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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GUEST OBSERVER
The Reserve Bank Board meets next week on April 5. We expect that the Board will decide to hold rates steady.
It remains our long held view that the RBA will keep rates on hold for the remainder of 2016.
Steady rates will come as no surprise to markets with the probability of a move that is priced into the curve running at just around 5 percent.
We have consistently argued that any move from here, at these low rate levels, is only likely to occur at the February, May, August, and November meetings. Those meetings precede the quarterly Statement on Monetary Policy when the Bank can release revised forecasts which are likely to be used to justify any move.
Market probabilities for the next “live” month, May, are only around 25 percent. A complication for the meeting in May is that it will now coincide with the release of the Federal Budget rather than precede the Budget by one week.
The market based probability of a cut by June has moved to 40 percent with a 100 percent probability of a cut priced in for December.
The most important market development since the last Board meeting on March 1 has been the surge in the Australian dollar. The currency has jumped from USD0.715 to USD 0.765, a 7 percent appreciation against the USD.
The Reserve Bank puts its emphasis on the Trade Weighted Index (TWI) where the movement has been from 61.3 to 64.2 (an increase of 4.7 percent).
Supporting the lift in the TWI has been a rise in Australia’s export commodity prices. Westpac ‘s Index of Commodity Export prices (including Iron Ore and Coal – WCFI) has lifted from 155 to 166 (up 7 percent) since the Board meeting in March. The spot iron ore price has surprised by increasing to US$54/t, up from $50 at the end of February and bouncing off the December low of $38 - despite plentiful supply and weak demand.
By far the most important issue around the announcement at 2:30pm next Tuesday will be whether the Governor decides to strengthen his commentary around the Australian dollar. Since August last year the commentary has been along the lines of the March Statement “the exchange rate has been adjusting to the evolving economic outlook”.
Recall that back in July last year he stated, “Further depreciation seems both likely and necessary…”. At that time the AUD was at USD 0.745 and the TWI at 62.5. Westpac’s broad commodity price Index stood at 176.
However by August he had adopted the benign, “The exchange rate has been adjusting to the significant declines in key commodity prices”.
By that time the AUD had stabilised at USD 0.74 and the TWI had settled at 62.0. Westpac’s Commodity Price Index had also held at 171.
Given there was little change between July and August the decision to soften the language in August implies that consideration must have been given to softening the language around the AUD at the July meeting. The Bank was probably looking for some sign of stability before changing the message.
Using strong language around the AUD had, arguably, proved to be a successful strategy in the period from March 2014 (when the Governor first referred to the AUD as being high by historical standards) until August 2015 when he adopted the “adjusting” commentary. Over that period the AUD had fallen from USD 0.895 to USD 0.74 (down 17 percent) while the TWI had fallen from 68.7 to 62.0 (down 11 percent).
Certainly other factors also assisted – Westpac’s Commodity Price Index fell from 304 to 171 (down 44 percent) while the Governor cut the overnight cash rate from 2.5 percent to 2.0 percent in the latter stages of that period.
Consider two points – the RBA would have assessed the “talk down” strategy as having been successful (although the AUD was little changed until November 2014 when markets started to detect a possible rate cut) and the precedent from July 2015 (TWI at 62.5; commodities at 176) compared with today (TWI at 64.2 and commodities at 166).
Those two points indicate that the Governor will certainly discuss reintroducing the strategy of “talking down” the AUD. That would imply changing the language around the AUD from “adjusting to the evolving economic outlook” to something like “a lower AUD seems both likely and necessary”.
Such a change in strategy around the AUD commentary would be very significant.
Most importantly it would alert markets that the Bank was uncomfortable with recent developments in the AUD and may be prepared to use interest rates to achieve its objective. (Arguably, the lesson from 2014, where there was little impact on AUD until markets started anticipating lower rates, points to that conclusion). Changing that commentary would certainly see markets increasing rate cut probabilities in the face of any further appreciation in the AUD.
But we also need to remember that central banks are inherently conservative institutions. We expect that, like ourselves, the RBA will be sceptical about the recent “recovery” in commodity prices and, more importantly, like ourselves, still expects the Federal Reserve to raise rates in June.
Buying some time before changing the strategy seems like the most prudent approach in the current circumstances. After all, the boost in the AUD has occurred suddenly in the space of just one month and a prudent patient approach seems the more likely policy outcome at this stage.
Accordingly, we do not expect to see any significant changes in the Governor’s Statement next week.
Bill Evans is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
</body></html>

bevans-rYk9SxEa4r

RBA on hold, unchanged rhetoric on AUD: Westpac's Bill Evans

<html><body>
The rising Aussie dollar has board members on high alert but the overwhelming majority of leading economists predict that the Reserve Bank of Australia (RBA) will keep the cash rate on hold next month, according to finder.com.au.
Thirty-four of 35 (97 percent) leading economists and experts in the <a href="https://finder.us9.list-manage.com/track/click?u=cc5e9bce699fa1d71a67cf499&amp;id=17d3826c80&amp;e=58cd8ffd03" target="_blank">finder.com.au Reserve Bank Survey</a>, the biggest of its kind, expect the cash rate to remain at 2 percent at the RBA board meeting on Tuesday (5th April, 2016). The last time the Reserve Bank cut the cash rate was in May 2015. 
Noel Whittaker, adjunct professor at QUT, was the only expert to predict further easing at the April meeting based on the recent strength of the Aussie dollar. 
Twenty-one experts (60 percent) predicted no movement for the rest of the year, with the majority of this group (20 experts) forecasting a rate rise – but not until 2017 at earliest.  
Just three experts (9 percent) expect a fall beyond 2016.
Bessie Hassan, Consumer Advocate at finder.com.au, said the RBA would be watching the Aussie dollar closely.
“Central banks often favour a depreciating currency to stimulate inflation and boost activity,” she says.
There was more good news for home loan customers with a drop in interest-only loans.
“With interest rates at record lows, fewer borrowers are opting for interest-only home loans as mortgage repayments become more affordable,” she says.  
Figures from the Australian Bureau of Statistics and the Australian Prudential Regulatory Authority (APRA) analysed by finder.com.au reveal the percentage market share of interest-only loans nosedived from 45.8 percent in the June 2015 quarter to 37 percent by December 2015.  
“The value of new interest-only loans approved in Australia also dropped from $44 billion in the June quarter to $36 billion by December 2015 – the first time such a drop has been observed since the GFC,” she says. 
Ms Hassan says if the Australian dollar moves even higher, experts predict the Reserve Bank will feel compelled to step in. 
“The most popular months for indications of a movement in 2016 were May, June and July - with a total of seven economists (20 percent) predicting falls over these three months,” she says.
Of the economists (31) who weighed in on how low the cash rate would drop this cycle, 52 percent (16) said it would drop no lower than its current value. Twenty-nine percent (9 experts) predicted a low of 1.75 percent, and 19 percent (6) predicted the rate to drop to 1.50 percent or lower.
 
