<a href="https://www.apartments.com.au/developments/broadbeach-qld-4218">Broadbeach</a> offers plenty of reasons to live vertically, but moving from a substantial family home into an apartment can expose the compromises of high-density living. Privacy, room for guests and usable living space tend to matter more when an apartment is intended as a permanent home rather than an occasional coastal base.

A typical residential floor at <a href="https://www.apartments.com.au/new-apartments/the-eveleigh-broadbeach-7-9-surf-parade-broadbeach-qld-4218">The Eveleigh</a>, on Surf Parade,&nbsp;contains just four apartments. The 94-residence development by <a href="https://www.apartments.com.au/developers/hirsch-faigen">Hirsch &amp; Faigen</a> is predominantly made up of expansive three-bedroom homes, with a limited collection of half-floor penthouses above.

Across the apartment floors, <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a> has used the relatively limited number of residences to give each home greater access to natural light and outlook. Living spaces extend towards full-height glazing, while a series of bay windows frame selected views across the Pacific Ocean, city and hinterland rather than treating the building edge as a continuous wall of glass.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360965]

“The apartment floors deliver a collection of homes that embrace controlled outlook via a series of bay windows deliberately framing moments of view,” Rothelowman Director Kim Lowman said.

From outside, those projecting forms contribute to the tower’s faceted profile. Strong horizontal and vertical elements establish its proportions, while the changing position of the sun alters the light, shadow and reflection across the façade throughout the day.

The same attention moves inside the apartments, where the material palette combines warm timber, natural stone, metallic detailing and softer curved forms. Kitchens sit within the main living zone, with stone island benches, integrated joinery and European appliances, before the living areas extend towards the glazing and the outlook.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360981]

Three genuine bedrooms provide room to accommodate family and guests, while two secure car spaces and storage address some of the practical considerations that can become more noticeable when moving from a larger home. Feedback from the display suite has centred on the warmth and restraint of the interiors, with buyers commenting that the residences feel like homes rather than conventional coastal apartments.

A limited collection of half-floor penthouses occupies the upper levels, increasing the scale of the living spaces and adding private balconies and elevated finishes. From this position, the outlook extends between the ocean and hinterland.

Outside the private residences, The Eveleigh separates its shared spaces between the podium and rooftop. The podium is centred on wellness, with subtropical landscaping surrounding a swimming pool and pool terrace, yoga garden, private gymnasium, sauna and hot and cold plunge facilities. Landscaped retreats and pavilions provide additional places to sit away from the main recreation areas.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360966]

Higher in the building, a rooftop pavilion and private dining suite sit alongside resident lounge, barbecue and outdoor dining areas, opening towards panoramic views across the ocean, city and hinterland.

“Buyers are no longer just looking for an apartment, but a lifestyle where they can relax, reset, and enjoy a balanced way of living,” Hirsch &amp; Faigen Director of Sales Matt George said.

Interest to date has come from established owner-occupiers and interstate lifestyle purchasers, including buyers planning a future move to the Gold Coast. Many are coming from larger homes and want to reduce ongoing maintenance without giving up space for family and guests, privacy, two car spaces or the ability to entertain at home.

&nbsp;

[smartcode_project:default project_id=149670 project_image_fid=360969]

Much of that daily life can also take place beyond the building without requiring a drive. Kurrawa Beach and Pratten Park are an easy walk from Surf Parade, while Pacific Fair, Oracle Boulevard, The Oasis, restaurants, cafés, entertainment and public transport are also within walking distance.

The Eveleigh is Hirsch &amp; Faigen's fourth Gold Coast development since entering the market in 2021, following The Hemingway at Palm Beach, The Emerson at Kirra and Yves at Mermaid Beach. Each of the preceding projects sold out before completion.

“Broadbeach had been on our radar throughout our time operating on the Gold Coast,” the developer said. “Following our projects in Palm Beach, Kirra and Mermaid Beach, Broadbeach represented the natural next step for the business.”

The Surf Parade site brought together proximity to the beach, protected coastal outlooks and walkability to dining, shopping and recreation. Hirsch &amp; Faigen also identified the street as an emerging premium residential address, with enough separation from Broadbeach's busier destinations to retain a quieter environment at home.

The Eveleigh is now under construction by Maxcon, with completion forecast for mid-2028. Three-bedroom residences are currently available from $2.87 million.

[smartcode_project_cta:default project_id=149670]

Joel Robinson

The Eveleigh brings house-like apartments to Broadbeach

A long-stalled Campbelltown development site is back in play, with new plans for 139 apartments set to supersede a mixed-use scheme approved almost a decade ago but never built.

The new proposal for 28 Cordeaux Street would deliver 116 market and 23 affordable apartments in a part 14-storey building, bringing a substantial new project into a Campbelltown market where new apartment supply remains limited.

Plans have been filed over the 3,092 sqm corner site at Moore-Oxley Street, around 600 metres from Campbelltown Railway Station and the city-centre retail core.

The site already carries a mixed-use residential approval dating to 2016. Doroch Architects has now been engaged on a larger replacement scheme, which is progressing as a State Significant Development Application following a Housing Delivery Authority determination in August 2025.

The apartment mix comprises 39 one-bedroom, 72 two-bedroom and 28 three-bedroom residences. Two-bedroom apartments make up just over half of the project, while three-bedroom homes account for 20 per cent.

<img alt="First look: New 139-apartment plans revive long-stalled Campbelltown city centre site" data-entity-type="file" data-entity-uuid="136dd5b9-3791-4da6-9e31-76f533f5b4de" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Campbelltown%20da2.png?VersionId=LgOSy9nwf5u.MGswBBwaGGxuX8QpHSl_" />

Of the 139 apartments, 23 will be delivered as affordable housing under the in-fill affordable housing provisions of the Housing SEPP. The affordable component represents 15 per cent of the residential gross floor area and will be managed by a registered Community Housing Provider.

Doroch has sought to break the scale of the building into two distinct elements, with a masonry podium of around four storeys establishing the street edge before the residential tower steps back above.

The corner position has shaped that approach. Cordeaux Street faces toward the commercial and civic centre, while Moore-Oxley Street leads into the lower-scale residential neighbourhood to the south, and the design verification report describes the site as "bridging the commercial core to the north and established residential areas to the south."

The podium will be expressed predominantly in face brick, while the upper levels shift to brushed and grooved concrete cladding with darker metal detailing. Recessed sections, deep balcony edges and landscaping break down the upper form, with an approximately 11.8-metre setback to the northern boundary addressing the adjoining St Peters Anglican School.

<img alt="First look: New 139-apartment plans revive long-stalled Campbelltown city centre site" data-entity-type="file" data-entity-uuid="c8b3d2d3-c561-4bfc-a5d9-a68c0c10dac1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Campbelltown%20da1.png?VersionId=AeAEyJU02Gk2k5noUj2StziCvdQ7fW4B" />

Campbelltown has been starved of new residential developments in the last decade.

The only other notable development set to come to market this year is ALAND's Queen Square, a mixed-use precinct on over two hectares that will comprise apartments above a vibrant ground-level retail and hospitality dining precinct.

First look: New 139-apartment plans revive long-stalled Campbelltown city centre site

First Look: Sherlock Construction pitches apartments for low-rise Deception Bay

Queensland builder-developer MAYD has revealed the first look at its major North Kirra beachfront development, lodging amended plans that reduce the number of apartments and increase the proportion of larger residences.

