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>
</main>

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 Rate Decision

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EXPERT OBSERVER
As expected the RBA Board lowered the cash rate by 25 basis points at its October meeting to 0.75%.
Back in July we identified October and February as the likely dates for the next moves. At that time only 3 forecasters out of 24 in the surveys were forecasting an October move and most were not anticipating a terminal rate as low as 0.5%.
We have not changed our forecasts since then and therefore welcome the Governor’s Statement which opens the door for another move.
However we cannot concur with the markets pricing in around a 50% probability of a follow up move in November.
There are a number of reasons for this caution.
Firstly, markets should understand that central banks will usually bias their comments on days on which they make policy changes to justify the decision. We saw some examples of that approach in the Governor’s Statement.
For example, he has, for no reason that is justified by the data, adopted a bolder objective than had been the case before by aiming for “full employment” rather than the more modest, “reduce unemployment” that we saw in September.
With the unemployment rate trending away from his full employment target and, by his own admission, “forward-looking indicators of labour demand indicate that employment growth is likely to slow from its recent fast rate” the introduction of that full employment target as a substitute for the more realistic “reduce unemployment” seems curious and is probably less significant than markets may have assessed.
In full, he noted, “the Board will continue to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.”
A more significant aspect of that statement is the choice of the term, “if needed” which arguably implies that time will be taken to assess the impact of the three cuts in this cycle before moving again (note that he did not use “if needed” following the June decision which was subsequently followed up by a cut in July.)
We also think the RBA will be mindful of the response of the Westpac Melbourne Institute Consumer Sentiment Index to the consecutive cuts in June/ July. Following the cut in July the Index fell by 4.1%. There was an apparent “spooking” of the consumer around the policy action.
At the time we noted: “The main driver continues to be deepening concerns about the outlook for the Australian economy and prospects for family finances. The index components show the biggest decline in the sub-index tracking expectations for the ‘economy, next 12 months’ which slumped 12.3% to be down 16.4% since May to its lowest level in four years. Longer term expectations for the economy were also pared back sharply, the ‘economy, next 5 years’ sub-index falling 6.7%.”
BILL EVANS is the Chief Economist at Westpac.
This was first published on <a href="https://westpaciq.westpac.com.au/Article/40295/52930/" target="_blank">Westpac IQ</a>.
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bevans-rYk9SxEa4r

Low chance of follow up rate cut in November: Bill Evans

<html><body>
The big four banks have all only passed on part of the RBA's 25 basis point rate cut, keeping a large chunk for themselves.
They've defied treasurer Josh Frydenberg's call for them to pass on the full cut, with further cuts expected in the not too distant future.
CBA and NAB were the <a href="/expert-insights/finance/nab-and-cba-fail-to-pass-on-full-rate-cut">first to cut their rates</a> on Tuesday, with <a href="/expert-insights/finance/anz-cut-interest-rates-by-just-0-14">ANZ</a> and then <a href="/expert-insights/finance/westpac-the-final-big-four-bank-to-fail-to-pass-on-full-rate-cut">Westpac</a> following yesterday.
Investors were the big winners. Investors with interest only investor mortgage's saw their rates get cut the full 25 basis points by ANZ, CBA and NAB. Westpac were the only ones not to pass fully.
<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/2019/10/3/Labour%20Market%20Oct%20RBA.jpg" alt=""> The labour market performance was one of the key statistics that drove the RBA to cut rates. Source: RBA
Owner occupiers paying principal and interest on variable rate home loans is the number one market for most banks and home lenders.
The number of fixed home loans is down over 50 per cent since August 2017, a drop from 11,373 to 5,416.
According to Finder.com.au, there has been a near 400 per cent spike in visitors to their pages about breaking from fixed loans.
Following October’s RBA rate cut, there was a 69 per cent spike in visitors across all Finder home loan pages, including a 296 per cent jump in views of the variable home loans page, week-on-week.
Graham Cooke, insights manager at Finder, said fixed rates seem "less sexy" given there are likely further cuts on the way.
<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/2019/10/3/GDP%20Growth%20October.jpg" alt=""> GDP growth continues its downward trajectory. Source: RBA
“In our RBA cash rate survey we found that nearly three-quarters (72%, 26/36) of experts predicted that the cash rate will reach 0.50% before it starts to increase," Cooke said. “Based on all the economic indicators the RBA reviews – employment, inflation, housing, wages – we are likely to be in a low-rate environment for the foreseeable future.  “Unless we see huge drops in fixed loan rates, variable loans will likely stay in vogue,” Cooke said. The lowest current fixed home loan rate sits at 2.79% (Mortgage House and Greater Bank) which is higher than the lowest variable home loan rate on the market at 2.69% (Reduce Home Loans). 
Far and away the biggest cut came from G&amp;C Mutual Bank who cut 50 basis points, taking their variable rate first home-owner loan to 2.79 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/2019/10/3/House%20Prices%20Oct%20RBA.jpg" alt=""> House prices have continued to bounce back. Source: RBA
InfoChoice.com.au chief executive Vadim Taube has urged home loan borrowers to check their rate and compare it with other loans in the market. 
“If your lender hasn’t passed on the full RBA rate cut to you, you may like to listen to the treasurer Josh Frydenberg and think about voting with your feet.
“There are plenty of lenders who are passing on the full rate cut to customers and switching loans is getting easier and cheaper all the time. 
“More lenders are going completely online and accepting applications that you can put together on your lounge at home.”  
Who's cut their cash rate?
ANZ
Athena
Auswide Bank
Bank of Melbourne
BankSA
Bankwest
CBA
FreedomLend
Homestar Finance
Macquarie Bank
NAB
Pepper Money
RACQ Bank
RAMS
Reduce Home Loans
St George
Suncorp
UBank
Westpac
 
