As apartment living continues to evolve across Sydney's growth corridors, the quality and distribution of shared spaces is increasingly shaping how residents experience home. Rather than functioning as add-ons, amenities are being embedded into the daily rhythm of a building, supporting everything from quiet retreat to social interaction, often within a single vertical community.

At <a href="https://www.apartments.com.au/new-apartments/aeris-melrose-park-nursery-street-melrose-park-nsw-2114">Aeris</a> in Melrose Park, this approach is resolved through a layered amenity offering that unfolds from ground level through to its upper podium. Developed by <a href="https://www.apartments.com.au/developers/sekisui-house-australia">Sekisui House Australia</a> in partnership with Hankyu Hanshin Properties, the project introduces 468 apartments across two towers and a mid-rise building, positioned at the highest point of the broader masterplan.

[smartcode_project:default project_id=426 project_image_fid=359199]

The amenity experience begins at street level, where two courtyards sit within a landscaped setting that connects residents to the wider network of parks and green spaces. These green spaces are not isolated pockets but part of a wider pedestrian network that links Aeris to the surrounding <a href="https://www.apartments.com.au/developments/melrose-park-nsw-2114">Melrose Park</a> precinct, including Central Park, future schools, and the Town Centre opening in July 2026. The result is a transition that moves from public to private without abrupt boundaries, allowing residents to pass through shaded, tree-lined environments before reaching the building itself.

Moving upward, the focus shifts to the level five podium, where the primary communal facilities are concentrated. This space brings together a 16-metre swimming pool, outdoor seating areas, and a communal BBQ zone arranged to take advantage of elevated outlooks. Seating is positioned beneath pergolas, creating pockets of shade that extend the usability of the space throughout the day. The pool edge aligns with views toward the wider district, reinforcing the sense of elevation that defines the project’s positioning.

In the adjacent building, this is complemented by quieter, more contemplative spaces, including an outdoor cinema set within the same level. Positioned to operate primarily in the evening, it introduces a different tempo to the shared environment, shifting from daytime activity to after-hours use without requiring separate zones.

[smartcode_project:default project_id=426 project_image_fid=360299]

The podium also accommodates an intimate private resident gym. Located on the lower levels, it gives residents convenient access to fitness facilities without leaving the building.

Above, the elevated podium sky deck extends the amenity offering, providing additional open-air spaces with elevated outlooks across the surrounding landscape. While more restrained in program, this upper level reinforces the project’s vertical progression, from ground-level greenery to elevated outlook, allowing residents to move between distinct spatial conditions within a single address.

This distribution of amenities reflects a deliberate response to how residents use space across the day. Sekisui House Australia Sales and Marketing Director Peter Kalaf points to the role these shared areas play in shaping buyer demand. Aeris has been conceived as more than a collection of apartments, with the podium pool, gym and outdoor cinema forming part of a broader lifestyle offering that extends the home beyond each individual residence.

[smartcode_project:default project_id=426 project_image_fid=360300]

What distinguishes Aeris is not the inclusion of these elements individually, but how they are arranged in relation to one another. Active, social, and passive spaces are layered vertically rather than separated, allowing residents to choose between them without leaving the building or moving far from their apartment. This proximity supports both routine use, such as a morning swim or evening workout, and more occasional gatherings, whether around the BBQ area or within the cinema setting.

The amenity design also sits within a broader framework of connectivity across Melrose Park. The Melrose Park Town Centre, anchored by Coles and Dan Murphys, features a mix of retail, dining, health and lifestyle offerings, bringing everyday convenience closer to residents. By the end of the year, more than five hectares of parks and open space, equivalent to around seven football fields of green space on residents' doorstep, will further enhance the precinct, allowing the internal facilities at Aeris to operate as an extension of the wider neighbourhood rather than a substitute for it.

Construction at Aeris continues to gather momentum, with ground floor slabs expected to be completed in late 2026 before the first sections of the buildings begin to rise above ground.