What our experts had to say in the April Reserve Bank Survey: Saul Eslake, Independent economist: "The RBA is satisfied that current monetary policy settings are consistent with inflation being within its target band and growth returning to (or remaining at) about its trend pace over the medium term. They may have some concern about the currently elevated level of the A$, were that to continue, but they would need to see whether the recent rise is going to be sustained before contemplating any action in response to it"
Melissa, A&amp;TA and The Money Barre: "I don't believe there's a case to cut rates at present and certainly no reason to move them upwards."
Shane Oliver, AMP Capital: "While the RBA retains an easing bias recent data suggests that economic growth has been stronger than expected so it's unlikely to act on that bias just yet."
Garry Shilson-Josling, Australian Associated Press: "There's no compelling reason to change."
Steven Pambris, Bank Of Sydney: "Economy  whilst not ideal is still  tracking ok "
Richard Robinson, BIS Shrapnel: "Economy still growing OK. No need to panic...yet"
Michael Blythe, CBA: "Economy not in need of any further assistance at this stage"
Savanth Sebastian, CommSec: "The economic data has certainly been more upbeat in the past month. However the Reserve Bank would want more time to gauge how well the economy is tracking. The recent lift in the Aussie dollar would be more concerning to policymakers."
Dr Andrew Wilson, Domain Group: "Close decision with higher dollar but may wait to see if  higher dollar will deflate. Recent jobless data better but volatile. Upward pressure on bank rates may force RBA hand sooner rather than later "
Scott Morgan, Greater Building Society: "I don't see any economic drivers for  an increase or decrease any time soon. The RBA will wait for more definitive evidence. The economy is not performing that badly. GDP figures were OK. The issue is that there are many other factors at play such as upcoming election campaigns, the actions of overseas central banks and worries about the $A. It has never been harder to crystal ball gaze."
Mark Brimble, Griffith University: "The RBA still remains biased to easing, but is very reluctant to do so due to fears around property and the general market volatility.  My view is that the economy does need support with China lowering expectations, Europe requiring and receiving further support, negative rates in Japan, and the US pace of recovering remaining muted.  The NZRBA cut rates earlier this month and the RBA will need to do so in the near future also.  They may wait one more month however."
Paul Williams, Heritage Bank: "The RBA are happy to continue to monitor market conditions and keep monetary policy generally accommodative"
Shane Garrett, Housing Industry Association: "No substantial change in conditions since last RBA meeting."
Michael Witts, ING Bank: "The RBA will likely be on hold as the domestic economy continue to perform positively with minimal impact from the equity and capital markets volatility from the earlier part of the year. The RBA will be concerned that the Australian dollar's move higher is contrary to the decrease in the terms of trade of recent years. "
James Boyle, Liberty: "There are signs that point to a need for action in the future – but none seem severe enough to increase the chances of a move higher than what is implied by the market. Perhaps for now monetary policy is in balance, but a major shift in wage inflation, housing construction or unemployment would encourage the RBA to take a different outlook"
Grant Harrod, LJ Hooker: "There has been no significant deterioration in the Australian economy since last month’s RBA meeting. The recent drop in the unemployment rate will see the RBA hold rates steady this month. However, the strengthening Australian dollar and low inflation provide scope for a cut mid-2016."
John Caelli, ME Bank: "The RBA will keep rates on hold due to strong growth data and employment numbers. The only concern is the strength of the Australian dollar. The RBA will keep the powder dry to help protect against any global market shocks.”
Mark Crosby, Melbourne Business School: "Markets have stabilised in the past month, and local inflation and growth numbers warrant a hold for the moment."
Emily Dabbs, Moody's Analytics: "The already low rates combined with rising employment are supporting domestic demand. However, if the dollar continues to appreciate, the RBA will move to cut rates."
Lisa Montgomery, Mortgage and Consumer Finance Specialist: "Although the RBA will be keeping a sharp eye on the rising Australian Dollar - data to hand will suggest that the Board will keep rates on hold for the near term", "My responses to your questions about negative gearing were on the assumption that they were about the policy being proposed by the Opposition - which includes 'grandfathering' of existing investors. If negative gearing were to be abolished without any such provision, then my answer would probably have been different, I would have said it likely would have caused a fall in house prices, probably of less than 5% - but not a 'major correction'"
Jessica Darnbrough, Mortgage Choice: "In recent weeks, unemployment has dropped, property prices have climbed slightly higher and new consumer sentiment data shows confidence continues to hover around average levels. All of these things combined should provide the RBA with no incentive to change the cash rate setting. "
Ken Sayer, Mortgage House: "The market is way too volatile nurturing uncertainty "
Chris Schade, MyState Bank: "Whilst it remains more likely the Reserve Bank will cut as oppose to raise rates in 2016, conditions in the domestic economy do not currently warrant such. That said, the Board will be closely watching economic developments over the coming period and remains ready to act if required."
Alan Oster, NAB: "Still looking to see what non mining adjustment does.  Too early yet", "My assessment that rates will not rise or fall this year is based on current economic factors and data. The economy isn't in too bad a shape. The issue is that there are many other factors in play such as broader confidence, election campaigns, the actions of overseas central banks and movement in in the $A."
Peter Boehm, onthehouse.com.au: "No compelling reason to move rates just yet - I think by the middle of the year we'll have a better line of sight of possible rate movements"
Jonathan Chancellor, Property Observer: "We are very close to the likely next move downwards, but it will still be a wait and see approach from the board."
Matthew Peter, QIC: "With resilient economic growth, the RBA will wait for data on inflation (later in April) and indications from the US Federal Reserve intended hikes to the fed funds rate before deciding on whether to lower rates or keep rates on hold."
Noel Whittaker, QUT: "Because our dollar is so high"
Angus Raine, Raine &amp; Horne: "The RBA will be keeping an eye on the strong Aussie dollar, and the wider global economy, as it makes its decision. Indicators such as a sluggish local jobs market will probably prompt the RBA to leave things 'status quo' this month."
Nathan McMullen, RAMS: "Reasonable prospects for continued growth in the economy remain and thus no compelling immediate case to ease rates"
Janu Chan, St.George Bank: "The RBA is still in "wait and see" mode. Low inflation is keeping the door open to lower rates, but it does not see a need to with non-mining sectors recovering. ", "Just to note that I haven't answered any questions on negative gearing because it is impossible to judge any impact without details of the proposed policy. For example, are we referring to getting rid of just "negative gearing" (only the losses on interest expenses) or is the policy aimed at eliminating deductions on all interest rate expenses altogether?  Are we looking at abolishing just deductions on interest rate expenses or all expenses that can be currently deducted against a property?  None of this is clear when we talk about abolishing "negative gearing" and these are important questions when considering any potential impact on the housing market.  "
Nicki Hutley, Urbis: "The economy is showing solid momentum, with minimal downside risks at present"
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jonathanchancellor-7SQnKwU6yx

