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.

Joel Robinson

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

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

A collection of just 25 large-format apartments and penthouses overlooking Goodwin Park is entering the Coolangatta market, with <a href="https://www.apartments.com.au/new-apartments/marea-residences-coolangatta-27-27a-dixon-street-coolangatta-qld-4225">Maréa Residences</a> combining a low-density, residential-only approach with uninterrupted park and Pacific Ocean outlooks.

Located at 27 Dixon Street, Maréa comprises three and four-bedroom residences alongside a limited number of dual-level penthouses, with the project positioned between Goodwin Park and <a href="https://www.apartments.com.au/developments/coolangatta-qld-4225">Coolangatta</a>’s coastal precinct.

Construction has commenced, with completion currently estimated for late 2027. Three-bedroom residences are priced from $1.8 million.

[smartcode_project:default project_id=150999 project_image_fid=374005]

The project has been designed around its northern outlook across the park, with the building’s architecture, landscaping and material palette intended to establish a connection with the neighbouring green space. The residences have been configured to maximise natural light and views across Goodwin Park towards the ocean.

Inside, the material palette incorporates timber, stone and brushed brass, complemented by curved detailing and ambient lighting. Kitchens and bathrooms carry the same natural material approach, while residences also include basement parking, storage and lift access.

Maréa’s penthouses are arranged over two levels and include private pools, adding another layer to the project’s focus on larger-format apartment living. Across the development, residences are configured with three or four bedrooms rather than the broader mix of smaller apartment types commonly found in larger projects.

[smartcode_project:default project_id=150999 project_image_fid=374010]

Resident amenity is concentrated at rooftop level, where landscaped entertaining terraces and pools take advantage of elevated views across Coolangatta and the Pacific Ocean.

The project has so far been particularly well received by local owner-occupiers and downsizers, according to Urban Activation Property Sales and Marketing Director Matt George, with the residential-only format, construction quality and northern park outlook among the features resonating with purchasers.

“The uninterrupted northern aspect overlooking Goodwin Park has been a key point of difference, with buyers attracted to the sense of serenity and open space the park provides, while still enjoying easy access to the ocean and being within walking distance of the lifestyle and amenities Coolangatta has to offer,” George said.

[smartcode_project:default project_id=150999 project_image_fid=374002]

“The combination of high-quality construction, a residential-only building, park outlook and proximity to the beach has resonated strongly with the local downsizer market.”

The Dixon Street address is within walking distance of Coolangatta Beach and the broader southern Gold Coast coastline, including the surf breaks at Snapper Rocks and Kirra. Coolangatta’s cafés, restaurants and retail are nearby, while Gold Coast Airport is also within close proximity.

[smartcode_project_cta:default project_id=150999]

Maréa Residences brings parkside apartments to Coolangatta

Melbourne developer PDG has secured Victorian Government approval for its $1.5 billion Southbank development <a href="https://www.apartments.com.au/new-apartments/the-one-1-queens-bridge-street-southbank-vic-3006">The One</a>, clearing the way for the long-dormant riverfront site opposite Crown to finally be developed.

The Minister for Planning has approved the project at 1-29 Queens Bridge Street, with the Department of Transport and Planning issuing the planning permit following its assessment.

The approval will allow PDG to develop the prominent 5,059 sqm site with a major mixed-use tower comprising premium apartments, including branded residences, a luxury hotel and boutique office space.

PDG acquired the site in late 2024, with its position directly opposite Crown's main entrance and near Melbourne's Arts Precinct making it one of Southbank's most significant remaining development opportunities.

<img alt="PDG" data-entity-type="file" data-entity-uuid="3933013e-6332-4386-b9be-089df05caf17" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%209.29.22%E2%80%AFAM.png?VersionId=sITIgBqDL0N3VNSMwWEmF5UA.uvcsRyu" />

Designed by COX in collaboration with ODO and PDG, the tower's architecture draws on the movement of the Yarra River, with six vertical pleats running the height of the sculpted facade.

The project will also see the heritage-listed Queens Bridge Hotel restored and incorporated into the development&nbsp;with new hospitality and public uses, including a rooftop venue.

A significant component of The One will be its residential amenity.

More than 5,000 sqm of resident facilities will be delivered across a single level, making it one of the largest consolidated residential amenity offerings proposed in an Australian apartment development.

The planning approval also incorporates a major upgrade of Queensbridge Square, which PDG will deliver in partnership with the City of Melbourne.

<img alt="PDG" data-entity-type="file" data-entity-uuid="73167fcd-1031-4b6f-a408-a064cfe45ed1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-27%20at%209.29.17%E2%80%AFAM.png?VersionId=Pf1AEWxw6SNmBqR0zQW5lyEze.MtxgFp" />

The existing square will be revitalised as a new civic and pedestrian space along the Yarra River, strengthening the connection between the project, Southbank and the riverfront.

PDG Founder and Managing Director Vince Giuliano said the approval represented a major milestone for a site which has remained largely underutilised for more than 15 years.

“This is the most significant Planning Permit approval Melbourne has seen in recent years,” Giuliano said.

“For more than 15 years, this site has remained underutilised. This approval enables us to deliver a project that will contribute meaningfully to the revitalisation of Southbank, restore and reactivate an important heritage building, and create a new civic and hospitality destination for Melbourne.”

The latest approval follows an earlier planning permit issued by the City of Melbourne covering demolition works across part of the site at 9-29 Queens Bridge Street. Those demolition and early works are already underway.

PDG has also started generating early interest in the residential component from owner-occupiers ahead of a planned public launch in early 2027.

