Repeat buyers are one of the strongest measures of confidence in any apartment development.

At <a href="https://www.apartments.com.au/new-apartments/era-newcastle-west-124-126-bull-street-newcastle-west-nsw-2302">ERA</a> in Newcastle West, some purchasers are returning to <a href="https://www.apartments.com.au/developers/gwh">GWH</a> after living at the developer's One Apartments. Their decision to purchase again was driven by the quality of life they found after moving into their first GWH home.

Keith Wilton had spent years living in a house in East Maitland before deciding it was time for a change. Apartment living had always been on his radar, but he was selective about what he wanted.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/FH_1EzB-1vs?si=XScVlP1ERsTDJoME" title="YouTube video player" width="560"></iframe>

"I had some boxes I wanted to tick," he says.

Keith points to the open-plan design, generous outdoor areas and considered inclusions as key reasons One Apartments worked for him.

“One of those things was a nice indoor open plan area, but also I wanted a nice outdoor open area that I could entertain on in summer or Christmases or birthdays,” he says.

He also found value in the smaller details, from integrated appliances to shared resident spaces including the pool, cinema and rooftop areas.

[smartcode_project:default project_id=135096 project_image_fid=356818]

After comparing several developments, he chose One Apartments because of GWH's longstanding local reputation and his own experience working with the developer on a commercial project more than a decade earlier.

"I knew that they were local, that the quality of the build was going to be up there. I'd looked at other apartment complexes around and close by, and I just knew that here was a better decision location wise."

Today, Keith says the move has completely changed how he experiences Newcastle.

"I enjoy living in this location because it's more of a lifestyle change. That Newcastle city living where you can walk to restaurants and bars and even beaches and parks and even shopping across the road."

[smartcode_project:default project_id=135096 project_image_fid=356828]

Beyond the location, he says it's the sense of community that has surprised him most.

"Everyone loves living here because they chose to live here, but everyone looks out for each other. It's a real great community feel here."

For Aimee and Lyle Goodman, the journey started almost by chance.

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The couple happened to be having coffee in Newcastle when they noticed the site where One Apartments was about to begin construction.

"We were aware GWH was planning a development," Aimee says. "We made one phone call and things moved pretty quickly after that."

As busy business owners, they initially thought apartment living would simply reduce the maintenance that came with larger homes. Instead, it fundamentally changed how they spent time together.

"We actually catch up more as a family now," Aimee says.

"We've had homes with big yards and lots of space, but everyone ended up in different rooms. Here we'll have dinner together, the kids can play, and we spend far more quality time together."

[smartcode_project:default project_id=135096 project_image_fid=356829]

Lyle says their confidence came from GWH's reputation within Newcastle's building industry.

"I know people who've worked across different apartment projects, and whenever GWH came up the feedback was always the same. They're rock solid. They're quality."

That confidence only grew throughout the buying process.

"One of the things that really impressed us with GWH was the whole process, was the communication," Lyle says. "It was consistent, it was regular, there was no problem if we had some weird questions, there was no problems in getting answers."

[smartcode_project:default project_id=135096 project_image_fid=351104]

Aimee says one moment stood out.

"The project actually finished on time. We realised we needed to hurry up and sell our house because everything was happening exactly when they said it would."

The positive experience at One Apartments ultimately gave all three buyers the confidence to purchase again with GWH, this time at ERA.

Their confidence reflects what many buyers are seeking in today's apartment market. Location remains important, but so too does certainty around delivery, quality and long-term liveability.

[smartcode_project:default project_id=135096 project_image_fid=356822]

ERA builds on those foundations with 280 one, two and three-bedroom apartments across two landmark towers in <a href="https://www.apartments.com.au/developments/newcastle-west-nsw-2302">Newcastle West</a>.&nbsp;

Designed by <a href="https://www.apartments.com.au/architects/fk-australia">Fender Katsalidis</a>, the project will include more than 2,000 square metres of resident amenities, including a resort-style pool, gym, sauna, private cinema and rooftop entertaining spaces overlooking the harbour and coastline.&nbsp;

The development is also within walking distance of the Newcastle Interchange, Honeysuckle, Darby Street, the harbour foreshore, restaurants, retail and the city’s beaches, continuing the walkable lifestyle that existing GWH buyers say has transformed how they live.

[smartcode_project:default project_id=135096 project_image_fid=356826]

For Keith, the appeal remains straightforward.

