indigenous Australians and older people, find employment opportunities. “Initiatives such as ParentsNext and Closing the Gap are two examples of this, and it’s likely employment and job creation will remain a central theme in the 2018-19 budget, due to be released next Tuesday (08/05/2018),” Mr Cooke says. Here’s what our experts had to say: Jordan Eliseo, ABC Bullion (Hold): "The RBA will keep the cash rate steady at 1.50% at their next meeting. Inflation is soft, property prices are easing, and employment growth looks to be slowing down, so we are still of a view that the next move will be a cut, though this will take some time to come through." Shane Oliver, AMP Capital (Hold): "Strong business conditions and employment, rising non-mining investment, strong global growth and the RBA's own forecasts argue against a cut but low inflation and wages growth, risks around the outlook for consumer spending, the slowing Sydney and Melbourne property markets and tightening bank lending standards argue against a hike. So the RBA is likely to remain on hold." Alison Booth, ANU (Hold): " The fundamentals do not yet justify a change." John Hewson, ANU (Hold): "Economy still mixed Household debt constraint" Malcolm Wood, Baillieu Holst (Hold): "Muddle-through economy, inflation at low end of target band" Paul Dales, Capital Economics (Hold): "Economic growth and inflation still aren't strong enough to warrant higher interest rates" Michael Blythe, CBA (Hold): "Inflation is low, the downtrend in unemployment appears to have stalled and the RBA is emphasising ‘patience’." Saul Eslake, Corinna Economic Advisory (Hold): "None of the data released since the last meeting, nor anything else that has occurred since then, will have altered the RBA's assessment of the economic outlook sufficiently to prompt a change in its view that current monetary policy settings are appropriate for the time being." Peter Gilmore, Gateway Bank (Hold): "The RBA knows that pressure from home price rises is beginning to stabilise, however, it's still too soon to move on the cash rate with so many borrowers heavily exposed to rising rates and inflation still low." Mark Brimble, Griffith Uni (Hold): "Insufficient traction or momentum in the economy to consider any tightening for the year" Shane Garrett, Housing Industry Association (Hold): "No real inflationary pressures, strong jobs market." Alex Joiner, IFM Investors (Hold): "The economy is tracking along the RBA's own projections, however, private demand is picking up only gradually and consequently inflationary pressures remain modest. Further strong labour market outcomes have not as yet prompted a discernible acceleration of broad-based wages growth that would underpin an inflationary pulse. The RBA has little cause to shift its policy stance as a result. " Michael Witts, ING Bank (Hold): "Month on month no significant changes to require changes in policy rate." Leanne Pilkington, Laing+Simmons (Hold): "The fundamentals have remained relatively static, meaning the RBA has no impetus to adjust interest rates at this time. There’s a strong argument to leave the cash rate unchanged for the foreseeable future given stagnant house prices, the marked drop in investor lending and other macro challenges to the economy, especially when the banks cannot be trusted not to hike rates independently." Mathew Tiller, LJ Hooker (Hold): "Inflation and wages growth remain too soft to see any movement in the cash rate." John Caelli, ME (Hold): "The RBA will want to see inflation and wages improve and lower unemployment before making any changes." Michael Yardney, Metropole Property Strategists (Hold): "RBA  Governor Philip Lowe has warned the next shift in the official cash rate will be up rather than down, but there is no reason for this to occur until there is a pick up in economic growth and wages. Both of these are likely to be gradual so there is no case for any near-term change in policy." Mark Crosby, Monash University (Hold): "The RBA have signaled that they will keep rates at low levels for a while longer, but that the next move is likely to be upwards." Jacqueline Dearle, Mortgage Choice (Hold): "When the economy can better absorb the impact of an increase and inflation is at 2% or near that target level, Gov Lowe will lift the rate." Dr Andrew Wilson, My Housing Market (Increase): "Latest data remains neutral for the current setting environment with ABS March quarter CPI still clearly underwhelming. Predictable end to APRA market manipulation reflects generally moderated housing market activity so RBA can concentrate on main macro game." Alan Oster, NAB (Hold): "Too early to change. Waiting on data regarding wages and unemployment." Matthew Peter, QIC (Hold): "After the tepid March quarter CPI report and the ongoing slowdown in the housing market, the RBA can park monetary policy into 2019." Noel Whittaker, QUT (Hold): "Won't drop them - property prices flat - why move." Nerida Conisbee, REA Group (Hold): "Although momentum seems to be slowly building in the Australian