PDG secures approval for $1.5bn Southbank apartment development, The One

Local developer Harridan is seeking to turn its Woolloongabba apartment project into the first stage of a broader transformation of Burke Street, using a new 16-storey mixed-use building to establish a greener pedestrian connection toward the rapidly evolving Boggo Road transport and knowledge precinct.

The South East Queensland developer has filed plans for 154 apartments on the <a href="https://www.apartments.com.au/new-apartments/4-burke-street-woolloongabba-qld-4102">southern side of Burke Street</a>, where its proposal has been designed alongside a wider vision by LatStudios for the street.

That vision positions the southern side of Burke Street for buildings of 15 storeys and above, while envisaging lower-rise development of up to five storeys on the northern side to transition into Woolloongabba's existing character housing. It also proposes wider pedestrian verges, deep planting, new street trees and upgrades to the pedestrian approach to Boggo Road Station.

The Harridan development itself has been designed by Brisbane-based Arqus Design and will comprise 154 apartments across 16 storeys. The mix is weighted heavily toward two-bedroom apartments, with 121 proposed alongside 10 one-bedroom and 23 three-bedroom residences. There will typically be around 14 units per floor.

A lower-ground car park and three podium levels will accommodate 156 resident parking spaces, along with visitor and commercial parking. There will also be 154 resident bicycle spaces and 40 visitor bicycle parks.

&nbsp;

Harridan is a family-owned developer and part of the Holmwood Highgate Group, with more than three decades of development activity across South East Queensland. Its portfolio spans residential, commercial and industrial property, with current residential projects including Riverbank on Byron in Bulimba, Esperance Residences in Carina and The Precinct at Kinross Road in Thornlands.

Wooloongabba has been popular for apartment developers, particularly since the announcement of the 2032 Summer Olympics games in Brisbane.

While there have been a lot of development applications, it has failed to materialize into real supply.&nbsp;

Sarazin has been the major player in the area. They are under construction at Murcia Residences, on the fringe of East Brisbane and Woolloongabba. They have just launched <a href="https://www.apartments.com.au/new-apartments/the-stanley-residences-woolloongabba-8-trafalgar-street-woolloongabba-qld-4102">The Stanley Residences</a>, in Woolloongabba on Trafalagar Street. They also have Nuage coming soon on the nearby <a href="https://www.apartments.com.au/new-apartments/nuage-woolloongabba-14-wellington-road-woolloongabba-qld-4102">Wellington Road</a>.

First look: Harridan plans Burke Street transformation beside Boggo Road transport hub

Rba Insights

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 Westpac senior economist Matthew Hassan discusses what is troubling the RBA. 
<iframe src="https://player.vimeo.com/video/264905975" frameborder="0" width="440" height="460"></iframe>
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jrobinson-rf4aSBido9

What troubles the RBA? Westpac's Matthew Hassan

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The third meeting of the Reserve Bank of Australia for 2018 saw no change in the official cash rate.
The central bank's last move saw it go to 1.5 percent at the August 2016 meeting, so rates have been held steady for 18 meetings.
It was 19 meetings ago that they last came down. 
Almost every economist predicted a hold at the first meeting of the year. 
31 of 32 experts in Finder.com.au's RBA survey had predicted a cash rate hold.
Just Mark Crosby from Monash University expected a rise to 1.75 percent. 
Canstar group executive Steve Mickenbecker said they couldn't see the RBA raising rates.
"The Reserve Bank will want to see inflation, in particular wages growth, before it increases rates," Mickenbecker said.
He said so much has been happening that you have to ask if the Reserve Bank's decision matters anyway.
“The big banks have brought out low rate promotional offers on their base products.
"They usually don't deliver rate reductions for existing borrowers and they are often not even available to existing customers.
“Borrowers now have a huge choice of loans that have an interest rate starting with a three. 
"Canstar's website lists 324 loans with an interest rate below 4%."
“Rates are going to go up, and with the deals around now, it is also a good time to consider whether fixing for a few years might be right for you.”
CoreLogic's head of research Tim Lawless says a softening slowdown will likely be welcomed by the RBA.
"Housing market conditions are likely to be moving further down the RBA’s list of priorities, considering the market is showing every sign of moving through a soft landing, with the pace of value decline easing over recent months," he said.
"The controlled slowdown in the housing sector is likely to be a welcome outcome from the RBA, who are more likely to be focussing on labour markets, where the rate of unemployment, although lower than a year ago, crept higher, from 5.4% to 5.5% in February. 
"With some slack in labour markets, wages growth remains close to record lows, which is keeping a lid on inflation and household consumption. 
"National dwelling values were flat last month, however <a href="/expert-insights/buying/six-of-eight-capital-cities-record-falling-values-in-first-quarter-corelogic">six of the eight capital cities saw dwelling values slip lower in March</a>, albeit at a reduced rate of decline relative to other months.
"Despite the hold decision from the RBA, mortgage rates remain close to historic lows, particularly for owner occupiers who are paying down both their interest and principal.
"Investors are facing a mortgage rate premium of around 60 basis points, but relative to long term averages, their mortgage rates are low. 
"While the RBA has flagged the next move in interest rates will be a rise, it remains likely that any hike to the cash rate is well in the future. 
 