"You feel at home even before you've moved into your home."

For Aimee, the change is measured in time.

“I just felt like I had more time,” she says.

[smartcode_project:default project_id=135096 project_image_fid=351102]

Construction at ERA is now underway, with more than half of the residences already sold and limited two and three-bedroom apartments remaining in the East Tower release. Priced from $980,000 for two-bedroom residences and $1.46 million for three-bedroom residences, buyers can secure an apartment with a 10 per cent deposit, with premium homes offering ocean views from Level 8 and harbour views from Level 10.

ERA is also backed by Resilience Insurance's 10-year Latent Defects Insurance policy, providing protection against structural or waterproofing defects for 10 years after completion. The project is anticipated to be completed in early 2028.

[smartcode_project_cta:default project_id=135096]

Joel Robinson

From ONE to ERA: Why buyers are choosing GWH again in Newcastle West

Virgate Property Group is preparing to commence construction of Verdé, its new apartment development in Melbourne's Arts Precinct at Southbank, following a strong run of sales that has seen more than half of the project's 173 apartments secured.

Verdé has attracted a broad mix of first home buyers, owner-occupiers upgrading from nearby inner-city suburbs and investors, with younger owner-occupier couples aged between 28 and 45 accounting for the strongest enquiry. Many are already living in Southbank, South Melbourne, Albert Park, Port Melbourne, South Yarra and the CBD.

"Verdé is located in one of the most desirable pockets of southern Melbourne," Blair Property Group Director Darren Blair, who is managing sales at Verdé, said.

"It's within walking distance of the Arts Centre, Royal Botanic Gardens, Albert Park Lake, and Southbank's restaurants and retail. It's a great lifestyle location with strong amenity and liveability, which made it a very attractive choice for the project."

[smartcode_project:default project_id=4661 project_image_fid=372549]

Virgate was already familiar with the precinct, having previously delivered the successful Domain House development in neighbouring South Melbourne. That experience gave the developer confidence to acquire the Coventry Street site and continue expanding its presence in Melbourne's inner south.

"We had been keeping an eye on the site and the broader precinct for a few months before deciding to move forward with the acquisition," Virgate said.

The project was ultimately secured in 2020 following feasibility studies, planning assessments and due diligence, with the brief centred on delivering "a high-quality, considered design that feels both refined and fit for purpose."

[smartcode_project:default project_id=4661 project_image_fid=314259]

Designed by <a href="https://www.apartments.com.au/architects/bruce-henderson-architects">Bruce Henderson Architects</a>, Verdé comprises 173 one, two and three-bedroom apartments priced from $599,000. The architecture is distinguished by a faceted glass façade that responds to both the site's outlook and Melbourne's changing light conditions.

According to Bruce Henderson Architects, the coloured glazing gives the building a distinctive identity while also providing privacy and solar shading, with residences oriented to capture views across the bay, city skyline and surrounding parklands.

Inside, <a href="https://www.apartments.com.au/interior-designers/designoffice">DesignOffice</a> has created interiors focused on natural light, efficient planning and enduring materials. Apartments feature engineered oak flooring, natural stone benchtops, floor-to-ceiling glazing and SMEG appliances, while a restrained material palette aims to complement the expansive outlooks rather than compete with them.

[smartcode_project:default project_id=4661 project_image_fid=372550]

Resident amenity has also been designed around everyday functionality rather than occasional use. Facilities include a concierge-serviced lobby, residents' lounge with fireplace, library and co-working space, gym, terrace garden with barbecue facilities, ground-floor café, and package delivery management.

The project's location continues to be one of its strongest drawcards. Positioned on Coventry Street, Verdé sits within walking distance of the National Gallery of Victoria, Arts Centre Melbourne, Royal Botanic Gardens and Albert Park Lake, while Southbank's dining precinct, Sturt Street trams and the new ANZAC Station are all nearby. The surrounding education catchment also includes Melbourne Grammar, Melbourne Girls Grammar, Mac.Robertson Girls' High School and several major university campuses.

The sales team says buyers have responded particularly well to the combination of location, design quality and long-term liveability.

"They're responding really positively to the quality of the design, premium resident amenities and the uninterrupted views. Many also appreciate the location and how connected it is to everything they need."

The ability to secure stamp duty savings before completion has also been a key factor for purchasers, alongside the opportunity to personalise finishes ahead of settlement.

