Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

Rba Rate Decision

<html><body>
The RBA have suggested that the there will be another cut later in the year.
"Financial market pricing implied that the cash rate target was expected to be lowered by 25 basis points at the present meeting, with a further 25 basis point reduction expected later in the year," the RBA said in their June 2019 meeting minutes.
"Given the amount of spare capacity in the labour market and the economy more broadly, members agreed that it was more likely than not that a further easing in monetary policy would be appropriate in the period ahead."
The meeting minutes highlighted that the Coalition government win, paired with APRA's announcement that they will loosen their lending standards, will effect the housing market.
The RBA Governor Philip Lowe said in the June meeting minutes that it is too early to determine the overall effects, however he cited the auction clearance rates in Sydney "increasing noticeably following these developments."
"Members noted that the housing market was likely to be affected by the removal of uncertainty around possible changes to taxation arrangements relating to housing," Lowe said.
"They also considered the effects of the Australian Prudential Regulation Authority's (APRA's) proposal to amend its requirement for banks to determine the borrowing capacity of loan applicants using a specified minimum interest rate."
The RBA noted that building approvals declined further in April to be more than 20 percent lower over the preceding 12 months.
"This suggested that, even if there were a marked turnaround in housing sentiment, given the lags involved it would take some time for this to translate into higher residential construction activity," Lowe added.
Lowe said housing credit had stabilised in recent months, having slowed substantially over the preceding year.
One of the biggest segments the RBA were monitoring when considering cutting the official interest rate was the labour market.
"The data on conditions in the labour market in April had been mixed," Lowe said.
"Members noted the significant uncertainty around modelled estimates of the unemployment rate consistent with full employment.
"The unemployment rate had increased to 5.2 per cent in April from (an upwardly revised) 5.1 per cent in March.
"This followed a six-month period during which the unemployment rate had remained at around 5 per cent. 
"The increase in the unemployment rate had been accompanied by an increase in the participation rate to its highest level on record. 
To read the full minutes, <a href="/expert-insights/finance/minutes-of-june-2019-monetary-policy-meeting-of-the-reserve-bank-board">click here</a>.
 
 
</body></html>

jrobinson-rf4aSBido9

Further cash rate cut expected later in the year: RBA June 2019 meeting minutes

<html><body>
EXPERT OBSERVER
Developments since the RBA rate cut on Tuesday 4 June have provided us with further confidence that our forecast for three rate cuts in 2019 will prove accurate. Firstly, the Governor has pointed to an ambitious objective for the labour market, with an unemployment rate of 4.5% seen as necessary to bring inflation back to target. This is despite his own forecasts indicating a 5% result on the basis of two rate cuts. That challenge can certainly be interpreted as an expectation of the need to deliver more than just two rate cuts.
Our earlier discussion on 24 May around our target cash rate of 0.75% emphasised downside risks to the cash rate, but noted the difficulties in lowering the cash rate below 0.5% and providing some pass through to the general economy – except for the impact on the currency. We concluded that 0.5% could be the lower bound for the cash rate, although we are comfortable with our 0.75% target. The Governor considered international precedence and referred to the 0.25-0.50% seen in the US, UK and Canada, but did not indicate whether the same level would be effective for Australia.
The other significant development since the RBA meeting has been the disappointing GDP report for the March quarter. This again highlighted the key themes that have been most prominent in our consistent assessment that the Australian economy is likely to continue operating well below potential, namely weak household income growth, a cautious consumer and a turning point in the savings rate.
This report, showing that GDP growth was only 0.4% in the March quarter is likely to trigger a further downward revision to the RBA’s 2019 GDP forecast. Westpac has consistently forecast around 2.2% for GDP growth in 2019, while the RBA has recently lowered its forecast from 3% in February to 2.75% in May (2.6% to 1 decimal point), with a likely further downward revision in August.
We have also argued that it will be difficult to retain the 1.75% underlying inflation forecast for 2019 by August when, as we expect, the June quarter underlying CPI will print 0.4% for a total of 0.7% for the first half of the year. We think it will be important that when the RBA addresses these lower forecasts, it responds with a further rate cut in August and another one to follow in November.
There has been some speculation that the RBA may cut earlier in July. This is not our central view given the likely need to respond to these downward revisions in August.
Turning to the US, we have revised our federal funds rate profile to include two cuts of 25bps in September and December this year.
A key influence on this assessment is that a new variable has entered the US economic model – one labelled “political unpredictability”. This variable is certain to have a negative coefficient on any equation describing US investment decisions and general confidence. We believe that it is now so embedded in US business behaviour that even resolutions of the current trade controversies are unlikely to convince business that the coast is clear.
We expect the FOMC will be assessing current risks in a similar fashion, revising down central growth views, particularly around business investment and confidence, and widening the uncertainty bands around these views. Chair Powell has recently pivoted from his previous “patient” stance to one where he is prepared to act and it is likely that the FOMC are seeing this variable as part of their risk assessment.
At this stage, we are not franking market pricing by extending the rate cuts into 2020 as we expect some reasonable resolutions to the current crises to prevent a ‘worst case’ scenario, particularly for the US consumer. Failure to resolve these issues would lead to a considerable shock to household disposable income and household demand. That development, of course, would require further action from the FOMC than we are currently forecasting. In 2020, with the consumer remaining in reasonable shape, we would also expect the housing market, which has currently stabilised, to respond to this lower profile for interest rates.
With markets currently pricing in more extensive cuts than we are forecasting, we see little scope for further declines in US yields in 2019, and anticipate they will rise modestly through 2020.
Given that markets are still not fully pricing in our RBA view by the end of 2019 and are more aggressive on the profile for federal funds rate cuts, we are comfortable to retain our central forecast that the AUD drifts down to USD 0.66, albeit reaching that level in the first half of 2020 rather than late 2019.
BILL EVANS is the Chief Economist for Westpac
</body></html>