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RBA keeps rates on hold for record 18th consecutive meeting

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The Reserve Bank of Australia should follow the example of other central banks and be clearer about when and how rates will change, called “forward guidance”, to make its policy more effective.<a href="https://theconversation.com/profiles/giovanni-pellegrino-452180"></a>
At the moment the RBA follows an approach to implement monetary policy known as <a href="http://www.rba.gov.au/monetary-policy/" target="_blank">inflation targeting</a>. This means it has a numerical target for inflation (an average 2-3% inflation over the medium term) and a framework to achieve that target (how it thinks monetary policy affects the economy, and how it communicates policy decisions).
Australia’s cash rate is at a historical low of 1.5%. So if there’s any adverse shock to our economy (for example, a large correction in house prices), the RBA would have little room to reduce the cash rate before getting to 0% – the zero lower bound on nominal interest rates.
At that point, you can’t cut rates anymore. <a href="https://www.sciencedirect.com/science/article/pii/S0014292117301605" target="_blank">Research shows</a> economic shocks can have a more severe impact on economic activity when the policy rate is at, or near, zero.
Instead the RBA should be more explicit about the conditions that would lead to a rate change. <a href="https://www.chicagofed.org/publications/working-papers/2016/wp2016-07" target="_blank">Research shows</a> this has stimulated economic recovery before.
<h2>How rates work at the moment</h2>
To understand forward guidance it helps to understand conventional thinking about monetary policy. The RBA controls inflation by adjusting the cash rate, which is the interest rate on overnight loans in the interbank market.
Changes in the cash rate change longer-term interest rates in the economy. These then influence households’ and businesses’ spending and investment plans. These decisions also determine demand and inflation.
For example, suppose inflation is below target. A cut in the cash rate reduces longer-term interest rates, which encourages people to buy goods and services (falls in long-term deposit rates and government bonds reduce the incentive to save) and invest (commercial and mortgage loans are cheaper). Rising demand sends prices up, which brings inflation back to target.
As with other central banks around the world, the RBA also explains the rationale for its policy decisions. For example, in the <a href="http://www.rba.gov.au/publications/smp/" target="_blank">Statement of Monetary Policy</a>, released four times a year, the bank sets out its assessment of current domestic and international economic conditions, along with an outlook for Australian inflation and output growth.
The purpose of these announcements is to enhance the credibility of the inflation target. If people trust the RBA will implement policy to achieve the inflation target, they will make plans around what they spend and how they price goods and services based on this. This makes inflation easier to control.
<h2>How being clearer about rates helps</h2>
While the RBA might not be able to influence the current cash rate, it can still influence longer-term rates by making announcements about its future policy decisions. Long-term interest rates usually change depending on what people expect of future cash rate changes.
So if monetary policy can influence these expectations, it can move long-term rates.
Of course, words are cheap. To make these declarations credible the RBA would need to communicate its plans for the future cash-rate, with modelling and forecasts justifying those plans.
Economists could then judge whether the RBA is meeting its objective through good luck or good policy. If it’s through good policy, it enhances the RBA’s credibility and, in a virtuous circle, this gives the bank policy more influence over expectations.
A prominent example of forward guidance comes from the United States’ central bank, the Federal Reserve. In December 2008, when the federal funds rate (the US equivalent of the Australian cash rate) was first at the zero lower bound, the Federal Reserve <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20081216b.htm" target="_blank">announced</a>:
The committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.
Translated, the Fed anticipated keeping the federal funds rate at zero for a considerable time. This communication was meant to influence the public’s expectations about the future course of US monetary policy, and to have consumers and businesses expect an expansionary monetary policy for some time.
During the recovery, the Fed refined its communication strategy to become more explicit about the economic circumstances that would lead to a change in policy. For example, in June 2013, the committee that sets rates <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20121212a.htm">anticipated that</a>:
this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-½%.
This type of announcement gives people more information about the strategy the Fed will take with rates, rather than simply providing forecasts about what it expects future economic conditions to be like (which doesn’t need to have any information about policy strategy).
<a href="https://www.aeaweb.org/articles?id=10.1257/aer.104.10.3154" target="_blank">Recent evidence</a> confirms this had an impact on businesses’ expectations. Right after the June 2013 announcement by the Federal Reserve, there was an increase in the number of quarters until businesses expected the US policy rate to increase above 25 basis points.
<a href="https://images.theconversation.com/files/210482/original/file-20180315-104659-5fu59l.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/210482/original/file-20180315-104659-5fu59l.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
FOMC= Federal Open Market Committee (which sets rates) Swanson and Williams: the zero bound and interest rates, Author provided
<a href="https://www.chicagofed.org/publications/working-papers/2016/wp2016-07" target="_blank">Other research also</a> suggests forward guidance influenced private sector expectations and stimulated the economic recovery after the global financial crisis.
At the moment, the RBA doesn’t produce statements about future monetary policy and how this would change if the economic environment changed. But the bank could do this.
The RBA has the luxury to develop its communications policy during a time of economic calm, unlike the Federal Reserve, which was forced to experiment with new policies during the worst recession since the Great Depression.
<img src="https://counter.theconversation.com/content/93292/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">If the RBA waits until a future crisis, it would limit the power forward guidance could have in our economy.
<a href="https://theconversation.com/profiles/efrem-castelnuovo-145615" target="_blank">Efrem Castelnuovo</a>, Principal Research Fellow, Melbourne Institute of Applied Economic and Social Research, and Professor of Economics, Department of Economics, <a href="http://theconversation.com/institutions/university-of-melbourne-722" target="_blank">University of Melbourne</a>; <a href="https://theconversation.com/profiles/bruce-preston-452859">Bruce Preston</a>, Professor of Economics, <a href="http://theconversation.com/institutions/university-of-melbourne-722" target="_blank">University of Melbourne</a>, and <a href="https://theconversation.com/profiles/giovanni-pellegrino-452180" target="_blank">Giovanni Pellegrino</a>, Postdoctoral Research Fellow, <a href="http://theconversation.com/institutions/university-of-melbourne-722" target="_blank">University of Melbourne</a>
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/why-the-rba-needs-to-talk-about-future-interest-rate-policy-93292" target="_blank">original article</a>.
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j.ballantyne1990-6AQqhLzZaK