 
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jrobinson-rf4aSBido9

Investors fare better, as owner-occupiers miss out on full rate cuts

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EXPERT OBSERVER
Anyone who thought that with the Reserve Bank’s cash rate now close to zero, its run of interest rate cuts was over, needs only to read the last sentence of Governor Philip Lowe’s <a href="https://www.rba.gov.au/media-releases/2019/mr-19-27" target="_blank">announcement</a> after Tuesday’s cut:
The Board will continue to monitor developments, including in the labour market, and is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.
For the longest time, the run of cuts was over.
Lowe’s immediate predecessor, Glenn Stevens, cut the cash rate to a record low of 1.5% in August 2016 as something of a “parting gift”, allowing Lowe to take over and keep it steady, unchanged for a record 34 months.
For most of those three years he made it clear the rate was unlikely to fall further. <a href="https://www.rba.gov.au/search/?q=%22rather+than+down%22+lowe+-%22card%22#gsc.tab=0&amp;gsc.q=%22rather%20than%20down%22%20lowe%20-%22card%22&amp;gsc.page=1" target="_blank">Six times</a> he said the next move in rates was likely to be up, “rather than down”, pointing to rate increases overseas and progress on jobs and returning Australia’s unusually low inflation rate to his target band.
By February this year he <a href="https://www.rba.gov.au/speeches/2019/sp-gov-2019-02-22" target="_blank">was backtracking</a>. Although it wasn’t apparent in the published figures, the unemployment rate was about to begin climbing. Wage growth had been far weaker than forecast, inflation showed no sign of returning to the centre of his target band, and forecasts for global growth were falling.
<hr>
Reserve Bank cash rate
<a href="https://images.theconversation.com/files/294952/original/file-20191001-173393-1b2cjw9.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/294952/original/file-20191001-173393-1b2cjw9.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a> <a class="source" href="https://www.rba.gov.au/statistics/cash-rate/" target="_blank">Source: RBA</a>
<hr>
More importantly, consumer spending, which accounts for six in every ten dollars spent in Australia, was extraordinarily weak, growing at less than half the usual rate, as households “responded to this extended period of weaker income growth by progressively downgrading their spending plans”.
The probabilities of next move being up and down had become “more evenly balanced”.
Two weeks after the May election he cut the cash rate, then cut it again, taking it to a new record low of 1%, anticipated by <a href="https://theconversation.com/no-surplus-no-share-market-growth-no-lift-in-wage-growth-economic-survey-points-to-bleaker-times-post-election-110315" target="_blank">only two</a> of the 19 economists surveyed by The Conversation just six months earlier.
The extra cut announced on Tuesday is because the last two didn’t do enough.
House prices have begun to move up (as would be expected with lower rates) but borrowing is growing only slowly, and home building is weak. The Australian dollar is low (in part because of the lower rates), which should help make Australian businesses competitive, but they are not keen to borrow.
Since the last Reserve Bank board meeting we have learned that economic growth is <a href="https://theconversation.com/why-weve-the-weakest-economy-since-the-global-financial-crisis-with-few-clear-ways-out-122942" target="_blank">shockingly low</a>, just 1.4% over the past year, the weakest since the global financial crisis. Household spending is barely keeping pace with population growth.
Lowe would like to believe the economy has reached “a gentle turning point”. He told a <a href="https://www.rba.gov.au/speeches/2019/sp-gov-2019-10-01" target="_blank">community dinner</a> in Melbourne on Tuesday night the board thinks it might have.
There are a number of factors that are supporting this outlook. These include the low level of interest rates, the recent tax cuts, ongoing spending on infrastructure, signs of stabilisation in some established housing markets, and a brighter outlook for the resources sector.
But they will need help. The bank believes the economy is capable of producing an unemployment rate of 4.5%. Instead it has been climbing, to 5.3%.
<h2>How the cuts will help</h2>
The cash rate is determined by the rate the Reserve Bank pays banks who deposit with it overnight. It drives almost every other rate, including the rates banks pay retail depositors, which help determine their cost of lending.
They don’t have to cut their mortgage and business rates in line with cuts in the Reserve Bank cash rate, but they usually do.
The big banks played a game of chicken yesterday, each waiting for the other to move. The Commonwealth Bank moved first, offering just 0.13 of the 0.25 points, followed by the National Australia Bank, which offered 0.15 points.
The real action is in the discounted rates that target borrowers for whom they matter. Before Tuesday they averaged 3.46%. Some were much lower. HSBC Australia wanted just 3.17%. If it passes on Tuesday’s cut in full it will charge only 2.92%, offering the first Australian mortgage rate in history beginning with the number “2”.
There’s every reason to believe the cuts will help. Even if Australians don’t borrow more to buy houses, they will be able to use the historically cheap credit embodied in their house loans to buy other things, such as solar panels whose payoff period will have shortened dramatically.
Since June many mortgage-holders will have saved A$150 on monthly payments.
Sure, confidence and decent wage growth would help, but given how indebted many Australians are, low mortgage rates will do quite a bit on their own.
<h2>Why they’ll continue</h2>
Governor Lowe made it clear on Tuesday that they will have to stay low for “an extended period”. A <a href="https://rba.gov.au/monetary-policy/framework/stmt-conduct-mp-7-2016-09-19" target="_blank">signed agreement with the treasurer</a> requires him to keep them low until unemployment falls and inflation and economic growth return to return to normal levels.
He would like the government to help by boosting spending. He often mentions spending on infrastructure. But his employment contract requires him to use the cards he has been dealt. If the economy is weak, he is required to boost it using the instruments he has.
That’s why he says he is prepared “to ease monetary policy further”.
If needed, he’ll do it as soon as next month, cutting the cash rate to 0.5%. If more is needed beyond that, he will get ready to use so-called <a href="https://theconversation.com/below-zero-is-reverse-how-the-reserve-bank-would-make-quantitative-easing-work-118843" target="_blank">unconventional measures</a> of the kind being used overseas, buying government and corporate bonds in order to force even more money into Australian’s hands.
There’s no reason to believe that the tools he has won’t work, and every reason to believe he’ll keep using them.<img src="https://counter.theconversation.com/content/124499/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
<a href="https://theconversation.com/profiles/peter-martin-682709" target="_blank">Peter Martin</a>, Visiting Fellow, <a href="http://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292" target="_blank">Crawford School of Public Policy, Australian National University</a>
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/0-75-is-a-record-low-but-dont-think-for-a-second-the-reserve-bank-has-finished-cutting-the-cash-rate-124499" target="_blank">original article</a>.
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j.ballantyne1990-6AQqhLzZaK

