<p>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.</p>

<p>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;</p>

<p>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;</p>

<p>“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;</p>

<p>[smartcode_project:default project_id=110291 project_image_fid=302785]</p>

<h2>Affordable product leads, premium demand remains resilient</h2>

<p>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;</p>

<p>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;</p>

<p>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.</p>

<p>Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.</p>

<p>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;</p>

<p>[smartcode_project:default project_id=148957 project_image_fid=364102]</p>

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

<p>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.</p>

<p>David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.</p>

<p>“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;</p>

<p>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.</p>

<p>[smartcode_project:default project_id=108869 project_image_fid=317905]</p>

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

<p>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;</p>

<p>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;</p>

<p>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”.</p>

<p>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;</p>


Joel Robinson

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

<p><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.</p>

<p>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.</p>

<p>Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.</p>

<p>“Brisbane was the right step for Sammut,” Sammut said.</p>

<p>“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.”</p>

<p><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" /></p>

<p>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.</p>

<p>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.</p>

<p>“We are DA approved now which is very exciting,” Sammut said.</p>

<p>“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.”</p>

<p><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" /></p>

<p>Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.</p>

<p>“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.</p>

<p>The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.</p>

<p>“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.”</p>

<p>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.</p>

<p>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.</p>


Sammut secures approval for debut Brisbane apartment development in Toowong

<p>Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.</p>

<p>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.</p>

<p>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.</p>

<p>“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.</p>

<p>“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.</p>

<p>“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.”</p>

<p>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.</p>

<p>“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.”</p>

<p>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.</p>

<p>“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.”</p>

<p>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.</p>

<p>“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.</p>

<p>Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.</p>

<p>“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.</p>

<p>“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”</p>

<p>The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.</p>

<p>“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.</p>

<p>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.</p>

<p>&nbsp;</p>


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

<p>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.</p>

<p>The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.</p>

<p>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.</p>

<p>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.</p>

<p>“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.</p>

<p>“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.”</p>

<p><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" /></p>

<p>GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.</p>

<p>“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.”</p>

<p>Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.</p>

<p>“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.</p>

<p><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" /></p>

<p>&nbsp;</p>

<p>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.</p>

<p>Green praised local policy settings.</p>

<p>“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.”</p>

<p>One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.</p>

<p>“The way we will be able to achieve economies of scale is through size,” Green added.</p>


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

<p>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.</p>

<p>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.</p>

<p>Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be</p>

<p data-end="683" data-start="511">"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.</p>

<p data-end="882" data-start="690">"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."</p>

<p data-end="882" data-start="690">[smartcode_project:default project_id=134646 project_image_fid=6109]</p>

<p>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.</p>

<p>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.</p>

<p>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.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6110]</p>

<p>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.</p>

<p>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.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6116]</p>

<p data-end="247" data-is-last-node="" data-is-only-node="" data-start="0">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.</p>

<p>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.</p>

<p>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.</p>

<p>[smartcode_project_cta:default project_id=134646]</p>


WM Residences fills gap in Mordialloc townhouse market

Rba Rate Decision

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<p>The third meeting of the Reserve Bank of Australia for 2018 saw no change in the official cash rate.</p>
<p>The central bank's last move saw it go to 1.5 percent at the August 2016 meeting, so rates have been held steady for 18 meetings.</p>
<p>It was 19 meetings ago that they last came down. </p>
<p><span>Almost every economist predicted a hold at the first meeting of the year.</span> </p>
<p>31 of 32 experts in Finder.com.au's RBA survey had predicted a cash rate hold.</p>
<p>Just Mark Crosby from Monash University expected a rise to 1.75 percent. </p>
<p>Canstar group executive Steve Mickenbecker said they couldn't see the RBA raising rates.</p>
<p>"The Reserve Bank will want to see inflation, in particular wages growth, before it increases rates," Mickenbecker said.</p>
<p class="x_MsoNormal">He said so much has been happening that you have to ask if the Reserve Bank's decision matters anyway.</p>
<p class="x_MsoNormal">“The big banks have brought out low rate promotional offers on their base products.</p>
<p class="x_MsoNormal">"They usually don't deliver rate reductions for existing borrowers and they are often not even available to existing customers.</p>
<p class="x_MsoNormal">“Borrowers now have a huge choice of loans that have an interest rate starting with a three. </p>
<p class="x_MsoNormal">"Canstar's<span class="Apple-converted-space"> </span>website lists 324 loans with an interest rate below<span class="Apple-converted-space"> </span>4%."</p>
<p class="x_MsoNormal">“Rates are going to go up, and with the deals around now, it is also a good time to consider whether fixing for a few years might be right for you.”</p>
<p class="x_MsoNormal">CoreLogic's head of research Tim Lawless says a softening slowdown will likely be welcomed by the RBA.</p>
<p class="x_MsoNormal">"Housing market conditions are likely to be moving further down the RBA’s list of priorities, considering the market is showing every sign of moving through a soft landing, with the pace of value decline easing over recent months," he said.</p>
<p class="x_MsoNormal">"The controlled slowdown in the housing sector is likely to be a welcome outcome from the RBA, who are more likely to be focussing on labour markets, where the rate of unemployment, although lower than a year ago, crept higher, from 5.4% to 5.5% in February.<span class="Apple-converted-space"><br></span></p>
<p class="x_MsoNormal">"With some slack in labour markets, wages growth remains close to record lows, which is keeping a lid on inflation and household consumption. </p>
<p class="x_MsoNormal">"National dwelling values were flat last month, however <a href="/expert-insights/buying/six-of-eight-capital-cities-record-falling-values-in-first-quarter-corelogic">six of the eight capital cities saw dwelling values slip lower in March</a>, albeit at a reduced rate of decline relative to other months.</p>
<p class="x_MsoNormal">"Despite the hold decision from the RBA, mortgage rates remain close to historic lows, particularly for owner occupiers who are paying down both their interest and principal.</p>
<p class="x_MsoNormal">"Investors are facing a mortgage rate premium of around 60 basis points, but relative to long term averages, their mortgage rates are low. </p>
<p class="x_MsoNormal">"While the RBA has flagged the next move in interest rates will be a rise, it remains likely that any hike to the cash rate is well in the future. </p>
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jrobinson-rf4aSBido9