[smartcode_project_cta:default project_id=426]

Joel Robinson

Elevated amenity anchors daily life at Aeris, Melrose Park

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

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

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

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

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

Kooyongkoot wins Gold and Silver at Better Future Melbourne Design Awards

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

The apartment price gap drawing Sydney buyers west

Rba Insights

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At its meeting today, the Board decided to leave the cash rate unchanged at 1.00 per cent.
The outlook for the global economy remains reasonable, although the risks are tilted to the downside. The trade and technology disputes are affecting international trade flows and investment as businesses scale back spending plans due to the increased uncertainty. At the same time, in most advanced economies, unemployment rates are low and wages growth has picked up, although inflation remains low. In China, the authorities have taken further steps to support the economy, while continuing to address risks in the financial system.
Global financial conditions remain accommodative. The persistent downside risks to the global economy combined with subdued inflation have led a number of central banks to reduce interest rates this year and further monetary easing is widely expected. Long-term government bond yields have declined and are at record lows in many countries, including Australia. Borrowing rates for both businesses and households are also at historically low levels. The Australian dollar is at its lowest level of recent times.
Economic growth in Australia over the first half of this year has been lower than earlier expected, with household consumption weighed down by a protracted period of low income growth and declining housing prices and turnover. Looking forward, growth in Australia is expected to strengthen gradually to be around trend over the next couple of years. The outlook is being supported by the low level of interest rates, recent tax cuts, ongoing spending on infrastructure, signs of stabilisation in some established housing markets and a brighter outlook for the resources sector. The main domestic uncertainty continues to be the outlook for consumption, although a pick-up in growth in household disposable income and a stabilisation of the housing market are expected to support spending.
Employment has grown strongly over recent years and labour force participation is at a record high. The unemployment rate has, however, remained steady at 5.2 per cent over recent months. Wages growth remains subdued and there is little upward pressure at present, with strong labour demand being met by more supply. Caps on wages growth are also affecting public-sector pay outcomes across the country. A further gradual lift in wages growth would be a welcome development. Taken together, recent labour market outcomes suggest that the Australian economy can sustain lower rates of unemployment and underemployment.
Inflation pressures remain subdued and this is likely to be the case for some time yet. In both headline and underlying terms, inflation is expected to be a little under 2 per cent over 2020 and a little above 2 per cent over 2021.
There are further signs of a turnaround in established housing markets, especially in Sydney and Melbourne. In contrast, new dwelling activity has weakened. Growth in housing credit remains low. Demand for credit by investors continues to be subdued and credit conditions, especially for small and medium-sized businesses, remain tight. Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality.
It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target. The Board will continue to monitor developments, including in the labour market, and ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time.
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jrobinson-rf4aSBido9

Further signs of property turnaround especially in Sydney and Melbourne: RBA September meeting