0.75% is a record low, but don’t think for a second the Reserve Bank has finished cutting the cash rate

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The RBA Governor Philip Lowe speaking after the RBA cut the official cash rate to 0.75 per cent.
Good evening. On behalf of the Reserve Bank Board I would like to thank you for joining us at this community dinner. The Board held its monthly meeting here in Melbourne today. This was the first meeting that we have held in our new offices on Collins Street after last year selling our building on the corner of Collins and Exhibition Streets. So even if we are in a different location, it is really good to be back in Melbourne.
As you are probably aware, at our meeting today, the Board decided to cut the cash rate by a quarter of one per cent to 0.75 per cent.
This decision followed a detailed assessment of both global and domestic developments.
Globally, the main issue at the moment is the uncertainty generated by a series of geopolitical events, particularly the US–China disputes over trade and technology. Understandably, this uncertainty is causing many firms around the world to sit and wait before proceeding with costly investment decisions. At the same time, many businesses are having to deal with disruptions to their supply chains. The result of all this is that after a period of reasonable growth in the global economy, the risks are clearly to the downside.
Central banks are responding to these downside risks by lowering interest rates. With inflation low – and expected to remain low – they are seeking to take out some insurance against the possibility of a noticeable slowdown in economic growth.
From a longer-term perspective though, central banks have for some time been responding to fundamental shifts in the global appetite to save and invest. The underlying explanation for low interest rates globally is that the global appetite to save is high relative to the global appetite to invest.
Like many things in economics it comes down to supply and demand. When the global supply of savings is high relative to the global demand for funding to invest in new capital, the price of savings – or the global interest rate – is going to be low. There are certainly other factors at play as well, but savings and investment decisions are at the heart of the issue.
This means that the key to a return to more normal interest rates globally is addressing the factors that are leading to the low appetite to invest, relative to the appetite to save. This is mainly a task for governments and businesses, not for central banks. Whether or not this will happen, only time will tell. But as a central bank in a small open economy we have to take the world as we find it. While we might wish it were otherwise, we can't ignore these global trends and their impact on our economy. So, the Board is watching these global developments.
Domestically, the Board today discussed how the Australian economy appears to have reached a gentle turning point. The economy has been through a soft patch recently, but we are expecting a return to around trend growth over the next year. There are a number of factors that are supporting this outlook. These include the low level of interest rates, the recent tax cuts, ongoing spending on infrastructure, signs of stabilisation in some established housing markets, and a brighter outlook for the resources sector. Together, these factors provide a reasonable basis for expecting that the economy will remain on an improving trend from here.
The Board has also been paying close attention to the labour market. Over recent years, employment growth has consistently surprised on the upside, which is good news. At the same time, the strong demand for workers has been met with strong growth in the supply of available workers, with the participation rate now at a record high. Partly as a result of this flexibility on the supply side, unemployment is a little higher than it was at the beginning of the year, and there has not been much upward pressure on wages. In turn, this has contributed to the extended run of inflation outcomes below the medium-term target range.
In considering these developments today, the Board decided that it was appropriate to ease monetary policy further. We are seeking to make more assured progress towards both full employment and the inflation target. We still expect to make progress on both fronts, but that progress is slower than we would like. Today's decision will help.
In reaching that decision, the Board recognises that the impact of monetary policy on the economy has changed over time, and that there can be some undesirable side effects from low interest rates. The many people who write to me saying how low interest rates are hurting their finances serve as a constant reminder of this.
But, importantly, the Board also recognises that monetary policy still works. It works to support employment, jobs and income growth across the economy. Today's decision, together with our decisions in June and July, will assist on each of these fronts. In doing so, these decisions will promote the collective economic welfare of the Australian people, which we need to remember is the ultimate goal of monetary policy.
Even so, my earlier point about the solution to low interest rates globally is relevant here in Australia too. We will all be better off if businesses have the confidence to expand, invest, innovate and hire people. Given Australia's strong longer-term fundamentals this should not be out of our reach, but it does require constant effort. One part of this effort could be a renewed focus on structural measures to lift the nation's productivity performance.
At our meeting today, as well as considering monetary policy, the Board had its six-monthly deep dive into financial stability issues. On Friday, the Bank will be releasing the results of this in our <cite>Financial Stability Review</cite>. Ahead of that, I would highlight three issues we discussed.