RBA keeps rates on hold for record 18th consecutive meeting

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<div>Most market onlookers believe the cash rate will remain static at the April board meeting, but just two 25-basis-point rate rises is all it could take before some ‘risky’ mortgage holders lose grip of their repayments, according to new finder.com.au research.</div>
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<p>Thirty one of the 32 (97%) panellists from the finder.com.au RBA survey are expecting the rate to remain on hold, with one respondent (Mark Crosby from Monash University) forecasting a rise to 1.75%.<br><br>Eighty-three percent (24 of 29) of experts and economists believe the next rate move will be an increase, while the remainder of the panel believe the Reserve Bank will stay in the cutting cycle.<br><br>Finder’s new Economic Sentiment Tracker, which was introduced to the survey last month, has found household debt to be the number one area of concern for the majority (55%) of panellists.<br>Graham Cooke, insights manager at finder.com.au, says household debt is still a struggle for many Australians.</p>
<p>“Mortgage repayments are king of household debt, but other costs like personal loans and credit card repayments also comprise a large chunk of household debt — and they roll in like clockwork.</p>
<p>“Running costs like electricity and gas can also quickly deplete household savings,” he says.</p>
<p>Employment is viewed with optimism among the experts and economists (65%) while the panellists mostly felt neutral (50%) or negative (15%) about the nation’s wage growth.</p>
<p>Thirty percent of panellists expressed negative sentiment toward cost of living.</p>
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<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/4/3/finder.jpg" target="_blank">to enlarge.</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/4/3/finder.jpg" alt=""> </p>
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<p>UBS Wealth Management Australia recently released a report saying 18% of the home loan market included fraudulent details on their applications. With this in mind, panelists were asked how many 25-basis-point rate increases it would take before mortgage holders started defaulting.</p>
<p>In response to this, 56% of experts believe up to two rate increases could cause the “risky” end of the market to default on their repayments.</p>
<p>Thirty-nine percent think two cash rate increases would be enough to throw homeowners into default, while a further 17% said just one rate increase would put fraudulent borrowers in a precarious position.</p>
<p>According to recent data, Sydney’s auction clearance rates (ACR) have fallen from 73.7% in August 2017 to 63.8% on March 2018, hitting a low of 57.5% in February 2018.</p>
<p>Panellists were asked if clearance rates will fall below 50% in 2018. Most respondents (13 of the 20 who opted in to this question) said they don’t expect to see Sydney ACRs fall below 50%.</p>
<p>“We’ve seen some correction in the Sydney market, with some experts indicating the market may continue to slow and we may see an average clearance rate around the 55% mark,” Mr Cooke says.</p>
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<p><strong>Here’s what the experts had to say: </strong></p>
<p>Jordan Eliseo, ABC Bullion (Hold):"The RBA will continue with their current monetary policy settings, though recent data will have dented their confidence regarding the outlook for employment, inflation and overall economic growth. We remain of the view that their next move will be a cut to the cash rate, particularly if house price weakness continues, but this will take time to play out."</p>
<p>Tim Nelson, AGL Energy (Hold):"No material changes to outlook since March. "</p>
<p>Shane Oliver, AMP Capital (Hold):"High business confidence, strong jobs growth and the RBA's own growth and inflation forecasts argue against a rate cut, but risks around consumer spending, weak wages growth and inflation, the slowing Sydney and Melbourne property markets and the still too high $A argue against a rate hike."</p>
<p>Alison Booth, ANU (Hold): "The fundamentals don’t want any change."</p>
<p>John Hewson, ANU (Hold):"[The RBA] simply can't move given level of household debt. The economy is still mixed."</p>
<p>Malcolm Wood, Baillieu Holst (Hold):"Inflation below target range, Moderate growth, global volatility."</p>
<p>Paul Dales, Capital Economics (Hold):"There are still no real signs that inflation is heading back up to the middle of the 2-3% target range, so interest rates need to stay low to give it a bit of a boost."</p>
<p>Saul Eslake, Corinna Economic Advisory (Hold):"Nothing has materially changed since the RBA last stated that current monetary policy settings were (in its opinion) appropriate. There’s been no new data on price or wage inflation; and the most recent labour force data suggests that the margin of spare capacity in the labour market remains unchanged, despite ongoing strong employment growth (because most of the new jobs are going to new entrants to the labour force). And the RBA has repeatedly made it clear that it feels under no pressure to follow other central banks in hiking rates."</p>
<p>Peter Gilmore, Gateway Bank (Hold): "The RBA is still concerned about low wages growth and household debt levels."</p>
<p>Mark Brimble, Griffith University (Hold): "Volatility and uncertainty are key factors in the global context and the Australian economy continues to show lackluster performance."</p>
<p>Shane Garrett, Housing Industry Association (Hold):"The current economic environment of strong job creation and fairly weak price pressures does not merit a change in monetary policy from the RBA at this time."</p>
<p>Alex Joiner , IFM Investors (Hold):"There is no material change in the outlook. The labour market continues to perform well however economic activity nor consumer price/wages inflation justifies a near term adjustment of policy."</p>
<p>Michael Witts, ING (Hold):"The RBA will keep rates unchanged as it is looking for the economy to gather further momentum."</p>
<p>Leanne Pilkington, Laing+Simmons (Hold):“The residential housing market, and the economy generally, requires the steady interest rate environment to continue. Employment growth has been encouraging but tempered by flattened wage growth, while house price growth is also subdued and clearance rates are solid if unspectacular. It amounts to a prudent case of the RBA leaving rates as is."</p>
<p>Nicholas Gruen, Lateral Economics (Hold): "The economy has spare capacity and the bank doesn't want to cut – even though for a long time it should have."</p>
<p>Mathew Tiller, LJ Hooker (Hold):"The global economy has continued to show signs of improvement, despite ongoing geopolitical uncertainty. In Australia, the economy remains on a steady footing with business confidence and employment improving. However, this is yet to flow through the increased wages or consumer prices. Housing markets across the country continue to remain active with listings numbers increasing and auction clearance rates sitting just below the long-term average. More properties on the market for sale has provided more choice for buyers and when combined with the moderation of investor demand has led to a slowdown in price growth. In weighing up these variables, it is likely that the RBA will keep the cash rate at the record low of 1.50% over the short-term."</p>
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<p><span>Marie Mortimer, loans.com.au (Hold):</span><span>"We are speaking to a lot of borrowers who are refinancing with loans.com.au for a cheaper rate than traditional lenders because they are conscious of their household budget. The RBA are also aware of the impact on a rate rise to household budgets and we believe that rates will remain on hold in the short term due to the relatively low inflation rate and weak economic sentiment." </span></p>
<p><span>Stephen Koukoulas, Market Economics (Hold): </span><span>"The RBA is unable to get away from its obsession with non-existant financial instability. It should be cutting rates" </span></p>
<p><span>John Caelli, ME (Hold): </span><span>"The RBA has flagged they are in no hurry in increasing rates. They want to see inflation increase, a pick-up in wages and lower unemployment before they consider putting up rates again." </span></p>
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<p><span>Michael Yardney, Metropole (Hold):</span><span>"Despite an increasing divergence with overseas rates, the RBA will keep official rates at their historic low of 1.5% because of spare capacity in our employment markets. While the Australian economy added 17,500 jobs in February, strong </span>population growth and increased labour-force participation meant the official unemployment rate crept up a notch from 5.5% to 5.6%."</p>
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<p><span>Mark Crosby, Monash University (Increase):</span><span>"Despite ‘The Donald’s’ attempts to trash the world economy, the case for the RBA raising is now very strong." </span></p>
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<p><span>Christopher Schade, MyState (Hold): </span><span>"With wages growth subdued and inflation well contained; there is no need for the RBA to rush to raise rates. We would not be surprised to see the RBA on hold for much, if not all of CY 2018." </span></p>
<p><span>Alan Oster, nab (Hold): </span><span>"No increase until we get better wages and more consumer activity." </span><span>Jonathan Chancellor, Property Observer (Hold): </span><span>"More time and confidence is needed </span>before any rate rise."</p>
<p><span>Matthew Peter, QIC (Hold): </span><span>"No inflation to speak of, tepid growth, slowing housing market and an unsettled global outlook give the RBA more than enough reasons to remain on hold." </span></p>
<p><span>Noel Whittaker, QUT (Hold):</span><span>"Housing not rising - markets wobbly - no reason to move." </span><span>Nerida Conisbee, REA Group (Hold): </span><span>"Economy still isn't strong enough." </span></p>
<p><span>Christine Williams, Smarter Property Investing (Hold):</span><span>"Unemployment figures have reduced slightly across most states, however individual debt has increased per capita. Banks are continuing to tighten their policy to be in line with responsible lending with owner occupier and investment property loans, thus reducing their overall risk in the property segment." </span></p>
<p><span>Besa Deda, St George Bank (Hold):</span><span>“The inflation outlook does not warrant a near term rate increase from the RBA.” </span></p>
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<p><span>Brian Parker, Sunsuper (Hold): </span><span>"Labour market and inflation developments aren't robust enough to warrant any near term tightening, and the RBA is clearly unwilling to ease to boost growth. On hold for a long time!" </span></p>
<p><span>Clement Tisdell, UQ-School of Economics (Hold):</span><span>"No reason for a change."<br></span></p>
<p><span>Bill Evans, Westpac (Hold):</span><span>"Unlike the “immediate” Trump fiscal stimulus the Australian</span>Government is adopting a more structured, cautious approach."</p>
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No RBA change says Finder.com.au experts