The project is planned across a substantial 4,742 sqm amalgamated site spanning seven lots at <a href="https://www.apartments.com.au/new-apartments/2-6-pacific-parade-bilinga-qld-4225">2-6 Pacific Parade</a> and 27-33 Golden Four Drive in Bilin​ga, directly opposite Nor​th Kirra Beach.

<a href="https://www.apartments.com.au/developers/mayd-group">MAYD</a> secured the site for $32.5 million in 2025, in what was one of the Gold Coast's largest property transactions of the year.

The development will be delivered across two stages, with the first stage carrying an estimated gross realisation value of around $360 million.

The latest amendments seek to reduce the overall apartment count and shift the project further toward the owner-occupier market, with larger residences designed for buyers wanting considerably more space than traditionally offered in a beachfront apartment.

The residential mix will include townhomes, oversized two-bedroom apartments, substantial three-bedroom residences and four-bedroom homes.

MAYD has appointed Cera Stribley to lead the architecture and interiors, with the Melbourne-based design practice drawing on the beachfront setting through a series of ocean-facing terraces and heavily landscaped balconies.

Strong horizontal forms and curved balconies will define the exterior, with subtropical landscaping integrated throughout the building to soften the built form and increase the connection between the residences and the beachfront.

The project will also include an extensive collection of resident wellness and lifestyle facilities, continuing the broader shift across the Gold Coast's luxury apartment market toward larger homes supported by resort-style amenity.

<img alt="MAYD" data-entity-type="file" data-entity-uuid="d1bcbb05-e659-4b47-8bd4-1e595315e2ad" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%202.05.03%E2%80%AFPM.png?VersionId=jj0XEud1X1DuLt7_KyElhjMdZGOXmLHP" />

MAYD Founder Todd Mould said North Kirra was increasingly appealing to buyers attracted to the more established, lower-density character of the southern Gold Coast.

"North Kirra presents one of the most compelling luxury residential opportunities currently emerging in Australia, combining absolute beachfront with the character and authenticity that buyers are increasingly seeking, and the same sense of tight-knit community that defined Burleigh and Currumbin perhaps 10 or 15 years ago," Mould said.

"With Gold Coast Airport on its doorstep, it also offers a level of accessibility that broadens its appeal across almost every market demographic."

The project comes as the southern Gold Coast continues to attract an increasing share of high-end apartment development and buyer activity.

Kirra in particular has emerged as one of the region's more tightly held beachfront markets, with its relatively low-density character, established surf and hospitality scene and proximity to Gold Coast Airport differentiating it from the higher-density markets further north.

Mould said those characteristics had informed the approach MAYD and Cera Stribley had taken to the project.

"We've worked closely with Cera Stribley to create a vision that is deeply connected to its surroundings," he said.

"Inspired by the coastline itself, the architecture has been shaped around space, privacy and resort-style living, creating a collection of homes that reflects the next generation of luxury on the southern Gold Coast."

MOTIV Managing Director Carly Cottam, who has been appointed to market the project, said buyer attention had continued to move south along the Gold Coast.

"Purchasers who may once have defaulted to Broadbeach, Main Beach or Surfers Paradise are increasingly recognising the value of a genuine beachfront location that offers lower density, strong amenity and a more established sense of community," Cottam said.

"Kirra has a powerful combination of growing demand and genuine scarcity. Beachfront supply is inherently constrained, the area remains relatively low density, and buyers are increasingly placing a premium on locations that feel established, uncrowded and authentic rather than heavily developed."

Cottam said the proximity to Gold Coast Airport was also proving increasingly important for interstate and second-home buyers.

"Being minutes from Gold Coast Airport makes it particularly compelling for interstate buyers, frequent travellers and second-home purchasers who can access an authentic coastal lifestyle almost immediately after stepping off a flight."

The acquisition takes MAYD's active development portfolio to more than $500 million, with the North Kirra project representing one of its largest undertakings to date.

MAYD is targeting an early 2027 launch.

First look at MAYD's North Kirra mixed-use precinct

<main data-perf-region="main">
Castle Hill, the longtime hub of the Hills District, has been one of the major beneficiaries of Sydney's Metro expansion, with improved connectivity helping drive continued population growth, development and buyer demand across the Hills District.

But despite that growth, the suburb has seen relatively few major new apartment projects brought to market over the past 18 months.

Hills District developer Reve Group is looking to fill that gap with <a href="https://www.apartments.com.au/new-apartments/nova-r-ve-castle-hill-2-garthowen-crescent-castle-hill-nsw-2154">Nova Rêve</a>, a major new mixed-use precinct on the corner of Garthowen Crescent and Old Castle Hill Road, a short walk from Castle Hill Metro Station and Castle Towers.

[smartcode_project:default project_id=152737 project_image_fid=377679]

The project will comprise three residential towers alongside a hotel, restaurants, cafes and a skybar, more than 1,600 sqm of ground-floor retail and almost an acre of landscaped gardens.

It represents the largest project undertaken by Reve Group, the development arm of the Kassis family, which has been building across the Hills District for more than 30 years through Kassis Homes.

[smartcode_project:default project_id=152737 project_image_fid=377675]

Nova Rêve also represents a significant step up from the family's first apartment development, Grand Rêve, which was delivered nearby on Garthowen Crescent.

Grand Rêve introduced larger, house-like apartment layouts and premium inclusions including Wolf and Sub-Zero appliances to the Castle Hill market.

Nova Rêve takes that approach to a precinct scale, combining the residential component with hospitality, retail and substantial public and resident landscaping.

[smartcode_project:default project_id=152737 project_image_fid=377685]

Reve Group Managing Director Sam Kassis said the project reflected the family's three decades of building in the Hills, which has evolved from trophy homes on quarter-acre blocks to larger-scale apartment development.

"Grand Rêve was our first apartment project here and it showed us what this pocket of Castle Hill could be. Nova Rêve is the refinement of that idea: not just apartments, but a place the whole suburb can use," Kassis said.

A key part of that approach is the hotel, which has been designed to operate as an amenity for the wider Castle Hill community rather than solely hotel guests.

It will include restaurants, cafes, skybars and all-day dining, alongside conference and event facilities catering to business functions, community groups and private events.

At ground level, more than 1,600 sqm of shops and cafes will open onto the surrounding streets and landscaped areas.

Almost an acre of gardens designed by Land and Form Studios will run through the precinct, incorporating pathways, seating, barbecue areas and children's play spaces.

[smartcode_project:default project_id=152737 project_image_fid=377680]

Reve Group's Romio Georges said creating an active ground plane had been central to the planning of Nova Rêve.

"There are gardens with pathways, barbecues, seating and play areas, shops and cafes opening onto the street, and a hotel with restaurants and a skybar that anyone in Castle Hill can walk into," Georges said.

The project's elevated position on one of Sydney's highest ridgelines will also provide apartments with outlooks toward the Sydney skyline, surrounding parkland and the Blue Mountains.

More than 80 per cent of the apartments will occupy corner positions, with Turner responsible for both the architecture and interiors.