The first is that internationally, there seems to be a disconnect between the uncertainty that investors feel about the economic situation and the compensation that they require for holding risk. Normally when people feel uncertain about the future, they want to be compensated for taking on risk. At the moment though, despite the uncertainty, credit spreads are low and asset prices are generally high. At our meeting today we talked about the possibility that a shock somewhere in the global system could cause a recalibration, leading to a disruptive repricing of risk.
The second issue is that the resilience of Australia's financial system has steadily improved over recent times. The core capital ratios of our banks are now well within the top quartile of banks around the world. Our banks are well placed to withstand a wide range of shocks and their position will be further strengthened as they meet requirements to increase their loss absorbing capacity further over the next few years.
Lending standards have also been strengthened, although in some areas the pendulum may have swung a bit too far. It is important that our financial institutions support small businesses in particular. Lenders should not be so scared of making a loan that goes bad that they don't provide the credit that the economy needs.
One other risk area that we are paying close attention to is cyber and technology risks. Banks' systems have become more complex and digital platforms are now key to banking. We need to make sure that these systems are safe and resilient.
The third issue is that while the Australian household sector has a high level of debt, it has also built up substantial buffers. All up, the balances in mortgage offset accounts and redraw facilities amount to 16 per cent of outstanding housing debt. This is equivalent to around 2½ years of required mortgage payments at current interest rates. It is important to recognise though that this figure masks a lot of variation across households. We estimate that around a quarter of households with a mortgage have either no buffer or a very small one.
Loan arrears remain low, although they have risen over recent years. Also, we estimate that for almost 4 per cent of borrowers their current loan balance exceeds the value of their property. Over half of these borrowers are in Western Australia where there has been a large and persistent decline in housing prices. So this is an area that bears watching.
On a completely different matter, I would like to draw your attention to the fact that we will be releasing the new $20 note next week, on 9 October. This note is printed here in Melbourne, at our printing works in Craigieburn. I have brought along a few notes tonight hot off the presses for you to have a look at.
I sometimes get asked why the Reserve Bank is replacing the existing series of banknotes, especially when more of us are moving to electronic payments. People also wonder with contactless payments now so ubiquitous, do we still need banknotes?
Given these questions, it might surprise you then to know that the demand for banknotes in Australia is still strong. The stock of banknotes on issue, relative to the size of the economy, is close to the highest it has been in 50 years. It is possible that low interest rates are part of the story here. All up, there are 14 $100 notes on issue for every Australian, 30 $50s, and 7 $20s. That makes for around $3000 worth of banknotes on issue for every Australian. I, for one, don't have anywhere near that amount.
At the RBA, we have recently undertaken some work to understand the whereabouts of all these banknotes. It is hard to know exactly, but we estimate that around a quarter are used to make legitimate day-to-day transactions within Australia.<a id="r1" href="https://www.rba.gov.au/speeches/2019/sp-gov-2019-10-01#fn1">[1]</a> It also appears that between half and three-quarters are held as a store of value in safes, under beds and at the back of cupboards, both here in Australia and elsewhere around the world. We estimate that a further 4 to 8 per cent are used in the shadow economy, either to hide transactions from the tax office or to undertake illegal transactions. Finally, it appears that between 5 and 10 per cent of banknotes are either simply lost, maybe at the beach, or destroyed, perhaps in a natural disaster. So, as best we can tell, that is where all the banknotes are.
One indicator of the decline in the use of banknotes for day-to-day transactions is the fact that the value of cash withdrawals through ATMs has fallen by a quarter over the past decade. Australians have clearly embraced the convenience of contactless payments. We are also increasingly embracing payments through Australia's fast 24/7 payment system, the New Payments Platform. If you have not already got your PayID to use the simple addressing feature of this new system, I encourage you to get one. If your bank is not offering this new fast payment service to you, I encourage you to ask them why. And if you are not happy with the answer, give some thought to switching banks.
Before finishing I would like to return to the question of why we have been issuing a new series of banknotes. The main answer is to keep ahead of the counterfeiters. We have long had one of the safest and most secure currencies in the world. The level of counterfeiting in Australia is low and declining, with around 15 counterfeits detected per million banknotes in circulation in recent times. This compares with rates above 50 for some other major currencies. But the counterfeiters don't stand still and we need to stay ahead. So we have added new high-tech security features to the new banknotes so that they remain safe, secure and reliable. For those of you who still use banknotes for your spending, it would be good to see a bit more use and spending out there.
Finally, I would like to thank you again for joining us this evening. We are looking forward to hearing directly from you about how things are going here in Victoria.
The article was originally posted on www.rba.gov.au.
To read the original article, <a href="https://www.rba.gov.au/speeches/2019/sp-gov-2019-10-01" target="_blank">click here</a>.
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RBA Governor Philip Lowe's Reserve Bank board dinner speech