With construction set to commence soon and more than half the apartments already sold, Verdé enters its next phase as one of the Arts Precinct's more established apartment developments, offering remaining buyers an opportunity to secure a residence before construction advances further. Expected completion is scheduled for late 2027.

[smartcode_project_cta:default project_id=4661]

Virgate's Verdé Southbank moves toward construction as sales fly past halfway stage

Downsizer-focused apartment development Kooyongkoot in Hawthorn has been recognised at the 2026 Better Future Melbourne Design Awards, taking home Gold and Silver awards in two categories.

<a href="https://www.apartments.com.au/new-apartments/kooyongkoot-hawthorn-1-kooyongkoot-road-hawthorn-vic-3122">Kooyongkoot</a>, currently being delivered by developer PQD and designed by Cera Stribley, received Gold in the Interior Design – Proposed category and Silver in the Architecture – Proposed category.

The dual recognition reflects the design approach behind the boutique development on prestigious Kooyongkoot Road, where the focus has been on creating homes for downsizers seeking the space, quality and functionality of a detached house within a low-rise apartment building.

Rather than maximising apartment numbers, <a href="https://www.apartments.com.au/developers/pqd">PQD</a> and <a href="https://www.apartments.com.au/architects/cera-stribley-architects">Cera Stribley</a> limited the development to just 18 residences, allowing for larger floorplans, greater privacy, generous landscaping and expansive communal spaces.&nbsp;The majority of the apartments also benefit from corner aspects, allowing for dual sources of natural light.

Now around 70 per cent complete and on track for completion in November 2026, Kooyongkoot will comprise a mix of garden residences, ter​race apartments, sub-penthouses, and is crowned by two half-floor penthouses with direct lift access and private rooftop terraces.

[smartcode_project:default project_id=102717 project_image_fid=355297]

The Silver Award for Architecture recognised the way the building responds to its prominent corner position at the ent​rance to Hawthorn's Scotch Hill precinct, one of Melbourne's most established residential neighbourhoods.

Rather than competing with the grand homes that line Kooyongkoot Road, the architectural approach focused on restraint and longevity, using curved brickwork, generous landscaping and carefully considered proportions to integrate with the existing streetscape.

"The form feels fluid and timeless, as though shaped by the landscape itself – architecture that belongs, rather than competes," said Chris Stribley, Co-Founder and Managing Principal of Cera Stribley.

The judging submission also highlighted practical innovations throughout the building, including lift cores servicing only nine homes each, a central landscaped lightcourt designed to bring daylight and ventilation into the building, and fully enclosed private storage rooms with lighting, power and shelving to better accommodate residents transitioning from larger family homes.

[smartcode_project:default project_id=102717 project_image_fid=355293]

The Gold Award for Interior Design recognised the project's focus on long-term liveability rather than display-home aesthetics.

According to the awards submission, the interiors were designed from the inside out, prioritising how homes would function over decades of daily use through generous proportions, practical storage, durable natural materials and flexible layouts.

The specification includes natural stone throughout, upgraded acoustic glazing, V-ZUG appliances and fully enclosed storage rooms, alongside an amenity offering focused on wellness, entertainment and everyday convenience.&nbsp;

Residents will have access to a gym and yoga studio, a wellness centre featuring traditional and infrared saunas, a cold therapy shower and treatment room, as well as a residents' lounge and golf simulator/cinema room for entertainment.&nbsp;Kooyongkoot has also considered the everyday convenience of its residents by offering a private carwash and pet wash facilities on site as well as dedicated parcel lockers and oversized fully enclosed storage rooms.&nbsp;

[smartcode_project:default project_id=102717 project_image_fid=355303]

The project's attention to detail has already resonated with buyers. Earlier this year, Kooyongkoot recorded one of Boroondara's highest apartment sales when an $8 million penthouse was purchased by a Melbourne CEO downsizing from a nearby family home.

"Every detail feels deliberate, from the overall design down to the smallest touches," the purchaser said.

"The level of quality and refinement is exceptional, but what really sold it was how liveable it felt... It felt like a place where everything had been considered, not just a luxury building."

[smartcode_project:default project_id=102717 project_image_fid=355304]

Sustainability also formed a key part of both award submissions. Kooyongkoot is targeting a minimum 7.5-star NatHERS rating across all residences, supported by passive design principles, high-performance glazing, EV charging infrastructure, water reuse systems and a wellness model focused on lower-energy dry facilities rather than pools and large wet areas.