The RBA should be clearer about when it will change interest rates

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The latest data from the Reserve Bank (RBA) shows that the expansion of housing credit is occurring at a historically sluggish pace as tighter credit policies and slower housing market conditions dampen investment participation in the housing market.
The RBA releases its financial aggregates on the last working day of each month and it provides valuable insight into outstanding credit to all mortgage lenders in Australia.  
The latest data shows that in January 2018, housing credit expanded by 0.5% which was actually greater than the 0.4% expansion the previous month.  Splitting the data by owner occupier and investors, owner occupier credit expanded by 0.6% compared to 0.2% for investors.
<img src="https://www.corelogic.com.au/sites/default/files/2018-03/2018-03-05-pulseimg1.png" alt="CoreLogic monthly change in housing credit owner occupier vs investor" width="655" height="297">
The first chart shows the monthly change in housing credit for owner occupiers and investors, while owner occupier credit expansion is tracked fairly steady, there is a clear slowing of credit expansion to investors currently.  The slowdown is being fueled by switching of investor loans to owner occupier and macroprudential policies which limit credit growth to investors.  
The macroprudential policies have come in two waves, the first wave limited lenders from growing investor credit by more than 10%pa while the second wave limited new interest-only lending (which is largely utilised by investors) to 30% of new originations.  The first chart suggests that the first wave actually tightened investor credit growth more than the second wave, highlighted by the fact that in December 2015 investor credit recorded no change while the slowest rate of expansion since the second wave of policies has been 0.2% which is not as severe of a slowdown as that experienced following the first wave of macroprudential policies.
<img src="https://www.corelogic.com.au/sites/default/files/2018-03/2018-03-05-pulseimg2.png" alt="CoreLogic Annual change in housing credit, owner occupier vs investor" width="658" height="303">
The second chart focusses on the annual change in housing credit and shows the benchmark for the 10% speed limit for investor lending which was introduced by APRA in late 2014. This chart also highlights a relatively steady expansion in owner occupier credit but a slowing expansion of investor credit.
<img src="https://www.corelogic.com.au/sites/default/files/2018-03/2018-03-05-pulseimg3.png" alt="CoreLogic housing's share of total outstanding credit to lenders" width="666" height="271">
At the end of January 2018, the total value of outstanding housing credit was $1.731 trillion which was an historic high.  As a share of the total value of credit outstanding to lenders, residential housing accounts for a record-high 62.0%. The data shows a clear preference for lending for residential housing over recent years especially when you consider at the end of 2007, just prior to the GFC, housing accounted for a much lower 51.9% of total outstanding credit.
<img src="https://www.corelogic.com.au/sites/default/files/2018-03/2018-03-05-pulseimg4.png" alt="CoreLogic share of total outstanding housing credit to investors" width="665" height="292">
The fourth chart highlights outstanding investor credit as a share of total outstanding housing credit.  In January 2018, outstanding credit to investors was recorded at $587.9 billion which represented 34.0% of total housing credit.  Although investors make up a significant proportion of outstanding credit, as a share investor credit has been falling since its peak of 38.7% in June 2015.  In fact, the share of credit to investors is at its lowest level since May 2013.
Based on the most recent data from APRA, Australian lenders have comprehensively met the macroprudential targets for investment credit growth and interest only lending.  Considering annual investment credit growth, at 3.0%, continues to track well under the 10% speed limit and interest only lending  is also well under the 30% benchmark, it’s possible investment credit growth could lift over coming months.
Investors do face other headwinds though, with capital gains cooling, yields tracking well below average and depreciation benefits less appealing since the federal government budget last year.
Overall, the expansion in housing credit is now largely being driven by the owner occupier segment of the market.  With mortgage rates expected to rise some time over the next two years and dwelling values falling, it will be interesting to see how long the steady expansion in owner occupier credit can last.
Cameron Kusher is head of research for CoreLogic. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>.
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Overall housing credit growth lower after investor loan drop: Cameron Kusher