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EXPERT OBSERVER
The Reserve Bank Board meets next week on September 3.
We expect that the Board will decide to keep rates on hold at the meeting but continue to expect the next rate cut to occur in October.
A key signal around the Governor’s Statement following the decision next week will be whether the Governor continues with the wording “ease monetary policy further if needed”.
“If needed” was used in both July and August and seemed to imply a degree of patience with rates remaining on hold at the August and, we believe, the September meetings.
However, those words were not used in June and we saw a follow up move in July.
If the “if needed” is still used in the Statement then it will not necessarily preclude a move in October – it might be considered prudent to break with that signalling approach but an absence of “if needed” will certainly be very encouraging for our October view.
October has some advantages – we saw the response in the Westpac Consumer Sentiment Index to consecutive cuts in June and July, with Sentiment actually falling by 4% following the July cut only to recover by 3.6% after rates were on hold in August. This result is likely to have impressed upon the RBA the need to avoid a policy response, such as consecutive months or a 50 basis point move, that might unnecessarily unnerve households.
We are aware that the Governor is concerned about global developments and probably would like to retain some flexibility to respond to an unexpected global shock – better to cut rates in October and allow flexibility to move again in December rather than delay until November and have to do consecutive November/ December moves.
There also seems little reason to delay beyond October – we know that the August inflation, wages, and unemployment forecasts were revised down despite assuming two more rate cuts – one in 2019 and one in early 2020.
We do not expect any further downward revisions in November that might require an immediate policy response.
The forecasts also embed a lift in growth momentum in 2019 from 2% (annualised in 2019 H1) to 2.75% in 2019 H2.
The June quarter GDP report will print the day after the September Board meeting. In our preview we expect that Q2 will print 0.5% growth, including consumption growth of 0.4% up from 0.3% in the March quarter.
We think this report is unlikely to impact any decision for an October cut since the real question around GDP will be the extent to which spending responds to the rate cuts in June/July; a lower AUD; the tax offset payments, which are now rolling out ($7.7 billion); the election result and the lift in auction clearance rates in Sydney and Melbourne.
This information is unlikely to be sufficiently clear by November to justify waiting until then.
In this note I also wanted to comment on some of our other financial market forecasts.
We are not anticipating further sharp falls in fixed interest rates.
The Australian 3 year swap rate has now fallen to 0.70% - 30 basis points below cash but only around 30 basis points above the expected terminal cash rate. That compares with around 50 basis points that the swap rate averaged over the 1.5% cash rate that held between August 2016 and June 2019. That period was marked by expectations of rate increases, although those expectations faded badly by the second half of 2018. Nevertheless we are now dealing with the expectation of an incredibly flat curve even when markets resume some form of equilibrium.
For those reasons our current swap rate forecasts envisage the swap rate holding around current levels despite further rate cuts from the RBA.
The current shape of the curve is likely also influenced by the market’s expectation that some form of QE may impact the term premium. Such policy could be implemented by the RBA (a direct asset purchase program) or via the banks (through direct funding from the RBA which flows on to other rates).
Of course the other way that current swap rates could fall further would be through an even lower terminal cash rate than the 0.5% which we currently envisage. To be sure, a package of QE and a cut to 0.25% would significantly lower swap rates further.
There are similar considerations for the 10 year bond rate. The bond rate has fallen to 0.90% - around 50 basis points above the market’s terminal cash rate, of around 0.4%. That compares with a margin of around 100 basis points between the 10 year bond rate and the steady 1.5% cash rate in the 2016-2019 period. Without an even lower terminal cash rate or some QE program by the RBA (directly or through the banks) it seems a stretch to expect any further sustained falls in that bond rate despite two more rate cuts coming from the RBA.
The comparison with the US is interesting. The market’s terminal federal funds rate is now around 0.9% by early 2021. A current US 10 year bond rate of around 1.5% is largely in line with our expected equilibrium margin in Australia of 50 basis points.
Westpac’s forecasts for the terminal cash rate in Australia are now broadly in line with the market. While our current federal funds rate forecast currently entails three more cuts in 2019 followed by some stability at a federal funds rate of 1.375%, the speed that we envision this easing is more aggressive than market pricing of 2½ cuts by end 2019 and therefore consistent with the US bond rate staying down at these levels for the rest of this year.
In 2020, we are certainly not expecting a recession in the US despite the inverted 2-10 year bond curve signal. US 10 year rates are distorted by the negative bond rates in Europe and Japan, and indeed, that also partly explains the unprecedented flat curve relative to the market’s expected terminal federal funds rate which we highlighted earlier. Instead, we look to a more cautious White House in 2020 as the Presidential election nears. However we do acknowledge that the FOMC might eventually move even closer to the cash rates in other markets as US economic growth drops below potential in 2020 and 2021.
BILL EVANS is the Chief Economist at Westpac
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RBA to hold next week, but expect October rate cut: Bill Evans