economy, it still isn't at a point where interest rates will start to increase. We are now running at quite a different speed to large parts of the rest of the world - our time will come but it is taking lot longer than expected." Christine Williams, Smarter Property Investing P/L (Hold): "Even with unemployment reducing and the positiveness within the business sector, and the slowing of the housing market in many states I feel with the Royal Commission at is peak and the findings that have been released the RBA Reserve Bank would be very courageous to increase interest rates at the present." Janu Chan, St.George Bank (Hold): "The RBA has explicitly stated that the next move is likely to be up, but given that spare capacity remains in the labour market, wage growth continues to be subdued and inflation pressure muted a hike is not likely to occur for some time." Brian Parker, Sunsuper (Hold): "Nothing in the recent data to force them to adjust rates one way or the other.  Still enough labour market slack to keep them from raising rates, and they've made it clear they would be very reluctant to ease at this point."</body></html>

Increased international lending costs may force banks to increase rates for home loan customers out-of-cycle

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Australian Prudential Regulatory Authority chairman Wayne Byres has said there is little evidence of a lending free-for-all.
The APRA chairman defended the banking regulators’ actions to reduce what were perceived to be growing risks in Australia’s housing market.
Speaking to lawmakers in Canberra, Byres said that without the introduction of tighter macroprudential measures it may have led to interest rate increases from the Reserve Bank of Australia and a further deterioration in lending standards.
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He faced more than an hour of questioning about revelations of poor lending standards from the Hayne royal commission at the House Economics Committee yesterday.
"We are still dealing with an environment in which arrears are not particularly high, they are higher than they have been for a while, but if lending was a free-for-all in the way that some are suggesting I think arrears rates and other things, indicators of financial stress, would be much higher than what they are now" Byres said.
The latest RBA data the proportion of impaired housing loans as a proportion of all loans is 0.15 per cent. 
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<div id="article-inline-ad">Sarah Henderson MP, the new chairman for the committee, asked whether the Australian community could have the confidence that APRA was up for the task.</div>
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<div>
Byres explained that the chief banking regulator had been engaging the largest lending institutions about their lending standards for several years and many of the issues raised were the responsibility of the corporate regulator, the Australian Securities and Investments Commission.
"The prudential standards are about safety ... boiled down to its absolute essence is the question 'Is the money of depositors safe' and I don't think anyone has drawn the conclusion that that isn't the case ... we shouldn't suggest that there is any threat at all to depositors money here," Byres said.
Byres was asked to elaborate on comments made before the House Economics Committee last month when he said the macro-prudential limits were "reaching the end of their useful life".
</div>
<div>
Byres said the 10 per cent cap on the rate of investor lending announced in December 2014 was likely to be the first measure to be unwound.
Byres said he couldn't foreshadow the removal of the 30 per cent cap on the flow of new interest-only loans which was announced 12 months ago as "we've only just got that in place".
 
</div>
</div>
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Little evidence of lending free-for-all: APRA's Wayne Byres

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Expert Observer
As expected, the Minutes of the March Monetary Policy Meeting of the Reserve Bank Board provided no real surprises although from our perspective there is some confusion as to the Bank’s growth forecast for 2018.
When the Governor made his statement following the Meeting, he changed the growth assessment for 2018 from “a little above 3%” to “faster than 2017”. That appeared to be a substantial change given that the expectation was that growth in 2017 (to print the following day in the December quarter GDP report) was expected to be only 2.5%. In today’s Minutes, we get a third variation where growth in 2018 is described as “expected to exceed potential growth”.
Potential growth is assessed by the RBA as 2.75%. So, we can conclude that despite sending somewhat different signals, the Statement and the Minutes are both pointing to a somewhat lower growth outlook for 2018. Note that the forecast for the February Statement on Monetary Policy was 3.25% and we will receive the next forecast on May 4.