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The weekly ANZ/Roy Morgan consumer confidence rating fell by 3.5 per cent last week. Sentiment towards household finances and the economy fell, despite a recovery in global stock markets and strong jobs data. However, the index remains above its long-term average of 112.9.  
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Consumers’ inflation expectations rose to 4.7 per cent last week, up from 4.4 per cent in the previous week. This is the equal highest reading in 13 months. The consumer assessment comes at a time when US markets are pricing-in higher inflation. The strongest US wages growth since June 2009 prompted the market sell-off a few weeks ago.
Assistant Governor Michele Bullock spoke on “Household Indebtedness and Mortgage Stress” in Sydney this morning. The Assistant Governor allayed concerns about household debt and mortgage stress. She highlighted that the “the overall level of stress among mortgaged households remains relatively low”. She also cited the HILDA survey, suggesting that “mortgage repayments were not at levels that would indicate an unusual or high level of financial stress for most owner-occupiers”. In fact, “the number of households experiencing financial stress has fallen steadily since the mid-2000s”. This view is in contrast to some private sector surveys which have pointed to rising financial/mortgage stress and the negative impact on household consumption.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/2/21/comm1.jpg" alt="">
Reserve Bank Board minutes: The minutes from the February 6 Board meeting were issued. The Board’s neutral policy bias remain intact with a period of record low interest rate stability ahead for the foreseeable future. It noted that “inflation also remained low, but was expected to increase gradually as the economy strengthened and wage pressures rose over the forecast period.”
The consumer confidence figures have implications for retailers, and other consumer-focussed businesses. The Reserve Bank Board minutes provides guidance on interest rate settings.
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What does it all mean?
·         Political uncertainty in Canberra, falling home prices and lingering concerns about stock market volatility weighed on household’s views toward their finances and the economic outlook last week.
·         The weaker consumer confidence rating occurred despite record jobs growth and a recovery in share markets during the survey period. In fact, the Australian S&amp;P/ASX 200 Index, while down so far in February (-1.6 per cent to February 19), has outperformed US equities (Dow Jones Industrial Index, -3.6 per cent).  
·         Aussie households are also acutely aware of global developments. Inflation pressures are building in the US. Rising inflation in the form of wages growth and interest rate anxiety prompted the recent sell-off on Wall Street.
·         The US is enjoying full employment with the unemployment rate at 16-year lows of 4.1 per cent. Strong jobs growth and a tightening labour market have contributed to average hourly earnings jumping to 2.9 per cent on an annual basis in January, the largest increase since June 2009. 
·         And on Friday, the US January core Consumer Price Index increased by 0.35 percentage points - the highest monthly result in 12 years.
·         Despite US economic outperformance, the Aussie labour market is strengthening. In fact, a record 16 consecutive months of jobs growth has been posted with the annual pace of jobs creation (403,100) the highest in 12½ years.
·         Record jobs growth has lifted the consumer sentiment rating off its most recent lows back in August. And while consumer prices remain subdued because of global competition, Aussies’ expectations for price rises are growing. Certainly buoyant business conditions and profits are pre-conditions for pay rises. Skilled job vacancies are beginning to emerge in some industries.
·         The Reserve Bank Governor Philip Lowe recently spoke about the benefits of stronger wage growth. He was concerned that annual wage growth near 2 per cent was seen as the new norm. Governor Lowe said that a 2.5 per cent inflation rate was consistent with a 3.5 per cent lift in wages. 
·         In today’s February meeting minutes, the Board surmised that “it was possible that ongoing strength in the demand for labour might result in wage growth picking up by more than anticipated, both in Australia and abroad.”
·         The Reserve Bank appears comfortable with the rebalancing of the Aussie housing market and overall levels of household debt. Putting things into perspective, Assistant Governor Michele Bullock concluded that “the overall level of stress among mortgaged households remains relatively low” and “mortgage stress has fallen over the past decade”.
·         The Assistant Governor also remarked that risks from “household mortgage stress are not particularly acute at the moment”, with large mortgage buffers and other data suggesting “mortgage stress has fallen over the past decade”. Similarly, for investors, Ms. Bullock noted that these mortgagees tend to have higher deposits, higher incomes, more assets, have been “resilient to the recent (regulatory) changes” and that the risk to financial stability from this source also “remained low”.         
What do the figures show?
Consumer Sentiment
·- The weekly ANZ/Roy Morgan consumer confidence rating fell by 3.5 per cent to 115.3. Confidence is down by 3.2 per cent over the year, but well above the average of 113.5 since 2014 and average of 112.9 since 1990.
- All five components of the index fell in the latest week:
- The estimate of family finances compared with a year ago was down from +5.9 to +4.2;
- The estimate of family finances over the next year was down from +25.2 to +23.6;
- Economic conditions over the next 12 months was down from +13.2 to +7.0; 
- Economic conditions over the next 5 years was down from +16.5 to +6.3; 
- The measure of whether it was a good time to buy a major household item was down from +36.9 to +35.6.  
- The measure of inflation expectations 2 years ahead rose to 4.7 per cent from 4.4 per cent.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/2/21/comm2.jpg" alt="">
 
Household Indebtedness and Mortgage Stress speech:
- Last paragraph: “The information we have suggests that, while there are some pockets of financial stress, the overall level of stress among mortgaged households remains relatively low.”
- “Appropriately prudent lending standards will continue to play an important role in ensuring that the financial system remains stable and households borrow responsibly.”
- On mortgage serviceability: “As recently as 2016, mortgage repayments were not at levels that would indicate an unusual or high level of financial stress for most owner-occupiers.” From the HILDA survey: “the median ratio of mortgage servicing payments to income has been fairly stable through time, remaining around 20 per cent in 2016”. Also, “financial stress for owner-occupiers with mortgage debt has not changed much over the past decade, and is actually lower than in the early 2000s. Around 12 per cent of such households indicated that they would expect difficulty raising funds in an emergency in 2016.”
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/2/21/comm3.jpg" alt="">
- On measures of financial stress: “Banks' non-performing housing loans have been trending upwards over the past few years, although they remain very low in absolute terms at around 0.8 per cent of banks' domestic housing loan books. Much of this rise is attributable to a rise in non-performing loans in the mining-exposed states of Western Australia and Queensland – not unexpected given the large falls in employment and housing prices in some of these regions.”
- On investor borrowing: “The recent increases in interest rates on investor loans, in response to APRA's measures to reduce the growth in investor lending, has probably affected the cash flows of investors. Interest rates on outstanding variable-rate interest-only loans to investors have increased by 60 basis points since late 2016. However, over the past few years, lenders have been assessing borrowers' ability to service the loan at a minimum interest rate of at least 7 per cent. So while interest rates and required repayments have likely risen, many borrowers should be relatively resilient to the recent changes.”
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/2/21/comm4.jpg" alt="">
 