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<p>In a radically unsurprising decision on Tuesday the Reserve Bank of Australia left official interest rates unchanged at 1.5%.</p>
<p><a href="https://www.rba.gov.au/media-releases/2018/mr-18-05" target="_blank">In their announcement</a> there was plenty of what amounts to copy-and-paste from previous rate decisions.</p>
<p>For instance:</p>
<p>“Employment grew strongly over the past year and the unemployment rate declined… Notwithstanding the improving labour market, wage growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wage growth over time.”</p>
<p>And on inflation it’s still low with the consumer price index (CPI) and underlying inflation (inflationary pressures in the economy that are predominantly due to market forces like supply and demand), below 2%.</p>
<p><iframe src="https://datawrapper.dwcdn.net/5TxE0/3/" frameborder="0" scrolling="no" width="100%" height="449"></iframe>These are the key factors that make raising rates unlikely. Indeed, perhaps the only thing preventing a cut in rates is the fear of a housing bubble.</p>
<p>On that front the RBA seemed to report progress, saying:</p>
<blockquote>
<p>“[the Australian Prudential Regulation Authority] APRA’s supervisory measures and tighter credit standards have been helpful in containing the build-up of risk in household balance sheets, although the level of household debt remains high.”</p>
</blockquote>
<p>Little wonder that markets are not predicting an increase in rates this year.</p>
<p>On the labour market front, <a href="http://www.media.anz.com/phoenix.zhtml?c=248677&amp;p=irol-jobad&amp;nyo=0" target="_blank">the ANZ job advertisements survey</a> revealed that the strong growth in ads from previous months was largely maintained. Although for the month of February ads were down 0.3%, the robust growth in previous months means that ads are still up 13.3% on the previous 12 month period. It seems that the strong employment growth from last year is set to continue, but there is still no real sign of this translating into wage growth.</p>
<p>The global puzzle of why employment growth is strong while wages growth is weak endures. And, as the RBA comments reveal, it is weighing on the minds of central bankers.</p>
<p>The volatile <a href="http://www.abs.gov.au/ausstats/abs@.nsf/latestProducts/8731.0Media%20Release1Jan%202018?OpenDocument" target="_blank">building approval data</a> jumped around again in January, with approvals up 17.1% in January, following a 20% fall in December. Approvals for apartments jumped a massive 42.2% in January. That’s an interesting figure for two reasons.</p>
<p>The strong growth in supply of apartments is one factor that is (slowly) helping housing affordability. In cities like Sydney, with geographic constraints on all sides, the only place to go is up in terms of building new dwellings.</p>
<p>And less happily, sharp increases in supply are typically how bubbles burst. An important question is who is going to buy all these new apartments, and how speculative are those purchases.</p>
<p>There is scant evidence on this point, but <a href="http://www.news.com.au/finance/real-estate/flipping-properties-to-be-debt-free/news-story/6a426435d073784bd0b10d1798be7ff5" target="_blank">plenty of anecdotal fears</a> about people purchasing off the plan with significant leverage in the hope of flipping at a quick profit. The apartment market is a key indicator to watch in 2018.</p>
<p><a href="http://www.abs.gov.au/ausstats/abs@.nsf/latestProducts/5206.0Media%20Release1Dec%202017?OpenDocument" target="_blank">National accounts data</a> showed the Australian economy grew at the same rate in 2017 as is did in 2016, with GDP growth coming in at 2.4%. This points to one of the big, unresolved macreconomic questions of our time.</p>
<p>Is the “new normal” for economic growth something like 2% ? (This would put GDP growth per capita well below that.) Or was the great recession a damaging and long, but ultimately a temporary lull, and that we will return to 3%-plus growth sooner or later. I have consistently said I think its the former, but again it is too early to tell.</p>
<p><a href="https://www.propertyobserver.com.au/http://www.abs.gov.au/ausstats/abs@.nsf/mf/5368.0?OpenDocument">International trade data</a> released Thursday showed Australia’s trade balance at A$1.1 billion, up slightly from the previous month.</p>
<p>Speaking of trade, the biggest economic news of recent weeks was <a href="https://theconversation.com/americas-allies-will-bear-the-brunt-of-trumps-trade-protectionism-92735" target="_blank">the Trump administration’s announcement</a> that it would impose significant steel and aluminium tariffs (25% and 10% respectively). This has the potential to trigger a global trade war and tank economies around the world, although such a cataclysm is a fair way off yet.</p>
<p>Make no mistake, this is terrible policy. The worry is that its not just another cunning and cynical move by Trump, but that he actually believes in it. He has railed against trade deficits for 20 years, revealing the poverty of his understanding of economics.</p>
<p><img src="https://counter.theconversation.com/content/92829/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">For now its wait-and-see, but the fact that National Economic Council director Gary Cohn resigned in the wage of the announcement suggests that Trump might not flip-flop on this issue - and that there is more bad news to come.</p>
<p><span><a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a>, Professor of Economics and PLuS Alliance Fellow, <em><a href="http://theconversation.com/institutions/unsw-1414" target="_blank">UNSW</a></em></span></p>
<p>This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/vital-signs-the-one-thing-holding-back-an-rba-rate-cut-92829" target="_blank">original article</a>.</p>
<p><em>Vital Signs is a weekly economic wrap from UNSW economics professor and Harvard PhD Richard Holden (<a href="https://twitter.com/profholden" target="_blank">@profholden</a>).</em></p>
<p><em>Vital Signs aims to contextualise weekly economic events and cut through the noise of the data affecting global economies.</em></p>
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The one thing holding back an RBA rate cut: Richard Holden