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The minutes of the RBA's meeting for August highlighted the turnaround in the housing market.
"The evidence that conditions in housing markets were showing signs of a turnaround had strengthened in July," the RBA members noted.
He suggested that in Sydney and Melbourne house prices had increased, with housing turnover appearing to have reached a trough.
They noted that auction clearance rates had risen further.
The minutes noted a slightly slower, but noticeable, turnaround in housing market conditions outside of Sydney and Melbourne.
"Outside the two largest cities, housing market conditions had shown tentative signs of improvement; prices had risen in Brisbane, while the pace of decline had slowed in Perth," the minutes read.
There's hope from the RBA that the house price decline could also trigger the downward trend of consumption. 
"Signs of a recovery in some established housing markets suggested that the dampening effect of declining housing prices on consumption could dissipate earlier than had previously been assumed.
Members observed that it could take some time for the stabilisation of conditions in the established housing market to translate into a pick-up in construction activity.
"Leading indicators suggested that dwelling investment was likely to decline further in the near term," the members said.
Residential building approvals had declined further over May and June and were around their lowest levels in six years.
The RBA members continued to state that they expect an extended period of low interest rates as they seek sustained progress towards full employment and the desired inflation target.
Again they said that would consider a further easing if necessary to support sustainable growth in the economy.
To read the full August RBA meeting minutes, <a href="/news/strengthened-property-turnaround-evidence-seen-by-rba-august-rba-minutes">click here</a>.
 
 
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Housing market conditions outside of Sydney and Melbourne show tentative sign of improvement: RBA August meeting minutes

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The RBA deputy governor Guy Debelle has noted that the housing market downturn seems to have come to an end.
Debelle, who was the keynote speaker at the 14th Annual Risk Australia Conference in Sydney on Thursday, said there is evidence the decline has reached his conclusion.
"If this is the case, the drag from declining wealth and turnover will dissipate," Debelle said.
"Housing market conditions may even start to support consumption growth again in the period ahead."
Debelle suggested the dynamics of the housing markets have affected the consumption outlook.
"Overlaid on the slow growth in household income has been the effect of the decline in housing prices," Debelle said
"Some part of that effect comes through a wealth effect: as housing prices fall, homeowners' wealth declines, which reduces their spending.
"Some part of the effect comes through the lower housing turnover that has accompanied the decline in housing prices.
"Housing turnover is around its lowest level in more than 20 years. When people move house, they spend more on things like household furniture."
Debelle suggests households are benefitting, in aggregate, from the effect of lower interest rates.
"While the income of households with deposits is lower, the household sector as a whole has around twice as much debt as deposits. Hence the cash flow boost from lower mortgage payments outweighs that of lower deposit rates.
"Again, there is uncertainty about how much of that cash flow boost will be spent or saved, including in the form of paying down mortgages faster.
"If households use the additional cash flow to pay down their mortgages, it does bring closer the date that they will be more comfortable with their balance sheets and return to more regular spending habits.
Debelle says the RBA are expecting the GDP growth outcomes to strengthen after a run of disappointing numbers.
"This outlook is supported by a number of developments including: lower interest rates, the recent tax cuts, a depreciation of the Australian dollar, a brighter outlook for investment in the resources sector, some stabilisation of the housing market and ongoing high levels of investment in infrastructure," Debelle added.
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Evidence decline in house prices has reached an end: RBA's deputy governor Guy Debelle