Reserve Bank Board minutes:
- Last paragraph: “Taking into account the available information, the Board judged that holding the stance of monetary policy unchanged would be consistent with sustainable growth in the economy and achieving the inflation target over time.”  
- “Members noted that global growth could continue to surprise on the upside, given the synchronised nature of the current upturn. Stronger demand could induce higher global inflation than expected, which would have implications both for financial asset prices and exchange rates. Stronger global growth would boost growth and inflation in Australia, particularly if the exchange rate were to depreciate.”
- “Household debt levels remained elevated and members agreed that household balance sheets still warranted careful monitoring.”
- “Strong competition in the retail sector, which had placed downward pressure on the prices of consumer durables and food for some time, was expected to persist in the next few years.”
- Business conditions had remained at a relatively high level in recent quarters. Private non-mining business investment had increased by more than expected in the September quarter, to be nearly 10 per cent higher over the preceding year. Members noted that the prospects for private non-mining investment were more positive than they had been for some time.”
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/2/21/comm5.jpg" alt="">
- “Members observed that, while standard variable interest rates for housing loans had been little changed since mid 2017, the average outstanding variable rate had declined slightly as new and refinanced loans were typically being offered at lower rates.”
- “The unemployment rate was expected to decline a little further over this period to 5¼ per cent, consistent with GDP growth rising to be above potential.”  
- “Over 2017, progress had been made in reducing the unemployment rate and bringing inflation closer to target.”
- “There was still a risk that growth in consumption might turn out to be weaker than forecast if household income growth were to increase by less than expected.” 
- “Members noted that there had continued to be positive spillovers from the pick-up in public infrastructure investment, particularly in New South Wales and Victoria.”
- “The Australian dollar had appreciated a little on a trade-weighted basis over prior months, but had remained within the relatively narrow range in which it had been over the preceding couple of years.”
<h1>What is the importance of the economic data?</h1>
- The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is now closely tracked by the Reserve Bank.
The Reserve Bank releases minutes of its monthly Board meeting a fortnight after the event. The minutes give a guide to Reserve Bank thinking on interest rate settings.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/2/21/comm6.jpg" alt="">
<h1>What are the implications for interest rates and investors?</h1>
- Consumer confidence has improved since bottoming in August last year. Sentiment was at 4-year highs at the beginning of the year on the back of strong jobs gains and record low interest rates. The economic backdrop has not fundamentally changed despite recent share market volatility. 
- Political uncertainty in Canberra is nothing new to most Aussies. Hung parliaments and small government majorities have been the norm since 2010.
- But Aussie households are becoming acutely aware of building global inflationary pressures. All eyes will be on tomorrow’s quarterly Wages Price Index print.
- The Reserve Bank expects inflation to only increase gradually as the economy continues to strengthen on the back of robust business investment and infrastructure-related government spending. The global economic backdrop is supportive.
- The Bank’s liaison program also implied a recovery in retail sales following recent global competition-related weakness, a gradual rise in rents and a moderation in average outstanding variable mortgage rates.
- In an environment of weak income growth, household consumption and elevated mortgage debt remains an uncertainty this year. It is expected that as spare capacity in the labour market recedes over the year, this could boost wages growth, albeit gradually. 
- On a positive note, the Reserve Bank believes that Aussie mortgage stress is “relatively low”. And while debt levels are high, the number of owner-occupiers currently experiencing acute financial stress is not growing rapidly. 
- CommSec doesn’t expect a change in interest rates until late 2018 at the earliest.
 
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Reserve Bank content, but consumers cautious: CommSec

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Housing market conditions had generally eased in areas where growth had earlier been strong: RBA minutes

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The RBA have noted they are aware of the number interest-only loans which were penned before the recent tightening of mortgage lending.
Speaking at the Responsible Lending and Borrowing Summit on Tuesday, RBA assistant governor Michele Bullock said a "large proportion of interest-only loans are due to expire between 2018 and 2022".
Bullock said most of her focus has been on owner-occupiers, who account for around two-thirds of housing debt outstanding.
She said investors have less incentive than owner-occupiers to pay down their debt.
"Many take out interest-only loans so that their debt does not decline over time," Bullock said.
"If housing prices were to fall substantially, therefore, such borrowers might find themselves in a position of negative equity more quickly than borrowers with an equivalent starting LVR that had paid down some principal."
 
<img class="lazy620x0" src="http://www.afr.com/content/dam/images/h/0/w/c/e/g/image.imgtype.afrArticleInline.620x0.png/1519080192171.gif" alt="By early 2017, 40 per cent of the debt did not require principal repayments." width="620">
Bullock said there is always a balance to be struck with lending standards.
"If they are too tight, access to credit will be unreasonably constrained, potentially impacting economic activity and restricting some households from making large purchases that they can afford," Bullock suggested.
"If they are too loose, however, borrowers and lenders could find risks building on their balance sheets which, if large enough, might have implications for financial stability."
 