bevans-rYk9SxEa4r

RBA moves further towards two additional rate cuts: Bill Evans

<html><body>
Home loan lenders have continued to cut rates following the RBA rate cut announcement on Tuesday.
The <a href="/expert-insights/finance/who-cut-their-interest-rates-following-the-rbas-move">big four banks all cut within a few hours</a> following the decision for the RBA to cut rates to 1.25%, the lowest in history and the first time they've moved since August 2016.
ING, Bank of Queensland, Virgin Money, Qudos Bank and Newcastle Permanent have moved their variable interest rates since the last RateCity.com.au update yesterday.
ING, the nation’s fifth largest home loan lender chose to pass the full 0.25 per cent cut on to their variable rate customers, effective 25 June 2019
BOQ is only passing 0.15 per cent on to their most popular product, the Clear Path variable rate package, while all other variable rate loans will be cut by the full 0.25 per cent.
Virgin Money is passing on 0.22 per cent to their variable rate customer.
Popular banks still yet to announce their intentions include BankWest, Bendigo Bank, Adelaide Bank, ME Bank, HSBC and AMP.
<img src="https://www.urban.com.au/images/2019/6/6/RateCity%20New%20Rates.JPG" alt="">
The first to cut was Athena, a small Sydney-based non-bank lender who only entered the market this year. They cut their rates by the full 25 basis points within 15 minutes of the RBA decision.
The online lender announced a new headline variable rate for owner-occupiers at 3.34 percent.
The <a href="/expert-insights/finance/anz-first-to-pass-on-part-of-june-2019-rba-rate-cut">first big four bank to cut was the ANZ</a>, just nine minutes after the RBA's announcement, however they've been outed by Treasurer Josh Frydenberg because they only cut 18 basis points, as opposed to the 25 basis points the RBA cut by.
“I think the ANZ has let down its customers,” Frydenberg said.
Commonwealth Bank were next, <a href="/news/cba-announce-full-rate-cut-after-june-rba-meeting">announcing their 25 basis point cut</a> at around 3.30pm. 
Effective from June 25, CBA's standard variable rate will drop by 0.25%.
NAB joined CBA with <a href="/expert-insights/finance/nab-joins-cba-in-full-0-25-rate-cut-to-historic-lows">a full 25 basis point cut</a> for their standard variable rate which will be the lowest rate they have offered in four decades.
Westpac were the last to cut, <a href="/expert-insights/finance/westpac-to-cut-by-0-2-but-more-for-io-borrowers">only passing on a 20 basis point cut</a>.
TERM DEPOSITS
We saw a huge flurry of cuts to term deposits in the lead up to Tuesday’s RBA rate announcement, as banks moved to price the expected cut in. Over 50 banks have cut term deposit rates in the past two months.
This week, the term deposit rate cuts continue to come in, particularly from Westpac and ANZ. A stocktake of the big 4 banks below:
<ul type="disc">
<li>ANZ – ANZ has cut almost 20 term deposit rates and has hiked just a couple since Tuesday. The biggest cut on our database is 0.60 per cent;</li>
</ul>
<ul type="disc">
<li>Westpac – Westpac has also changed a range of term deposit rates since the beginning of the week, cutting by up to 0.50 per cent and increasing one by 0.25 per cent. Westpac’s at-call deposits remain under review;</li>
</ul>
<ul type="disc">
<li>CBA – no change to date;</li>
</ul>
<ul type="disc">
<li>NAB – no change to date.</li>
</ul>
RateCity.com.au’s research director Sally Tindall said Tuesday’s rate announcement was like rubbing salt into a wound for savers.
“It’s been a tough slog for savers over the last three years, and while a range of factors influence deposit rates, we’re expecting them to sink even further," Tindall said.
“It is especially frustrating to see ANZ and Westpac hold back part of a home loan rate cut with one hand and slash some of their deposit rates with the other.
“It does still pay to shop around. Right now, you can find term deposit and savings rates that offer up to around 3 per cent, however, these rates are unlikely to last for long,” she said.
</body></html>