The discussion around consumption is little changed. There is still “uncertainty surrounding the outlook for consumption growth”. Note that this meeting did not have the advantage of knowing the substantial upward revision for consumption in 2017. Based on partials, it was reasonable to expect consumption growth in 2017 to be around 2.2%.
The final number printed 2.9%. In response to that faster momentum, Westpac has revised up its GDP forecast for 2018 form 2.5% to 2.7%. However, we still expect growth of 2.5% in 2019, indicating a slowdown in the economy in that year. Even with this faster actual consumption path in 2018, we still think the Bank will remain uncertain around the consumption outlook, particularly given the reference to the impact of high household debt levels on consumption.
There is a special consideration of the switch from interest-only to principal and interest loans, and the associated impact on borrowers’ cash flows. The Board notes that “the increase in payments would be significant for some individual households”, but concludes that this impact represents “a small proportion of household disposable income”. We concur with that assessment.
There is a long discussion on the outlook for business investment, concluding that there may be some upside risks to the Bank’s forecasts in growth in non-mining business investment over the medium term.
The discussion on the labour market continues to be dominated by the word “gradual”; “wages growth was expected to rise gradually and spare capacity in the labour would continue to decline gradually”.
Housing markets in Sydney and Melbourne are recognised to have slowed and housing credit growth had eased, particularly under the weight of tighter credit standards. However, the Board is not fully satisfied and still noted that household balance sheets continued to warrant “careful monitoring”.
It is noteworthy that the Minutes assess financial market pricing as indicating that the cash rate is expected to remain unchanged during 2018 with a 25bps increase expected in the first half of 2019.
Commentary around the Australian Dollar is unchanged “on a trade-weighted basis, the Australian Dollar remained within its range of the preceding two years”. Overall conditions in the global economy are assessed as continuing to improve with a broadly based upswing. Nevertheless, the minutes repeat the Bank’s long-held view that Australia’s terms of trade are likely to “decline over the following few years”.
Conclusion
Given that the national accounts were not available at the time of the Board meeting, it is not certain that the Bank has decided to lower its 2018 growth forecast from 3 ¼ per cent. Certainly, Westpac assessed the December quarter report as justifying a modest lift in our growth forecast from 2.5% to 2.7%. A growth forecast of 3 ¼% in an economy where potential is 2.75% would normally be associated with a central bank that expects to tighten policy at some stage over the course of the year. We certainly have believed that the Bank held such an expectation.
The ongoing emphasis on “gradual” with regard to the labour market and inflation increase the probability that the Bank is reassessing that view. It was always our expectation that such a reassessment would occur over the course of 2018.
We continue to expect that the cash rate will remain on hold in 2018 and 2019.
With growth slowing to below trend in 2019, we cannot see a case for higher rates in that year either.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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bevans-rYk9SxEa4r

Confusion on the RBA's growth forecast for 2018

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The Reserve Bank of Australia should follow the example of other central banks and be clearer about when and how rates will change, called “forward guidance”, to make its policy more effective.<a href="https://theconversation.com/profiles/giovanni-pellegrino-452180"></a>
At the moment the RBA follows an approach to implement monetary policy known as <a href="http://www.rba.gov.au/monetary-policy/" target="_blank">inflation targeting</a>. This means it has a numerical target for inflation (an average 2-3% inflation over the medium term) and a framework to achieve that target (how it thinks monetary policy affects the economy, and how it communicates policy decisions).
Australia’s cash rate is at a historical low of 1.5%. So if there’s any adverse shock to our economy (for example, a large correction in house prices), the RBA would have little room to reduce the cash rate before getting to 0% – the zero lower bound on nominal interest rates.
At that point, you can’t cut rates anymore. <a href="https://www.sciencedirect.com/science/article/pii/S0014292117301605" target="_blank">Research shows</a> economic shocks can have a more severe impact on economic activity when the policy rate is at, or near, zero.
Instead the RBA should be more explicit about the conditions that would lead to a rate change. <a href="https://www.chicagofed.org/publications/working-papers/2016/wp2016-07" target="_blank">Research shows</a> this has stimulated economic recovery before.