Located within walking distance of Scotch College, Methodist Ladies' College, Koo​yong Lawn Tennis Club, Aubur​n Village and Camberwell Junction, Kooyongkoot continues to target owner-occupiers looking to remain in Melbourne's inner east without compromising on space or quality. A limited selection of two, three and four-bedroom residences remains available, with prices starting from $1.9 million.

[smartcode_project_cta:default project_id=102717]

Kooyongkoot wins Gold and Silver at Better Future Melbourne Design Awards

New apartment supply has become increasingly constrained across <a href="https://www.apartments.com.au/developments/parramatta-nsw-2150">Parramatta</a> in recent years, with fewer projects progressing through to completion as development conditions have become more challenging.

It makes <a href="https://www.apartments.com.au/developers/novm">NOVM</a>'s 2021-completed <a href="https://www.apartments.com.au/buildings/the-lennox-parramatta-12-phillip-street-parramatta-nsw-2150">The Lennox</a> one of the most recently completed residential towers on the Parramatta River, and among the newest apartment developments in Sydney's second CBD.

With the project largely completed before the sharp escalation in construction costs and inflation following the pandemic, The Lennox is now offering pricing that would be difficult to replicate in a comparable new development in Parramatta today, or across much of Western Sydney.

The majority of the 413 apartments at The Lennox sold before and shortly after completion. A limited release of the remaining apartments has recently been brought to market by capital partner <a href="https://www.apartments.com.au/project-marketer/equitifund-group">Equitifund</a>, with entry-level pricing from $700,000 and two-bedroom apartments available from under $1 million.

Rising above the Parramatta River at 12 Phillip Street, The Lennox comprises one, two, three and four-bedroom apartments, appealing to first home buyers, young professionals, families, downsizers and interstate investors seeking a completed apartment in one of Australia's fastest-growing economic centres.

[smartcode_project:default project_id=5743 project_image_fid=372394]

Rather than positioning Parramatta as an alternative to Sydney's CBD, Equitifund believes the city has reached a point where it stands on its own merits.

"Parramatta is no longer simply an alternative to Sydney CBD, it's becoming a destination in its own right," Equitifund Executive Chairman Greg Huxley said.

"The Lennox captures that evolution with a level of quality and amenity that's difficult to match at its price point."

[smartcode_project:default project_id=5743 project_image_fid=953]

Designed by <a href="https://www.apartments.com.au/architects/marchese-partners">Marchese Partners</a>, the tower responds directly to its riverfront setting through expansive glazing and open-plan layouts that maximise views across the Parramatta River and city skyline. Interiors feature engineered timber flooring, stone benchtops, stainless steel appliances and floor-to-ceiling glazing, while generous balconies extend the living spaces outdoors.

Marchese Partners says the project was conceived to balance high-quality apartment living with practical, long-term functionality, pairing larger, efficient floorplans with amenities more commonly associated with five-star hotels.

That emphasis continues through the resident facilities, which include a 20-metre rooftop swimming pool, fully equipped gym and wellness spaces, full-time concierge, a residents' lounge, function room, private lifts, secure basement parking and rooftop communal areas overlooking the Parramatta River. Ground-floor boardwalk retail and dining further activate the riverfront and integrate the building into the surrounding public realm.

[smartcode_project:default project_id=5743 project_image_fid=925]

Australian housing and finance group Equitifund has secured the remaining apartments, believing there are few completed apartment opportunities in Parramatta that offer the same combination of location, amenity and pricing.

Equitifund National Sales Director Ben Hamblett says buyers are increasingly recognising that premium apartment living no longer needs to come with Sydney CBD pricing.

"The Lennox is where aspirational living becomes attainable," Hamblett said.

"Wake to river and mountain views, step into Sydney's Second CBD, and arrive home to resort-calibre amenities, all without the harbour price tag."

Hamblett says owner-occupiers are also attracted by the convenience of having Westfield Parramatta, Church Street's dining precinct, Parramatta Park, Riverside Theatres, Western Sydney University and major transport connections all within walking distance.

"At The Lennox, lifestyle is not an afterthought, it is the foundation."

[smartcode_project:default project_id=5743 project_image_fid=5374]

The Lennox places residents within walking distance of Parramatta Square, Westfield Parramatta, Church Street Eat Street, Parramatta Station, the ferry wharf, Light Rail, the future Sydney Metro West, Parramatta Park and CommBank Stadium, reinforcing Parramatta's position as one of Australia's most connected metropolitan centres outside Sydney's CBD.