Risks to the outlook: RBA deputy governor Guy Debelle

Financial stability through the lense of business: RBA's Michele Bullock

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At its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.00 per cent. This follows a similar reduction at the Board's June meeting. This easing of monetary policy will support employment growth and provide greater confidence that inflation will be consistent with the medium-term target.
The outlook for the global economy remains reasonable. However, the uncertainty generated by the trade and technology disputes is affecting investment and means that the risks to the global economy are tilted to the downside. In most advanced economies, inflation remains subdued, unemployment rates are low and wages growth has picked up. The slowdown in global trade has contributed to slower growth in Asia. In China, the authorities have taken steps to support the economy, while continuing to address risks in the financial system.
Global financial conditions remain accommodative. The persistent downside risks to the global economy combined with subdued inflation have led to expectations of easing of monetary policy by the major central banks. Long-term government bond yields have declined further and are at record lows in a number of countries, including Australia. Bank funding costs in Australia have also declined, with money-market spreads having fully reversed the increases that took place last year. Borrowing rates for both businesses and households are at historically low levels. The Australian dollar is at the low end of its narrow range of recent times.
Over the year to the March quarter, the Australian economy grew at a below-trend 1.8 per cent. Consumption growth has been subdued, weighed down by a protracted period of low income growth and declining housing prices. Increased investment in infrastructure is providing an offset and a pick-up in activity in the resources sector is expected, partly in response to an increase in the prices of Australia's exports. The central scenario for the Australian economy remains reasonable, with growth around trend expected. The main domestic uncertainty continues to be the outlook for consumption, although a pick-up in growth in household disposable income is expected to support spending.
Employment growth has continued to be strong. Labour force participation is at a record level, the vacancy rate remains high and there are reports of skills shortages in some areas. There has, however, been little inroad into the spare capacity in the labour market recently, with the unemployment rate having risen slightly to 5.2 per cent. The strong employment growth over the past year or so has led to a pick-up in wages growth in the private sector, although overall wages growth remains low. A further gradual lift in wages growth is still expected and this would be a welcome development. Taken together, these labour market outcomes suggest that the Australian economy can sustain lower rates of unemployment and underemployment.
Inflation pressures remain subdued across much of the economy. Inflation is still, however, anticipated to pick up, and will be boosted in the June quarter by increases in petrol prices. The central scenario remains for underlying inflation to be around 2 per cent in 2020 and a little higher after that.
Conditions in most housing markets remain soft, although there are some tentative signs that prices are now stabilising in Sydney and Melbourne. Growth in housing credit has also stabilised recently. Demand for credit by investors continues to be subdued and credit conditions, especially for small and medium-sized businesses, remain tight. Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality.
Today's decision to lower the cash rate will help make further inroads into the spare capacity in the economy. It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target. The Board will continue to monitor developments in the labour market closely and adjust monetary policy if needed to support sustainable growth in the economy and the achievement of the inflation target over time.
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Tenatative signs Sydney and Melbourne prices stabilising: RBA Governor Philip Lowe's July 2019 meeting statement

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The RBA have decided to cut rates by 25 basis points for the second time in as many months, bringing the cash rate to a historic low one percent.
The RBA had left the cash rate on hold for nearly three years at a record low 1.5% before cutting it to 1.25% last month.
It's the first time the RBA have cut rates in back to back months for the first time in over a decade.
It was 2008 when it was slashed at five consecutive meetings from 7.25% in August to 3.25% in February of 2009.
CoreLogic research analyst Cameron Kusher says the prospect of another interest rate cut had risen over June. 
"The likelihood of an interest rate cut had been rising throughout June, particularly since the weak GDP reading in early June and following RBA Governor Phil Lowe’s speech which indicated that a single 25 basis point cut to rates (which was delivered last month) was unlikely to shift the path that we are on," Kusher said.
"In fact, the ongoing slowing of the rate of decline in dwelling values throughout 2019 and the recent uptick in Sydney and Melbourne dwelling values, would likely have reduced concerns of further wealth erosion from housing. 
"Furthermore, the 25 basis point cut in June along with the cut today and the likelihood of reduced serviceability buffers from APRA are likely to be further positives for the housing market and encourage an ongoing gradual levelling in the housing downturn nationally.  
"Despite these positives, the introduction of the Banking Code of Conduct and the expansion of Comprehensive Credit Reporting from the beginning of July will ensure that although taking out a mortgage may become a little easier, the scrutiny on loan applications will remain significantly greater than it has been in the past.  
"Given this, the expectation is that a recovery in housing market conditions is likely to be slow and gradual despite lower interest rates.  
"No doubt attention will now turn to mortgage rates and how much of the cash rate cut will be passed through to mortgages. 
"Our expectation is that banks will be holding back on passing on the full cut as they seek to balance out mortgage rates with deposit rates and protect net interest margins. 
Over a third of experts and economists in Finder's RBA survey predicted the July cut.
Graham Cooke, insights manager at Finder, said last month’s cut – the first change to the cash rate in almost three years – was perhaps too small to make the desired impact.
“The objective is to lower unemployment, boost wage growth and push inflation back to target. It’s clear that one cut isn’t enough.
“Frankly, two cuts might not be either, but it’s a step in the right direction and it’s great news for homeowners. It’s two down and maybe one or two more to go.
“On an average mortgage, if your bank passes on both rate cuts in full – that is a 50 basis point reduction – you could be saving almost $42,000 over 30-years.”
<img src="https://gallery.mailchimp.com/cc5e9bce699fa1d71a67cf499/images/07c8c05c-6357-453a-8fce-d19df3afb60e.png" width="563" height="391"> 
<div>Mortgage Choice's Jacqueline Dearle predicted the cut and said, should they be passed on, they’ll give the property market a nudge in the right direction.</div>
<div> </div>
<div>“[A cut will be] great for first home buyers and property investors but the fall in official interest rates will not be so welcome to those Australians with cash savings in the banks, who may see their returns diminish if the banks trim back their rates further from the current average rate of 1.4%,” Dearle said. </div>
<div> </div>
<div> </div>
<div> </div>
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RBA cuts rates again at the July meeting