&nbsp;

[smartcode_project_cta:default project_id=152737]

<h3 data-end="3697" data-section-id="q3n5ak" data-start="3672">&nbsp;</h3>
</main>

Nova Rêve arrives as Reve Group bets on Castle Hill's next growth phase

Interest Rates

<html><body>
The Reserve Bank of Australia has left the official cash rate unchanged at 2%, in line with most analysts’ predictions. 
Unchanged at historic lows, the official cash rate was last dropped at the May meeting.
"Inflation is low and should remain so, with the economy likely to have a degree of spare capacity for some time yet," the board noted.
"Inflation is forecast to be consistent with the target over the next one to two years, but a little lower than earlier expected.
"In such circumstances, monetary policy needs to be accommodative.
"Low interest rates are acting to support borrowing and spending."
Some 80 percent of leading economists and experts in the <a href="https://www.finder.com.au/rba-cash-rate" target="_blank">finder.com.au RBA Survey</a> predicted this outcome.
The next RBA board meeting is on December 1. 
Tim Lawless, the head of research at CoreLogic RP Data said while interest rates are important to the housing market, other factors are also at play in the recent abatement in the rate of capital growth. 
"Investors are now paying close to a 30 basis point premium on their mortgages, rental yields have slipped to new record lows, housing supply is moving through record peaks and affordability challenges are very much apparent in Sydney and to a lesser extent Melbourne," he said.
Angus Raine, executive chairman, Raine &amp; Horne said the RBA governor didn’t strike him as someone who spooks easily, and "the RBA has taken the sensible move to check more local and international data before tweaking the monetary policy levers again.”
The RBA’s decision to leave the cash rate unchanged does very little to buoy the hopes of those dreaming of buying their first home, according to Laing + Simmons managing director Leanne Pilkington.
 
<table id="table_1" class="tableStyle_1 tableWidth75 marginB20" summary="This table records the percentage change in the cash rate beside the new target for the cash rate since 6 January 2008">
<caption>Interest Rate Decisions2008–2015
</caption>
<thead><tr>
<th class="textAlignLeft">Effective Date</th>
<th>Change in cash rate Percentage points
</th>
<th colspan="2">New cash rate target Per cent
</th>
</tr></thead>
<tbody>
<tr>
<td class="textAlignLeft">4 Nov 2015</td>
<td>0.00</td>
<td>2.00</td>
</tr>
<tr>
<td class="textAlignLeft">7 Oct 2015</td>
<td>0.00</td>
<td>2.00</td>
</tr>
<tr>
<td class="textAlignLeft">2 Sep 2015</td>
<td>0.00</td>
<td>2.00</td>
</tr>
<tr>
<td class="textAlignLeft">5 Aug 2015</td>
<td>0.00</td>
<td>2.00</td>
</tr>
<tr>
<td class="textAlignLeft">8 Jul 2015</td>
<td>0.00</td>
<td>2.00</td>
</tr>
<tr>
<td class="textAlignLeft">3 Jun 2015</td>
<td>0.00</td>
<td>2.00</td>
</tr>
<tr>
<td class="textAlignLeft">6 May 2015</td>
<td>-0.25</td>
<td>2.00</td>
</tr>
<tr>
<td class="textAlignLeft">8 Apr 2015</td>
<td>0.00</td>
<td>2.25</td>
</tr>
<tr>
<td class="textAlignLeft">4 Mar 2015</td>
<td>0.00</td>
<td>2.25</td>
</tr>
<tr>
<td class="textAlignLeft">4 Feb 2015</td>
<td>-0.25</td>
<td>2.25</td>
</tr>
<tr>
<td class="textAlignLeft">3 Dec 2014</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">5 Nov 2014</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">8 Oct 2014</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">3 Sep 2014</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">6 Aug 2014</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">2 Jul 2014</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">4 Jun 2014</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">7 May 2014</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">2 Apr 2014</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">5 Mar 2014</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">5 Feb 2014</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">4 Dec 2013</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">6 Nov 2013</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">2 Oct 2013</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">4 Sep 2013</td>
<td>0.00</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">7 Aug 2013</td>
<td>-0.25</td>
<td>2.50</td>
</tr>
<tr>
<td class="textAlignLeft">3 Jul 2013</td>
<td>0.00</td>
<td>2.75</td>
</tr>
<tr>
<td class="textAlignLeft">5 Jun 2013</td>
<td>0.00</td>
<td>2.75</td>
</tr>
<tr>
<td class="textAlignLeft">8 May 2013</td>
<td>-0.25</td>
<td>2.75</td>
</tr>
<tr>
<td class="textAlignLeft">3 Apr 2013</td>
<td>0.00</td>
<td>3.00</td>
</tr>
<tr>
<td class="textAlignLeft">6 Mar 2013</td>
<td>0.00</td>
<td>3.00</td>
</tr>
<tr>
<td class="textAlignLeft">6 Feb 2013</td>
<td>0.00</td>
<td>3.00</td>
</tr>
<tr>
<td class="textAlignLeft">5 Dec 2012</td>
<td>-0.25</td>
<td>3.00</td>
</tr>
<tr>
<td class="textAlignLeft">7 Nov 2012</td>
<td>0.00</td>
<td>3.25</td>
</tr>
<tr>
<td class="textAlignLeft">3 Oct 2012</td>
<td>-0.25</td>
<td>3.25</td>
</tr>
<tr>
<td class="textAlignLeft">5 Sep 2012</td>
<td>0.00</td>
<td>3.50</td>
</tr>
<tr>
<td class="textAlignLeft">8 Aug 2012</td>
<td>0.00</td>
<td>3.50</td>
</tr>
<tr>
<td class="textAlignLeft">4 Jul 2012</td>
<td>0.00</td>
<td>3.50</td>
</tr>
<tr>
<td class="textAlignLeft">6 Jun 2012</td>
<td>-0.25</td>
<td>3.50</td>
</tr>
<tr>
<td class="textAlignLeft">2 May 2012</td>
<td>-0.50</td>
<td>3.75</td>
</tr>
<tr>
<td class="textAlignLeft">4 Apr 2012</td>
<td>0.00</td>
<td>4.25</td>
</tr>
<tr>
<td class="textAlignLeft">7 Mar 2012</td>
<td>0.00</td>
<td>4.25</td>
</tr>
<tr>
<td class="textAlignLeft">8 Feb 2012</td>
<td>0.00</td>
<td>4.25</td>
</tr>
<tr>
<td class="textAlignLeft">7 Dec 2011</td>
<td>-0.25</td>
<td>4.25</td>
</tr>
<tr>
<td class="textAlignLeft">2 Nov 2011</td>
<td>-0.25</td>
<td>4.50</td>
</tr>
<tr>
<td class="textAlignLeft">5 Oct 2011</td>
<td>0.00</td>
<td>4.75</td>
</tr>
<tr>
<td class="textAlignLeft">7 Sep 2011</td>
<td>0.00</td>
<td>4.75</td>
</tr>
<tr>
<td class="textAlignLeft">3 Aug 2011</td>
<td>0.00</td>
<td>4.75</td>
</tr>
<tr>
<td class="textAlignLeft">6 Jul 2011</td>
<td>0.00</td>
<td>4.75</td>
</tr>
<tr>
<td class="textAlignLeft">8 Jun 2011</td>
<td>0.00</td>
<td>4.75</td>
</tr>
<tr>
<td class="textAlignLeft">4 May 2011</td>
<td>0.00</td>
<td>4.75</td>
</tr>
<tr>
<td class="textAlignLeft">6 Apr 2011</td>
<td>0.00</td>
<td>4.75</td>
</tr>
<tr>
<td class="textAlignLeft">2 Mar 2011</td>
<td>0.00</td>
<td>4.75</td>
</tr>
<tr>
<td class="textAlignLeft">2 Feb 2011</td>
<td>0.00</td>
<td>4.75</td>
</tr>
<tr>
<td class="textAlignLeft">8 Dec 2010</td>
<td>0.00</td>
<td>4.75</td>
</tr>
<tr>
<td class="textAlignLeft">3 Nov 2010</td>
<td>+0.25</td>
<td>4.75</td>
</tr>
<tr>
<td class="textAlignLeft">6 Oct 2010</td>
<td>0.00</td>
<td>4.50</td>
</tr>
<tr>
<td class="textAlignLeft">8 Sep 2010</td>
<td>0.00</td>
<td>4.50</td>
</tr>
<tr>
<td class="textAlignLeft">4 Aug 2010</td>
<td>0.00</td>
<td>4.50</td>
</tr>
<tr>
<td class="textAlignLeft">7 Jul 2010</td>
<td>0.00</td>
<td>4.50</td>
</tr>
<tr>
<td class="textAlignLeft">2 Jun 2010</td>
<td>0.00</td>
<td>4.50</td>
</tr>
<tr>
<td class="textAlignLeft">5 May 2010</td>
<td>+0.25</td>
<td>4.50</td>
</tr>
<tr>
<td class="textAlignLeft">7 Apr 2010</td>
<td>+0.25</td>
<td>4.25</td>
</tr>
<tr>
<td class="textAlignLeft">3 Mar 2010</td>
<td>+0.25</td>
<td>4.00</td>
</tr>
<tr>
<td class="textAlignLeft">3 Feb 2010</td>
<td>0.00</td>
<td>3.75</td>
</tr>
<tr>
<td class="textAlignLeft">2 Dec 2009</td>
<td>+0.25</td>
<td align="right">3.75</td>
</tr>
<tr>
<td class="textAlignLeft">4 Nov 2009</td>
<td>+0.25</td>
<td>3.50</td>
</tr>
<tr>
<td class="textAlignLeft">7 Oct 2009</td>
<td>+0.25</td>
<td>3.25</td>
</tr>
<tr>
<td class="textAlignLeft">2 Sep 2009</td>
<td>0.00</td>
<td>3.00</td>
</tr>
<tr>
<td class="textAlignLeft">5 Aug 2009</td>
<td>0.00</td>
<td>3.00</td>
</tr>
<tr>
<td class="textAlignLeft">8 Jul 2009</td>
<td>0.00</td>
<td>3.00</td>
</tr>
<tr>
<td class="textAlignLeft">3 Jun 2009</td>
<td>0.00</td>
<td>3.00</td>
</tr>
<tr>
<td class="textAlignLeft">6 May 2009</td>
<td>0.00</td>
<td>3.00</td>
</tr>
<tr>
<td class="textAlignLeft">8 Apr 2009</td>
<td>-0.25</td>
<td>3.00</td>
</tr>
<tr>
<td class="textAlignLeft">4 Mar 2009</td>
<td>0.00</td>
<td>3.25</td>
</tr>
<tr>
<td class="textAlignLeft">4 Feb 2009</td>
<td>-1.00</td>
<td>3.25</td>
</tr>
<tr>
<td class="textAlignLeft">3 Dec 2008</td>
<td>-1.00</td>
<td>4.25</td>
</tr>
<tr>
<td class="textAlignLeft">5 Nov 2008</td>
<td>-0.75</td>
<td>5.25</td>
</tr>
<tr>
<td class="textAlignLeft">8 Oct 2008</td>
<td>-1.00</td>
<td>6.00</td>
</tr>
<tr>
<td class="textAlignLeft">3 Sep 2008</td>
<td>-0.25</td>
<td>7.00</td>
</tr>
<tr>
<td class="textAlignLeft">6 Aug 2008</td>
<td>0.00</td>
<td>7.25</td>
</tr>
<tr>
<td class="textAlignLeft">2 Jul 2008</td>
<td>0.00</td>
<td>7.25</td>
</tr>
<tr>
<td class="textAlignLeft">4 Jun 2008</td>
<td>0.00</td>
<td>7.25</td>
</tr>
<tr>
<td class="textAlignLeft">7 May 2008</td>
<td>0.00</td>
<td>7.25</td>
</tr>
<tr>
<td class="textAlignLeft">2 Apr 2008</td>
<td>0.00</td>
<td>7.25</td>
</tr>
<tr>
<td class="textAlignLeft">5 Mar 2008</td>
<td>+0.25</td>
<td>7.25</td>
</tr>
<tr>
<td>6 Feb 2008</td>
<td>+0.25</td>
<td>7.00 
</td>
</tr>
</tbody>
</table>
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jchancellor-FAypfDUnLy