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Following the RBA cutting the official interest rates to a record low 0.75 per cent, NAB and CBA are the only two of the big four to cut their home loan rates.
They've both heeded pleas from the Prime Minister and have failed to pass on the full 25 basis point cut.
Mozo have calculated the big banks failing to hold back some of the RBA's rate cuts has seen them pocket a $4.7 billion windfall since 2016.
Commonwealth Bank were the first to cut their rates, by just 13 basis points, just over half of the RBA's cut. They are set to make an annual windfall of $334 million by only partially passing on the cut, according to Mozo.
They announced their cut at 6pm, with cuts to take effect from October 22 which will help them pocket $59.9 million by delaying the effective date of their cuts.
CBA passed on the full 0.25 per cent cut to investors paying interest only.
Their lowest variable rate is now 3.22 per cent, the lowest of all the big banks, however Westpac and ANZ are yet to announce their cuts.
<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/2019/10/2/CBA%20rate%20cut.jpg" alt="">
RateCity.com.au chief executive Paul Marshall said CBA’s variable home loan customers will be disappointed by the banks’ decision not pass on a bigger cut.
“As a result, the average CBA home loan customer, on the lowest rate will miss out on $26 per month, or $314 per year.
“The banks are between a rock and a hard place when it comes to passing on rate cuts, because it is a balancing act to satisfy their borrowers, savers and shareholders as rates dip closer to zero.” 
“With the cash rate now so close to zero, the banks are attempting to balance the needs of their shareholders, investors and borrowers.
"However, it’s disappointing to see such small cuts being passed on by two of the big banks.” 
NAB followed Commonwealth Bank's announcement, cutting their owner-occupier principal and interest, and interest only mortgage holders, by 15 basis points.
Their partial cut will save them $120.9 million, and the delay of nine days until the new rates come in to affect will add a further $13.7 million to their pockets. 
<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/2019/10/2/NAB%20rate%20cut.jpg" alt="">
They too passed on a higher rate to investors paying interest only, cutting rates by 0.3 per cent.
The rate cuts are effective from 11 October and are for new and existing customers.
Homestar Finance, Athena Home Loans and Auswide Bank have passed on the full 25 basis point rate cut, while Reduce Home Loans have cut by 20 points.
UBank have also passed on the full cut, with their variable rates dropping 0.25 per cent by October 29.
Pepper Money have also cut, nearly in full. They've cut by 24 basis points.
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NAB and CBA fail to pass on full rate cut

