&nbsp;

Developer GURNER™ Group has revealed $1.65 billion in residential sales nationally across the 12 months to December 2025, driven largely by the continued momentum of its Docklands wellness-focused precinct, Elysium Fields.

The sales result was generated across seven projects in Victoria and New South Wales, headlined by Elysium Fields, GURNER™’s $2.75 billion mixed-use precinct planned for Harbour Esplanade in Docklands.

The project has recorded more than $500 million in sales across the first three towers, equating to around 580 apartments sold.

The first tower, Helios, has now sold out of its 240 private residences, with GURNER™ preparing to release a premium penthouse collection comprising 15 three-bedroom penthouses in coming weeks.

[smartcode_project:default project_id=144441 project_image_fid=370975]

Elysium Fields is being developed on the long-held 20,000 sqm Docklands site at 208-226 Harbour Esplanade, which had remained undeveloped for more than two decades prior to GURNER™ taking over the project around four years ago.

Construction has now commenced across four towers ranging between 18 and 30 storeys, with Hamilton Marino and Maxcon appointed as builders.

Once complete, the precinct is expected to comprise around 1,100 residences, alongside retail, hospitality and public realm uses integrated throughout the site.

[smartcode_project:default project_id=144441 project_image_fid=370981]

Designed by Fraser &amp; Partners in collaboration with GURNER™ Design House, the project has been positioned around the developer’s broader focus on wellness-led residential living.

“We don’t sell apartments. We create a true luxury lifestyle that simply doesn’t exist elsewhere in the market today,” Founder and Executive Chairman Tim Gurner said.

“To deliver that requires an extraordinary level of detail, coordination and discipline across multiple verticals, from design and hospitality through to wellness and service.”

“We’ve always believed that living extends far beyond the physical residence. It’s about how you feel the moment you arrive, how you live day-to-day, and the ecosystem that supports that.” 
[smartcode_project:default project_id=144441 project_image_fid=370977]

The project’s design places a heavy focus on landscaping, wellness amenities and biophilic design principles.

Plans include around 3,700 sqm of landscaped gardens and open space throughout the precinct, alongside a retail and dining offering spanning approximately 5,000 sqm.

The broader public realm strategy centres around what GURNER™ describes as the “Path of Life”, an urban forest and landscaped pedestrian environment intended to connect the various buildings and wellness spaces across the precinct.

The apartments themselves will incorporate a range of wellness-focused inclusions, including purified air and water systems, circadian lighting, antimicrobial surfaces, and optional in-home wellness upgrades.

[smartcode_project:default project_id=144441 project_image_fid=370980]

Gurner said the company’s experience through its Saint Haven wellness clubs had directly informed the residential offering now being incorporated into Elysium Fields.

“We’re seeing a clear global shift toward longevity, performance and proactive health,” Gurner said.

“Our role is to deliver that in a way that feels seamless, highly private and beautifully resolved within the environments we create.”

A large component of the wellness offering is planned through the resident amenity and health facilities proposed within the precinct.

That includes plans for bathing and recovery facilities spread throughout the towers, incorporating mineral pools, saunas, steam rooms, flotation therapy, red light therapy and wellness lounges.

The developer is also seeking approvals for what it describes as a “reverse ageing medical clinic” within the precinct.

[smartcode_project:default project_id=144441 project_image_fid=370978]

According to project information released by the group, the proposed facility would include cryotherapy, IV infusion therapy, infrared and dry saunas, PEMF beds, MRIs, DEXA scans, brain scans and blood analysis services.

Within the first tower, Helios, residents will also have access to a dedicated amenity offering known as the Sky Private Club.

The upper 15 levels of the building will include private lounges, dining spaces, rooftop amenities and optional private wellness studios integrated within residences.

The Helios tower itself comprises 260 apartments ranging between 60 sqm and 300 sqm, including a collection of penthouses.

That includes a planned two-storey penthouse spanning around 600 sqm with uninterrupted bay views.