j.ballantyne1990-6AQqhLzZaK

What are lenders doing following the June RBA rate cut? RateCity

<html><body>
The RBA cut rates for the first time in nearly three years at its June meeting to a record low 1.25%.
It had previously stood at 1.5%, which had been a record low rate, since it was last cut from 1.75% in August 2016.
Over 90% of the economists and experts surveyed in Finder.com.au's monthly RBA Cash Rate Survey <a href="/expert-insights/finance/over-90-of-experts-and-economists-predict-cut-finders-rba-cash-rate-survey">predicted the cut</a>.
RBA Governor Philip Lowe has <a href="/news/why-the-rba-cut-rates-to-record-lows-governor-philip-lowe">explained the cash rate cut</a>, suggesting the "decision was taken to support employment growth and to provide greater confidence that inflation will be consistent with the medium-term target."
Today the RBA have released their chart pack, which highlights key factors in the Australian economy.
Property Observer takes a look at four key charts which will have been strong influencers in the decision to cut the official interest rate.
1. GDP Growth
Australia's GDP growth continued its decline toward two percent.
The economy only grew 0.3 percent in the September quarter and 0.2 percent in the December quarter, an annualised rate of just one percent. <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/2019/6/5/GDP-growth.jpg" alt="">
2. Consumer Price Inflation
Consumer Price Inflation has continued its downward trajectory towards one percent. 
Income and spending per person fell in the December quarter, following a September quarter where it barely grew.
UNSW's Peter Martin <a href="/expert-insights/finance/the-reserve-bank-will-cut-rates-again-and-again-until-we-lift-spending-and-push-up-prices">says the RBA cut rates</a> because "we aren’t spending or pushing up prices at anything like the rate it would like."
<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/2019/6/5/CPI.jpg" alt=""> 
3. Underlying Inflation
Since 1993, the RBA has targeted inflation of between two and three per cent, on average, over the course of the business cycle.
The latest March quarter figures has the inflation tracking further away from the two to three percent bracket.
<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/2019/6/5/underlying-inflation.jpg" alt=""> 
4. Unemployment
The latest unemployment figures were a mixed bag.
Total employment rose 28,400 in April, stronger than the market median estimate of over 15,000.
Full-time employment in April fell 6,300 with part-time employment growing 34,700.
<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/2019/6/5/Labor-Market.jpg" alt="">
The big surprise in the April results was the jump in the unemployment rate from 5.1% to 5.2%.
This was the result of a jump in the participation rate to a new record high of 65.85%. 
To see the full chart pack from the RBA, <a href="https://www.rba.gov.au/chart-pack/" target="_blank">click here</a>.
 
 
 
