<p><a href="https://www.apartments.com.au/developers/draycon">Draycon Building</a> is nearing completion of Boutique Chevron Island, a 42-apartment development on the northern end of Chevron Island at 17–19 Parneno Street, with a limited-time offer of fully furnished apartments available.</p>

<p>Now more than 90 per cent complete, <a href="https://www.apartments.com.au/buildings/boutique-chevron-island-17-19-parneno-chevron-island-qld-4217">Boutique</a> has been shaped by one of the Gold Coast’s most tightly held island addresses, where riverfront outlooks and walkable access to Surfers Paradise converge.</p>

<p>For Draycon Building Managing Director Howard Dabit, the appeal of the site was immediate.</p>

<p>“I knew it was a good site as soon as I saw it,” Dabit said.</p>

<p>“The position and location on the north end of <a href="https://www.apartments.com.au/developments/chevron-island-qld-4217">Chevron Island</a>, the way the river swirls around the site basically from the north to the east, it feels like the site is surrounded by the water. The height that we’ve got and the aspect looking north is beautiful. Eighty per cent of the apartments are looking north so they get that drenching sunlight coming in.”</p>

<p>[smartcode_project:default project_id=89709 project_image_fid=360922]</p>

<p>That northern orientation places the development within a stretch of Chevron Island defined by open river aspects and skyline views, while remaining embedded in the suburb’s established village setting.</p>

<p>Chevron Island has increasingly drawn owner-occupiers seeking centrality without the intensity of high-rise beachfront living. Positioned at the geographical centre of the Gold Coast, the island offers direct access to both the beach and key cultural infrastructure while retaining a neighbourhood-scale character.</p>

<p>Connected by bridge to Surfers Paradise, Chevron Island offers walkable access to beaches, riverfront parklands and a revitalised foreshore boulevard animated by walkers and cyclists throughout the day. The Pacific Ocean is only minutes away, reinforcing the suburb’s dual river-and-surf identity.</p>

<p>At the same time, Thomas Drive forms the spine of the island’s village life, delivering cafés, wine bars, casual dining and everyday services within easy reach. Independent grocers, wellness operators and neighbourhood retailers contribute to a community atmosphere that remains distinct from the vertical scale of the beachfront.</p>

<p>[smartcode_project:default project_id=89709 project_image_fid=360915]</p>

<p>In the opposite direction, the Green Bridge links directly to HOTA – Home of the Arts – placing galleries, performance venues and parklands within walking distance. Weekly markets and major exhibitions draw visitors from across the region, while residents return to a quieter residential pocket at day’s end.</p>

<p>Public transport, including nearby bus routes and the G:link light rail corridor along the coastal spine, strengthens connectivity north and south. Griffith University, the Gold Coast University Hospital precinct and established private schools such as The Southport School are all within a short drive.</p>

<p>Ongoing investment across Surfers Paradise, HOTA and the broader Southport corridor has elevated amenity while preserving Chevron Island’s comparatively low-rise residential character. It is this balance, walkable village atmosphere paired with metropolitan-scale infrastructure, that continues to differentiate the suburb from higher-density beachfront precincts.</p>

<p>Boutique comprises just 42 residences, designed to maximise river and skyline outlooks within this tightly held island setting.</p>

<p>Boutique Chevron Island is slated for completion in April 2026, with prices starting from $1,220,000.</p>

<p>[smartcode_project_cta:default project_id=89709]</p>


Joel Robinson

Draycon Building’s Boutique Chevron Island places 42 residences at the heart of the Gold Coast

<p>Sydney developer <a href="https://www.apartments.com.au/developers/deicorp">Deicorp</a> has secured planning approval for a $300 million residential development in Lindfield, marking the company’s second project on Sydney’s North Shore and its first on the Upper North Shore.</p>

<p>Located on Beaconsfield Parade and designed by DKO Architecture, the state significant development comprises three buildings of up to 10 storeys and will include 399 residences, including 59 affordable homes and 40 adaptable homes.</p>

<p>Residences will range in size from one, two and three bedrooms, with two-bedroom apartments accounting for over 60 per cent of the product make-up. Residents will have access to a broad suite of amenities, including a wellness area, indoor and outdoor recreational spaces, a pool, a gym, a community room and a golf simulator.</p>

<p>In line with Deicorp’s long-standing focus on creating transit-oriented communities, the project is located just 260 metres from the Lindfield Train Station, reinforcing its role in delivering well-connected housing close to established infrastructure, retail and local services.</p>

<p>The inclusion of affordable and adaptable housing supports greater diversity within the local market, while the mix of apartment types responds to demand from downsizers, young professionals and families seeking access to the Upper North Shore.</p>

<p>Deicorp Founder Fouad Deiri OAM said the approval represents an important milestone for both the company and the suburb</p>