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<div class="column">The Australian economy grew 2.4% through 2017, good but well below potential given high population growth.</div>
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<div class="column">There is good reason to expect growth to continue and pick up a bit: the drag from falling mining investment is nearly over, non-mining investment is turning up, public investment is strong, trade should add to growth and profits are rising. But growth is likely to be constrained to just below 3% this year and underlying inflation is likely to remain low.</div>
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<div class="column">We don’t expect the RBA to start raising rates until 2019 (we were looking for a hike late this year). Australian shares are likely to move higher by year end, but to continue underperforming global shares.</div>
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<p><strong>Growth just muddling along</strong></p>
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<p><span>For the last few years the Australian economy has been </span>meandering between 2-3% growth. This remained the case through last year with December quarter GDP up just 0.4%, and annual growth of 2.4% as a bounce a year ago dropped out.</p>
<p>In the quarter growth was helped by consumer spending and public investment but soft housing and business investment and a large detraction from net exports weighed on growth.</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/3/8/gdpgrowth.jpg" target="_blank">to enlarge.</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/8/gdpgrowth.jpg" alt=""></p>
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<p><span>Australia continues to defy recession calls. Against this, economic growth is well below potential, with per capita growth running at just 0.8% year on year, which is below that in most major countries. </span></p>
<p><strong>The usual worry list</strong></p>
<p><span>Global threats aside, Australia's worry list is well known.</span></p>
<p><span>- The solid contribution to growth from housing construction seen over 2013-16 has faded and building approvals are off their highs.</span></p>
<p>- Average house prices have started to edge down, with fears of a deeper crash. But in the absence of a stronger supply surge, the Reserve Bank of Australia (RBA) making a mistake and raising rates too high and/or unemployment surging, our view remains that price declines in Sydney and Melbourne will be limited to 5-10% and other cities face a more positive outlook.</p>
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<p><span>- The outlook for consumer spending is constrained and </span>uncertain given record low wages growth, high levels of underemployment and slowing wealth gains. Consumers have been running down their savings rate helped by rising wealth (to now just 2.7%), but this is unlikely to continue as property prices in Sydney and Melbourne slow.</p>
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<p><span>- Mining investment is still falling </span><span>with investment plans </span>pointing to roughly 15% falls this financial year and next.</p>
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<p><span>- The Australian dollar at around $US0.78 is up 12% from </span>its 2015 low and risks threatening growth in trade-exposed sectors like tourism, agriculture and manufacturing.</p>
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<p><span>- Underlying inflation is too low </span><span>with a fall in inflationary </span>expectations, making it harder to get wages growth up and with the stronger $A not helping.</p>
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<p><span>- Our political leaders seem collectively unable to </span>undertake productivity-enhancing economic reforms. And it’s unlikely this will change any time soon which is a concern with productivity falling 0.8% through 2017. </p>
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<p><span>These drags are nothing new. We continue to see five reasons </span>why recession will be avoided, and growth will be okay:</p>
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<p><span>- <strong>First, the drag from falling mining investment is nearly </strong></span><strong>over. </strong></p>
<p>Mining investment peaked at nearly 7% of GDP five years ago and has since been falling, knocking around 1.5% pa from GDP growth. At around 2% of GDP now, its growth drag has fallen to around 0.3% pa and it’s near the bottom. </p>
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<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/3/8/mining.jpg" target="_blank">to enlarge.</a></p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/8/mining.jpg" alt=""></span></p>
<div class="page" title="Page 2">- <strong>Second, non-mining investment is now rising</strong>
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<p><span>Comparing corporate investment plans for this financial year with those made a year ago points to a decline in business investment this year of around 3% (see next chart) and a similar sized rise in 2018-19. But this is the best since 2013 and once mining investment is excluded this turns into an 8% gain for non-mining investment in both years.</span></p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/3/8/capital.jpg" target="_blank">to enlarge.</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/8/capital.jpg" alt=""></p>
<p>- <strong>Third, public investment is rising strongly</strong>, reflecting state infrastructure spending.</p>
<p>- <strong>Fourth, net exports are likely to add to growth</strong> as the completion of resources projects and strong global demand boosts resources export volumes and services sectors like tourism and higher education remain strong.</p>
<p>- <strong>Finally, profits for listed companies are rising</strong>. This is a positive for investment.</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/3/8/EPS.jpg" target="_blank">to enlarge.</a></p>
<p><a href="https://www.propertyobserver.com.au/images/2018/3/8/EPS.jpg" target="_blank"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/8/EPS.jpg" alt=""></a></p>
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<p><span>While profit growth has slowed from 16% in 2016-17 to </span>around 7% now as the 2016-17 surge in commodity prices dropped out, more companies (74%) are seeing profit gains than at any time since before the GFC. 92% of Australian companies either raised or maintained their dividends in the most recent reporting season indicating a high degree of confidence in the earnings and growth outlook.</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/3/8/company%20profits.jpg" target="_blank">to enlarge.</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/8/company%20profits.jpg" alt=""></p>
<p>So while housing is slowing and consumer spending is constrained )with January retail sales data suggesting consumer spending this year is off to a weak start), a lessening drag from mining investment and stronger non-mining investment (both public and private) along with solid export growth are likely to keep the economy growing and see a pick-up in growth to between 2.5% and 3%.</p>
<p>However, growth is likely to remain below Reserve Bank of Australia expectations for a pick up to 3.25% this year and next. As a result, and with wages growth and inflation likely to remain low for a while yet we have pushed out the epected timing for the first RBA rate hike from later this year into February next year. </p>
<p><strong>Implications for investors</strong></p>
<p>There are several implications for Australian investors. First, continuing growth should provide a reasonable backdrop for Australian growth assets. Australian shares are vulnerable to the concerns impacting global markets - particularly US inflation and Fed fears and worries about a trade war - but we remain of the view that the ASX 200 will be higher by year end.</p>
<p>Second, bank deposits are likely to provide poor reutnrs for investors for a while yet. The issue for investors in bank deposits is to think about what they are really after. If it's peace of mind regarding the capital value of their investment, then maybe stay put. But if it's a decent income yield then there are plenty of alternatives providing superior yield. The yield gap between Australian shares and bank deposits remains wide.</p>
<p>Third, while Australian shares are great for income, global shares are likely to remain outperformers for capital growth. Global shares have been outperforming Australian shares since October 2009 and over the last five years have outperformed in local currency terms by nearly 4$ pa and by 9% pa in Australia dollar terms. This reflects relatively tighter monetary policy in Australia, the commodity slump, the lagged impact of the rise in the $A above parity in 2010, and a mean reversion of the 2000 to 20009 outperformance by Australian shares. While earnings growth in Australia is around 7%, it's double this globally, suggesting the relative underpformance of Australian shares in terms of capital growth may go for a while yet. Which all argues for a continuing decent exposure to global shares.</p>
<p>Finally, the risks remain on the downside for the $A. With the RBA comfortably on hold and the Fed set to raise rates later this month with four hikes this year in total, the interest rate gap between Australia and the US will go negative and keep falling this year. Historically this has been associated with falls in the value of the Australian dollar. Fears of a global trade war may add to this risk given Australia’s relatively high trade exposure. All of which is another reason to maintain a continuing decent exposure to global shares but on an unhedged basis. </p>
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<div class="page" title="Page 2"><em><span><a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> </span>is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.</em></div>
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Olivers insights: Growth will continue but rate hikes not expected till 2019