 
 
 
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Large proportion of interest only loans due to expire between 2018 and 2022: RBA

There are clearly households experiencing financial stress: RBA assistant governor

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GUEST OBSERVER
This is an edited extract from RBA Governor Philip Lowe's speech at the recent A50 Dinner.
For a while now we have been expecting the Australian economy to grow more strongly in 2018 and 2019 than it did, on average, over recent years. There are a number of reasons for this. We are all but through the decline in mining investment to more normal levels, there is a large pipeline of urban infrastructure work to be done, the global economy is experiencing a solid upswing, commodity prices are up and financial conditions remain accommodative. All this is helping.
The RBA will be releasing our latest economic forecasts tomorrow in the <cite>Statement on Monetary Policy</cite>. These forecasts will be largely unchanged from the previous set of forecasts. The RBA's central scenario remains for the Australian economy to grow at an average rate of a bit above 3% over the next couple of years. This outlook has not been affected by the volatility in the stock market over recent days. Indeed, it is worth keeping in mind that the catalyst for this volatility was a reassessment in financial markets of the implications of strong growth for inflation in the United States. For some time, many investors had been working under the assumptions that unusually low inflation and unusually low volatility in asset prices would persist, even with above-trend growth at a time of low unemployment. A reassessment of these assumptions now appears to be taking place against the backdrop of strong economic conditions globally.
Looking beyond these financial events, the data we have received on the real economy over the summer have been consistent with our assessment that GDP growth will pick up over 2018. Taken together, the recent domestic and global data on the real economy suggest that 2018 has started on a more positive note than did recent years.
Particularly noteworthy has been the labour market, with employment increasing by 3¼% over the past year. This strong performance has been accompanied by a large number of people joining the workforce, so that the participation rate has returned to around the level reached at the peak of the mining investment boom. There have been noticeable increases in the participation rates of both women and older Australians. At the same time, the unemployment rate has declined to around 5½% and a further gradual decline is expected over the next couple of years.
Business conditions are around their highest level since before the global financial crisis and there has also been an improvement in business confidence. Non-mining business investment has been stronger than we had expected a year ago and the investment outlook has brightened. One ongoing area of uncertainty, though, is consumer spending. Household incomes are growing slowly and debt levels are high. I will return to these issues in a moment.
On the prices front, we continue to experience subdued outcomes, although inflation is higher than it was a year ago. Over 2017, inflation was a bit under 2%, in both headline and underlying terms. Last week's data provided further confirmation of trends we have been witnessing for some time. Increased competition in retailing is contributing to price declines for many consumer durables. And subdued wage increases are contributing to low rates of inflation for a range of market services. The rate of rent inflation also remains low.
The immediate outlook is for a continuation of these broad trends, but for inflation to pick up gradually as the economy and labour market strengthen. We are expecting CPI inflation to be in the 2 to 2½% range over the next couple of years. Underlying inflation, which is less affected by the scheduled increases in tobacco excise, is expected to be a bit lower than CPI inflation.
I would now like to touch on a couple of issues that we are paying close attention to and that could have a significant bearing on the outlook for growth and inflation over the next couple of years.
The first of these is wage growth. Not only are most workers experiencing low wage increases, but following the resources boom some people have moved out of highly paid jobs. The result is that after many years of Australians experiencing strong growth in real incomes, growth in average nominal and real incomes has been much slower over recent times.
The effects of low real wage growth on the economy work in different directions. On the one hand, the restrained growth in labour costs is one of the factors that has boosted employment. But, on the other hand, the slow growth in incomes has weighed on spending, including by making it harder for some households to pay down their debts.
On balance, though, in the current environment, some pick-up in wage growth would be a welcome development. Ideally, this would be on the back of stronger productivity growth. But even if productivity growth were to be around the average of recent years, a faster rate of wage increase should be possible. Indeed, a lift in wage growth is likely to be necessary for inflation to average around the midpoint of the 2–3% medium-term inflation target. Stronger growth in real wages would also boost household incomes and create a stronger sense of shared prosperity.
Our central scenario is for this pick-up in wage growth to occur as the economy strengthens, but to do so only gradually. Through our liaison with business we hear some reports of wage pressures emerging in pockets where labour markets are tight. We expect that over time we will hear more such reports. After all, the laws of supply and demand still work.
I have spoken previously about the factors affecting wages, and they have a global dimension. Globalisation and advances in technology have increased competition, and greater competition means less pricing power. Given the strength and pervasiveness of these forces, it is unlikely that they are going to disappear quickly, so the pick-up in wage growth is likely to be fairly gradual.
A second factor shaping the outlook is the level of household debt. Indeed, the high level of household debt in Australia is remarked upon by international investors almost as often as the fact of 26 years of growth.
A while back we had become quite concerned about some of the trends in household borrowing, including very fast growth in lending to investors and the high share of loans being made that did not require regular repayment of principal. Our concern was not that developments in household balance sheets posed a risk to the stability of the banking system. Rather, it was more that they posed a broader macro stability risk – that is, the day might come, when faced with bad economic news, households feel they have borrowed too much and respond by cutting their spending sharply, damaging the overall economy.
We have worked closely with APRA, including through the Council of Financial Regulators, to address these issues. This work, together with other steps taken by APRA, has helped improve the quality of lending in Australia. In the housing market, there has also been a change. National measures of housing prices are up by only around 3% over the past year, a marked change from the situation a couple of years ago. This change is most pronounced in Sydney, where prices are no longer rising and conditions have also cooled in Melbourne. These changes in the housing market have reduced the incentive to borrow at low interest rates to invest in an asset whose price is increasing quickly.
On balance then, from a macro stability perspective, the situation looks less risky than it was a while ago. We do, however, continue to watch household balance sheets carefully as there are still risks here.
Challenges
I would now like to move to the second question that I get asked frequently. Beyond the short term, what are the challenges facing the Australian economy?