<p>“This approval allows us to deliver well-designed homes in a location that is already supported by strong transport and community infrastructure," Deiri said.</p>

<p>"Our focus is on creating places that integrate into their surroundings and provide long-term value for residents, and the broader Lindfield community. Being within walking distance of the station ensures this project supports sustainable growth in the right locations."</p>

<p>Across its portfolio, Deicorp currently has 4,703 apartments under construction, playing a leading role in shaping connected, liveable communities across Sydney.</p>

<p>Its expanding portfolio of Metro-linked developments includes Tallawong Village, <a href="https://www.apartments.com.au/new-apartments/kings-bay-village-five-dock-53-75-queens-road-five-dock-nsw-2046">Kings Bay Village</a> in Five Dock, <a href="https://www.apartments.com.au/new-apartments/hyde-metropolitan-sydney-133-141-liverpool-street-sydney-nsw-2000">Hyde Metropolitan</a> in Sydney CBD, <a href="https://www.apartments.com.au/new-apartments/falcon-alexander-crows-nest-8-alexander-street-crows-nest-nsw-2065">Falcon &amp; Alexander</a> in Crows Nest and Showground Village, Castle Hill.</p>

<p>Deicorp purchased the Beaconsfield Paradise site last year. Construction is scheduled to commence in Q2 of 2026 and will be completed in 2029.</p>


Deicorp expands portfolio to nearly 5,000 apartments with Lindfield project

<p>In a joint venture with The Trump Organization, Australia developer Altus Property Group has announced plans to bring a Trump International Hotel &amp; Tower to the Gold Coast, marking the first Trump-branded project in Australia.</p>

<p>"Trump International Hotel &amp; Tower, Gold Coast is our first official project in Australia and reflects our unwavering commitment to delivering world-class luxury experiences in iconic locations around the world," Eric Trump, Executive Vice President of The Trump Organization, said.</p>

<p>"This development exemplifies the Trump brand’s dedication to quality, sophistication, and unmatched service, and we are thrilled to bring this vision to the vibrant Gold Coast community."</p>

<p>The 91-storey building, which will become the tallest in Australia at 335 metres, will feature a&nbsp;285-room luxury hotel bearing the trademark Trump logo. It will also include 272 luxury residential apartments, a three-level podium with an exclusive Beach Club, and over 3,400 sqm of premium commercial, retail, and dining space, revitalizing the central Surfers Paradise precinct.</p>

<p>“Trump International Hotel &amp; Tower, Gold Coast will be a truly unique offering in the Australian market, bringing the prestige and allure of a world-class luxury brand,"&nbsp;Altus founder and chief executive David Young said.</p>

<p>"Altus Property Group is proud of its track record in delivering landmark developments across Australia, and our expertise ensures this project will be an outstanding success."</p>


Trump Hotel heads for the Gold Coast to become Australia's tallest building

<p>More than a century after the Corrimal Coke Works first opened in 1912, the industrial landmark that helped shape the suburb is being reinterpreted as a walkable residential neighbourhood, with Stage One of <a href="https://www.apartments.com.au/new-apartments/the-works-stage-one-27-railway-street-corrimal-nsw-2518">The Works</a> now underway at 27 Railway Street.</p>

<p>For 102 years, the site was central to <a href="https://www.apartments.com.au/developments/corrimal-nsw-2518">Corrimal</a>’s economic and social identity before operations ceased in 2014. Rather than erasing that legacy, developer Legacy Property has embedded it into the masterplan, retaining and reinterpreting elements such as the iconic 1912 brick chimney and sections of the original C1 Coke Oven Battery, alongside the adaptive reuse of the former powerhouse building.</p>

<p>Stage One will introduce 181 apartments across low-rise buildings, offering predominantly two and three-bedroom residences with completion targeted for mid-2027. The scale and configuration reflect a deliberate focus on owner-occupiers, targeting those seeking a lower-maintenance home in a prime location within the northern suburbs of Wollongong.</p>

<p>[smartcode_project:default project_id=143415 project_image_fid=359833]</p>

<p>Apartments have been designed to maximise natural light and cross-ventilation, with floor-to-ceiling glazing extending living areas onto generous balconies. Engineered timber flooring, induction cooktops and 900mm ovens in larger residences support everyday functionality, while two interior palettes allow buyers to tailor finishes to their preferences. The material selection draws on a restrained coastal language, intended to connect homes to their surroundings rather than compete with them.</p>

<p>The Works forms part of a broader 18-hectare masterplan that will ultimately deliver around 550 dwellings, new parks, and a heritage precinct celebrating the site’s past. More than seven hectares are dedicated to open space, including Southern Park and a Village Green with community gardens and recreation areas. The creek corridor is being rehabilitated with 150,000 native plantings, restoring biodiversity to the site and softening landscape.</p>