The Elysium Fields precinct is being delivered in partnership with Digital Harbour Holdings, a consortium that includes the Liberman family, which controls the development rights across the Docklands site.

[smartcode_project:default project_id=144441 project_image_fid=370979]

The sales result comes as GURNER™ continues expanding its national development pipeline beyond Victoria.

“We have a strong pipeline across Australia and are now focused on scaling into key markets including New South Wales and Queensland, while continuing to build on our Melbourne base,” Gurner said.

“We currently have more than $3 billion in the market, growing to over $5 billion by October, and expect to materially outperform last year in the 2026 calendar year.”

The result also reflects the continued strength of the upper-end apartment market in Melbourne, particularly for owner-occupier-focused product with large-scale amenity and lifestyle offerings.

[smartcode_project_cta:default project_id=144441]

Record result anchored by the Group’s “utopian” Elysium Fields precinct – defying market headwinds in Docklands.

Joel Robinson

Elysium Fields drive Gurner to $1.65 billion in apartment sales over 2025

National Australia Bank (NAB) will fund <a href="https://www.apartments.com.au/new-apartments/palmera-residences-gold-coast-18-garfield-terrace-surfers-paradise-qld-4217">Palmera</a>, a $1 billion, 52-level luxury residential tower being developed by Central Equity in one of the Gold Coast’s most tightly held coastal locations at Northcliffe.

The project, launched recently by <a href="https://www.apartments.com.au/developers/central-equity">Central Equity</a>, one of Victoria’s largest private residential developers, comes at a time when construction funding for large residential developments has become increasingly competitive as lenders tighten exposure to the sector.

Multiplex has been appointed the builder, and construction is now underway.

[smartcode_project:default project_id=108274 project_image_fid=365784]

Since its first project, Central Equity has delivered more than 85 residential developments with a combined end value exceeding $8 billion.

Palmera reflects Central Equity’s growing focus on the Gold Coast luxury apartment market and continues a relationship between Central Equity and NAB that dates back to the late 1980s, when the bank funded one of Melbourne’s earliest inner-city residential towers at a time when high-rise apartment living in the CBD was largely unproven.

“NAB’s funding of Central Equity’s $36 million CBD development in the late 1980’s to the financing of the billion-dollar tower today highlights the long-term relationship between the two organisations in delivering major residential projects” said Central Equity Founder and Chairman Eddie Kutner.

He said NAB’s early support was instrumental in helping establish the company’s development model.

“When we commenced our first residential tower in the late 1980s the concept of funding off-the-plan apartments was still largely untested in Australia,” Kutner said.

“NAB recognised the opportunity early and supported the project when others were uncertain. That relationship has now continued for more than 37 years across many developments.”

[smartcode_project:default project_id=108274 project_image_fid=365771]

Central Equity was established in 1987 when Melbourne’s CBD and Southbank precinct were still dominated by warehouses and commercial buildings. Fewer than 100 residents lived in Southbank at the time, and large-scale residential development in the inner city was not widely considered.

Recognising changing demographics and lifestyle preferences, the company began developing high-rise residential projects designed to bring permanent residents into the city centre.

Central Equity has provided accommodation for approximately 40,000 residents across Melbourne’s CBD and Southbank, while also incorporating supporting infrastructure including essential lifestyle facilities like retail spaces, childcare facilities and neighbourhood activity centres.

Central Equity has spent many years assembling the Palmera development site on the corner of Garfield Terrace and Frederick Street in Northcliffe, creating a supersite of around 3,300 sqm.

The developer said the Palmera apartment tower reflects its long-term view of the Gold Coast as a growing and increasingly diversified economy.

[smartcode_project:default project_id=108274 project_image_fid=365768]

Supported by infrastructure including the light rail network, major road upgrades expanded education, hospital and medical facilities and continued expansion at the Gold Coast Airport with more internation and domestic flights.

Positioned in the tightly held Northcliffe precinct, the 52-level tower will deliver 347 apartments, targeting buyers seeking a high-end coastal lifestyle, from downsizers to interstate investors.