RBA keeps rates at 2% in Melbourne Cup day decision

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<h3 id="mr-title">Statement by Glenn Stevens, Governor: Monetary Policy Decision</h3>
At its meeting today, the Board decided to leave the cash rate unchanged at 2.0 per cent.
The global economy is expanding at a moderate pace, with some further softening in conditions in the Asian region, continuing US growth and a recovery in Europe. Key commodity prices are much lower than a year ago, in part reflecting increased supply, including from Australia. Australia's terms of trade are falling.
The Federal Reserve is expected to start increasing its policy rate over the period ahead, but some other major central banks are continuing to ease monetary policy. Volatility in financial markets has abated somewhat for the moment. While credit costs for some emerging market countries remain higher than a year ago, global financial conditions overall remain very accommodative.
In Australia, the available information suggests that moderate expansion in the economy continues. While GDP growth has been somewhat below longer-term averages for some time, business surveys suggest a gradual improvement in conditions over the past year. This has been accompanied by somewhat stronger growth in employment and a steady rate of unemployment.
Inflation is low and should remain so, with the economy likely to have a degree of spare capacity for some time yet. Inflation is forecast to be consistent with the target over the next one to two years, but a little lower than earlier expected.
In such circumstances, monetary policy needs to be accommodative. Low interest rates are acting to support borrowing and spending. While the recent changes to some lending rates for housing will reduce this support slightly, overall conditions are still quite accommodative. Credit growth has increased a little over recent months, with growth in lending to investors in the housing market easing slightly while that for owner-occupiers appears to be picking up. Dwelling prices continue to rise in Melbourne and Sydney, though the pace of growth has moderated of late. Growth in dwelling prices has remained mostly subdued in other cities. Supervisory measures are helping to contain risks that may arise from the housing market.
In other asset markets, prices for commercial property have been supported by lower long-term interest rates, while equity prices have moved in parallel with developments in global markets. The Australian dollar is adjusting to the significant declines in key commodity prices.
At today's meeting the Board judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate at this meeting. Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand. The Board will continue to assess the outlook, and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.
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po-LsXgBTHBmX

Containing housing risks as supervisory measures assist: November RBA Governor Glenn Stevens' statement