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<p class="x_MsoNormal">The Australian economy as measured by GDP grew 0.4% in the December quarter of 2017, which was just under consensus estimates for a 0.5% lift and is a weak finish to 2017.</p>
<p class="x_MsoNormal">Annual growth declined to 2.4% (from 2.9% - see chart below) which remains below Australia’s potential (at around 2¾%). Per capita GDP growth was just 0.8% year on year. Annual GDP growth in 2017 averaged out at 2.3%, the lowest annual rate since 2013 and less than would be expected given a strong labour market (employment was up by 3.3% over the year to December 2017).</p>
<p class="x_MsoNormal">This can be explained by a decline in productivity which was down by 0.8% over the year.</p>
<p class="x_MsoNormal">Click here <a href="https://www.propertyobserver.com.au/images/2018/3/7/GDP.jpg" target="_blank">to enlarge.</a></p>
<p class="x_MsoNormal"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/7/GDP.jpg" alt=""> </p>
<p class="x_MsoNormal">The main points from the December quarter GDP data are:</p>
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<strong>Stronger than expected consumer spending.<span class="Apple-converted-space"> </span></strong>Consumer spending rose by 1.0% in the quarter (contributing 0.6 percentage points to growth and retail accounting for a third of the contribution). This was a strong quarter for consumers but is unlikely to be repeated in early 2018, with the latest retail data showing poor growth in spending over January. The household savings rate is low (at 2.7% in the December quarter) and has probably bottomed for now (stabilising from a downwardly revised 2.5% in mid-2017) but still is well below levels of 8% around three years ago. It is difficult to see households gaining confidence to run down their savings rate further in the current environment of low wages growth, slowing wealth accumulation (as home price growth weakens) and high debt levels.</li>
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<strong>Residential construction</strong><span class="Apple-converted-space"> </span>detracted 0.1 percentage points from growth, as expected. Housing construction has passed its peak and will continue to make a small negative contribution to growth in 2018. But, building approvals remain at high levels which will keep residential construction elevated.<span class="Apple-converted-space"> </span>
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<strong>Underlying business investment</strong><span class="Apple-converted-space"> </span>(which takes into account asset transfers between the private and public sector) detracted 0.1 percentage points from growth, with non-residential building up, engineering construction down and a solid lift in plant and equipment spending. Business investment growth is recovering as the mining investment decline has nearly finished and non-mining investment is improving. The recently published capital expenditure survey indicated that the environment for business investment is becoming more favourable in Australia, but the pick-up in non-mining investment growth is still probably a little softer compared to what is required to push GDP growth to 3% (the RBA’s forecast for 2018 GDP growth). </li>
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<strong>Net exports</strong><span class="Apple-converted-space"> </span>detracted 0.5 percentage points from growth as export growth declined while imports rose. The outlook for export growth is still positive, as various resources projects continue to complete, there is plenty of global demand for Australian resources and as service exports like tourism and education continue to grow.</li>
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<strong>Inflation pressures and wages are still weak but have bottomed for now.</strong><span class="Apple-converted-space"> </span>The household consumption deflator (an alternative measure of inflation) is just up 1.3% year on year which is well below the rate of inflation as measured by the CPI. And while total compensation of employees was up by 4.8% over the year this just reflects strong employment growth – average compensation per employee was up by just 1.6% over the year. This is below the 2.1% wages growth recorded in the Wage Price Index because jobs growth has been faster for low paid jobs than for high paid jobs.<strong> </strong>
</li>
</ul>
<p class="x_MsoNormal"><strong>Implications</strong></p>
<p class="x_MsoNormal">GDP growth ended 2017 close to the RBA’s forecasts (of 2.5%) but the central bank still expects growth to average at around 3% in 2018 which may be challenging because of the poor outlook for consumer spending and a slowing in housing construction. And while non-mining business investment is rising, public infrastructure spending is surging and the labour market is strong, there are few signs of significant cost pressures as the economy is running below its capacity. Our view is that the Australian economy will strengthen somewhat in 2018 as business conditions are still very positive which will work through the spare capacity in the economy and eventually lift inflation. But that process will take some time. We see the RBA starting to lift the cash rate at the end of this year, but the risk is that the first rate hike for this cycle won’t happen until sometime in 2019.</p>
<p class="x_MsoNormal"><span class="s1"><a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author"><em>SHANE OLIVER</em></a></span><span class="s2"><em> is head of investment strategy and economics and chief economist at </em><a href="https://www.ampcapital.com.au/home"><span class="s1"><em>AMP Capital</em></span></a><em> and is responsible for AMP Capital's diversified investment funds.</em></span></p>
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No case for a near-term RBA rate hike as December quarter GDP soft and below-trend: Shane Oliver