Only one forecaster thinks there'll be an April 2016 RBA rate cut

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ANZ Banking Group will take a more cautious approach towards property borrowers' expenses from April.
ANZ is the final big bank to toughen rules on living expenses, in response to APRA concerns that banks have issued loans too easily.
Its note to mortgage brokers, ANZ said it would change the way living expenses were calculating home loan totals.
What the more prudent bank views as a "minimum" living expense will depend on the borrower's income, the number of dependants they have, and whether the application is for a joint or individual loan.
The changes, to take effect from April 4, Fairfax Media reported.
Mortgage brokers were advised on common scenarios, such as a hypothetical couple with two children wanting to buy a $500,000 investment property.
The slide pack says that due to the bank changing its estimate of such a couple's minimum living expenses, the maximum amount they could borrow would fall more than $50,000.
ANZ will also tighten assessments of overtime pay, bonuses and commissions. 
It will also lower its interest rate "buffer" – a rate that tests how borrowers would cope if interest rates rose.
"We regularly review our retail credit policies to ensure that lending remains prudent and aligned with risk appetite in light of the competitive, economic and regulatory environment," an ANZ spokesman said.
"For our customers, these changes are designed to ensure that we continue to assess any application for credit in a prudent way in view of their individual circumstances."
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jchancellor-FAypfDUnLy

ANZ tightens lending rules for borrowers

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GUEST OBSERVER
Some say that economics is “the dismal science” and perhaps this is because many economic theories do not seem to work in practice.
One contemporary example is negative interest rates, where instead of interest being added to their savings, individuals find that value is lost.
Negative rates have been introduced by some central banks worldwide. In theory doing so should both devalue their currency, making their exports cheaper and imports more expensive, and at the same time encourage consumer spending. It should also boost lending by financial institutions, as the value of capital being held by both individuals and banks is ever decreasing.
Sadly this theory when put into practice has been found wanting. The Bank of Japan introduced a negative interest rate of minus 0.1 percent in January 2016 and the yen subsequently increased in value compared to its competitor currencies. Indeed in 2016 the yen is the best performing G10 currency against the US$.
Similarly the Swiss National Bank flagged a negative interest rate of minus 0.25 percent to be introduced in January 2015, but the inflow of funds into the Swiss franc continued and the rate was finally reduced on its introduction to minus 0.75 percent, with the aim of discouraging capital inflows. However despite these moves the Swiss National Bank continued to accumulate foreign exchange reserves into the second half of 2015.
The European Central Bank (ECB) further increased its negative interest to minus 0.4 percent, on bank deposits held at the ECB in mid March 2016, as it attempted to manipulate downward the value of the Euro. The impact of this was undermined somewhat by allowing the European banks to borrow from their central bank at the same minus rate, depending on how much they lend to businesses and consumers. An initial dip in the value of the Euro when the minus 0.4 percent was announced was then followed by a sharp rise, as the implications of the whole package became clearer.
The aim of this is to lower the cost of borrowing for both consumers and corporations, as the banks borrow money from the ECB at no cost to them. This is intended to help stave of the threat of deflation in the eurozone by stimulating investment and consumption.
Recently published research from the Bank for International Settlement (BIS) found that in some cases savings accounts had been insulated from the impact of negative interest rates and that some mortgage rates in Switzerland had “perversely increased”. The conclusion from the BIS was then,“if negative interest rates do not feed into lower lending rates for households and firms, they largely lose their rationale”.
The Governor of the Bank of England has argued that if central bank policies are structured in ways that shield retail bank customers from minus interest rates, then they are unlikely to do much to stimulate domestic demand. Instead the main effect will be on exchange rates and this will result in the provoking of currency wars, as central banks attempt to out do each other in negative interest. Negative interest rates are intended to boost domestic demand by forcing banks to lend money out and encouraging consumers to both borrow and spend.
<h2>Consumer behaviour is unpredictable</h2>
Once again the “dismal science” comes up against the unpredictable behaviour of individuals and organisations, when they enter the territory of negative interest rates.
Take Japan in February 2016. One month on from the Bank of Japan’s decision to unleash negative interest rates, applications to join the loyalty clubs of Japanese department stores such as Mitsukoshi, Daimaru and Takashimaya were 100-200 percent higher than in the same month of 2015. The explanation is that these loyalty clubs offer a 5 to 8 percent annual bonus to their members, a far better return than any Japanese bank can offer, even if it encourages them to spend their money where they have their account(s).
So will negative interest rates continue to be used as a weapon from the central bank armoury, or will the unpredictable behaviour of consumers and investors undermine the intentions of the central banks?
If the weapon of negative interest rates does not work as expected on currency values or domestic consumption and investment, what else is there left to deploy to prevent deflation and a further slow down in economic actively? Economics indeed truly is dismal science.
Steve Worthington is adjunct professor, Swinburne University of Technology and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/steve-worthington-138" target="_blank">here</a>.
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Negative interest rates – are there any positives?