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GUEST OBSERVER
The move by the big four banks to raise rates above the Reserve Bank is set to put mortgage holders in a world of hurt with research showing over a third of consumers are unprepared to make higher home loan payments given the interest rate hike. 
Research from Citiwide Homeloans revealed 35 percent of consumers admitted that not only have they not budgeted for an interest rate rise, such an increase would negatively impact their household. 
This would be enough of a concern in itself in terms of consumers potentially defaulting on their home loans, but when allied to other survey findings that average wages are stagnating and a large proportion of consumers are paying scant attention to budgeting or saving, it paints a worrying picture. 
Although rates were at historic lows, consumers should be keeping a tighter rein on their household budgets to ensure that they are not left in a financial pickle with the markets shifting again. 
Our research found that a third of respondents have gone two years or more since their last pay increase, and three quarters reported pay increases fell into the 1-3 percent range, which has minimal impact on a household’s disposable income. 
This is creating an environment where less money is being set aside for savings, with over 40 percent of the survey participants saving less than 5 percent of their total income, and 15 percent admitting that they save nothing at all.
Our findings clearly indicate that not enough attention is being paid to household budgeting, which in wake of rates moving up again could leave a lot of households in considerable financial strife.
With almost 40 percent of respondents admitting that they did not organise their finances based on a set household budget, it is clear that the importance of budgeting and saving at all times is being lost on consumers, or is simply being ignored.
On the flip side though, almost 70 percent of those we questioned said their home loan repayments made up 30 percent or less of their total household income, so that still leaves a fair proportion of household budgets which could be saved or placed in a mortgage offset account to reduce interest, once the other household expenses are taken care of.
It is imperative that people address this now while they still have some wiggle room, rather than waiting until they get into financial difficulties.
Patrick Marion is chief executive officer of <a href="https://citiwide.com.au" target="_blank">Citiwide Homeloans</a> 
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mick.cee-iDmgDDAmu8

Wages stagnation leaves consumers vulnerable to interest rate rises: Patrick Marion

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The RBA Shadow Board is preferring to keep the cash rate on hold ahead of today's monthly RBA meeting and has rated the chance of hold at 65%.
According to the Shadow Board, Australian headline inflation, benefiting from exceptionally low energy prices, equals 1.5% (year-on-year) for a second quarter in a row, well below the RBA’s target band of 2-3%, while economic growth and the unemployment rate continue to underwhelm.
"The global economy looks weak and financial markets are nervous. The RBA Board lowered the official cash rate from 2.25 % to 2.0 % in May. However, Australia’s four major banks have all increased interest rates in the past month due to tougher prudential standards, prompting markets to factor in a 60% chance of another official rate cut as early as this week," the Shadow Board recently noted.
"The CAMA RBA Shadow Board on balance prefers to keep the cash rate on hold, attaching a 65% probability to this being the appropriate policy setting. The confidence attached to a required rate cut equals 26%, up twelve percentage points from the previous month, while the confidence in a required rate hike has fallen to 9%. So, while the overall sentiment is one of holding rates steady, the balance of risks has shifted down.
"Australia’s unemployment rate remains at 6.2%, according to the Australian Bureau of Statistics. Worryingly, employment has fallen, in particular full time employment (-13,900 in September), and the participation rate, now equal to 64.86%, continues to decline.
"The Aussie dollar appears to have found a floor at the 70 US¢ mark, with the currency trading as high 72.5 US¢ in recent days. This likely reflects a reaction to the US Federal Reserve’s continued delay of lifting its federal funds rate target. This year’s depreciation of the Aussie dollar has not led to an improvement in the balance of trade. On the contrary, in August the balance of trade was $-3.095 billion, compared to $-1.277 billion at the beginning of this year, suggestive of a J-curve effect, whereby supply and demand elasticities respond to a currency depreciation with a delay. Yields on Australian 10-year government bonds have edged down further to 2.58%.
"The Australian property market looks like weakening, with the construction PMI, building permits and new home sales falling. The S&amp;P/ASX200 has rebounded from last month’s lows below 5000. With heightened uncertainty about the Australian and global economic outlook, the stock index may well trade sideways for some time.
"Considerable attention is given to the US Federal Reserve Bank’s global outlook and its policy decisions. An increase in the federal funds rate was highly anticipated until the middle of this year but then delayed in light of weak global economic data. This week’s Fed statement sounds more bullish again even though the latest US economic data is not as strong as expected. There remain divisions within the Federal Reserve Bank Board about when to lift rates. Europe’s problems are not lessening: the refugee crisis will strain government budgets while the Greek debt crisis is only enjoying a brief hiatus. China’s economy still looks shaky and growth is likely to be remain relatively soft, with most economists expecting a target growth rate of 6.5% for the newly adopted five-year economic plan.
"Consumer and producer sentiment measures continue to yoyo around without a clear trend. After successive drops, the Westpac/Melbourne Institute Consumer Sentiment Index rose to 97.8 in October from 93.9 in September. Business confidence, according to the NAB business survey slid further, rebounded from 1 to 5. The AIG manufacturing and services indices, both leading economic indicators, contradict each other.
"The Shadow Board’s confidence that the cash rate should remain at its current level dropped from 72% in October to 65%. The confidence that a rate cut is appropriate has increased substantially to 26%, from 14% in the previous month; conversely, the confidence that a rate increase, to 2.25% or higher, is necessary has fallen to 9% (14% in October).
"The probabilities at longer horizons are as follows: 6 months out, the estimated probability that the cash rate should remain at 2% is nearly unchanged at 24% (25% in October). The estimated need for an interest rate increase has dropped further, to 58% (62% in October), while the need for a rate decrease has risen to 19% (13% in October). A year out, the Shadow Board members’ confidence that the cash rate should be held steady is unchanged at 18%, while the confidence in a required cash rate increase equals 67% (68% in October) and in a required cash rate decrease 15% (14% in October)."
To see the report in full, <a href="https://cama.crawford.anu.edu.au/rba-shadow-board/outcome/2015-11" target="_blank">click here</a>.
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jonathanchancellor-7SQnKwU6yx