 
</body></html>

The key charts that determined the RBA's June rate cut

<html><body>
The RBA cut the official cash rate to a historic low 1.25% in its June meeting, the first time it's cut the rate in nearly three years.
A number of lenders followed suit, cutting their rates, some within the hour, after the announcement.
The first to cut was Athena, a small Sydney-based non-bank lender who only entered the market this year. They cut their rates by the full 25 basis points within 15 minutes of the RBA decision.
The online lender announced a new headline variable rate for owner-occupiers at 3.34 percent.
The <a href="/expert-insights/finance/anz-first-to-pass-on-part-of-june-2019-rba-rate-cut">first big four bank to cut was the ANZ</a>, just nine minutes after the RBA's announcement, however they've been outed by Treasurer Josh Frydenberg because they only cut 18 basis points, as opposed to the 25 basis points the RBA cut by.
“I think the ANZ has let down its customers,” Frydenberg said.
“This is deeply disappointing from the ANZ.
"We heard from Commissioner Hayne just months ago that the banks were putting profits before people. Actions like this don't give the Australian people any comfort that the banks have changed their behaviour”
ANZ chief executive Shayne Elliott said it was unfair to keep cutting depositor rates and penalising people who rely on interest income.
<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/2019/6/5/Banks-interest0-rates.jpg" alt=""> The banks rate moves since January 2018. Source: DFA
The other big four banks weren't all going to follow suit.
Commonwealth Bank were next, <a href="/news/cba-announce-full-rate-cut-after-june-rba-meeting">announcing their 25 basis point cut</a> at around 3.30pm. 
Effective from June 25, CBA's standard variable rate will drop by 0.25%.
Angus Sullivan, group executive retail banking services, said “we have carefully considered the RBA rate decision and the current funding environment, together with how we continue to meet our regulatory commitments, capital requirements, and community expectations."
NAB joined CBA with <a href="/expert-insights/finance/nab-joins-cba-in-full-0-25-rate-cut-to-historic-lows">a full 25 basis point cut</a> for their standard variable rate which will be the lowest rate they have offered in four decades.
Mike Baird, chief customer officer of consumer banking, said “we strongly believe reducing rates is the right thing to do by our customers and reflects our focus on earning trust in the community and rewarding our loyal existing customers."
Westpac were the last to cut, <a href="/expert-insights/finance/westpac-to-cut-by-0-2-but-more-for-io-borrowers">only passing on a 20 basis point cut</a>.
There will be higher rate cuts for its investor only borrowers who will be a 35 basis point cut.
David Lindberg at Westpac said the bank took many factors into account in making the decision.
“We are operating in a historically low interest rate environment, which creates the opportunity for home-owners to get ahead on their repayments,” he said.
“It is also a good time for first home buyers to get onto the property ladder with some of the lowest rates in the history of the Australian mortgage market available.”
The quick moves from the big four is in stark contrast to when the RBA last cut the cash rate in August 2016.
Only three of the big four banks passed on the full cut last time around, and waited up to 20 days to do so.
Graham Cooke, insights manager at home loan comparison site Finder.com.au, said if your bank doesn't cut, then you should look elsewhere.
“If you don’t get the full rate cut, vote with your feet," Cooke said. “A lower cash rate will spur even further competition within the market so it is the perfect time to weigh up your options as you have the bargaining power.
"The best value home loan rates right now start with a ‘3’,” he said. 
Finder's research shows the average variable rate across all lenders is 4.91%. If lenders cut the full 25 basis points, mortgage holders could save $1,812 a year on a $1 million loan.
Click here <a href="https://www.propertyobserver.com.au/images/2019/6/5/Potential-savings-finder.jpg" target="_blank">to enlarge</a>.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/6/5/Potential-savings-finder.jpg" alt="">
Other lenders who have either cut or have announced they will be cutting their home loan rates.
<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/2019/6/5/Rate-cutters.jpg" alt="">
 
</body></html>

Who cut their interest rates following the RBA's move?