Equitifund says buyers visiting the display suite consistently comment on the quality of the finishes, generous floorplans, river and skyline views, and the walkability of the location. The project has attracted a broad mix of local professionals, upsizers, downsizers, buyers relocating from Sydney's inner suburbs and interstate investors seeking long-term growth opportunities.

That demand aligns with Parramatta's continued evolution as an economic powerhouse. Equitifund Research and Market Insights specialist John Bekiaris says sustained population growth, infrastructure investment and expanding employment opportunities continue to support long-term housing demand across the city.

"Parramatta has evolved from a satellite city into one of Australia's most important economic centres. Population growth, infrastructure investment and employment are all supporting sustained long-term housing demand."

[smartcode_project_cta:default project_id=5743]

The apartment price gap drawing Sydney buyers west

A luxury beachfront apartment at Rainbow Bay has more than doubled in value since it sold off the plan six years ago, setting a new local apartment record in the process.

The three-bedroom apartment in the Flow development on Petrie Street, the first of four new projects locally by Paul Gedoun's S&amp;S Projects, has sold for $7.4 million, after originally selling for $3.27 million when the project launched in 2020.

The seventh-floor apartment, comprising 187 sqm of internal living space and a 54 sqm balcony overlooking Froggies Beach and Snapper Rocks, was purchased by a local family.

The transaction was negotiated by Pezet Matheson director Kerry Pezet and equates to more than $30,000 per sqm.

Pezet said the sale reflected the limited opportunities to buy into the boutique beachfront development.

"The sale highlights the rarity of opportunities within the boutique beachfront development, where residences seldom become available," Pezet said.

"Flow is one of the Gold Coast's most tightly held buildings. Buyers from our database move quickly when residences become available, and achieving an off-market sale at $7.4 million demonstrates the depth of demand for property of this calibre."

<img alt="Flow" data-entity-type="file" data-entity-uuid="c585b206-2130-4eee-a50c-3f27c51a7c70" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-07-06%20at%208.33.25%E2%80%AFPM.png?VersionId=m3pHRDV62Y3fvN.XQuQHq.52ilTWpRLf" />

Flow was the first of four luxury apartment developments delivered by Paul Gedoun's S&amp;S Projects at Rainbow Bay and was completed in 2023.

Positioned on the beachfront overlooking Snapper Rocks, the residence includes three bedrooms, three bathrooms, a powder room and views stretching north along the coastline towards Surfers Paradise.

Pezet Matheson Residential principal Mitchell Lambert said buyers continued to prioritise quality beachfront apartments in tightly held locations.

"Flow Residences offers a rare combination of elevated beachfront positioning, architectural excellence, comprehensive resident amenity and premium finishes, which is exactly what discerning purchasers are seeking," Lambert said.

"The transaction further reinforces Rainbow Bay's reputation as one of Australia's premier coastal lifestyle destinations, where limited supply and growing demand continue to support strong market performance."

Pezet Matheson originally marketed and sold out Flow off the plan, making the latest transaction a return to one of the project's original buyers.

Paul Gedoun is selling his third project, <a href="https://www.apartments.com.au/new-apartments/radia-rainbow-bay-271-boundary-street-coolangatta-qld-4225">Radia Rainbow Bay</a>, after recently completing, and selling out, <a href="https://www.apartments.com.au/buildings/esprit-217-227-boundary-street-coolangatta-qld-4225">Esprit</a>. He has plans for a <a href="https://www.apartments.com.au/news/qld/first-look-s-s-projects-proposes-88-apartment-wellness-tower-at-coolangattas-boundary-street">fourth building</a>, 88 apartments on <a href="https://www.apartments.com.au/new-apartments/209-213-boundary-street-coolangatta-qld-4225">Boundary Street</a>.