<p>[smartcode_project:default project_id=143415 project_image_fid=359841]</p>

<p>Positioned adjacent to Corrimal Station and within walking distance of Corrimal Town Centre, the precinct places daily essentials, rail connections and local retail within easy reach. Wollongong CBD, including the hospital, university and entertainment venues, sits approximately 6.5 kilometres to the south.</p>

<p>For buyers more familiar with North Wollongong, Corrimal offers a different proposition: a well-established coastal suburb framed by beaches to the east and the escarpment to the west, with a strong sense of local identity shaped in part by the former Coke Works. The Works seeks to reinforce that identity by creating a connected, walkable neighbourhood between coast and escarpment, rather than a standalone apartment complex.</p>

<p>Sustainability underpins the development approach. The Works is targeting Wollongong’s first 5-Star Green Star-rated community, with water-sensitive urban design, recycled materials and energy-efficient buildings integrated across the masterplan. For residents, these measures provide not only environmental benefits but also reduced operational costs and future resilience.</p>

<p>[smartcode_project:default project_id=143415 project_image_fid=359842]</p>

<p>With construction commenced and display materials available to view, prospective buyers can now engage more directly with the project’s vision, reviewing floorplans, material selections and the broader masterplan in detail. For many local homeowners weighing a move, the opportunity to experience how heritage, landscape and contemporary design intersect may help bridge the gap between familiarity and the next chapter.</p>

<p>As Stage One progresses toward its mid-2027 completion, The Works represents a significant chapter in Corrimal’s evolution, transforming a site that once powered local industry into a walkable residential precinct designed for its next generation of residents.</p>

<p>[smartcode_project_cta:default project_id=143415]</p>


Legacy Property’s The Works reimagines Corrimal’s century-old Coke Works

<p data-end="174" data-start="72">When it comes to developing in Melb​ourne's Bayside region, <a href="https://www.apartments.com.au/developers/lowe-living">Lowe Living</a> knows exactly what buyers want.</p>

<p data-end="346" data-start="176">With a longstanding presence in the area and a string of sell-out projects, Lowe Living consistently delivers developments that are as sought-after as their predecessors.</p>

<p data-end="585" data-start="348">Their latest instalment is in <a href="https://www.apartments.com.au/developments/hampton-vic-3188">Hampton</a><a href="https://www.apartments.com.au/developments/hampton-east-vic-3188">&nbsp;East,</a> the same postcode where they have previously delivered Hampton Hill and Oceano. The developer-builder recently commenced construction on its newest project,&nbsp;<a href="https://www.apartments.com.au/new-apartments/marella-hampton-31-35-alicia-street-hampton-east-vic-3188">Marella</a>, a collection of 32 apartments just five minutes from the beach.</p>

<p data-end="945" data-start="587">Site acquisition is paramount to success. Lowe Living rarely brings a building to market that isn’t within walking distance of essential amenities, whether it be the beach, a prominent retail strip, or a train station. Marella is no exception, located at its Alicia Street address, less than a kilometre from the retail heart of Hampton Street and Hampton Station.</p>

<p data-end="945" data-start="587">[smartcode_project:default project_id=146197 project_image_fid=358495]</p>

<p data-end="993" data-start="947">Equally important to Lowe Living is the architecture.</p>

<p>For Marella, they appointed <a href="https://www.apartments.com.au/architects/cera-stribley-architects">Cera Stribley</a>, who explains that the architectural vision was to create a contemporary reinterpretation of the Californian bungalow, a style that’s iconic to Hampton’s heritage.</p>

<p>"By borrowing, abstracting, and reinterpreting elements of this quintessential style, such as strong datum lines, articulated columns, exposed structures, and roof tiles, our design strikes a balance between modernity and familiarity," says Cera Stribley.</p>

<p>"This approach ensures that the development is not only visually appealing but also contextually sensitive, resonating with Hampton's existing architectural landscape."</p>

<p data-end="1628" data-start="1460">[smartcode_project:default project_id=146197 project_image_fid=358499]</p>

<p>The building features terracotta brick, soft cream masonry, and exposed metal detailing, giving it a tactile presence that is intended to weather gently over time.</p>

<p>Internally, the focus on lasting quality continues, with two and three-bedroom residences anchored by sculptural stone kitchen islands, natural light, and clearly defined transitions between living, dining, and outdoor spaces.</p>

<p>The layouts have been carefully designed. Open-plan zones extend to private balconies, with light-filled interiors and generous kitchen proportions, supported by Miele wall ovens, induction cooktops, and integrated fridge-freezers. These are not small apartments rebranded as luxury; they have been designed at scale, with ample storage, hotel-style entry access, and secure basement parking provided as standard.</p>

<p data-end="2437" data-start="2024">[smartcode_project:default project_id=146197 project_image_fid=358492]</p>