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<p>Guest Observer</p>
<p>As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 1.5%.</p>
<p>While we expected that result, we were not expecting any significant surprises in the Governor’s Statement.</p>
<p>We were wrong.</p>
<p>Readers will be aware that Westpac has been consistently critical of the RBA’s GDP growth forecasts for 2018 and 2019 of 3 ¼ per cent in both years.</p>
<p>We have consistently argued that the number will be more in line with 2.5%. In all recent statements, the Governor has noted “the Bank’s central forecast for the Australian economy is for GDP growth to pick up to average a bit over 3% over the next couple of years”. This is confirmed in the official forecasts from the February Statement on Monetary Policy of 3 ¼ per cent in 2018 and 2019.</p>
<p>In today’s statement, he notes “the Bank’s central forecast is for the Australian economy to grow faster in 2018 than it did in 2017”. Tomorrow, with the release of the December quarter national accounts,  the measure of GDP growth in 2017 will print. Consensus  expects  growth of 2.5%. Westpac expects 2.4%. On the reasonable assumption that the RBA has a similar estimate (forecast in February SoMP was 2.5%), the above statement can be interpreted as the Bank now feeling comfortable with growth being above 2.5%, which is a major qualification of the Bank’s previous growth outlook.</p>
<p>This change does not seem to be indicated by a change in rhetoric around the economy. Indeed, the Governor points out that growth in exports “is expected to recover from the temporary weakness at the end of 2017”. Arguably, we could interpret this observation as attributing the lift in growth in 2018 mainly to a pick-up in exports. While the Reserve Bank does not supply independent estimates of its forecasts for household consumption, we have always presumed that it is more optimistic for household spending in 2018 than in 2017.</p>
<p>Certainly, Treasury’s forecasts indicate an expected boost to consumer spending in 2018. The RBA continues to highlight the outlook for household consumption as a “continuing source of uncertainty”.</p>
<p>While this change in the attitude to growth appears to be somewhat more dovish, the Bank does show some more confidence about wages. The Governor points out that “the rate of wage growth appears to have troughed”. This is an upgrade from the wages commentary in previous statements. The facts are of course that annual wages growth lifted in the December quarter from 2.0% in the September quarter to 2.1%, also consistent with the Governor’s comment, “wage growth remains low”.</p>
<p>The commentary around housing has also changed somewhat. The two major markets, Sydney and Melbourne, are now singled out and described as “have slowed”.</p>
<p>There is no change in the commentary around inflation (“likely to remain low for some time”); the Australian dollar (“remains within the range it has been in over the past two years”); employment (“forward looking indicators continue to point to solid growth”); Terms of Trade (“expected to decline over the next few years”); and the global economy (“has strengthened over the past year”).</p>
<p>The recent volatility in the share market is recognised, although no implications for markets or the global economy are drawn.</p>
<p><strong>Conclusion</strong></p>
<p>The Reserve Bank appears to be less confident about the growth outlook. Nevertheless, we still believe that it expects to be raising interest rates beginning sometime in late 2018 and into 2019. That would be in line with current market pricing.</p>
<p>In contrast, Westpac is not surprised to see the Bank more cautious on the growth outlook and we continue to expect that the cash rate will remain on hold in 2018 and 2019.</p>
<p><em>BILL EVANS</em><em> is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.</em><span> </span></p>
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Reserve Bank hold suggests a more cautious assessment of the growth outlook: Westpac

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<p>The second meeting of the Reserve Bank of Australia for 2018 saw no change in the official cash rate.</p>
<p>The central bank's last move saw it go to 1.5 percent at the August 2016 meeting, so rates have been held steady for 17 meetings.</p>
<p>It was 18 meetings ago that they last came down. </p>
<p>It is the longest run of steady rates. Last rate decision was a run of were 17 meetings (inclusive) between their August 2013 meeting and December 2014 where they held at 2.5 percent. There was another run of 16 meetings between July 2002 and October 2003 where rates were held at 4.75 percent.</p>
<p>Almost every economist predicted a hold at the first meeting of the year.</p>
<p>Most don't foresee any change throughout much of 2018.</p>
<p>AMP Capital senior economist Shane Oliver said RBA will hike rates, but not yet.</p>
<p>"High levels of business confidence, strong jobs growth and the RBA’s forecasts for stronger growth and inflation point to eventual rate hikes.</p>
<p>"But against this, continuing very weak wages growth, sub-target inflation, the $A remaining too high and uncertainty around the outlook for consumer spending all argue for rates to remain on hold or even fall.</p>
<p>"So on balance it makes sense to continue to leave interest rates on hold."</p>
<p>For a full list of what the 33 experts in Finder.com.au's RBA Survey have to say on the RBA cash rate decision click here.</p>
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RBA keeps rates on hold for record 17th consecutive meetings