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The RBA have cut rates for the third time this year, bringing the official cash rate down to a historic low 0.75 per cent as consumption remains the main concern along with the unemployment rate and the slow wage growth. 
The cut comes hours after CoreLogic released their September Home Value index which showed <a href="/news/sydney-and-melbourne-compete-to-lead-the-recovery-as-perth-struggles-continue-corelogic-september-update">national dwelling values rose 0.9 per cent over September</a>. 
RBA Governor Philip Lowe noted after the meeting that "there are further signs of a turnaround in established housing markets, especially in Sydney and Melbourne.
"In contrast, new dwelling activity has weakened and growth in housing credit remains low.
"Demand for credit by investors is 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."
Within 15 minutes of the announcement, the likes of Athena Home Loans and Homestar finance have passed on the full 25 basis point cut.
Reduce Home Loans passed on 20 basis points.
The lowest rate owner occupier variable home loans, according to Canstar. To enlarge, <a href="/expert-insights/finance/rba-bow-to-economic-pressures-and-cut-rates-for-third-time-in-2019">click here</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/2019/10/1/Canstar%20variable.jpg" alt="">
Dan White, the managing director of Ray White, said today’s rate cut by the RBA is a win for anyone looking to make a move in the property market, provided it's passed on by banks and lenders to its customers.
“The optimism on the ground across the country for both buyers and sellers is palpable right now and that’s highlighted in our auction clearance rates," White says.
CoreLogic head of research Tim Lawless said the recent evidence of a strong rebound in Sydney and Melbourne housing values wasn’t enough to stave off a rate cut.
"A trend towards higher unemployment and a slowdown in jobs growth were likely the primary factors in the RBA’s decision to cut rates to a new low, as well as concerns around persistently weak household spending, subdued wages growth and low inflation," Lawless noted.
"Lower interest rates together with a subtle loosening in credit policies and improved housing sentiment has seen national housing values recover 1.7% of the 8.4% peak to trough decline in value, with a substantially larger bounce in Sydney and Melbourne. 
Lawless said the rebound in housing conditions should help to support an improvement in economic conditions as higher housing prices translate to a wealthier and more confident household sector who will hopefully be inclined to spend more.  
"Stronger housing conditions should also support the residential construction sector where approvals dropped through the housing downturn. 
"Both household spending and residential construction activity have weighed on economic growth, so a turnaround in these sectors would be a welcome turn of events. 
"Although the housing recovery is likely to add to Australia’s economic momentum, it comes amidst record levels of household debt and ongoing affordability challenges. 
Lawless suggested there is a risk that lower interest rates could fuel a further rise in household indebtedness as housing credit picks up and investors once again become more active, while higher housing prices are likely to curb participation from first home buyers despite the lower cost of debt. 
In this month’s Finder RBA Cash Rate Survey <a href="/expert-insights/finance/over-half-of-economists-surveyed-predict-cash-rate-cut-finder">45 experts and economists made their predictions</a>, with 55% (25/45) correctly predicting an easing of the rate.
They cited the recently released data on employment, retail sales and consumer sentiment as the main drivers of the cut.
Graham Cooke, insights manager at Finder, said nearly three-quarters (72%, 26/36) of experts predicted that the cash rate will reach 0.50% before it starts to increase.
“The RBA uses each cut like a defibrillator to zap the economy back to life but as the rate gets closer to zero, they are running out of options," Cooke said.
“An injection of cash [quantitative easing] and the potential of a negative cash rate may be the only option to stimulate the economy."
Cooke said that lenders are likely to pass on most, but not all of the 25 basis point rate cut if recent history is any indication.
“From across the market, we’ve seen more than 8,700 loan products reduced since June 2019.
“Some lenders have passed on the full 50 point reduction (from the June and July cuts), but most have not.
“After today’s cut, you can expect to see more lenders offering variable rate loans that start with a ‘2’, so if yours doesn’t start with at least a ‘3’ it’s time to shop around,” Cooke said.
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RBA bow to economic pressures and cut rates for third time in 2019

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At its meeting today, the Board decided to lower the cash rate by 25 basis points to 0.75 per cent.
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While the outlook for the global economy remains reasonable, the risks are tilted to the downside. The US–China trade and technology disputes are affecting international trade flows and investment as businesses scale back spending plans because of 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.
Interest rates are very low around the world and further monetary easing is widely expected, as central banks respond to the persistent downside risks to the global economy and subdued inflation. Long-term government bond yields are around 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.
The Australian economy expanded by 1.4 per cent over the year to the June quarter, which was a weaker-than-expected outcome. A gentle turning point, however, appears to have been reached with economic growth a little higher over the first half of this year than over the second half of 2018. 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 should all support growth. The main domestic uncertainty continues to be the outlook for consumption, with the sustained period of only modest increases in household disposable income continuing to weigh on consumer spending.
Employment has continued to grow strongly and labour force participation is at a record high. The unemployment rate has, however, remained steady at around 5¼ per cent over recent months. Forward-looking indicators of labour demand indicate that employment growth is likely to slow from its recent fast rate. Wages growth remains subdued and there is little upward pressure at present, with increased 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 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 and growth in housing credit remains low. Demand for credit by investors is 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.
The Board took the decision to lower interest rates further today to support employment and income growth and to provide greater confidence that inflation will be consistent with the medium-term target. The economy still has spare capacity and lower interest rates will help make inroads into that. The Board also took account of the forces leading to the trend to lower interest rates globally and the effects this trend is having on the Australian economy and inflation outcomes.
It is reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target. The Board will continue to monitor developments, including in the labour market, and is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.
Source: <a href="https://protect-au.mimecast.com/s/5GWICp818qhqLnyQsYh3hc?domain=rba.gov.au" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://protect-au.mimecast.com/s/5GWICp818qhqLnyQsYh3hc?domain%3Drba.gov.au&amp;source=gmail&amp;ust=1569990828732000&amp;usg=AFQjCNG6wQ_QN5r2HRnleIKP5Y46pZgjgA">http://www.rba.gov.au</a>
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It is all about full employment: RBA Governor Philip Lowe's October 2019 meeting statement