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Cost of funding issues are likely to again force Australia’s major banks and lenders to lift their interest rates out of cycle from cash rate movements by the Reserve Bank of Australia (RBA), says mortgage broker network 1300HomeLoan.
1300HomeLoan Managing Director John Kolenda said despite the possibility of the RBA lowering its record low 2 percent cash rate in response to the rising Australian dollar, the central bank’s actions could be negated by the major banks raising their rates.
“Mortgage holders can expect to be hit again by lenders because of their additional current funding, compliance and provisioning costs,” Mr Kolenda said.
“With continued global economic uncertainty banks have recently seen their cost of funding increase and unless that eases they will have no choice but to pass those increases onto consumers.
“These have been confusing times for borrowers with banks lifting rates outside of the RBA’s deliberations and this looks like being the new normal going forward.
“We saw variable rates last year increased by up to 29 basis points and investor loans by up to 49 basis points. There is likely to be similar increases across the board for owner occupier and investor loans in the months ahead.
“While the RBA has plenty of room to cut its cash rate again, its actions are expected to be made redundant by the banks lifting their rates out of cycle.”
Mr Kolenda said banks are also under pressure to comply with a regulatory increase on reserves by the end of June this year and this has been a contributor to the recent out of cycle increases.
“This is the first time in history we have seen multiple triggers at play outside the RBA’s control that is forcing rate movements and competing with their directions.” 
1300HomeLoan is Australia’s first mortgage broker-owned home loan brand. The brand is an independent network of more than 200 of the most established, experienced, professional and successful local brokers in Australia. The network was founded by industry leader John Kolenda, founding partner and Sales Director of X Inc Finance, and Executive Director of Loan Market Group.
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John Kolenda tips out of cycle rate rises by banks

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The cost to the federal budget of negatively-geared rental property deductions has fallen 12.5 percent to $10.9 billion.
It sits at the lowest level in four years due to record low interest rates.
The latest Tax Office statistics show the country's two million landlords claimed interest deductions of $21 billion, a decline of 9 percent.
It noted earnings from rents were flat at $38 billion.
The figures, published on Friday, were based on taxpayer's 2013-14 tax returns.
<a href="/images/2016/03/21/Screen%20Shot%202016-03-21%20at%2010.24.04%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/21/Screen%20Shot%202016-03-21%20at%2010.24.04%20AM.png" alt="">
SOURCE: PCA/ATO
It show 62 percent of landlords are returning net losses, down from 64 percent the year before.
A record 776,672 taxpayers earned a net profit from their investment property in fiscal 2014, an increase of 44,322 people compared with the year before.
Columnist Pete Wargent writes the ALP have botched their numbers, and Labor will accordingly cop a good deal of heat on this point from the Coalition.
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Negative gearing deductions fall 12.5 percent

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GUEST OBSERVER
The US Federal Reserve at its March meeting left interest rates on hold as widely anticipated, but it was more dovish than expected.
While it sees continued moderate growth in the US it also acknowledged ongoing global and financial market risks and lowered its so-called "dot plot" of meeting participants' interest rate expectations to show just two 25 basis point rate hikes this year down from four and lowered the long term interest rate expectation to just 3.25 percent from 3.5 percent.
Fed Chair Janet Yellen in her press conference also signalled a greater willingness to tolerate upside surprise on inflation as opposed to it continuing to run below 2 percent as the Fed has more policy room to deal with an upside surprise in inflation than a downside surprise.
The lowering of the dot plot has again taken the Fed closer to market expectations for interest rates - much as occurred last year when it started by signalling four hikes and only ended up doing one.
The Fed’s dot plot
<a href="/images/2016/03/17/image001.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/17/image001.png" alt="">
Source: Evercore ISI
 
The Fed appears to have no inclination to hike at its April meeting, but a June hike does look like a reasonable base case, particularly given the recent upwards momentum in US inflation, but with only around a 55 percent probability. And its dependent on global threats and financial market turbulence continuing to settle down.
A risk in recent times has been that a too aggressive Fed will threaten the global outlook by further pushing up the US dollar which in turn would threaten US growth, put more downwards pressure on oil prices and hence energy producers and add to the risk of a funding crisis in the emerging world (as some emerging country borrowers struggle to service US dollar denominated debt).
By continuing to indicate that it is conscious of global risks and that US rate hikes will be data dependent and gradual, the Fed is clearly indicating that it is not going to do anything to consciously threaten the global and US outlook.  
So the Fed's latest decision is supportive for shares and growth assets and should lead to an ongoing stabilisation in the value of the US dollar.
A risk for Australia though is that the Fed's continuing dovishness maintains recent upwards pressure on the value of the $A, which rose 1.5 percent on the Fed’s announcement. This could go further in the short term but with the Fed still heading towards rate hikes (albeit ever more gradual) and the RBA still biased towards cutting rates we still see the $A ultimately resuming its downtrend.
 