No need for Cup Day rate cut: Shadow RBA board

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GUEST OBSERVER
The Consumer Price Index – the main measure of inflation in Australia – rose by 0.5% in the September quarter, below expectations. In seasonally adjusted terms the CPI rose by 0.5%. The annual rate of inflation held steady at 1.5%.
The Reserve Bank monitors three measures to derive the underlying inflation rate. The trimmed mean rose by 0.3% in the September quarter (2.1% annual); the weighted median rose by 0.3% (2.2% annual) and the CPI less volatile items rose by 0.5% (2.1% annual). Overall, underlying inflation rose by 0.4% in the quarter and by 2.1% over the year.
New home sales ease: New home sales fell by 0.4% in July. Sales of multi-units fell by 4.2% while detached house sales rose by 0.7%.
<a href="/images/2015/10/29/Screen%20Shot%202015-10-29%20at%209.59.59%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/10/29/Screen%20Shot%202015-10-29%20at%209.59.59%20AM.png" alt="">
What does it all mean?
Inflation remains healthy without being excessive. In fact the economic environment in Australia is far different from some other parts of the globe. The euro zone continues to worry about the deflationary threat from sluggish growth, while in the US inflation remains below the Fed’s target rate. But here in Australia underlying inflation is holding at the low end of the Reserve Bank’s target 2-3%.
It is pretty clear that inflation is not a threat to the domestic economy, meaning that the Reserve Bank can comfortably keep interest rates at exceptionally low levels over the medium term. Domestic inflationary pressures remain well contained and given the slow growth in wages it is unlikely to result in a change to the domestic inflation landscape.
The headline inflation measure rose by a less-than-expected 0.7% in the June quarter. Even the underlying measures were on the weaker side, with the annual growth rates at the low end of the Reserve Bank’s 2-3% target band. The average of the three key underlying inflation measures lifted by 0.5% in the quarter to be up 2.2% over the year.
Interestingly the ongoing slide in the Aussie dollar is starting to have an impact on the on lifting imported inflation. The tradeable component of the CPI result rose by 1.2% in the June quarter. The substantial rally in oil prices over the June quarter was the main driver of the result. In fact the 12% surge in the price of petrol marked the largest increase in 25 years and the main contributor to the inflation result. Whichever way you cut it, inflation is not a threat to the economy.
The Reserve Bank can comfortably ignore inflation and discuss merits of another interest rate cut on the economy if needed. But as the Reserve Bank Governor highlighted in his speech today, further rate cuts could be dangerous. It is clear that policymakers will focus more attention on the labour market, shifts in the Aussie dollar and retail activity in coming months. The Governors comments strengthened CommSec view that the Reserve Bank will keep rates on hold over the rest of 2015.
What do the figures show? 
Consumer Price Index
The All Groups Consumer Price Index (CPI) rose by 0.8% in seasonally adjusted terms in the June quarter. In original terms the CPI index rose by 0.7% in the June quarter. The annual rate of inflation rose from 1.3% in the March quarter to 1.5% in the June quarter.
Underlying measures of inflation were marginally higher than forecasts in the March quarter. The trimmed mean measure rose by 0.6% in the quarter, to be up 2.2% over the year. The weighted median measure rose by 0.5% in the quarter with the annual rate at 2.4%. The CPI less volatile items rose by 0.4% in the quarter to be up 2.0% over the year.
The Bureau of Statistics noted: “The most significant price rises this quarter were for are automotive fuel (+12.2%), medical and hospital services (+4.5%) and new dwelling purchase by owner–occupiers (+1.5%). These rises were partially offset by falls, for domestic holiday travel and accommodation (–5.4%) and pharmaceutical products (–1.8%).”
Prices of tradables rose by 1.2% in the June quarter, with higher prices for automotive fuel. The most significant offsetting fall in the tradable goods component was for pharmaceutical products and vegetables. The tradables component fell by 0.3% over the year to June.
Prices of non-tradables rose by 0.5% in the June quarter. Price increases were recorded for new dwelling purchase by owner-occupiers. The most significant offsetting fall was for electricity. The annual rate of non-tradables inflation rose by 2.6% in the year to June. Tradable goods are those items whose prices are largely determined on the world market. Non-tradable prices are more affected by domestic economic conditions.
New home sales
New home sales fell by 0.4% in July. Sales of multi-units fell by 4.2% while detached house sales rose by 0.7%.
The Housing Industry Association reported: “In the month of July 2015 detached house sales increased by 4.2% in New South Wales. Detached house sales fell by 2.3% in Victoria and by 4.9% in Western Australia. Sales were close to flat for the month in Queensland (-0.6%) and South Australia (-0.2%).”
“The annual peak for detached house sales has passed. Over the three months to July this year detached house sales fell by 2.8% to be 3.4% lower when compared to the three months to July 2014.”
“‘Multi-unit’ sales peaked in May this year and fell by 4.2% in July following a decline of 2.9% in June. Over the three months to July this year multi-unit sales increased by 8.3%, but it was the strength of the May result that drove the quarterly outcome.”
Why is the data important?
The Consumer Price Index (CPI) is regarded as Australia’s premier measure of inflation. The CPI is published quarterly and measures price changes for a ‘basket’ of goods and services that dominate expenditure of metropolitan households. The “All Groups” index is the main focus, but other inflation measures are also published such as so-called ‘underlying’ measures. These include measures that abstract from price changes in volatile price items such as fresh food and petrol.
The Reserve Bank aims to keep the headline inflation rate between 2-3% over an economic cycle. If inflation is high and expected to rise, the Reserve Bank may elect to raise interest rates in order to constrain price pressures. Conversely, if inflation is low and expected to remain low, the Reserve Bank may elect to cut interest rates if it believes the growth pace of the economy is in need of strengthening.
 
The Housing Industry Association releases data on the sales of new homes each month. The HIA collects the data each month from a sample of Australia's largest 100 home builders. The survey covers around 14% of the home building industry
What are the implications?
At present inflation is very much under control and not a threat to a movement in interest rates in either direction. We believe the Reserve Bank will be reluctant to cut interest rates again unless a left field event occurs.
 
Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>. 
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Low inflation raises chance of rate cut: CommSec's Savanth Sebastian

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GUEST OBSERVER
The Reserve Bank board meets next week on November 3. We expect the board will decide to keep rates on hold. 
Markets have lifted the probability of a cut from 25% to around 65% following the release of the September quarter Inflation Report. In the Report core inflation for the September quarter printed 0.3% (both Trimmed Mean and Weighted Median). That compared with market expectations of 0.5%.Annual core inflation is now printing 2.1% (Trimmed Mean) and 2.2% (Weighted Median). 
Note that in the August Statement on Monetary Policy the Bank forecast core inflation at 2.5% for the year to December 2015. At that time the six months to June 2015 had printed 1.6% for both Trimmed median and Weighted Median. That forecast implied that the Bank was expecting core inflation over the second half of 2015 to print 1.2% – around 0.6% per quarter. That is around twice the print for the September quarter. 
As such the September quarter read will come as a significant surprise. There is a precedent for this shock result. The Trimmed Mean measure for the September quarter last year also surprised on the low side at 0.3% (Weighted Median at 0.5%). We expect that the Trimmed Mean is given a greater weight in the eyes of the authorities than the Weighted Median – recall that other countries (e.g. US) only talk of Trimmed Means when they use sophisticated measures for core inflation. That measure pushed annual Trimmed Mean down from 2.8% to 2.4%. This measure has pushed it down from 2.2% to 2.1%.
Despite that “shock” on the Trimmed Mean in September last year the Bank held rates steady at the November board meeting and even maintained the call that the most appropriate approach to policy was a “period of stability”. At that time the Bank was forecasting underlying inflation to print 2.25% for the year to December 2014 but anticipated that lifting to 2.5% in the year to June 2015 and to 2.75% in the year to December 2015. So in the near term the Bank took notice of the low print but because of the fall in the AUD expected inflation to lift one year out. With the AUD having fallen even further it will still be mindful of some eventual upward pressure as demand conditions firm. 
The Bank will now revise down its forecast for core inflation to December 2015 from 2.5% to 2.25% (just as it had in November last year) but that will not be sufficient to change policy. We expect it will still hold its forecast for 2.5% through 2016 due to a combination of an expected lift in demand and a lagged impact from the fall in the AUD. Note that its growth forecasts in the August SOMP imply growth momentum in the second half of 2016 of around 3.75% (annualised). 
Last year the surprise low print for the Trimmed Mean did not prompt the Bank to move from “period of stability” to cutting rates in February. It was the growth outlook. 
The drop in core inflation was known at both the November and December meetings but it was the surprise slump in growth that was recorded in the September quarter GDP report that printed the day after the December board meeting that prompted the rate cut. 
In February when it cut rates it revised down its growth forecasts for 2015 from 3% to 2.75% and noted:” growth overall is now forecast to remain at a below-trend pace somewhat longer than had earlier been expected. 
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Accordingly, the economy is expected to be operating with a degree of spare capacity for some time yet, and domestic cost pressures are likely to remain subdued and inflation well contained”. 
The emphasis here was clearly on a deteriorating growth profile rather than a low inflation print. In fact the December quarter Trimmed Mean showed a rebound to 0.6% (Double the September print). Recall that the forecasts at the February board meeting were for growth at 2.75% in 2015 – below trend despite a rate cut and an assumption of a follow up rate cut by May. 
Could the Board be confronted by another below trend growth forecast in 2016 which would trigger another rate cut? 
It seems unlikely. 
Firstly the starting point is higher than we saw in February. The November growth forecast for 2015 was 3% – bang on trend whereas the August forecast for growth in 2016 is 3% (now 0.25% above trend, since trend has been revised down). 
To forecast below trend growth in 2016 which would be associated with a rate cut the Bank would have to forecast growth in 2016 of 2.5% down from 3%. 
The major “growth negative” development since the August SOMP has been the soft GDP print for the June quarter. We do not think the Bank was particularly surprised by the weak 0.2% print for GDP growth in the June quarter (largely driven by seasonally weak exports). Certainly the rhetoric in the October minutes was, on balance, more positive than we have seen, particularly around the labour market. The view has shifted over the last six months from unemployment rate rising through 2016 (May SOMP); to now having peaked (August SOMP); to possibly falling (October minutes). 
The one big change which may prompt a major downward revision to growth would be an anticipated impact from the recent independent increase in bank mortgage rates. Because most borrowers (Westpac has reported around 70% of its borrowers) are ahead on repayments the cash flow effect of the banks’ increase will be muted. 
The major impact would be through confidence. The weekly Morgan/ ANZ Consumer Sentiment Index , which printed after all majors had raised rates hardly moved this week. This is a volatile measure (as would be expected with weekly series) but it is the only one available in the window before the Board meeting. It’s result would be inconclusive from the Bank’s perspective and certainly not sufficient to justify a large mark down in the growth outlook. 
Conclusion 
We still expect the RBA to be on hold at its meeting next week. The surprise drop in the inflation measure is not unique and, in the past, the Bank has looked through a one off number. 
The motivation for cutting next week would be a significant downward revision to the growth outlook. The data flow and the RBA’s recent commentary does not point to such an event. 
Consequently we expect rates to stay around the current record lows. 
 