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In his speech yesterday to the Armidale Chamber of Business, RBA governor Philip Lowe opened the door for a rate cut next week.
"Over recent times, our economy has been going through a soft patch," Lowe opened his segment on the Australian economy.
He says they [the RBA] were not expecting a slowdown of GDP, which grew by just 1.4 per cent over the year to June, the slowest year-ended growth for a number of years.
"We did not expect this slowdown, so it has come as a bit of a surprise," Lowe suggested.
On interest rates, Lowe said the decisions to ease monetary policy in June and July were taken to help make more assured progress towards full employment and the inflation target.
"Further monetary easing may well be required," Lowe advised.
"Regardless of the short-term outlook for monetary policy, the point about the solution to low global rates is relevant here in Australia too.
"We will all be better off if businesses have the confidence to expand, invest, innovate and hire people.
"Given Australia's strong fundamentals, this is not out of our reach, but it does require constant effort. 
He said that Australia are "at a gentle turning point and expect growth to pick up," however he added that the strength and durability of the pick-up remains to be seen.
Unemployment and underemployment have been they key topics in the RBA's thinking as to when to cut rates, and how far.
Lowe said there has been an accumulation of evidence over recent times that the economy can sustain lower rates of unemployment and underemployment than previously thought likely.
He added that the flexibility of labour supply also means that strong rates of employment growth can be sustained without inflation becoming a problem.
"These are both positive developments," he said.
Lowe suggested inflation will pick up, with it having been below to two to three per cent medium-term target for some time, however said it will "remain below the midpoint of the target range for some time to come."
 
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RBA governor Philip Lowe lays foundations for October rate cut

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EXPERT OBSERVER
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This note is to confirm the RBA forecasts which we released on July 24 that the Bank will cut the cash rate by 25 basis points on October 1 and again by 25 basis points on February 4, 2020.
That call updated our previous call on May 24 when we were the only forecaster (Bloomberg Survey on that day) to argue that the cash rate would fall below 1%.
Over the last few weeks markets had lost confidence in the October view. On September 13 markets priced an October move with a probability of 26%.
We were feeling decidedly lonely with our October call.
However, over the course of last week markets have moved to a 80% probability of this move.
What changed over the week?
The most important development was the release of the September RBA Board minutes.
From our perspective we were encouraged by the sentiments in the minutes.
Following the release of the minutes I wrote:
“The minutes of the Reserve Bank Board’s September meeting contain similar themes to the August minutes but indicate that the Board acknowledges that it is getting closer to its next move on policy.
In August the Board minutes concluded that: “Having eased monetary policy at the previous two meetings, the Board judged it appropriate to assess developments in the global and domestic economies before considering further change to the setting of monetary policy. Members would consider a further easing of monetary policy if the accumulation of additional evidence suggested this was needed to support sustainable growth in the economy and the achievement of the inflation target over time”.
In these minutes there is no reference to previous actions. Arguably reference to previous actions is a clear sign that the Board is content to observe developments whereas not referring to previous actions there is less emphasis on the need to wait.
It is also interesting that the theme that drove the June and July decisions to cut rates: “the Australian economy could sustain lower rates of unemployment and underemployment” was repeated in these minutes whereas that particular theme was absent in the August minutes.
The minutes refer to three “developments that had a bearing on the monetary policy decision”.
- The labour market – strong employment growth was recognised but the unemployment rate had remained steady at 5.2% (recall that the Governor has noted on other occasions that he would like to see the unemployment rate at 4.5%) and that wages growth “had remained low”. Indeed the minutes point out that “the upward trend in wages growth appeared to have stalled”. We are aware that the Governor sees rising wages growth as the key to a sustained lift in spending growth and higher inflation. In addition the minutes noted that “forward – looking indicators had continued to suggest that employment growth would moderate over the following six months”.
- The housing market – it was noted that there was “a turnaround in established housing markets” but from the perspective of economic activity there was “further weakness in dwelling investment in the near term” and low turnover in the housing market meant that “spending on home furnishings and other housing related items was not expected to contribute to consumption growth in the near term”.
- GDP growth – the Board meeting was held the day before the release of the June quarter national accounts. When the RBA released its forecasts on August 9 it was expecting GDP growth in the June quarter to be 0.8%; in the minutes it referred to an expectation of 0.5% due to the weakness of the partials in the lead up to the release. That forecast proved to be correct but the minutes did note that “private final demand was expected to be weak”. (In fact it was flat in the June quarter and down 0.4% for the year! – “weak” is probably an overstatement of the state of final demand).
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BILL EVANS is the Chief Economist at Westpac.
This was first published on <a href="https://westpaciq.westpac.com.au/Article/40369/14186/" target="_blank">Westpac IQ</a>.
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Westpac's Bill Evans confirms October 1 rate cut forecast