<h2>How rates work at the moment</h2>
To understand forward guidance it helps to understand conventional thinking about monetary policy. The RBA controls inflation by adjusting the cash rate, which is the interest rate on overnight loans in the interbank market.
Changes in the cash rate change longer-term interest rates in the economy. These then influence households’ and businesses’ spending and investment plans. These decisions also determine demand and inflation.
For example, suppose inflation is below target. A cut in the cash rate reduces longer-term interest rates, which encourages people to buy goods and services (falls in long-term deposit rates and government bonds reduce the incentive to save) and invest (commercial and mortgage loans are cheaper). Rising demand sends prices up, which brings inflation back to target.
As with other central banks around the world, the RBA also explains the rationale for its policy decisions. For example, in the <a href="http://www.rba.gov.au/publications/smp/" target="_blank">Statement of Monetary Policy</a>, released four times a year, the bank sets out its assessment of current domestic and international economic conditions, along with an outlook for Australian inflation and output growth.
The purpose of these announcements is to enhance the credibility of the inflation target. If people trust the RBA will implement policy to achieve the inflation target, they will make plans around what they spend and how they price goods and services based on this. This makes inflation easier to control.
<h2>How being clearer about rates helps</h2>
While the RBA might not be able to influence the current cash rate, it can still influence longer-term rates by making announcements about its future policy decisions. Long-term interest rates usually change depending on what people expect of future cash rate changes.
So if monetary policy can influence these expectations, it can move long-term rates.
Of course, words are cheap. To make these declarations credible the RBA would need to communicate its plans for the future cash-rate, with modelling and forecasts justifying those plans.
Economists could then judge whether the RBA is meeting its objective through good luck or good policy. If it’s through good policy, it enhances the RBA’s credibility and, in a virtuous circle, this gives the bank policy more influence over expectations.
A prominent example of forward guidance comes from the United States’ central bank, the Federal Reserve. In December 2008, when the federal funds rate (the US equivalent of the Australian cash rate) was first at the zero lower bound, the Federal Reserve <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20081216b.htm" target="_blank">announced</a>:
The committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.
Translated, the Fed anticipated keeping the federal funds rate at zero for a considerable time. This communication was meant to influence the public’s expectations about the future course of US monetary policy, and to have consumers and businesses expect an expansionary monetary policy for some time.
During the recovery, the Fed refined its communication strategy to become more explicit about the economic circumstances that would lead to a change in policy. For example, in June 2013, the committee that sets rates <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20121212a.htm">anticipated that</a>:
this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-½%.
This type of announcement gives people more information about the strategy the Fed will take with rates, rather than simply providing forecasts about what it expects future economic conditions to be like (which doesn’t need to have any information about policy strategy).
<a href="https://www.aeaweb.org/articles?id=10.1257/aer.104.10.3154" target="_blank">Recent evidence</a> confirms this had an impact on businesses’ expectations. Right after the June 2013 announcement by the Federal Reserve, there was an increase in the number of quarters until businesses expected the US policy rate to increase above 25 basis points.
<a href="https://images.theconversation.com/files/210482/original/file-20180315-104659-5fu59l.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/210482/original/file-20180315-104659-5fu59l.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
FOMC= Federal Open Market Committee (which sets rates) Swanson and Williams: the zero bound and interest rates, Author provided
<a href="https://www.chicagofed.org/publications/working-papers/2016/wp2016-07" target="_blank">Other research also</a> suggests forward guidance influenced private sector expectations and stimulated the economic recovery after the global financial crisis.
At the moment, the RBA doesn’t produce statements about future monetary policy and how this would change if the economic environment changed. But the bank could do this.
The RBA has the luxury to develop its communications policy during a time of economic calm, unlike the Federal Reserve, which was forced to experiment with new policies during the worst recession since the Great Depression.
<img src="https://counter.theconversation.com/content/93292/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">If the RBA waits until a future crisis, it would limit the power forward guidance could have in our economy.