<html><body>
EXPERT OBSERVER
The Reserve Bank cut interest rates on Tuesday because we aren’t spending or pushing up prices at anything like the rate it would like. And things are even worse than it might have realised.
As the board met in Martin Place in Sydney, in Canberra at 11.30 am the Bureau of Statistics released details of retail spending in April, one month beyond the March quarter figures the bank was using to make its decision.
They show the dollars spent in shops fell in April, slipping 0.1%, notwithstanding weakly growing prices and a more strongly growing population.
The March quarter figures the board was looking at were adjusted for prices. They show that the volume of goods and services bought, but not the amount paid for them, fell in seasonally adjusted terms during the March quarter.
Adjusted for population, the volume bought would have fallen further.
<h2>We’ll know more on Wednesday</h2>
The Bureau of Statistics will release population-adjusted figures as part of the national accounts on Wednesday.
The figures for the September quarter show that income and spending per person barely grew. The figures for the December quarter show income and spending per person fell.
A second fall in the March quarter will mean two in a row – what some people call a per capita recession.
<hr>
<a href="https://images.theconversation.com/files/275325/original/file-20190520-69186-1pvxbji.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/275325/original/file-20190520-69186-1pvxbji.png?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.propertyobserver.com.au/http://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0" target="_blank">Australian National Accounts</a>
<hr>
Even unadjusted for population, economic growth is dismal.
During the September and December quarters the economy grew just <a href="https://www.propertyobserver.com.au/http://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0" target="_blank">0.3% and 0.2%</a> – an annualised rate of just 1%.
That’s well short of the <a href="https://www.smh.com.au/business/the-economy/myefo-treasury-downgrades-its-budget-projections-20151124-gl6mfd" target="_blank">2.75%</a> the treasury believes we are capable of, and the lower than normal <a href="https://budget.gov.au/2019-20/content/overview.htm" target="_blank">2.25%</a> it has forecast for the year to June.
<hr>
<a href="https://images.theconversation.com/files/275322/original/file-20190520-69199-1ir7rrj.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/275322/original/file-20190520-69199-1ir7rrj.png?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.propertyobserver.com.au/http://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0" target="_blank">Australian National Accounts</a>
<hr>
We’ve been doing it by ourselves. As Reserve Bank Governor Philip Lowe said in <a href="https://www.rba.gov.au/media-releases/2019/mr-19-15" target="_blank">announcing the rates decision</a> on Tuesday:
"The main domestic uncertainty continues to be the outlook for household consumption, which is being affected by a protracted period of low income growth and declining housing prices."
The bank wants both inflation and employment higher, and it wants us to spend more in order to do it. Lower rates should help, although <a href="https://theconversation.com/why-the-reserve-bank-shouldnt-but-might-cut-interest-rates-on-tuesday-116354" target="_blank">not for everybody</a>.
Lowe acknowledged this in a <a href="https://www.rba.gov.au/speeches/2019/sp-gov-2019-06-04" target="_blank">speech to a Sydney business audience on Tuesday night</a>, but he said households paid two dollars in interest for every one dollar of interest they received. So while rate cuts hurt savers, they benefit borrowers by more, and over time should benefit all households by boosting the economy. They also drive the dollar lower, making Australian businesses more competitive.
Tuesday’s cut should free up an extra A$60 a month for a typical mortgage holder. Another one will free up a total of A$120.
It’s not much, and there’s doubt about whether it will do much, but interest rates are about the only tool the Reserve Bank has.
It is required by its agreement with the government to aim for an inflation rate of between <a href="https://rba.gov.au/monetary-policy/framework/stmt-conduct-mp-7-2016-09-19" target="_blank">2% and 3%</a>, “on average, over time”.
<img src="https://images.theconversation.com/files/270879/original/file-20190425-121220-1csg8ma.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="">Treasurer and Reserve Bank Governor, Statement on the Conduct of Monetary Policy, September 19, 2016. <a class="source" href="https://rba.gov.au/monetary-policy/framework/stmt-conduct-mp-7-2016-09-19" target="_blank">Reserve Bank of Australia</a>
Uncomfortably for Governor Lowe, underlying inflation (abstracting from unusual moves which are quickly reversed) has been below 2% ever since he was appointed governor in late 2016.
Explaining his push for higher inflation to a business audience in Sydney on Tuesday night he said that while adherence to the target was intended to be flexible, that flexibility was “not boundless”.