When I spoke at this forum last year I talked about four challenges:
<ul>
<li>the need to reinvigorate productivity growth</li>
<li>finding ways of capitalising on the opportunities in Asia</li>
<li>providing the infrastructure needed for a growing population and to support productivity</li>
<li>making sure that our public finances were on the right track and that our tax system was internationally competitive.</li>
</ul>
This is by no means a complete list; at a minimum, you could add some of the issues I have just spoken about. But it remains a reasonable list and I thought it useful to offer an update.
Improving our productivity remains the key to further improvement in our living standards. Average growth in labour productivity has been a bit higher since the peak in the mining boom than it was in the preceding five years, although capital deepening has been an important part of the story here. Late last year the Productivity Commission provided some guidance about how we might lift our performance with the release of the first of its five-yearly reports – the <cite>Shifting the Dial</cite> report. This is another example of Australian policy institutions tackling important issues through serious and systematic reviews. A central theme of the report is the importance of services and cities. Most Australians now work in the service sector and live in cities, so how we deliver services and how our cities function have a major influence on our future living standards. This is yet another area where we will benefit from a strong innovation mindset.
On building our links with Asia, we continue to see progress. New trade agreements are opening up new opportunities for Australian business in the region and the share of Australia's exports going to Asia continues to rise. Last year, the value of Australia's merchandise exports increased by more than 15% to each of China, Japan, Korea, Taiwan, Indonesia and the Philippines. Exports of resources have been an important part of the story, but it is broader than that, with strong growth in exports of services too. Person to person links also continue to deepen, with half of all international visitors to Australia last year coming from Asia.
On infrastructure, the story is also a positive one. Increased public investment in infrastructure in our largest states is currently providing a boost to the economy and it is also building productive capacity for the future. With our population continuing to grow at a relatively fast rate for an advanced economy – around 1½% a year – this is an area for us to continue to focus on. As we do this, we need to pay close attention to the governance of decisions around project selection, the control of construction costs, usage pricing and the allocation of risk between the public and private sectors. Good governance is important in these areas to support sound decision-making and to retain public trust and confidence in governments' spending plans.
Finally, on the fiscal side, the latest estimates are that things are on track to meet the Australian Government's projection of returning the budget to balance by 2020/21. Australia's record of careful management of public finances meant that when the financial crisis hit a decade ago, fiscal policy was able to play a role stabilising the economy. Ensuring that our public finances are on a sustainable footing is important to ensuring that we have similar flexibility in the future. The issue of how the tax system affects the competitiveness of Australia as a destination for investment is one of ongoing political debate. There have been some cuts in company tax and parliament is considering further changes.
Reduction of Monetary Stimulus Globally
I would now like to turn to the final question that I often get asked: as other central banks raise interest rates, won't the RBA have to, too?
It is understandable that this question is asked. Over time, there is a common element to movements in interest rates around the world. The level of interest rates in all countries is influenced by movements in the neutral global real interest rate. During the financial crisis, the neutral global rate fell and this has had an important influence on the setting of interest rates in all countries, including here in Australia. If we had not lowered our interest rates as global rates fell, the Australian economy would have grown by less and inflation would have been even lower than it turned out to be.
The fact that there is a common element in interest rates, however, does not mean that interest rates need to move in lock-step with one another. Countries with a floating exchange rate, like Australia, still retain considerable flexibility to set interest rates based on their domestic considerations. We did not lower our interest rates to the extraordinarily low levels seen elsewhere after the financial crisis. Our circumstances were different: we didn't have a meltdown in the financial system and we experienced a very large cycle in commodity prices and mining investment.
Just as we did not move in lock-step on the way down, we don't need to do so in the other direction. It's understandable that some other central banks are raising rates. They lowered their rates by more than us and, in a number of countries, the unemployment rate is now below conventional estimates of full employment at a time when above-trend growth is expected.
Our circumstances are a little different. We are still some way from what could be considered full employment and our central scenario for inflation is for it to remain below the midpoint of the medium-term target range for the next couple of years.
We expect, though, to make further progress in reducing unemployment and having inflation return to the midpoint of the target range. If we do make that progress, at some point it will be appropriate for interest rates in Australia to also start moving up. So, given recent developments in Australia and overseas, it is likely that the next move in interest rates in Australia will be up, not down. If this is how things play out, the likely timing will depend upon the extent and pace of the progress that we make. As I have discussed, while we do expect steady progress, that progress is likely to be only gradual. Given this, the Reserve Bank Board does not see a strong case for a near-term adjustment in monetary policy. It will of course keep that judgement under review at future meetings.
I hope that these remarks this evening have helped you understand the Australian economy, our opportunities and some of the challenges we face. I look forward to answering your questions.
Philip Lowe is Governor of the Reserve Bank of Australia.
Read the full <a href="https://www.rba.gov.au/speeches/2018/sp-gov-2018-02-08" target="_blank">speech to A50 dinner</a>.
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The next few years for the Australian economy: RBA Governor Philip Lowe

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The RBA has released its January chart pack which contributed to their decision to leave cash rates on hold again at 1.5 percent.
The full pack can be <a href="http://www.rba.gov.au/chart-pack/" target="_blank">found here.</a>
Consumer sentiment is has been fluctuating over the year.
Click here <a href="https://www.propertyobserver.com.au/images/2018/1/4/chart1.jpg" target="_blank">to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/1/4/chart1.jpg" alt="">
Housing prices and house hold debt are both peaking, however the house prices are just beginning to level out.
Click here <a href="https://www.propertyobserver.com.au/images/2018/1/4/chart2.jpg" target="_blank">to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/1/4/chart2.jpg" alt="">
National house price growth has considerably stumbled since the middle of 2017.
Click here <a href="https://www.propertyobserver.com.au/images/2018/1/4/chart3.jpg" target="_blank">to enlarge.</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/1/4/chart3.jpg" alt="">
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