<a href="https://theconversation.com/profiles/efrem-castelnuovo-145615" target="_blank">Efrem Castelnuovo</a>, Principal Research Fellow, Melbourne Institute of Applied Economic and Social Research, and Professor of Economics, Department of Economics, <a href="http://theconversation.com/institutions/university-of-melbourne-722" target="_blank">University of Melbourne</a>; <a href="https://theconversation.com/profiles/bruce-preston-452859">Bruce Preston</a>, Professor of Economics, <a href="http://theconversation.com/institutions/university-of-melbourne-722" target="_blank">University of Melbourne</a>, and <a href="https://theconversation.com/profiles/giovanni-pellegrino-452180" target="_blank">Giovanni Pellegrino</a>, Postdoctoral Research Fellow, <a href="http://theconversation.com/institutions/university-of-melbourne-722" target="_blank">University of Melbourne</a>
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/why-the-rba-needs-to-talk-about-future-interest-rate-policy-93292" target="_blank">original article</a>.
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The RBA should be clearer about when it will change interest rates

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The Reserve Bank of Australia is tipped to sit on the sidelines for longer keeping interest rates steady say analysts at Macquarie.
Macquarie's economics team of Justin Fabo and Ric Deverell say they now expect the RBA to remain on hold until early 2019, Fairfax Media reported today.
While the economy is improving, the unemployment rate remains too high, and wages and price inflation too low for the 25 basis points of rate hikes pencilled in for August and November this year, the economists said.
"Monetary policy should be set on the path of least regret. That path, in our view, is now to err on the side of supporting growth for longer to gain more confidence that inflation will once again spend more time in the 2 per cent to 3 per cent target than not."
Macquarie noted that risks to the housing market have diminished with "the source of much angst for the Bank – fast growth in housing prices in Sydney and Melbourne" seen easing.
Since August 2017 Macquarie analysts had 25bp hikes pencilled in for August and November this year.
Markets are pricing a non-negligible 45% chance of a rate hike by end 2018, "which looks about right in our view," says Fabo.
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Macquarie says rates will be on hold until 2019

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Online lender <a href="http://loans.com.au/" target="_blank" data-saferedirecturl="https://www.google.com/url?hl=en&amp;q=http://loans.com.au&amp;source=gmail&amp;ust=1518571026670000&amp;usg=AFQjCNEDFZS7g-pwfjSJyfsyomnKSrxPtw">loans.com.au</a> has cuts home loan interest rates for homebuyers to just 3.52 percent.
Its managing director Marie Mortimer said the decisive 12 basis point cut would force the banks to lower their rates or continue losing market share to <a href="http://loans.com.au/" target="_blank" data-saferedirecturl="https://www.google.com/url?hl=en&amp;q=http://loans.com.au&amp;source=gmail&amp;ust=1518571026670000&amp;usg=AFQjCNEDFZS7g-pwfjSJyfsyomnKSrxPtw">loans.com.au</a>.
“We have grown from nothing in 2011 to almost $6 billion in loans under management today by consistently offering the lowest interest rates to Australian borrowers,” Ms Mortimer said. 
For owner occupier borrowers who are purchasing or refinancing, the site has dropped the rate on its streamlined Essentials product to just 3.52 per cent, and its Offset product to 3.60 per cent.
For investors, the innovative Smart Loan Package starts at 3.89 percent.
Mortimer said the new rates would help the site in its mission to rapidly drive online lending from five to 25 per cent of the Australian lending market.
Parent company Firstmac has surged to become the 14th largest residential mortgage lender in Australia, ahead of household names including Citbank, Heritage Bank, and Newcastle Permanent.
It is also Australa’s largest non-bank lender with aspirations to become an ADI.  
 
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Online lender loans.com.au cuts rates for investors and home buyers

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The APRA benchmark of no more than 30 per cent of new lending by Australian banks being on interest-only terms was not overly restrictive for borrowers who genuinely need the form of finance.
While roughly 1-in-3 loans granted can still be on an interest-only basis, APRA boss Wayne Byres advised last week that data for the last quarter of 2017 shows that only about 1-in-5 loans were interest-only.
Byres said it had required the major interest-only lenders to establish strategies that incentivise more borrowers to repay their principal.
"The industry has been quite successful in doing so:, and the number of interest-only loans with high LVRs continued to fall to quite low levels.
"All of that is positive for the quality of loan portfolios," he told the A50 Australian Economic Forum dinner.
"While the direction in asset quality is positive, we’re not declaring victory just yet.