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
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Fed on hold and dovish: AMP Capital's Shane Oliver

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<h1>Minutes of the Monetary Policy Meeting of the Reserve Bank Board</h1>
Sydney – 1 March 2016
<h2>Members Present</h2>
Glenn Stevens (Governor and Chair), Philip Lowe (Deputy Governor), John Edwards, Kathryn Fagg, John Fraser (Secretary to the Treasury), Allan Moss AO, Heather Ridout AO, Catherine Tanna
Members granted leave of absence to John Akehurst in terms of section 18A of the Reserve Bank Act 1959.
<h2>Others Present</h2>
Guy Debelle (Assistant Governor, Financial Markets), Christopher Kent (Assistant Governor, Economic), Alexandra Heath (Head, Economic Analysis Department), Ivan Roberts (Senior Economist, Economic Analysis Department)
Anthony Dickman (Secretary)
<h2>Domestic Economic Conditions</h2>
Members began their discussion of the domestic economy by noting that the December quarter national accounts would be released the day after the meeting. Based on the data available and in line with earlier expectations, growth appeared to have been slightly below average in the December quarter and over 2015 as a whole. There had been further indications of a rebalancing of activity towards the non-mining sectors of the economy. More recent data had suggested that the economy had continued to grow at a moderate pace in early 2016.
As expected, mining investment had fallen further in the December quarter as more large projects reached completion. The latest ABS capital expenditure (capex) survey of firms' investment intentions had pointed to further large falls in mining investment in 2015/16 and again in 2016/17, in line with the forecasts presented in the February Statement on Monetary Policy. Members noted that non-mining investment appeared to have been little changed over 2015. Although the capex survey had pointed to declines in 2015/16 and 2016/17, roughly half of non-mining investment was not covered by the capex survey and in the past there had been differences between signals provided by the capex survey and what was measured in the national accounts data. At the same time, members noted that survey measures of business conditions and capacity utilisation had remained at above-average levels and business credit growth had increased a little further over recent months.
Members observed that there had been only modest growth in resource export volumes in the December quarter. They noted that more production capacity – particularly for liquefied natural gas, but also iron ore – was expected to come on line over 2016. Chinese iron ore imports had increased over the past year, although by less than earlier years, and Australia's share of that had remained at a high level. The volume of coal exports had fallen, partly because Chinese demand for coal had eased. Meanwhile, iron ore prices had increased over the past month, while coal prices had fallen slightly. Notwithstanding the recent increases in iron ore prices, bulk commodity prices were still about 20 per cent below levels of a year earlier. Oil prices had been volatile over recent months, rising somewhat since the previous meeting but still lower than late last year, which largely reflected the ongoing strength of supply.
Members noted that household demand had continued to be supported by low interest rates and above-average employment growth. Consumption growth was expected to have been close to its average over 2015 and in early 2016. Survey measures of households' perceptions of their own finances had remained at above-average levels into early 2016. Information from the Bank's retail liaison suggested that there had been an improvement in trading conditions around the Christmas–New Year period.
While growth in dwelling investment had been strong over 2015, there were indications that it would gradually moderate over the course of this year. The level of building approvals had declined over 2015, but remained high. Conditions in the established housing market had eased since late 2015. Housing price growth in Sydney and Melbourne was lower than in September last year. Meanwhile, housing credit growth overall had remained around 7½ per cent, after having risen through to the middle of 2015. Members noted that growth in lending to investors in housing had slowed significantly over that period and, more recently, housing loan approvals overall had declined a little.
The unemployment rate rose to 6 per cent in January, from around 5¾ per cent in November and December, and employment had declined slightly. Nevertheless, conditions in the labour market had clearly improved since early 2015. Employment growth had been above average, the unemployment rate had declined by a little more than ¼ percentage point and the participation rate had been on an upward trend. Members noted that there was some uncertainty around the future trajectory of the participation rate. This was partly because the degree to which people had been encouraged to enter the labour force over the course of the past year had been unexpected, and partly because it was difficult to assess the net effect on the participation rate of population ageing (which tends to reduce participation rates). The fact that each generation has tended to have a higher participation rate than the one preceding it also contributed to uncertainty around the trajectory of the participation rate. Meanwhile, leading indicators of employment had increased recently, consistent with employment growth in the months ahead.
Data from the wage price index had confirmed that wage growth was low across all industries over 2015. Although wage growth had continued to slow in a number of mining-exposed industries, it appeared to have stabilised in some industries where employment growth had been relatively strong over the course of the past year. Members observed that ongoing low wage growth was consistent with there being some spare capacity in the labour market, though they also noted that this was not unique to Australia, which suggested that a common global factor, such as the increasingly globalised nature of the labour force, could have been playing a role.
<h2>International Economic Conditions</h2>
Growth in Australia's major trading partners had eased in the December quarter, although it had been little changed over the past year at slightly below its decade average. Labour market conditions had improved in a number of economies, which was consistent with ongoing consumption growth, particularly in the United States and the euro area. Aggregate growth had also been supported by low oil prices. Although measures of core inflation had edged higher over the second half of 2015 in Japan and the euro area, they had shown some signs of declining in the early part of 2016. There had been a more noticeable increase in core inflation in the United States over this period. However, inflation remained below most central banks' targets and monetary policies had remained very expansionary.
Growth in the US economy had been close to trend over 2015, despite slowing late in the year. Employment had continued to grow more rapidly than the working-age population, and the unemployment rate was around its long-run average level. While nominal wage growth had remained relatively modest, growth in unit labour costs was above its long-run average. Measures of core inflation had picked up, but remained below the inflation objective of the Federal Reserve Board. The euro area economy had continued to expand at an above-trend rate over 2015, driven by domestic demand, although industrial activity had remained weak. There had been a further gradual decline in the unemployment rate, but there was considerable spare capacity and wage growth had drifted lower. Inflation had remained low relative to the European Central Bank's target.
GDP had contracted in Japan in the December quarter, driven by a decline in consumption. Despite recent weakness in economic activity, labour market conditions had remained tight and nominal wage growth had been positive. Core inflation had picked up to close to 1 per cent by the end of 2015, but had eased a little in early 2016. Headline inflation had been low, reflecting the effect of lower oil prices. In the rest of east Asia, GDP growth had been a bit below average, particularly for the economies with larger exposures to the slowing in China through their direct trade links. Recent exchange rate depreciations, low oil prices and monetary and fiscal stimulus measures had been providing some support for activity in the east Asian region.
Recent Chinese data had pointed to continued weakness in the industrial and real estate sectors, although members noted that the variable timing of the Chinese New Year holidays made it difficult to interpret data in the early part of the calendar year. Overall, housing prices had increased a little over the past year, but prices had still declined in the smaller cities. Total sales had declined since mid 2015 and the stock of unsold housing remained substantial. In February, the authorities took further steps to support the demand for housing, particularly in markets where housing prices had been weakest. The downward trend in both exports and imports had continued in January, while the trade surplus remained at a high level.