"If inflation stays too low for too long, it is possible that inflation expectations move lower – that Australians come to expect sub-2% inflation on an ongoing basis. If this were to happen, it would be harder to achieve the medium term inflation goal. So we need to guard against this possibility."
He is also required to <a href="https://rba.gov.au/monetary-policy/framework/stmt-conduct-mp-7-2016-09-19" target="_blank">aim for full employment</a>.
He told the business audience that while for some years the bank and others had thought full employment meant an unemployment rate of 5%, the absence of inflation at 5% and the persistence of underemployment (where people wanted more hours) meant it could and should go lower.
"Our judgement now is that we can do better than this – that we can sustain an unemployment rate of 4 point something."
Lower interest rates should help by making it easier to businesses to borrow to expand, and giving consumers something in their pockets to buy from them.
<h2>If you don’t succeed…</h2>
If that doesn’t happen, the bank will cut again.
Tuesday’s statement as good as said so:
"The board will continue to monitor developments in the labour market closely and adjust monetary policy to support sustainable growth in the economy and the achievement of the inflation target over time."
Tuesday’s cut and the next will take the bank into uncharted waters, where its so-called cash rate – what it pays to banks to deposit money with it overnight – is close to zero.
As far as can be discerned it has never been that low in the 100+ years the Reserve Bank has been in operation, originally as the Commonwealth Bank of Australia.
<hr>
Reserve Bank cash rate since 1990
<a href="https://images.theconversation.com/files/277841/original/file-20190604-69059-1j2m4r9.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/277841/original/file-20190604-69059-1j2m4r9.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/media-releases/2019/mr-19-15" target="_blank">Reserve Bank of Australia</a>
<hr>
Should inflation still not pick up and employment still not fall as far as it believes it could, it will have to effectively cut its cash rate below zero, forcing cash into the hands of banks by aggressively buying government bonds, giving them little choice but to lend it to households and businesses, in a process known as quantitative easing. It has been done in the United States, Europe, the United Kingdom and Japan, and is by now <a href="https://www.bankofengland.co.uk/monetary-policy/quantitative-easing" target="_blank">anything but unconventional</a>.
Governor Lowe would prefer the government to pull its weight by cutting tax and boosting spending, especially on infrastructure, and by policies that make Australia more productive.
He said so on Tuesday night
"The best approach to delivering lower unemployment and a stronger economy is through structural policies that support firms expanding, investing, innovating and employing people. As we ease monetary policy, it is in the country’s interest that other policy options are considered too.
Treasurer Josh Frydenberg gets it.
He pointed out on Tuesday that the yet-to-be-approved tax offsets in the budget will give Australians on up to A$126,000 a cash bonus of up to A$1,080 when they submit this year’s tax return, far more than the rate cut.
His biggest concern, and the biggest concern of the governor, might be that they don’t spend it. Another concern would be that the banks don’t pass the rate cut on.
The ANZ has said it will only cut mortgage rates by 0.18 points instead of the full 0.25, a decision Frydenberg said “let down” customers. Westpac has cut by only 0.20 points. The National Australia and Commonwealth banks have passed on the cut in full.
On Tuesday night in Sydney Governor Lowe addressed the question of whether the banks should have passed on the full cut head on:
"My usual practice in answering this question has been to explain that there are a range of other factors that influence mortgage pricing, and then say “it all depends”.
"Today, though, I would like to break with my usual practice and provide a clearer answer. And that is: Yes. There has been a substantial reduction in the cost of banks raising funds in wholesale markets. Average rates on retail deposits have also come down.
This means that the lower cash rate should be fully passed through into standard variable mortgage rates. Full pass-through would also mean that the economy receives the full benefit of today’s policy decision.
The Governor is concerned that, for their own reasons, lenders such as ANZ and Westpac are forcing him to cut rates lower than he should and making an already difficult job harder.
If he has to cut further he will, but with the cash rate at just 1.25%, he would dearly love not to have to.
<a href="https://images.theconversation.com/files/277854/original/file-20190604-69071-xecu9u.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/277854/original/file-20190604-69071-xecu9u.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/media-releases/2019/mr-19-15" target="_blank">Reserve Bank of Australia</a>
<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/the-reserve-bank-will-cut-rates-again-and-again-until-we-lift-spending-and-push-up-prices-118263" target="_blank">original article</a>.
</body></html>