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<p>At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.</p>
<div>
<div class="rss-mr-content">
<p>The global economy has strengthened over the past year. A number of advanced economies are growing at an above-trend rate and unemployment rates are low. Growth picked up in the Asian economies in 2017, partly supported by increased international trade. The Chinese economy continues to grow solidly, with the authorities paying increased attention to the risks in the financial sector and the sustainability of growth.</p>
<p>The pick-up in the global economy has contributed to a rise in oil and other commodity prices over the past year. Even so, Australia's terms of trade are expected to decline over the next few years, but remain at a relatively high level.</p>
<p>Globally, inflation remains low, although higher commodity prices and tight labour markets are likely to see inflation increase over the next couple of years. Long-term bond yields have risen but are still low. Market volatility has increased from the very low levels of last year. As conditions have improved in the global economy, a number of central banks have withdrawn some monetary stimulus. Financial conditions remain expansionary, with credit spreads narrow.</p>
<p>The Bank's central forecast is for the Australian economy to grow faster in 2018 than it did in 2017. Business conditions are positive and non-mining business investment is increasing. Higher levels of public infrastructure investment are also supporting the economy. Further growth in exports is expected after temporary weakness at the end of 2017. One continuing source of uncertainty is the outlook for household consumption. Household incomes are growing slowly and debt levels are high.</p>
<p>Employment grew strongly over the past year and the unemployment rate declined. Employment has been rising in all states and has been accompanied by a significant rise in labour force participation. The various forward-looking indicators continue to point to solid growth in employment over the period ahead, with a further gradual reduction in the unemployment rate expected. Notwithstanding the improving labour market, wage growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wage growth over time. Consistent with this, the rate of wage growth appears to have troughed and there are reports that some employers are finding it more difficult to hire workers with the necessary skills.</p>
<p>Inflation remains low, with both CPI and underlying inflation running a little below 2 per cent. Inflation is likely to remain low for some time, reflecting low growth in labour costs and strong competition in retailing. A gradual pick-up in inflation is, however, expected as the economy strengthens. The central forecast is for CPI inflation to be a bit above 2 per cent in 2018.</p>
<p>On a trade-weighted basis, the Australian dollar remains within the range that it has been in over the past two years. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.</p>
<p>The housing markets in Sydney and Melbourne have slowed. Nationwide measures of housing prices are little changed over the past six months, with prices having recorded falls in some areas. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. APRA's supervisory measures and tighter credit standards have been helpful in containing the build-up of risk in household balance sheets, although the level of household debt remains high.</p>
<p>The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.</p>
</div>
</div>
<div class="box-enquiries">
<em>Philip Lowe is Governor, <a href="https://www.rba.gov.au/" target="_blank">Reserve Bank of Australia</a>.</em> </div>
<p> </p>
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House prices slowing: RBA March 2018 Governor Philip Lowe's statement 

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<p>Each of Finder.com.au's 33 experts predicted a cash rate hold at today's 2.30 RBA announcement.</p>
<p>Here’s what some of them had to say:</p>
<p>Jordan Eliseo, ABC Bullion (Hold): ​"There remains no compelling reason for the RBA to move the dial when it comes to interest rates. Employment data, business conditions and overall growth figures are solid, though there seems no obvious catalyst to turn around record low wage growth, whilst a slowing property market will inevitably weigh on confidence. We remain of the view that the next move in rates will be a reduction."</p>
<p>Tim Nelson, AGL Energy (Hold): ​"RBA has stated that the process of inflation returning to target will be gradual."</p>
<p>Shane Oliver, AMP Capital (Hold):​ "High levels of business confidence, strong jobs growth and the RBA’s forecasts for stronger growth and inflation point to eventual rate hikes. But against this, continuing very weak wages growth, sub-target inflation, the $A remaining too high and uncertainty around the outlook for consumer spending all argue for rates to remain on hold or even fall. So on balance it makes sense to continue to leave interest rates on hold."</p>
<p>Alison L Booth, ANU (Hold):​ "The fundamentals have remained fairly steady."</p>
<p>Malcolm Wood, Baillieu Holst (Hold):​ "Inflation below target band; mixed indicators."</p>
<p>Richard Robinson, BIS Oxford Economics (Hold):​ "Price and wages inflation still low, so no pressures yet. RBA has a large buffer between rising US rates and local rates, so there is no hurry to raise rates. Although A$ is still a bit high for RBA's comfort, the Bank is still reluctant to cut rates, because it fears it would re-ignite property prices."</p>
<p>Paul Dales, Capital Economics (Hold): ​"The RBA has said that there is not a strong case for a near-term adjustment in interest rates (i.e. a hike) as inflation is going to rise to the 2-3% target only slowly."</p>
<p>Michael Blythe, CBA (Hold): ​"RBA is emphasising patience and gradualism with respect to rates."</p>
<p>Saul Eslake, Corinna Economic Advisory (Hold): ​"Nothing has happened since the February meeting (and the publication of the February SoMP) to prompt the RBA to change its evaluation of the appropriateness of current monetary policy settings."</p>
<p>Peter Gilmore, Gateway Bank (Hold): ​"Still insufficient wages and price growth to force the RBA's hand."</p>
<p>Scott Morgan, Greater Bank (Hold):​ "Economic data does not yet support a shift"</p>
<p>Shane Garrett, Housing Industry Association (Hold): ​"Inflation and economic growth do not require intervention." Alex Joiner, IFM Investors (Hold): ​"There is no economic reason to shift rates and the outlook has not been altered by any deviation in the recent solid data flow."</p>
<p>Andrew Wilson, Independent economist (Hold):​ "We are experiencing a benign environment for interest rate movements either up or down. After APRA regulations restricting the availability of loans to investors, we actually saw rates for owner occupier loans fall – the difference between owner occupier and investor loans is now smaller than ever. APRA are starting to make noises that they are satisfied that the market has stabilised. We’re likely to see a flat year for interest rates."</p>
<p>Michael Witts, ING (Hold): ​"The RBA is happy for the current momentum in the economy to continue to run. Inflation remains under control and wages inflation is yet to emerge." Leanne Pilkington, Laing+Simmons (Hold):​ "The current interest rate remains appropriate and the fact that the banks themselves are applying tighter lending criteria to their customers demonstrates the potential impact a rate rise too soon may have. It’s a precarious position requiring a steady low environment in the near term."</p>
<p>Nicholas Gruen, Lateral Economics (Hold): ​"It has flagged that it's not in a hurry to raise rates." Mathew Tiller, LJ Hooker (Hold):​ "No discernible change from last month. Employment continue to remain strong, however, wage growth and inflation remain soft. Property markets have seen prices begin to soften, thanks to an increase in listings and a moderation in investor demand." John Caelli, ME (Hold): ​"The RBA has already indicated it will hold the cash rate until key economic indicators improve."</p>
<p>Michael Yardney, Metropole Property Strategists (Hold): ​"While overseas interest rates are likely to rise in the next few months, the RBA Governor has made it clear that Australian rates don't need to be in lock step with overseas rates. There is currently no reason to change rates to either stimulate or slow down our economy."</p>
<p>Mark Crosby, Monash University (Hold):​ "At this point the RBA would be close to raising rates, but probably still waiting for overseas rises to occur and monitoring of financial markets after this happens."</p>
<p>Christopher Schade, MyState Bank (Hold): ​"While the economic outlook has if anything improved in recent times, the economy is far from over-heating, inflation remains well contained, and the Australian dollar arguably remains a tad high. The Reserve Bank will leave rates at their current highly accommodative level for at least the next few months to allow the economy to continue to gather momentum. A rate hike will likely become a more serious consideration later in the year."</p>
<p>Alan Oster, NAB (Hold):​ "Wages data is too weak."</p>
<p>Jonathan Chancellor, Property Observer (Hold): ​"The central bank will be cautiously content with how things are faring, with no need to change the cash rate."</p>
<p>Noel Whittaker, QUT (Hold): ​"Property prices falling – our dollar weakening – no reason to move."</p>
<p>Nathan McMullen, RAMS (Hold): ​"Inflation is within tolerance." Nerida Conisbee, REA Group (Hold): ​"Economy still not strong enough to start increasing."</p>
<p>Janu Chan, St.George Bank (Hold):​ "The next move is more than likely to be higher, and the RBA sees progress towards employment and inflation goals. However, spare capacity still exists within the domestic economy and will therefore hold off from raising interest rates for some time.”</p>
<p>Clement Tisdell, UQ-School of Economics (Hold):​ "Wage growth slow. Exchange rate needs to be lowered somewhat."</p>
<p>Other participants:​ Bill Evans - Westpac (Hold), Stephen Koukoulas - Market Economics (Hold), Paul Bloxham - HSBC Bank Australia Limited (Hold), John Hewson -ANU (Hold).</p>
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jonathanchancellor-7SQnKwU6yx