Members spent part of the meeting discussing some issues relevant to China's longer-run economic performance and the risks to growth. They observed that demographic changes and strong productivity growth had been key drivers of economic growth in China for some time, but these forces were now reversing and were likely to weigh on future growth as a result. In particular, China's growth had been supported by an increase in the size of the working-age population and the migration of many agricultural workers to urban areas, where they had been more productive. The working-age population had started to fall but the urban workforce was still growing because of continued urbanisation. China's urbanisation rate was still relatively low by international standards, which suggested that this process had further to run, with the pace of reform to the urban registration system (hukou) likely to have some effect on how rapidly the growth of the urban workforce would moderate. Structural reform was also important for the future trajectory of productivity growth, which had slowed over the past decade.
China's economic development had been characterised by very strong investment growth, which had been funded to a significant extent by high saving rates in the household sector. An element of the policy response to the global financial crisis had been to increase the credit available to the non-financial corporate and government sectors, which had led to sizeable increases in the debt held by these sectors. Slowing aggregate growth and excess capacity in some industries had raised the risk that some firms would find it more difficult to make repayments on their debt, which could, at some point, be associated with more widespread financial problems. Notwithstanding this, members noted that household debt-to-income ratios and the share of debt denominated in foreign currency were both low. The low level of foreign currency debt, in particular, differentiated China from other emerging economies that had previously experienced financial crises. While the overhang of residential housing inventory and excess capacity in the industrial sector would affect demand for Australia's resource exports and their prices, the scope for Chinese household incomes to rise over time created long-run potential for Australia to increase exports of rural produce and services, including tourism, to China.
<h2>Financial Markets</h2>
Members commenced their discussion of financial markets with a review of movements in a range of markets following the Bank of Japan's unexpected lowering of the interest rate for some deposits held at the central bank in order to provide further stimulus. This decision led to significant movements in fixed income and foreign exchange markets in particular, and had also highlighted concerns over bank profits in an environment of low or negative interest rates. Members noted that implementation of the policy decision had been designed to minimise the adverse effect on the Japanese banking system; although the negative rate is effectively the marginal rate on excess funds and therefore had pushed other short-term rates lower, most central bank deposits continued to be remunerated with a positive rate.
Expectations of further increases in the US federal funds rate had been pushed out over the past month, with markets now pricing in only a 70 per cent chance of a further rate rise in 2016 and some market participants expecting a reduction in the federal funds rate this year. In contrast, expectations for additional monetary easing by the European Central Bank this year had increased over the past month, including at the next policy meeting later in the month.
Recent policy developments had contributed to further falls in sovereign bond yields. Members noted that the Japanese government bond yield curve was very flat, with the 10-year bond yield below zero. Almost two-thirds of Japanese government bonds and one-third of short-term bonds issued by euro area governments were currently trading at yields below zero. Australian government bond yields had moved broadly in line with US sovereign bonds.
The sharp declines in global share prices in early February, led by financial sector shares, had, more recently, been partly retraced by price rises. Australian equity prices declined by 2 per cent over February, with movements in prices closely linked to changes in commodity prices. Members noted the generally solid profit reports of Australian listed companies and discussed recent developments in relation to dividend policies.
Share prices of banks in the advanced economies, including Australia, had fallen significantly since early January. The declines had been largest in Europe and Japan. Globally, there had been concerns about the effect of the prevailing low or negative interest rates on interest margins and yields on banks' high-quality liquid asset holdings and, ultimately, on bank profits and business models. These concerns had been compounded in the euro area by specific issues in particular countries as well as uncertainty about the operation of the new European bank resolution regime.
In foreign exchange markets, volatility increased over the previous month alongside the changing current and prospective stance of monetary policy in the major economies. The US dollar had depreciated slightly on a trade-weighted basis, while the euro was little changed. Since the policy announcement by the Bank of Japan, the yen had appreciated by 5 per cent on a trade-weighted basis. The Chinese authorities had emphasised their intention to preserve stability in the trade-weighted value of the renminbi, which had moved in only a narrow range over the past year. The People's Bank of China had continued to sell foreign currency reserves in January in response to net private capital outflow. The Australian dollar was little changed on a trade-weighted basis and against the US dollar since the previous meeting.
Bond issuance by Australian banks had been solid in the first quarter to date, despite volatility in global financial markets in the period. Wholesale funding costs for Australian banks had continued to edge higher, but for long-term funding the cost of issuing new paper was still below the average cost of the existing stock on issue. The rise in short-term wholesale bank funding costs had been passed through to some business lending rates.
Pricing in domestic financial markets indicated that there was no expectation of a change in the cash rate at the present meeting.
<h2>Considerations for Monetary Policy</h2>
In considering the stance of monetary policy, members noted that the recent data on the international and domestic economies had been largely consistent with the outlook presented at the previous meeting. Growth in Australia's major trading partners had remained a little below average in year-ended terms and commodity prices were still significantly lower than they had been a year earlier. Meanwhile, global financial markets had been volatile in the aftermath of the Bank of Japan's decision to implement negative interest rates and generally there appeared to be more uncertainty about the direction and potency of monetary policy in the major jurisdictions. However, given the usual lags in the data, it was still too early to assess whether the bout of financial market volatility since the turn of the year foreshadowed or would lead to a weakening in global economic conditions. Globally, monetary policy remained very accommodative.
The available data suggested that the domestic economy had continued to grow at a slightly below-trend pace. There had also been further signs of a rebalancing of activity towards non-mining sectors of the economy, aided by the low level of interest rates and the depreciation of the exchange rate over the past couple of years, which had responded to the evolving economic outlook. There was a small decline in employment in January and a modest rise in the unemployment rate, following a run of much better-than-expected outcomes in the December quarter. Leading indicators of employment had increased further and were consistent with employment growth in the months ahead. Wage growth had remained at quite low levels.
Conditions in the established housing market had eased somewhat since September 2015, in part reflecting the effect of supervisory measures implemented in that year. In addition, after rising for some time, the growth in aggregate housing credit had stabilised over the past six months or so, with a significant easing in growth in lending to investors.
Members judged that there were reasonable prospects for continued growth in the economy and that it was appropriate to leave the cash rate unchanged at an accommodative setting. Over the period ahead, new information should allow the Board to assess whether the improvement in labour market conditions was continuing and whether the recent financial turbulence presaged weaker global and domestic demand. Members noted that continued low inflation would provide scope to ease monetary policy further, should that be appropriate to lend support to demand.
<h2>The Decision</h2>
The Board decided to leave the cash rate unchanged at 2.0 percent.
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Dwelling price growth easing: Minutes of March 2016 Monetary Policy Meeting of the Reserve Bank Board