Rainbow Bay apartment doubles in price since off the plan sale during pandemic

Monetary Policy

Last week we received further confirmation that the Australian economy is recovering well, and better than expected

The recovery, investment and monetary policy of Australia: RBA's Philip Lowe

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<div>Australia's banks are mostly funded by domestic deposit these days, at nearly 60 percent of their funding composition.</div>
<div> </div>
<div>Equity accounts for a fair share of the remainder too. </div>
<div> </div>
<div>But what about their debt funding costs?</div>
<div> </div>
<div>Last week's Statement on Monetary Policy took a short look at this. </div>
<div> </div>
<div>And the answer is that debt funding costs have kept on falling in 2016.</div>
<div> </div>
<div>And what's more they will continue to do so in the near future. </div>
<div> </div>
<div><a href="/images/2016/11/07/RBA1.jpg" target="_blank">Click to enlarge</a></div>
<div> </div>
<div class="separator"><img src="/images/2016/11/07/RBA1.jpg" alt=""></div>
<div class="separator"> </div>
<div>After cuts to the cash rate May and August, the major banks’ debt funding costs also declined. </div>
<div> </div>
<div>The cost of short-term debt is now under 2 per cent (down from well above 6 per cent in 2007).</div>
<div> </div>
<div>Meanwhile, the marginal cost of long-term debt is a bit above 3 per cent.</div>
<div> </div>
<div>It is true that since the beginning of the year, these costs have declined by a little less than the cash rate.</div>
<div> </div>
<div>This was mainly because of changes to term deposit rates. </div>
<div> </div>
<div>But overall the difference was not material.</div>
<div> </div>
<div>And now funding costs are expected to fall further, since the cost of new wholesale debt remains below the cost of outstanding debt. </div>
<div> </div>
<div>
<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

Funding costs keep falling: Pete Wargent

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EXPERT OBSERVATION
In its quarterly statement on monetary policy, released today, the Reserve Bank of Australia declared its preparedness to “ease monetary policy further if needed”.
This suggests the bank still thinks monetary policy – in this case lowering interest rates to stimulate the economy – could help “support sustainable growth in the economy, full employment and the achievement of the medium-term inflation target”.
But in the wake of the bank last month lowering the official interest rate to a record low and the current somewhat sad state of the Australian economy, <a href="https://www.afr.com/policy/economy/monetary-policy-has-run-its-race-costello-20191015-p530ys" target="_blank">many commentators</a> have speculated that <a href="https://www.rba.gov.au/monetary-policy/" target="_blank">monetary policy</a> doesn’t work any more.
Is that right?
Reserve Bank cash rate
<a href="https://images.theconversation.com/files/294952/original/file-20191001-173393-1b2cjw9.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/294952/original/file-20191001-173393-1b2cjw9.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
<a href="https://www.rba.gov.au/statistics/cash-rate/" target="_blank">Source: RBA</a>
There are a number of variants of the “monetary policy doesn’t work” argument. The most basic is that the Reserve Bank has this year cut rates from 1.50% to 0.75% without any improvement to the Australian economy.
This is a textbook example of one of the classic logic fallacies known as “<a href="https://www.britannica.com/topic/fallacy#ref1102390" target="_blank">post hoc ergo propter hoc</a>” (from the Latin, meaning “after this, therefore because of this”).
Put simply, it assumes the rate cuts have had no effect and doesn’t account for the possibility things might have been worse had there been no cuts.
Things might have been even worse. We’ll never know.
It also ignores what might have happened if the RBA had cut sooner. Again, we can’t know for sure. It is possible, though, to make an educated guess.
When to cut rates
Had Reserve Bank governor Philip Lowe acted, say, 18 months earlier to cut rates, he would have signalled that Gross Domestic Product growth was indeed lower than desired, that the sustainable rate of unemployment was more like 4.5% than 5%, and, most importantly, that he understood the need to act decisively.
That would have sent a powerful signal.
It would also have ameliorated the huge decline in housing credit that pushed down housing prices in Sydney and Melbourne by double digits.
That, in turn, would have prevented some of the weakening in the balance sheets of the big four banks that has occurred (witness this annual general meeting season).
All of this would have pumped more liquidity into the economy and put households in a much stronger position, likely leading to stronger consumer spending than we have seen.
Bank pass through
One gripe both the Reserve Bank governor Philip Lowe and federal treasurer Josh Frydenberg have had with the banks is their <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2019-10-14/josh-frydenberg-asks-accc-to-investigate-banking-sector/11598614" target="_blank">failure to fully pass through the RBA cuts</a>.
<a href="https://theconversation.com/four-questions-about-mortgages-the-accc-inquiry-should-put-to-the-big-four-banks-125224" target="_blank">It is true there is a problem</a> with banks not being able to cut deposit rates below zero, and as a result having less scope to cut mortgage rates, which are majority funded from deposits.
But there are, of course, other ways monetary policy can work. The leading example is quantitative easing (QE).
This is where the central bank pushes down long-term interest rates by buying government and corporate bonds. At the same time this expands the money supply, thereby adding some upward inflationary pressure.
There is <a href="https://theconversation.com/below-zero-is-reverse-how-the-reserve-bank-would-make-quantitative-easing-work-118843" target="_blank">little reason</a> to think such measures wouldn’t work.
The power of free money
Perhaps paradoxically, the closer interest rates get to zero the more powerful those rates may end up being.
To put it bluntly, if someone shoves a pile of money into your hand and asks almost nothing in return, you’re likely to use it. In fact, you would be pretty silly not to.
Suppose your mortgage rate really goes to zero – as <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2019-09-13/european-central-bank-ecb-cut-rates-negative-record-low/11508704" target="_blank">has happened in Europe</a>.
You might decide to redraw that and spend the money on a home renovation or some other productive purpose. Or you might decide to buy a more expensive house.
Such spending provides an economic boost.
The effect is all the more pronounced if people expect interest rates to be low for a long period of time. Aggressive cutting coupled with quantitative easing – which lowers long-term rates – signal just that.
But not only monetary policy
Just because monetary policy still has some effect at near-zero rates doesn’t mean we should pin all of our economic hopes to it.
A near consensus of economists have argued repeatedly for the use of more aggressive fiscal policy – including more infrastructure spending and more tax cuts.
Indeed, Philip Lowe has raised eyebrows by <a href="https://www.rba.gov.au/speeches/2019/sp-gov-2019-08-09" target="_blank">speaking so forthrightly</a> on this issue. That doesn’t make him wrong, though.
There is little doubt the Reserve Bank should have acted much earlier to cut official interest rates. There is also a very good chance it will need to begin to use other measures such as quantitative easing in the relatively near future.
All of that says the Australian economy, like most advanced economies around the world, is in bad shape.
But it doesn’t mean monetary policy has completely run out of puff.<img src="https://counter.theconversation.com/content/126579/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a>, Professor of Economics, <a href="http://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a>
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/vital-signs-does-monetary-policy-work-any-more-126579" target="_blank">original article</a>.
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Does monetary policy work any more?