Bill Evans is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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bevans-rYk9SxEa4r

RBA still on hold next week: Westpac's Bill Evans

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<div>A surprisingly soft inflation result, and one which puts further interest rate cuts right back in the frame, if indeed they ever snuck out of shot. 
</div>
<div>Headline CPI printed at 0.5% for the June quarter for an annual result of just 1.5%, well beneath the target range of inflation, thereby locking in the weakest run of inflation results we have seen in years. Indeed the index numbers show that the headline result was weaker still, and only rounding took the headline figure up to 0.5% for the September quarter.</div>
<div> </div>
<div>The soft result was influenced by the declining price of vegetables (!), telco quipment &amp; services, and perhaps more predictably, automotive fuel. </div>
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<div><a href="/images/2015/10/29/Inflation1.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2015/10/29/Inflation1.jpg" alt=""></div>
<div> </div>
<div>Non tradables or domestic inflation came in at a soft 0.4% for the quarter and 2.6% for the year, suggesting that domestic price pressures are fairly subdued, while tradables inflation remained very soft. </div>
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<div><a href="/images/2015/10/29/Inflation2.jpg" target="_blank">Click to enlarge</a></div>
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<div> </div>
<div>
Despite the Aussie dollar having tanked all the way from above parity against the US dollar to around 71.3 cents after this release, there still seems to be little evidence of inflationary pressure. This is generally viewed as a sign of weakness for the economy, with wages growth sundued and sentiment too weak to see the higher prices of imports to be passed on to consumers. Most significantly of all the underlying measures of inflation - the trimmed mean and weighted median - both came in at just 0.3% for the quarter, for annual prints of  2.1 and 2.2% respectively.
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<div><a href="/images/2015/10/29/Inflation3.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2015/10/29/Inflation3.jpg" alt=""></div>
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<div>
<div>These figures will be seen to add to the case for further interest rate cuts with inflation sinking towards the bottom end of the target range and unemployment remaining above 6%.</div>
<div> </div>
<div>Futures markets are undecided about an interest rate cut on Melbourne Cup Day next week (62% chance), but hav priced in a high probability of the cash rate being dropped once again before the Christmas break.</div>
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<div>
PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>. 
His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.
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pwargent-M4siyDbqQY

Veggie price decline influences inflation outcome: Pete Wargent

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GUEST OBSERVER
When Australia’s Reserve Bank board meets on Melbourne Cup day next week, the question at hand is whether the RBA will seek to offset recent bank rate raises with a cut to the cash rate. With a cut, the hope is banks will then reverse their decision and get mortgage rates back to where we were before.
First Westpac, then Commonwealth Bank, now all of the big four have raised their variable home loan rates, purportedly in response to more stringent capital requirements being imposed upon them.
In the wake of the 2008 financial crisis regulators around the world concluded banks didn’t hold enough capital as a buffer against potential losses.
The Murray report wisely suggested banks should hold more capital, but it doesn’t come free. The investors who provide it need to get paid – which raises the question: “by whom?”
It could be bank shareholders who might accept a lower rate of return on their investment. Indeed, since the extra capital requirements make banks safer this might not be unreasonable: the risk-return tradeoff has changed.
But the big four have decided their customers should pay. Costs have gone up, and those costs (or perhaps a bit more) are being passed on to home loan customers. Kudos to Malcolm Turnbull for pointing this out last week.
<h2>Time to cut</h2>
I’m on record as suggesting the RBA should and probably will cut rates at least once in the coming months. That comes from my view that Australia is suffering from <a href="https://theconversation.com/have-australian-bankers-bought-the-secular-stagnation-theory-29765">“secular stagnation”</a> – the idea that the speed limit of the economy (or more technically, the equilibrium real interest rate) has changed because, globally, there are too many savings chasing too few productive investment opportunities. This is enough of a reason to cut rates in and of itself, but the big four rate hike makes it all the more likely, and important.
That’s all simple enough, but it raises two important questions: (i) what are the implications for the RBA; and (ii) what does this say about our banking system and the regulation of it. The common thread in the answer to those questions is the B-word: “bubble”.
For the RBA, cutting rates by 25 basis points would offset the big four’s recent hikes (not quite exactly, but close enough). But, of course, the big four’s variable mortgage rates are not the only things affected by the cash rate. A 25bp cut should flow into commercial lending and it should also allow cuts by other mortgage providers. That would stimulate the economy.
Still, the RBA is clearly balancing the desire to stimulate the economy through lower rates, and concerns about asset price bubbles – especially in residential property. In that regard, the big four move is good and bad. It should cool the potentially overheated property market, but it also forces the RBA’s hand. And it takes away the stimulatory effect a cut would have had, absent the big four’s preemptive move.
The second, and deeper question, is what all this says about the competitiveness of our banking system. The fact that customers, not shareholders, are on the receiving end of the cost of holding more buffer capital shows how much market power the big four have.
That’s not necessarily a terrible thing – spreads on home loans are a little, but not particularly high by international standards. It’s not easy to make the case that the Australian public is getting ripped off by the big four.
They have, however, been willing to lend people a great deal of money, relative to their incomes, to purchase residential property. Go to any of the big four’s online calculators and see how much you can borrow with your income, and then try the same thing at a large American bank (like Bank of America). Australian banks will lend you a lot.
And therein lies the rub. It’s one thing to raise prices a bit, and then have those offset by an RBA rate cut. That will have little or no effect on borrowing behaviour. It’s quite another to reform lending practices and stop letting people borrow staggering sums against frothy assets.
And it is the latter practice that we should be focused on.
 