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GUEST OBSERVER
Petrol: Last week the key Singapore gasoline price recorded the biggest percentage increase in a year, up by US$6.60 or 13.6 percent to US$55.20 a barrel. In Australian dollar terms the Singapore gasoline price rose by $7.73 a barrel or 11.7 percent to $73.72 a barrel.
MotorMouth records the following retail prices for capital cities today: Sydney 94.9c; Melbourne 114.40c; Brisbane 120.6c; Adelaide 97.7c; Perth 103.7c; Canberra 112.7c; Darwin 116.2c; Hobart 118.0c.
Credit cards: The average credit card balance fell by $77.10 (2.4 percent) to $3,114.30 in January. In smoothed terms (12 month average) the average balance was down by 1.5 percent – the biggest fall in 21 months.
Credit limits: Usage of credit card limits eased from 35.2 percent to 34.3 percent in January - a 14-year low.
ATM use: Withdrawals at automated teller machines in January were down by 7.2 percent on a year ago in smoothed terms, the biggest decline on record.
The petrol figures have implications for retailers, especially petrol marketing groups. The credit card figures have implications for finance providers, retailers, and companies dependent on consumer and business spending.
<a href="/images/2016/03/15/Screen%20Shot%202016-03-15%20at%2010.18.00%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/15/Screen%20Shot%202016-03-15%20at%2010.18.00%20AM.png" alt="">
What does it all mean?
Global oil prices have surged in the past week. In fact the almost 14 percent lift in the Singapore unleaded price was the strongest gain in over a year. Even the heavy lifting Australian dollar has not managed to buffer the price gains. In Australian dollar terms prices the Singapore unleaded price lifted by almost 12 percent. Importantly while petrol prices will lift from recent seven year lows they remains relatively depressed, providing households and businesses with additional spending power.
In addition the discounting cycle continues to pay dividends for motorists – provided you are filling up at the cheap end of the cycle. More capital cities are experiencing petrol below $1 a litre. But the key is to keep an eye on the discounting cycle. In Sydney and Adelaide, prices are holding between 94-98c; Perth 104c; while in Melbourne and Brisbane prices are around $1.15-$1.20 a litre. Clearly filling up at the cheaper days of the cycle can yield motorists substantial savings.
Consumers continue to be savvy about plastic card use. The average credit balance has gone backwards over the past year with the smoothed measure at a near two-year low. And given that the inflation rate is above 2 per cent, it would suggest that credit card debt is falling even further in real terms. Cardholders are frequently paying off credit card debt by the due date and using cards to maximise loyalty points. In addition usage of credit card limits is holding at a 14-year low.
Interestingly, average ATM withdrawals fell by 7.2 percent in the year to January – the biggest fall on record. And the average value of a debit card transaction was just $53.40 in smoothed terms – a record 12-year low. No doubt the changes technology with PayPass and Paywave are resulting in fewer Aussies carrying physical cash and also using their cards for smaller purchases.
The Reserve Bank will continue to remain on the interest rate sidelines – comfortable about the way the Australian economy is evolving. Importantly, activity levels are lifting, driven by stronger home construction. Policymakers are likely to focus on the labour market and Australian dollar in coming months.
What do the figures show?
Petrol prices
Today the national average wholesale (terminal gate) unleaded petrol price  stands at 101.9 cents per litre, up 3.1 cents per litre on a week ago. The terminal gate diesel price  stands at 96.5 cents a litre, up 2.2 cents over the week. (Data on pump or retail prices is released on Tuesday).
Last week the key Singapore gasoline price  rose by US$6.60 or 13.6 per cent to US$55.20 a barrel. In Australian dollar terms the Singapore gasoline price rose by $7.73 a barrel or 11.7 per cent to $73.72 a barrel or 46.36 cents a litre.
MotorMouth records the following retail prices for capital cities today: Sydney 94.9c; Melbourne 114.40c; Brisbane 120.6c; Adelaide 97.7c; Perth 103.7c; Canberra 112.7c; Darwin 116.2c; Hobart 118.0c.
Credit card lending:
The average credit card balance  fell by $77.10 (2.4 percent) to $3,114.30 in January. Compared with a year ago, the average credit card balance was down 1.7 percent. In smoothed terms (12 month average) the average balance was down by 1.5 percent – the biggest fall in 21 months.
Of credit cards attracting interest charges , the average outstanding balance rose by $11.10 in January to $1,981.50. The average balance accruing interest is down by 4.6 per cent on a year ago. In smoothed terms (12 month average) the average balance was down by 5.7 percent on a year ago – the biggest decline in 16 months.
The average credit card limit  rose by $11.80 to $9,075.90 in January. The average credit card limit in January was down 0.1 percent on a year ago. Usage of credit card limits eased from 35.2 percent to 34.3 percent in
January - a 14-year low.
On average, there were 11.3 transactions made per each credit card account  in January, up from 11.1 a year ago. The average value of purchases was $119.4 in January. The rolling annual average of purchases eased from $129.4 to $128.9 in January - an 11-year low.
The number of cash advances  recorded a 2.4 per cent annual fall in smoothed (12-month average) terms in December.
<a href="/images/2016/03/15/Screen%20Shot%202016-03-15%20at%2010.16.46%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/15/Screen%20Shot%202016-03-15%20at%2010.16.46%20AM.png" alt="">
Debit card lending &amp; ATMs
The number of debit card accounts rose by 3.2 percent in the year to January to 41.66 million.
The number of purchases and cash-out transactions  made with debit cards in January was up by 13.7 percent on a year ago. The annual growth rate has averaged 12.1 per cent over the past two years.
On average there were 8.8 transactions made per debit card  in January, up from 8.1 a year ago. The average value of a transaction was $52.02 with the rolling annual average at $53.40 – a record (12-year) low.
Transactions at automated teller machines  in January were down by 8.4 percent on a year ago. In smoothed terms, ATM transactions were 7.2 percent down on a year ago, the biggest decline on record.
What is the importance of the economic data?
The Reserve Bank releases data on credit and debit card  transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.
Weekly figures on petrol prices  are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory's metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.
What are the implications for interest rates and investors?
The Reserve Bank will be comforted by the more stable conditions in financial markets and the broader economy. The Federal Reserve meeting will garner the most interest this week, particularly in terms of the impact on the Australian dollar. CommSec expects no change to interest rate settings for the foreseeable future.
<a href="/images/2016/03/15/Screen%20Shot%202016-03-15%20at%2010.15.02%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/15/Screen%20Shot%202016-03-15%20at%2010.15.02%20AM.png" alt="">
 Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>
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Usage of credit card limits at 14-year low: Savanth Sebastian