<p>At the uppermost level, Marella’s Signature Collection penthouses offer city or bay views, large entertaining terraces (some with outdoor spas), and elevated finishes, including fully wrapped stone kitchen benches and a Liebherr wine fridge.</p>

<p>Flexible room arrangements allow for a fourth bedroom or secondary living space, sought-after by both empty nesters who want the space when family visits and families with older children.</p>

<p data-end="2870" data-start="2684">[smartcode_project:default project_id=146197 project_image_fid=358498]</p>

<p>A residents’ lounge on the ground floor reinforces the project’s small-community feel. With a fireplace, private dining area, and adjoining terrace, it’s one of several shared spaces that balance amenity with privacy and scale.</p>

<p>Construction has commenced, with completion expected in early 2027.</p>

<p>[smartcode_project_cta:default project_id=146197]</p>


Lowe Living continues Bayside legacy as Marella rises in Hampton

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><span>After cuts to the cash rate May and August, the major banks’ debt funding costs also declined. </span></div>
<div><span> </span></div>
<div><span>The cost of short-term debt is now under 2 per cent (down from well above 6 per cent in 2007).</span></div>
<div><span> </span></div>
<div><span>Meanwhile, the marginal cost of long-term debt is a bit above 3 per cent.</span></div>
<div><span> </span></div>
<div><span>It is true that since the beginning of the year, these costs have declined by a little less than the cash rate.</span></div>
<div><span> </span></div>
<div><span>This was mainly because of changes to term deposit rates. </span></div>
<div><span> </span></div>
<div><span>But overall the difference was not material.</span></div>
<div><span> </span></div>
<div><span>And now funding costs are expected to fall further, since the cost of new wholesale debt remains below the cost of outstanding debt. </span></div>
<div><span> </span></div>
<div>
<div>
<p><span><em>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>.</em><br></span></p>
<p><em>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>.</em></p>
<p><em> </em></p>
</div>
</div>
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pwargent-M4siyDbqQY

Funding costs keep falling: Pete Wargent

<html><body>
<p>EXPERT OBSERVATION</p>
<p>In its quarterly statement on monetary policy, released today, the Reserve Bank of Australia declared its preparedness to “ease monetary policy further if needed”.</p>
<p>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”.</p>
<p>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.</p>
<p><strong>Is that right?</strong></p>
<p>Reserve Bank cash rate</p>
<p><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></p>
<p><a href="https://www.rba.gov.au/statistics/cash-rate/" target="_blank">Source: RBA</a></p>
<p>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.</p>
<p>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”).</p>
<p>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.</p>
<p>Things might have been even worse. We’ll never know.</p>
<p>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.</p>
<p><strong>When to cut rates</strong></p>
<p>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.</p>
<p>That would have sent a powerful signal.</p>
<p>It would also have ameliorated the huge decline in housing credit that pushed down housing prices in Sydney and Melbourne by double digits.</p>
<p>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).</p>
<p>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.</p>
<p><strong>Bank pass through</strong></p>
<p>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>.</p>
<p><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.</p>
<p>But there are, of course, other ways monetary policy can work. The leading example is quantitative easing (QE).</p>
<p>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.</p>
<p>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.</p>
<p><strong>The power of free money</strong></p>
<p>Perhaps paradoxically, the closer interest rates get to zero the more powerful those rates may end up being.</p>
<p>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.</p>
<p>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>.</p>
<p>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.</p>
<p>Such spending provides an economic boost.</p>
<p>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.</p>
<p><strong>But not only monetary policy</strong></p>
<p>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.</p>
<p>A near consensus of economists have argued repeatedly for the use of more aggressive fiscal policy – including more infrastructure spending and more tax cuts.</p>
<p>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.</p>
<p>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.</p>
<p>All of that says the Australian economy, like most advanced economies around the world, is in bad shape.</p>
<p>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"></p>
<p><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></p>
<p>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>.</p>
</body></html>

rh-YsoTT2xMuQ

Does monetary policy work any more?

<html><body>
<p>EXPERT OBSERVER</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p><strong>Conclusion</strong></p>
<p>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.</p>
<p>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.</p>
<p><em><strong>BILL EVANS</strong> is the Chief Economist at Westpac</em></p>
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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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<div class="column"><span style="line-height: 1.3em;">GUEST OBSERVATION</span></div>
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<p><span>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.</span></p>
<span style="line-height: 1.3em;">The points of interest in the Minutes were around Q2 growth and the labour market:</span>
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<li><span style="line-height: 1.3em;">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.</span></li>
<li><span style="line-height: 1.3em;">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).</span></li>
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<p><span>The comments on the currency were broadly unchanged with members noting that “further depreciation seemed both likely and necessary”.</span></p>
<p><span>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.</span></p>
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<p><span>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"><span>here</span></a>. </span></p>
<p><span>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"><span>here</span></a>.</span></p>
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