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EXPERT OBSERVER
The Reserve Bank has released its quarterly Statement on Monetary Policy (SMP). The two key areas of most interest in the Statement are around further policy insights and the RBA’s growth, unemployment and inflation outlook.
The discussion on policy was particularly interesting. The Overview for the Statement, which we expect largely reflects the Governor’s own views, provides the most open analysis of policy options that we have seen. In outlining the policy decision in October, the Overview noted “the Board was mindful that rates were already very low and that each further cut brings closer the point at which other policy options come into play”. This represents a more open approach to the discussion around unconventional policies. To date, that discussion has been characterised by comments such as “unlikely”, whereas this wording indicates almost an automatic move from cash rate policy to other policy options. To be sure, there is no firm commitment to move in that direction but the wording indicates that such a transition to other options may be considered to be a normal approach to policy.
Other issues around a very low cash rate, including that it may “unintentionally convey an overly negative view of the economic outlook” and “the usual channels of policy transmission might be less effective”, also signal that the cash rate cut cycle is nearing an end. That said, lower rates are seen as having some impact. Indeed, the usual channels of lower exchange rate and boosting household disposable income are pointed out. However, a new channel, “higher asset prices”, has been added to the list. Arguably, given that Sydney and Melbourne house prices bottomed out in May, the June and July rate cuts played a significant role in turning those markets. It is of some interest that the SMP highlights this channel as a constructive aspect of interest rate policy.
Commentary on the current policy position signals that rates are almost certain to remain on hold at the December Board meeting. Since the decision in November was part of a plan to allow time to assess the effects of the recent easing of monetary policy as well as global developments, no doubt the RBA’s observation that the low point in global pessimism may have passed is an important aspect of the current policy standing.
On balance, Westpac believes that its assessment that with the unemployment rate still well above the RBA’s target (4.5%) and the RBA seeing that there is a balance between the benefits and costs of lower rates, our view that 0.5% is the effective lower bound and that some transition to unconventional policies is likely is supported by this SMP.
The second point of interest in the SMP is around the RBA’s forecasts. As we anticipated in our preview to this SMP, the key growth forecasts for 2020 of 2.8% which was adopted in August, has been retained in this SMP. That is much higher than Westpac’s forecast of 2.4%. Surprisingly, the forecast in November includes a more optimistic outlook for dwelling construction for 2020 (-2.6%, upgraded from -3.3%) and business investment (+6.2% upgraded from +5.8%). Partially offsetting that more optimistic view is the lowering in growth of public demand from +3.2% to +2.9%. These forecasts for 2020 contrasts with Westpac’s forecast of 2.4% for GDP growth, -6% for dwelling investment, and +2.8% for business investment. Overall, Westpac’s forecast for growth in GNE of 2.3% in 2020 compares to 2.8% from the RBA. Looking further out, the RBA has retained its optimistic growth forecast for 2021 of 3.1% compared to our forecast of 2.7% with a substantial part of the difference being explained by the RBA seeing a much more rapid recovery in the dwelling investment cycle.
This substantial difference between Westpac and the RBA on the construction cycle partly hinges around the link between established house prices and construction activity. Furthermore, even the RBA points out that the current expected pipeline of construction may be overstating actual activity.
There have been some modest downward revisions to the inflation and wages outlook. Even though the unemployment rate profile of 5.2% in December 2020 and 4.9% by December 2021 is unchanged from August, wages growth for December 2021 has been cut from 2.4% to 2.3% (“wages growth is no longer expected to pick up”) and growth in the trimmed mean inflation measure has been cut from 2.1% to 1.9%. It must be particularly uncomfortable for the RBA to be forecasting that underlying and headline inflation will remain below the bottom of the 2-3% target band right out into 2021.
Readers will be aware that on November 6, Westpac advocated the bringing forward of the legislated personal income tax cuts, which had been timed for June 2022, to June 2020 and June 2021 (evenly distributed). If the Federal Government were to take up that policy option, then Westpac’s forecasts for consumer spending, housing activity and business investment will be lifted.
Conclusion
The November SMP provides the clearest insight yet into the RBA’s thinking about policy in 2020. The acceptance that, after rates reach a certain threshold, other policy options “might come into play” is quite significant. The recognition that asset prices are an additional channel of monetary policy and are assessed to be a positive channel is also important.
The overview of the RBA’s growth outlook, while largely unchanged from August, still appears to be overly optimistic, particularly around the residential construction cycle and business investment. On the other hand, the downbeat view on wages, inflation and the unemployment rate make it clear that the RBA does not believe that its job is done and so we can expect further policy action from the RBA in 2020. Westpac continues to expect the RBA to cut to 0.50% in February 2020 and to move to unconventional policies at an appropriate time.
BILL EVANS is the Chief Economist at Westpac
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RBA openly discusses the risks from very low rates: Bill Evans