"We still want to see that the improvements the industry has made are truly embedded into industry practice.
"And we can modify our interventions as more permanent measures come into play.
"That will include, amongst other things, further strengthening of borrower serviceability assessments by lenders, strengthened capital requirements for mortgage lending imposed by us, and comprehensive credit reporting being mandated by the Government.
"Through these initiatives, we are laying the platform to make sure prudent lending is maintained on an ongoing basis," he said.
Lending restrictions put in place by APRA on interest-only loans cost borrowers $500 million a year, according to the Productivity Commission.
In its draft report released following its review into competition in the Australian financial system, the PC has suggested that macro-prudential measures introduced to reduce IO lending were “blunt interventions."
“We estimated that the cost borne by taxpayers as a result of changes in home loan investor rates following APRA’s intervention on interest-only loans in 2017 was up to $500 million per year,” the PC report reads.
The PC claimed that the regulator’s measures boosted lender’s profits, reduced market competitiveness and hiked interest rates.
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APRA says IO loans now sit at 1 in 5 loans

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<div class="x_WordSection1">
The Reserve Bank has made no changes to forecasts for economic growth and underlying inflation. “It will be some time, however, before the economy reaches current estimates of full employment and inflation returns to the midpoint of the target.”
The number of loans (commitments) for home owners (owner-occupiers) fell by 2.3 per cent in December - the third fall in four months. 
The value of new housing commitments (owner occupier and investment) fell by 1.6 per cent in December. Owner-occupier loans fell by 1.0 per cent and investment loans fell by 2.6 per cent. The value of loans actually advanced was $22 billion – the second highest amount on record.
The home loan data have implications for builders, housing-reliant businesses, finance providers, retailers, and companies dependent on consumer and business spending.
</div>
What does it all mean? 
<div class="x_WordSection2">
· Move on, move on, nothing to see here. That is the clear message from the Reserve Bank. Interest rates are going nowhere. The defining sentence is: “It will be some time, however, before the economy reaches current estimates of full employment and inflation returns to the midpoint of the target.”
· The Reserve Bank Governor spoke last night and stressed that rates would likely remain unchanged for some time. The key area to watch is the job market, especially “how quickly spare capacity is absorbed.”
· If inflation continues to hold near 2 per cent, there will be no reason to either lift or cut rates. Of course, if you have a healthy economy, with few imbalances, that is what you want – interest rate stability. The economy is in good shape and expected to stay that way over 2018.
· Unemployment is expected to be broadly between 5.0-5.5 per cent for the next 2½ years. So-called “full employment” is near 5 per cent. So wages aren’t likely to soar, thus keeping inflation low and interest rates stable.
<h1>What do the figures show?</h1>
<h1>Key messages from the Reserve Bank report</h1>
“Over the course of 2017, the unemployment rate declined and inflation increased a little. The accommodative setting of monetary policy has played a role here. Further progress on both fronts is expected over the next couple of years. It will be some time, however, before the economy reaches current estimates of full employment and inflation returns to the midpoint of the target.”
“Strong competition among retailers is contributing to ongoing deflation in prices of consumer durables and several other retail categories; food prices (excluding volatile fruit and vegetable prices) have been broadly flat for some time.”
“The forecasts for inflation are similar to those published in the November Statement. Inflation is likely to increase gradually over time, as the economy and labour market strengthen.”
“Financial market volatility has picked up in recent days, most notably in equity markets as market participants have begun to reassess the outlook for global inflation and the speed of withdrawal of monetary accommodation.”
“Domestically, the recent run of activity data has been in line with, or a little stronger than, expectations at the time of the November Statement on Monetary Policy. The labour market has been particularly strong.”
“Household consumption growth was weak in the September quarter but indications are that it recovered in the December quarter. Consumption growth is expected to be a little above its decade average in the period ahead.”
“It is unclear whether participation rates will increase further and, if so, by how much; this represents an uncertainty around the question of how spare capacity in the labour market is likely to evolve.”
“..the unemployment rate is likely to remain above estimates of full employment in Australia for some time.”
Housing finance - number
·  The number of loans (commitments) by home owners (owner-occupiers) fell by 2.3 per cent in December – the third fall in four months. Loans are up 0.5 per cent on the year.