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The RBA Governor Philip Lowe has said the labour market is key to the three key objectives that the RBA has held for the last six decades.
Speaking at the Committee for Economic Development of Australia (CEDA) event, Lowe cited the three broad monetary policy objectives when the Reserver Bank Act was passed 60 years ago.
They were the stability of the currency, the maintenance of full employment and the economic prosperity and welfare of the Australian people.
"These objectives have remained unchanged since 1959," Lowe said.
He said that where other nation's will have focused solely on inflation, Australia have had a three aim approach.
He added however that from operational perspective the flexible inflation target is the centre piece of the monetary policy framework.
"The target – which has been agreed to with successive governments – is to deliver an average rate of inflation over time of 2–3 per cent.
"Our focus is on the average and on the medium term."
Lowe said it was obvious to see the labour markets connection with the second objective, full employment, however it was important in the other two objectives.
"Trends in the labour market have a major bearing on inflation outcomes, so they are important for the first element of our mandate [the stability of our currency] as well.
"The labour market is, of course, also central to the third objective in our mandate – our collective welfare," Lowe said.
"It is stating the obvious to say that for many Australians, having a good job at a decent rate of pay is central to their economic prosperity. 
"The RBA is seeking to achieve the lowest rate of unemployment that can be sustained without inflation becoming an issue.
Lowe suggests there is still spare capacity in the labour market.
"Over recent times there has been a gradual accumulation of evidence which has led to lower estimates," Lowe said.
"While it is not possible to pin the number down exactly, the evidence is consistent with an estimate below five percent, perhaps around four and a half percent.
"Given that the current unemployment rate is 5.2 per cent, this suggests that there is still spare capacity in our labour market.
In the 1960s, less than one in ten workers worked part time (below). Today is it one in three.
<div class="image-graph"><img src="https://www.rba.gov.au/speeches/2019/images/sp-gov-2019-06-20-graph1.gif" alt="Graph 1: Part-time Workers"></div>
<div class="image-graph">Around three million people work part time because they want to, not because they can't find a full-time job, according to the ABS.</div>
<div class="image-graph"> </div>
<div class="image-graph">"Most people who are working part time do so because they are studying or have caring responsibilities, or for other personal reasons," Lowe noted.</div>
<div class="image-graph"> </div>
<div class="image-graph">"So we should not think of part-time jobs as being <cite>bad</cite> jobs, and full-time jobs as being <cite>good</cite> jobs."</div>
<div class="image-graph"> </div>
<div class="image-graph">On the cash rate cut, Lowe said the decision was not in response to a deterioration in the economic outlook since the previous update was published in early May.</div>
<div class="image-graph"> </div>
<div class="image-graph">"Rather, it reflected a judgement that we could do better than the path we looked to be on."</div>
<div class="image-graph"> </div>
<div class="image-graph">To read Philip Lowe's full speech at CEDA, <a href="https://www.rba.gov.au/speeches/2019/sp-gov-2019-06-20" target="_blank">click here</a>.</div>
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