The Reserve Bank will cut rates again and again, until we lift spending and push up prices

<html><body>
EXPERT OBSERVER
As had become widely expected in the past two weeks, the Reserve Bank of Australia has cut the official cash rate by 0.25% which takes it to 1.25%.
This is the first move in official interest rates since August 2016 but is the 13th rate cut in this rate cutting cycle that started back in November 2011 when rates were 4.75%. (It’s not a new rate cutting cycle as rates have not been raised since they started to fall in 2011.) This takes the cash rate to a record low 1.25% in the longest easing cycle on record.
Assuming banks cut their rates by 0.25% it will take deposit rates to their lowest since the mid-1950s and headline mortgage rates to their lowest since the early 1950s, although some mortgage rates are already at record lows.
<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/2019/6/5/Chart1.jpg" alt="">
So what’s driven this? Will it help the economy? How low might rates go? And what does it mean for investors?
What drove the rate cut?
Put simply economic growth has slowed sharply below its long- term potential reflecting the housing downturn, but other factors from drought to the threat to global growth from the US trade wars cloud the outlook.
This in turn has seen the outlook for unemployment deteriorate – at a time when there is still a high combined level of unemployed and underemployed (at 13.7% of the workforce). Which in turn threatens to keep wages growth low and inflation below the RBA’s 2-3% inflation target for even longer.
Reflecting this the RBA has revised down sharply its growth and inflation forecasts over the past six months and now doesn’t see inflation rising above 2% out to 2021 even with the technical assumption of two rate cuts.
The RBA has concluded that it needs much lower unemployment than the 5% or so recently seen to get inflation back to target. But recent indicators point to rising unemployment. Hence the RBA has returned to cutting the cash rate to help boost growth.
What’s driving low inflation?
Inflation was just 1.3% over the year to the March quarter. Abstracting from volatile items, underlying inflation is just 1.4%.
This reflects a combination of weak demand, high levels of spare capacity &amp; underutilised workers, intense competition, technological innovation &amp; softish commodity prices. The problem is that inflation has been undershooting RBA forecasts and the inflation target for some time, threatening its credibility.
<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/2019/6/5/Chart2.jpg" alt="">
What’s wrong with low inflation anyway?
Surely low price rises or falling prices are good. So, many have suggested the RBA should just lower its inflation target. Such arguments are nonsense. First, the whole point of having an inflation target is to anchor inflation expectations. If the target is just moved each time it’s breached then those expectations will blow around. There would be no point having an inflation target.
Second, there are problems with allowing too-low inflation. Statistical measures of inflation tend to overstate actual inflation by 1-2% because statisticians have trouble adjusting for quality improvements. And targeting too low an inflation rate could mean we are knocked into deflation in an economic downturn.
Third, deflation is not good if its associated with falling wages, rising unemployment, falling asset prices and rising real debt burdens – particularly when debt levels are high. It risks a debt deflation spiral of falling asset prices &amp; incomes leading to rising debt burdens and defaults, and more falls in asset prices, etc.
Finally, targeting very low inflation gives central bankers less flexibility to achieve easy monetary policy in downturns as they have limited ability to achieve negative real interest rates.
More simply, low inflation is synonymous with low wages growth and this is contributing to a sense of dissatisfaction in the community. Getting both up to more normal levels is desirable.
It’s global not just local
While its natural to assess the RBA in isolation it’s clear that it is being caught up in global forces. The weakness in inflation is evident globally and reflects the same drivers as in Australia. Combine this ongoing softness in inflation with the latest threat to global growth – from Trump’s trade wars – and bond yields have pushed to new record lows globally. Reflecting this Australia bond yields have also been pushed to a new record low. So, the RBA is really just ratifying global market forces!
<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/2019/6/5/Chart3.jpg" alt="">
&gt;
How far will the RBA cut rates?
Rate cuts are a bit like cockroaches. If you see one there is normally another nearby. We expect another 0.25% rate cut in July or August and two more rate cuts by mid next year taking the cash rate to 0.5%. We had thought 1% would mark the low and positive signs regarding residential property prices are helpful in this regard.
But the flow of weak economic data and increasing risks to the global outlook with Trump’s trade wars and the slowing jobs market pointing to unemployment rising to 5.5% by year end make it hard to see just two rates cuts being enough, given that the RBA really needs to see unemployment fall to 4% or below to get inflation back to target.
But will the banks pass on RBA rate cuts?
With the recent reduction in bank funding costs meaning that last year’s 0.1-0.15% mortgage rate hikes should now be reversed and nearly 90% of bank deposits on interest rates above 0.5% (and hence able to be cut) we expect most banks to pass on all or the bulk of the RBA’s cut to customers. Short of a funding cost blow out, the interest rate structure on deposits should allow the bulk of subsequent cuts to be passed through but this may diminish as the cash rate reaches 0.5%.
But will more rate cuts help anyway?
Various arguments have been put up against RBA rate cuts: it should “preserve its fire power till it’s really needed”; “rate cuts haven’t helped so far so why should more cuts help”; “low rates won’t help as they cut the spending power of retirees and many of those with a mortgage just maintain their payments when rates fall”. However, looking at these in turn:
First, waiting till rate cuts are “really needed” risks leaving it too late as by then the economy will be in recession – monetary policy needs to be forward looking.
Second, rate cuts have helped the economy rebalance after the end of the mining investment boom by supporting non-mining spending. If the cash rate was still 4.75% and mortgage rates 7.5% the economy would have long ago gone into recession.
Finally, the level of household debt is more than double that of household deposits, so the household sector is a net beneficiary of lower interest rates. The responsiveness to changes in spending power for a family with a mortgage is far greater than for retirees. And, even if many with a mortgage just let their debt get paid off faster in response to falling rates this provides an offset to the negative wealth effect of the fall in house prices, reducing pressure to cut spending.
And RBA rate cuts help keep the $A lower. So, while rate cuts may not be as potent with higher household debt levels and tighter lending standards, they should provide some help for households with a mortgage and for businesses that compete internationally.
Should the RBA do quantitative easing?
As the cash rate falls, we are likely to see an increasing debate around whether the RBA will use quantitative easing - ie using printed money to buy bonds to inject cash into the economy. QE is not our base – as we don’t think things are that bad – but as has been the case at other major central banks the RBA is likely to prefer exhausting cash rate cuts before considering QE and this is unlikely until it gets the cash rate down to 0.5% (beyond which lower rates will be a negative for the banks).
QE is an option but to the extent that it lowers 10-year bond yields it may not help much in Australia as most household borrowing is on short term rates. It’s also debatable as to whether QE was the best approach globally. A more efficient and fairer option may be for the RBA to work with the Federal Government to provide direct financing of government spending or “cheques in the mail” to households with use by dates.
This is often referred to as “helicopter money”. Such stimulus would be guaranteed to boost inflation! Hopefully, it won’t come that, and we don’t think it will but it’s an option. In the meantime, more fiscal stimulus could take some pressure off the RBA.
Implications for investors?
There are a number of implications for investors from the continuing fall in interest rates. First, low interest rates will remain in place for some time keeping bank deposit rates unattractive so it’s important for investors in bank deposits to assess alternative options.
Second, the low interest rate environment means the chase for yield is likely to continue supporting commercial property, infrastructure and shares offering sustainable high dividends. Eg, the grossed-up yield on shares remains far superior to the yield on bank deposits. Investors need to consider what is most important – getting a decent income flow from their investment or absolute stability in the capital value of that investment. Of course, the equation will turn less favourable if economic growth weakens too much.
<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/2019/6/5/Chart4.jpg" alt="">
Third, the earlier than expected rate cut will likely contribute along with the election result and other recent moves to an earlier bottom in Australian house prices. However, with still high debt levels, tight lending conditions and rising unemployment it’s unlikely to set off another property boom.
Finally, RBA rate cuts will help keep the $A down in the face of already high short $A positions, strong iron ore prices and rising risks that the Fed will cut rates this year.
DR SHANE OLIVER is the Head of Investment Strategy and Chief Economist at AMP Capital.
</body></html>