·  Loans by owner-occupiers for the construction of homes fell by 1.1 per cent in December – the fourth fall in five months.
·  Loans to buy newly-erected dwellings fell by 3.8 per cent in December – the biggest fall in 10 months.
·  Loans for the purchase of established dwellings (excluding refinancing) fell by 3.9 per cent in December – the biggest fall for almost two years.
·   The number of refinancing transactions rose by 0.4 per cent in December after rising 1.8 per cent in November.
·   Changes in home loan across the country: NSW (down 2.5 per cent); Victoria (down 2.6 per cent); Queensland (down 0.7 per cent); South Australia (down 1.1 per cent); Western Australia (up 1.0 per cent); Tasmania (down 2.3 per cent); Northern Territory (up 0.5 per cent); ACT (down 7.1 per cent).
Housing finance - value
·  The value of new housing commitments (owner occupier and investment) fell by 1.6 per cent in December. Owner-occupier loans fell by 1.0 per cent and investment loans fell by 2.6 per cent.
·  The value of loans by owner-occupiers and investors to build new homes fell by 5.8 per cent in December, down from a record $3.42 billion to $3.22 billion.
Housing finance – other statistics
·         The value of cancelled loans fell by 2.0 per cent in December after rising by 3.5 per cent in November.
·         Commitments actually advanced (loans made) rose by 3.2 per cent in December to 2-year highs after lifting 8.6 per cent in November.
·         The proportion of first-time buyers in the home loan market eased from a 5-year high of 18.0 per cent to 17.9 per cent in December (decade-average 17.9 per cent). 
·         The proportion of fixed rate loans fell from 15.8 per cent to a 9-month low of 14.9 per cent in December.
·         And the average home loan across Australia stood at $393,200 in December, up by 4.6 per cent on the year.
Chinese inflation
· The annual rate of consumer prices fell from 1.8 per cent to 1.5 per cent as expected in January. The annual rate of producer prices in January fell from 4.9 per cent to 4.3 per cent (forecast 4.4 per cent).
<h1>What is the importance of the economic data?</h1>
· The Reserve Bank releases its Statement on Monetary Policy each quarter. The Statement is the Reserve Bank’s assessment of economic and financial conditions and also contains the latest inflation views. The Statement is crucial is assessing the short-term outlook for interest rates.
· Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.
<h1>What are the implications for interest rates and investors?</h1>
·  Interest rates are firmly on hold. It is of little value to signal the timing or direction of rate moves at the current time.
· Investors are fretting about the potential for higher inflation and thus higher interest rates. But in China, the pace of inflation is actually easing. Even here in Australia the Reserve Bank expects inflation to hold near 2 per cent for some time and the current inflation rate is still below the Reserve Bank’s 2-3 per cent target zone.
· The steam continues to be taken out of the housing market. A healthy $22 billion was actually advanced to home buyers in December – the second largest amount ever. But exuberance has been replaced with caution.
Craig James is chief economist at CommSec.
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jrobinson-rf4aSBido9

Long period of interest rate stability is likely: CommSec's Craig James 

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It’s not often there are <a href="https://www.businessinsider.com.au/anz-forecasts-another-interest-rate-hike-in-may-as-australias-inflation-outlook-picks-up-2018-1" target="_blank" style="font-family: Tahoma, Helvetica, Arial, sans-serif; font-size: 12.16px;">news stories</a> anticipating Australian Bureau of Statistics data a week before it comes out. But Wednesday’s Consumer Price Index was an exception. <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0" target="_blank" style="font-family: Tahoma, Helvetica, Arial, sans-serif; font-size: 12.16px;">The data showed</a> a 0.6% rise in the Consumer Price Index for the December quarter, bringing the annual rate up to 1.9% (from 1.8% in the 12 months to September).
This is still below the Reserve Bank of Australia’s <a href="https://www.rba.gov.au/inflation/inflation-target" target="_blank">target range</a> of 2-3%, but it’s edging closer. Kind of. It was still below what was <a href="https://www.rba.gov.au/publications/smp/2017/aug/pdf/06-economic-outlook.pdf" target="_blank">forecasted</a>.