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How the global picture affects the economic outlook and monetary policy: RBA Governor Philip Lowe

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The Minutes from the RBA’s July board meeting contained little new indication on the evolution of monetary policy, although they suggest that the Bank continues to holds a mild easing bias.
The points of interest in the Minutes were around Q2 growth and the labour market:
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<li>On the labour market, the Board noted the recent improvement in the data. They did, however, note that softer population growth had helped to keep a lid on the unemployment rate despite below-average growth in GDP, with workers leaving the mining states of Queensland and Western Australia where growth is weakest. They also noted the mixed outlook for labour demand indicated by the various forward indicators. These comments suggest to us that while the Bank would clearly be pleased if the peak in the unemployment rate does not prove to be as high as previously thought, it seems unlikely to change its view that the unemployment rate is likely to stay elevated for some time.</li>
<li>On growth, the Minutes noted that the strength in Q1 (when GDP rose a solid 0.9% q/q) had not carried through to Q2. The monthly trade data suggest resources exports declined in the quarter (our preliminary calculations point to a small net exports subtraction) while non-mining business investment remains subdued. They did, however, point out the improvement in recent months in business conditions (note that conditions have improved further since this meeting).</li>
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The comments on the currency were broadly unchanged with members noting that “further depreciation seemed both likely and necessary”.
Of more interest will be Governor Glenn Stevens’ speech tomorrow which is on the topic of ‘Issues in economic policy’. Given his recent rhetoric, we think he is likely to reiterate or expand on issues on monetary policy transmission and the government’s role in infrastructure spending.
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The full text of the Minutes can be found <a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2015/2015-07-07">here</a>. 
Felicity Emmett is co-head of Australian economics, ANZ Research and can be contacted <a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/felicity-emmett/5a/3ba/256">here</a>.
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