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GUEST OBSERVER
Bond yields are an important tool for making inferences about monetary policy. A yield curve is made by plotting the interest rates of bonds against their maturity dates. A normal yield curve occurs when long-term rates are higher than short- term rates. 
This is important for an economy’s liquidity, as banks can make a profit by borrowing at the (lower) short-term rates and lending at (higher) long-term rates.
Figure 1 shows the current yield curve on Australian Treasury bonds with maturities between 90 days and 10 years. Parts of the yield curve are inverted, meaning short-term rates (90 days) are higher than some long-term rates (2, 3 and 5 years). This creates a disincentive for banks to lend and if the entire curve is inverted, it can lead to a “credit crunch”. This happened in the US during the global financial crisis, when money suddenly dried up because banks could no longer profit from lending out money.
<a href="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%204.25.52%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%204.25.52%20PM.png" alt="">
To avoid a credit crunch, either long-term rates need to rise, or short-term rates need to fall. The first option is tied to investor expectations, as the yield on 10 year bonds is usually an indicator of peoples’ outlook for the future of the economy. This is hard to change. The relatively easier option is lowering the short-term cash rate, otherwise known as Quantitative Easing.
Figure 2 compares movements in the yield curve (Figure 1) and the RBA’s cash rate target. The blue line shows the difference between 10-year Treasury bonds and 90-day Treasury notes for any given month. If the line is above zero, the yield curve slopes upward, while if it is below zero, the yield curve is fully inverted. The red line shows movements in the cash rate: if it is on zero, the cash rate stayed the same that month, while if it goes up or down, there was a change in the cash rate. Notice that for the whole timeline (Jan 2000 – Jan 2016) interest rate cuts always followed an inversion of the yield curve.
<a href="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%204.34.08%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/10/Screen%20Shot%202016-03-10%20at%204.34.08%20PM.png" alt="">
When the bond yield curve inverts, intervention is often necessary to keep the economy stable and allow banks to keep lending out money. However, cutting interest rates is a blunt tool as it has ripple effects on the economy including increased demand for housing loans, a devaluation in the Aussie dollar, which in turn changes trade balances and so on. With an already highly inflated housing market and worries about a bubble, the RBA is often reluctant to cut the cash rate if it is not absolutely required.
Will interest rates change in then ear future? With a positive yield curve it may seem unlikely there will be another cut. However, the difference between yields on 10-year bonds and short-term debt is at only 0.4 percent and has been falling since the last interest rate cuts in 2015.
Notice that when the bond yield curve is falling, the trend continues until interest rates are cut. It is often dangerous to use historical patterns to predict the future, and other economic factors always need to be considered.
For more information, <a href="https://secretagent.com.au" target="_blank">click here</a>.
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