One reason why market participants follow the Consumer Price Index so closely is the impact it has on the RBA in setting the official cash rate. For the RBA to start raising interest rates would require it to be pretty confident that the <a href="https://www.investopedia.com/terms/d/disinflation.asp" target="_blank">disinflationary</a> pressures in the Australian economy have abated.
That still seems unclear, which is why it is a near certainty they will leave the cash rate unchanged at the next board meeting on Tuesday.
Two changes to how the Consumer Price Index is calculated were also introduced. Firstly, the weights that different categories of expenditure receive were tweaked, as they are periodically. This is to make sure that the goods in the “basket” reflect what households are actually spending their money on.
In the new calculation, items like childcare (now 1.35%) and education (now 4.27%) <a href="https://www.ausstats.abs.gov.au/ausstats/subscriber.nsf/0/B1D241EA20B49DA0CA258225000D7F1F/%24File/64400_2017.pdf" target="_blank">get a larger weighting</a>.
A less routine and more interesting change was to use scanner data from retailers at point-of-sale in calculating the Consumer Price Index. This was spearheaded by the work of my UNSW School of Economics colleague Professor Kevin Fox, who <a href="http://www.abs.gov.au/ausstats/abs@.nsf/latestProducts/6401.0Media%20Release1Dec%202017?OpenDocument">was quoted by the ABS</a>:
I strongly support the ABS decision to implement new CPI methods for the treatment of transactions data… These new methods will enhance the accuracy of the Australian CPI, provide additional analytics and better inform policy formulation.
Scanner data has been used in the Australian CPI since 2014, and makes up about one quarter of the expenditure basket. There were some issues, however, in how that data was incorporated. Roughly speaking (<a href="https://www.ausstats.abs.gov.au/ausstats/subscriber.nsf/0/79CD01D5D060B163CA2581400020AC01/%24File/6401060004_2017.pdf" target="_blank">for technical details see the ABS report</a>), the changes involve using all the products available (rather than a sample) and weighting products by their economic importance. A bonus for the cash-strapped ABS is that, as they put it
The use of multilateral methods will require fewer resources in the medium term.
Using more data, and using it better is definitely a good idea. And in the long run it will give us more informative, and reliable inflation figures.
<a href="http://www.rba.gov.au/statistics/frequency/fin-agg/2017/fin-agg-1217" target="_blank">Reserve Bank of Australia data</a> released Wednesday showed fairly steady credit growth compared to previous months. Housing credit grew at 6.3% for the year to December, as in 2016. Of course, one doesn’t want this to be too high given concerns about property bubbles, not too low given the importance of the housing market to the broader economy.
Meanwhile, in the US, this week marked the final board meeting of outgoing Federal Reserve Chair Janet Yellen. As expected, they left official interest rates unchanged at 1.25-1.50%, <a href="https://www.federalreserve.gov/monetarypolicy/files/monetary20180131a1.pdf" target="_blank">issuing this statement.</a>
The Fed continues to be heavily focused on inflation, much like the RBA. The Federal Open Market Committee statement made that point, stating:
<blockquote>
Inflation on a 12‑month basis is expected to move up this year and to stabilise around the Committee’s 2% objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.
</blockquote>
This is best read as a sign that another rate rise at the March meeting is likely, unless material new information arrives in the interim.
<img src="https://counter.theconversation.com/content/90924/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">One of the significant economic stories of 2018 seems likely to be the divergence between US and Australian interest rates, what it means for the Australian dollar, and what it means for capital flows to Australia. At the moment, it seems the Fed will steadily raise US interest rates this year, while the RBA will be stuck with hard choices and may be reticent to begin a tightening cycle.
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a>, Professor of Economics and PLuS Alliance Fellow, <a href="http://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a>
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/vital-signs-weak-inflation-means-interest-rates-arent-rising-anytime-soon-90924" target="_blank">original article</a>.
Vital Signs is a weekly economic wrap from UNSW economics professor and Harvard PhD Richard Holden (<a href="https://twitter.com/profholden" target="_blank">@profholden</a>). Vital Signs aims to contextualise weekly economic events and cut through the noise of the data affecting global economies.
 
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