RBA on hold: March's unanimous forecast among tipsters

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<p>GUEST OBSERVER</p>
<p>Weak wages growth and slow progress reducing unemployment means it is now less likely that the RBA will raise rates twice in 2018 (our previous forecast).</p>
<p>We now see the RBA raising rates only once in late 2018 – with November 2018 as the most likely start date for a gradual RBA rate hiking cycle.</p>
<p>By late 2018 growth should be near 3% and the unemployment rate approaching 5%. That, together with increasing tightness in employers’ ability to find suitable labour, may finally see private sector wages start to moderately edge up.</p>
<p>Inflation by that time should also be approaching the bottom of the 2-3% target range.</p>
<p>That said, much will still depend on the data flow – it is not impossible that the RBA stays on hold for all of 2018 and raises rates in early 2019.</p>
<p>For some time NAB has been forecasting that if the economy continues to improve as we expect, then the RBA’s confidence that inflation will return to their 2-3% target band would grow and with that they would begin to lift the cash rate from its current low level of 1½ percent.</p>
<p>We have emphasised that the key data that will give the RBA this confidence is a turn in the recent depressing trend on wages growth.</p>
<p>Last week’s Q4 2017 wage numbers were in that sense a little disappointing.</p>
<p>While total wages did increase a touch (to 0.55% unrounded) there was no acceleration in private wages growth. That stands in contrast to traditional models that suggest wage increases are overdue and runs counter to employers’ reports that it is getting more difficult to find suitable labour.</p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/2/28/private.jpg" target="_blank">to enlarge.</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/2/28/private.jpg" alt=""></p>
<p>Click here <a href="https://www.propertyobserver.com.au/images/2018/2/28/labour.jpg" target="_blank">to enlarge.</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/2/28/labour.jpg" alt=""> </p>
<p>In recent RBA communications (including the Statement on Monetary Policy and the Governor’s testimony to the House Standing Committee on Economics) the RBA has emphasised that they expect to make further progress reducing unemployment with some uptick in wages and inflation likely as a result. But the Bank has emphasised that this progress is expected to be “gradual”.</p>
<p>It is also worth noting that the Australian labour market remains in a somewhat different state than the US labour market. In the US, most estimates of the NAIRU are significantly higher than the current level of unemployment (4.1%). In contrast most estimates of the Australian NAIRU are around 5% (or possibly lower).</p>
<p>That is lower than the current unemployment rate which has been stuck around 5.5% in recent times. In addition, Australia’s labour underutilisation rate is nearer 14% and hence there is some more slack in the labour market than is implied by purely focussing on the unemployment rate. That said, underutilisation in now falling, and usually declines when firms report rising difficulty finding suitable labour.</p>
<p>Our wages model (above) uses underutilisation of labour (as well as inflationary expectations, productivity and the terms of trade – the latter as a proxy for mining wages). The model supports the RBA’s expectation that wages should begin to increase. The outlook for wages is important not just for its implications for inflation but also its ramifications for private sector consumption.</p>
<p>With increased utility prices consumers are still cautious about discretionary retail spending and there are of course ultimately limits as to how far savings can be run down. Our current forecasts see the broader economy still growing at around 2.9% in 2018 and 2.8% in 2019. While we will review these forecasts after next week’s national accounts and the February Monthly NAB Business Survey, our general view is that better business investment and infrastructure spending will offset a still cautious consumer (with delayed LNG exports also helping in 2018).</p>
<p>That said, we remain a little more cautious on the consumption outlook than the RBA in 2019. The RBA comments on the housing market (and financial stability) seem more relaxed recently given the success of APRA in slowing investor credit and house prices- especially in Sydney - however that too will do little to encourage consumption. Based on current data, August 2018 (our previous forecast start point for rate hikes) now appears too soon for the RBA to make a start despite the better global picture, which will see other central banks tighten further.</p>
<p>Finally while price competition (especially online retailing) will keep inflation relatively low for some time, our judgement remains that by late 2018 the RBA will feel sufficiently relaxed on the domestic fundamentals to cautiously start withdrawing the stimulatory policy stance it is currently running. Again however, the data flow will be critical with key determinants including: the strength of wages and consumer spending, unemployment and obviously core inflation. For 2019 we still have another two rate rises but well spread (May and November).</p>
<p><em>Alan Oster is group chief economist, National Australia Bank, and can be contacted </em><a href="https://business.nab.com.au/author/alan-oster/"><span class="s2"><em>here</em></span></a><em>.</em></p>
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