soliver-smf6LQXgW9

What the RBA rate cut means for investors: AMP's Shane Oliver

<html><body>
EXPERT OBSERVER
As expected, the Reserve Bank Board decided to lower the cash rate by 25bps to 1.25%. This action is very much in line with Westpac’s forecast first set out on February 21, although comes two months earlier than our original timeline. The basis for the RBA decision was “to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target”. The major dynamic in that regard is to push harder on the unemployment rate to try to reach that point where wages growth lifts markedly.
The Governor has left open the prospect of further action, noting that “the Board will continue to monitor developments in the labour market closely and adjust monetary policy to support sustainable growth in the economy and the achievement of the inflation target over time”.
Regular readers will be aware that Westpac expects that there will be further cuts in this cycle in August and November. It is possible that the Board might choose to bring forward the cut we expect in August to July in the event of a particularly disappointing employment report on June 13. However, we expect that given the limited policy flexibility available, the prudent approach will be to await more information and provide a full explanation of the next cut at the August meeting. A further benefit will be to provide updated forecasts for inflation and growth in the August Statement on Monetary Policy.
However, the key point from our perspective is the clear message that more work needs to be done and only one more cut will be seen as insufficient.
The description of the labour market still has vestiges of the consistent upbeat message that has been a key aspect of the Governor’s Statements in the last few years. However, he is clearly disappointed that recent progress on unemployment appears to have stalled at a level which is clearly not consistent with a healthy acceleration in wages growth. It is interesting that despite the tick-up in the unemployment rate in April to 5.2% being attributable to a record participation rate, he chooses not to qualify the rise in the unemployment rate in that manner.
The commentary on inflation seems largely unchanged with current pressures being described as subdued, although a pick-up is anticipated and the 1.75% forecast for underlying inflation in 2019 remains intact. We expect that the June and September quarter inflation reports will make it untenable to maintain that forecast as well as the associated lift in 2020 to 2%, indicating the clear need for further policy responses.
A key area of uncertainty is the outlook for the housing market given the recent surprising political developments and this rate cut. In that regard, the Governor provides no real guidance, pointing to “conditions remain soft”. He does recognise that price declines have slowed and growth in housing credit has stabilised recently.
Superimposed on this caution around the domestic economy is recognition of the damage that the trade disputes are having on the global economy. While the RBA’s outlook for global growth “remains reasonable”, quite rightly, he emphasises downside risks, including weak international trade and soft investment intentions.
Conclusion
In February, Westpac surprised markets by forecasting two rate cuts in 2019. Recently we revised that forecast to anticipate three cuts. Today’s decision confirms the validity of those forecasts and goes some way to justifying our decision to increase the number of forecast cuts from two to three.
The labour market will remain the key focus for the policy profile, and the two additional cuts that we anticipate in August and November are consistent with our more downbeat view on the labour market.
BILL EVANS is the Chief Economist for Westpac
</body></html>

RBA cash rate cut leaves prospects open for further moves: Bill Evans

<html><body>
EXPERT OBSERVER
Today, for the first time in 34 months, the Reserve Bank of Australia (RBA) decided to reduce the official cash rate by 25 basis points to 1.25 per cent. This represents the lowest cash rate on record and is the first time since August 2016 that the RBA board has shifted rates.
Why did they cut?
Despite the current strength of employment markets, the outlook for the Australian economy has softened. In addition, an escalation in the trade war between the US and China combined with the ongoing delay and dispute over Brexit has increased headwinds for global economic growth. The domestic economy has seen inflation track well below the RBA’s target of 2-3 per cent for some time, with low levels of household spending, soft wage growth, a slump in dwelling approvals and resistance from banks to lend all driving today’s RBA decision.
What it means for property markets?
Today’s interest rate decision, if passed on in full by the banks, will assist mortgage holders and encourage buyers that have disengaged from the property market to re-evaluate their situation. The past few weeks have seen buyers re-engage with enquiries and attendance at open homes both lifting. The increase in confidence comes off-the-back of the Coalition win at the federal election, ensuring there are no changes to negative gearing or capital gains tax concessions for property investors.
In addition, a new first home buyers deposit scheme, announced prior to the election, and the relaxation of finance restrictions by banking regulators provides a positive outlook for property markets leading into the second half of the year.
For property buyers
Today’s RBA decision along with the recent announcement by APRA that they are looking to relax lending restrictions, should help lift mortgage affordability. This will help up-sizers, down-sizers, investors and first home buyers re-engage with property markets after a period of indecision and uncertainly.
For property sellers
Today’s RBA decision bodes well for property owners looking to sell in the second half of 2019. The past two weeks has seen demand from buyers increase and a reduction in interest will help drive increased attendance at open homes and buyer enquiry levels. Despite higher levels of interest from buyers, the number of properties coming onto the market for sale has yet to rise to meet this demand. This will help drive competition for well-located and accurately priced properties that are listed for sale over coming months.
MATHEW TILLER is the Head of Research at LJ Hooker
</body></html>

RBA cuts rates to new record low: LJ Hooker's Matthew Tiller

<!DOCTYPE html PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN" "http://www.w3.org/TR/REC-html40/loose.dtd">

Rba Rate Decision

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Rba Rate Decision

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News