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EXPERT OBSERVER
The minutes of the Reserve Bank Board’s September meeting contain similar themes to the August minutes but indicate that the Board acknowledges that it is getting closer to its next move on policy.
In August the Board minutes concluded that: “Having eased monetary policy at the previous two meetings, the Board judged it appropriate to assess developments in the global and domestic economies before considering further change to the setting of monetary policy. Members would consider a further easing of monetary policy if the accumulation of additional evidence suggested this was needed to support sustainable growth in the economy and the achievement of the inflation target over time”.
In these minutes there is no reference to previous actions. Arguably reference to previous actions is a clear sign that the Board is content to observe developments whereas not referring to previous actions there is less emphasis on the need to wait.
It is also interesting that the theme that drove the June and July decisions to cut rates: “the Australian economy could sustain lower rates of unemployment and underemployment” was repeated in these minutes whereas that particular theme was absent in the August minutes.
The minutes refer to three “developments that had a bearing on the monetary policy decision”.
<ul>
<li>The labour market – strong employment growth was recognised but the unemployment rate had remained steady at 5.2% (recall that the Governor has noted on other occasions that he would like to see the unemployment rate at 4.5%) and that wages growth “had remained low”. Indeed the minutes point out that “the upward trend in wages growth appeared to have stalled”. We are aware that the Governor sees rising wages growth as the key to a sustained lift in spending growth and higher inflation. In addition the minutes noted that “forward – looking indicators had continued to suggest that employment growth would moderate over the following six months.”</li>
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<li>The housing market – it was noted that there was “a turnaround in established housing markets” but from the perspective of economic activity there was “further weakness in dwelling investment in the near term” and low turnover in the housing market meant that “spending on home furnishings and other housing related items was not expected to contribute to consumption growth in the near term”.</li>
</ul>
<ul>
<li>GDP growth – the Board meeting was held the day before the release of the June quarter national accounts. When the RBA released its forecasts on August 9 it was expecting GDP growth in the June quarter to be 0.8%; in the minutes it referred to an expectation of 0.5% due to the weakness of the partials in the lead up to the release. That forecast proved to be correct but the minutes did note that “private final demand was expected to be weak”. (In fact it was flat in the June quarter and down 0.4% for the year! – “weak” is probably an overstatement of the state of final demand).</li>
</ul>
On the international front the overriding theme was that “the escalation of the US–China trade and technology disputes, …had intensified the downside risks to the global outlook”. The outlook for China deteriorated somewhat and the trade disputes were weighing on East Asia generally.
On monetary policy the minutes note that markets priced in 100 basis points of easing from the Federal Reserve while generally “further monetary policy easing was widely expected “from a number of central banks.
Finally, the minutes point out that, for Australia, “ financial market pricing continued to imply that the cash rate was expected to be lowered by another 25 basis points by November, with a further cut expected in the early part of 2020”.
Conclusion
The minutes make a fairly clear case for another rate cut in 2019.
With two meetings now having passed since the last move and , from my perspective, most importantly, the key rate cut theme that “ the Australian economy could sustain lower rates of unemployment and underemployment” returning to the narrative, our central view that there is no reason to wait until November for the next move still seems reasonable.
November is typically favoured by the RBA since it is a time when it can refresh its forecasts although we are not expecting any significant changes along the lines of August when the forecast unemployment rate was lifted; the forecast pace of wages growth was lowered; and the timing of the return of inflation to the 2–3% band was pushed out by a year. The growth forecast in 2019 is likely to be lowered but the 2020 forecast should remain intact.
However, as the minutes warn, “developments in the international and domestic economies, including the labour market” will be assessed to see whether a further easing of policy is “needed”.
Westpac continues to predict cuts in the cash rate of 25 basis points in both October and February next year.
BILL EVANS is the Chief Economist at Westpac.
This was first published on <a href="https://westpaciq.westpac.com.au/Article/40295/52930/" target="_blank">Westpac IQ</a>.
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