Richard Holden is professor of economics, UNSW Australia and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">here</a>.
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The RBA should cut rates, but not because the banks are upping them

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Last week we wrote about the potential impact on monetary policy of an independent move by Westpac to raise its variable mortgage rates by 0.2%.
We observed that the Reserve Bank has noted in the past that it moves its cash rate to target retail rates.
The issue was whether a move by one bank would trigger a response from the RBA.
We argued that it was too early to make such a prediction given that the extent of financial tightening was not known. A move by one bank was insufficient to make a significant impact on overall financial conditions.
Yesterday the CBA Group, which covers 25% of mortgages, raised their mortgage rates by 0.15%. Today the NAB (14.8%) moved by 0.17%. and ANZ (14.7%) moved by 0.18%.
Overall, those banks that have been subject to the increase in capital requirements, and are now raising their mortgage rates, cover around 77.5% of mortgages in the system. The rest is covered by the regional banks (16.9%) and non-bank lenders (5.5%).
However, only about 85% of mortgages are on variable rate terms. This means that the net effect across the economy of these changes to variable mortgage rates by the majors will be around 11bps.
When the RBA moves rates it can affect both mortgages and business loans. Mortgages represent around 60% of total loans in the system so this initiative by the banks roughly equates to a 6-8bp rate hike by the RBA that is fully passed on by all financial institutions to both mortgage and business borrowers (depending on the exact share of loans directly affected by an RBA move).
On this basis it seems unlikely that the RBA would move immediately to offset bank rate rises with a 0.25% rate cut.
However last week we noted the historical precedent of 2012 when the RBA cut by 0.5% in May following increases of only 0.10% in variable mortgage rates by the banks.
Points we made about that period were firstly that the RBA had a very strong easing bias at the time, giving clear guidance that “inflation outlook would provide scope for easier monetary policy”. Despite that bias there was an extended delay between the banks’ moves in February that year and the eventual RBA cut in May.
When it did finally make a cut it also revised down its growth forecasts for 2012 from 3.25% to 3.0% and for 2013 from 3.5% to 3.0%. The 2013 change was very significant, cutting the outlook from comfortably above trend to around trend.
So to recap: despite fully neutralising the banks’ move and delivering a cut over and above that and subsequent bank moves (the banks only passed on 0.35% of the RBA’s 0.50% cut by the RBA) the RBA still revised down its growth forecasts significantly. One can only imagine what the revision would have been without the rate cut.
This brings us to the conclusion that given the move by the banks tightens financial conditions by significantly less than 0.25%, a full 0.25% rate cut would result in a net easing in financial conditions (on the basis that banks pass on the full cut). Hence the case would need to be made that the RBA needs to provide a net easing of financial conditions to justify a rate cut in November.
There was nothing in the Board’s minutes from the October meeting to suggest that a net financial easing was going to be required in the near term. In fact the minutes indicated that the Board was a little more upbeat about the domestic outlook, in particular noting: “forward-looking indicators had generally been consistent with the unemployment rate being around its current level or possibly slightly lower in the months ahead”. Recall that six months ago the Board was forecasting the unemployment rate to continue to rise through to the first half of 2016.
However we must acknowledge that November has in the past been a very popular month for the Bank to move rates. That is because, like February, May and August it presents the Bank with the opportunity to review its forecasts.
A scenario that would see the Bank cutting rates in November would be associated with a significant downward revision in its growth forecasts for 2016. If that decision was based around the banks’ actions then it would mean that the expected tightening in financial conditions would be sufficient to lower the growth outlook.
Given the effective size of the tightening though it seems unlikely that this would be viewed as sufficient to sharply lower the growth outlook.
With the RBA currently forecasting growth in 2016 to be an above trend 3.0% it would be necessary for the Bank to be considering a below trend 2.5% for the 2016 view to trigger a rate cut in November.
That seems premature given that the key way in which the banks’ decisions would impact the economy would be through confidence. Even the cash flow effect is likely to be muted. For example, Westpac noted that 70% of its borrowers are ahead on repayments – the rate rise will mean that these borrowers will take a little longer to pay down their loans rather than take a cash flow ‘hit’.
Surely the RBA would need to see the confidence impact of the banks’ moves before it decided to cut rates and lower its growth forecasts. A clean measure of that response will not be available until the Westpac Melbourne Institute Index of Consumer Sentiment is released on November 11.
The minutes were also used to signal the RBA’s comfort with the decisions of the banks so far with the comment that: “members judged that there were signs that the response of the banks to supervisory measures implemented by APRA were helping to manage risks in the housing market”. 
While that statement is probably referring to the banks’ tightening in lending guidelines and increase in interest rates for investor loans (announced back in July) it could, arguably have been used as a way of signalling that it was also comfortable with the Westpac move given it was only targeted at the housing market which has been the area of ‘excess’ concerns for the RBA.
So we feel quite comfortable in ruling out a rate cut in November. A December move, triggered by a major slump in confidence, remains a possibility. But our core view that rates are on hold through 2015 and 2016 is much more at risk in the early months of 2016.
After all, markets have been pricing in a full 0.25% cut by March and a 50% chance of a second cut by June.
A slowdown in consumer spending associated with the banks’ tightening or adverse developments offshore are much more likely to be triggers for the sort of downward revision to growth that would be linked with a February rate cut.
The October minutes implied such concerns with a more downbeat assessment of the outlook for China; and a marked change in the assessment of the outlook for the Federal Funds rate, noting that some market participants did not expect a Fed hike for the foreseeable future.
That compared with the September minutes which commented that “a tightening of monetary policy in the United States could start at the September meeting of the Federal Open Market Committee”.
The heavy emphasis on global issues culminated in the minutes concluding: “information about economic and financial developments, both domestically and abroad, would continue to inform the Board’s assessment of the outlook”. [Westpac’s emphasis]
Conclusion
We see little chance of an RBA rate cut in November. December remains ‘live’ as it allows for the Bank to assess the impact of the moves by the banks on confidence.
A combination of a more lagged impact on spending from the banks’ moves and adverse global developments including an extended pause from the FOMC (meetings in December and January before the February meeting of the RBA) might trigger the cut which the market so confidently expects from the February meeting.
For our part, including our expectation of a Fed tightening in December, we retain our central view that rates will be on hold over the course of the remainder of 2015 and 2016. 
 
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Bill Evans is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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RBA on hold in November despite banks’ rate hikes: Westpac's Bill Evans

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ANZ has increased variable interest rates for all Australian variable home and residential investment loans to partially offset rising regulatory capital requirements against home lending, chief executive officer Mark Whelan announced.
The standard variable rate for owner-occupier home loans will increase by 0.18%pa to 5.56%pa and the Residential Investment Property loan index will increase by 0.18%pa to 5.83%pa, with changes coming into effect 20 November.
The increase, a total of 18 basis points, will add $36 per month to the average home loan of $242,000, according to ANZ. 
Ashley Playsted, CEO of Wealthie, the mortgage brokering service, said he expected consumer confidence would take a hit, "but consumers need to proactively turn their attention to the less publicly-known lenders, who are actually putting their rates down." 
<div>"These non-major bank lenders may not have the branch networks that you can walk in to," he said.</div>
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<div>"People worry about the security of the small lender, however, this is slowly changing."</div>
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