Designed by Marchese Partners with interiors by DBI, Palmera has been conceived as a next-generation residential offering, featuring a collection of oversized apartments, with premium three-bedroom residences offering sweeping northern views stretching from Surfers Paradise through to Burleigh Heads.

[smartcode_project_cta:default project_id=108274]

NAB funds $1 billion Surfers Paradise apartment development, Palmera

Two years after completing one of the newest developments in North Sydney, developer <a href="https://www.apartments.com.au/developers/aqualand-australia">Aqualand</a> is turning its attention to the rapidly evolving St Leonards apartment market.

The developer, which completed AURA by Aqualand on North Sydney's Walker Street, has lodged plans for a 5,918 sqm site at <a href="https://www.apartments.com.au/new-apartments/33-37-herbert-street-st-leonards-nsw-2065">33-37 Herbert Street, St Leonards,</a> seeking approval for a pair of residential towers rising above a shared podium opposite Royal North Shore Hospital.

The proposal forms part of the broader transformation underway across the St Leonards-Crows Nest precinct, where former industrial and commercial sites are increasingly being redeveloped into high-density mixed-use projects tied to major transport infrastructure.

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="2cc428cf-fe70-4cac-9cd5-264ad53af62c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.56%E2%80%AFAM.png?VersionId=otKSnHtbjAvAddOnovyXQMgcAwE6DMe1" />

According to the planning documents, the site sits “within the St Leonards–Crows Nest Strategic Centre, identified by the NSW Government as a key area for accommodating future jobs and housing across Sydney.”

The proposal has been designed by fjcstudio, formerly FJMT Studio, and is being progressed through the State Significant Development pathway due to its scale and affordable housing provision.

The scheme would comprise 413 apartments, including 46 affordable housing units, alongside retail and commercial uses fronting Herbert Street. The project would also include communal open space, landscaping, a swimming pool, gymnasium, children’s play areas and podium-level resident amenities.

Planning documents show the development would consist of a part-13, part-39 storey tower form positioned above a four-storey podium.

“The development comprises a unified podium that activates the street interface, and two setback towers to accommodate new housing supply while maintaining an appropriate human scale at ground level,” fjcstudio noted in its Design Report.

The northern and southern towers have been shaped to respond to the surrounding skyline while also limiting overshadowing impacts to nearby public open space, particularly Talus Reserve.

The design report said the differing tower heights were intended to “contribute to a varied skyline while responding to the surrounding built form context and solar access considerations.”

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="36da62dc-ff9e-41f2-a7e3-7be38373751c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.45%E2%80%AFAM_0.png?VersionId=Mo6Rp2r.XRLTzIfg_PEEpw8NepDH8UBs" />

The site sits directly opposite Royal North Shore Hospital and within walking distance of both St Leonards Station and the new Crows Nest Metro station.

While the site itself sits just outside the formal Crows Nest Transport Oriented Development boundary, the planning documents repeatedly reference its alignment with the broader TOD objectives reshaping the Lower North Shore.

“The site is located adjacent to St Leonards Station and in close proximity to Crows Nest Metro which is within the Crows Nest Transit Orientated Development Accelerated Precinct which has been identified by the NSW Government to support housing delivery,” the Design Verification Statement noted.

According to fjcstudio, the project has been designed to respond to the broader transition occurring across St Leonards, where increasing residential density is being concentrated around transport infrastructure and employment hubs.

“The broader precinct is undergoing significant change, with a mix of existing mid-rise buildings and newer high-density developments,” the report stated.

“Recent and approved projects indicate a consistent shift toward taller built form, typically organised as tower-and-podium typologies with more active ground levels.”

The proposal includes close to 6,000 sqm of retail and commercial space across the ground floor and podium levels, designed to create a more activated street edge along Herbert Street.

Aqualand’s plans would also introduce a landscaped podium shared between the two towers, with communal open space in the form of a podium rooftop designed to support resident interaction and improve urban greening outcomes. The scheme would also introduce pocket parks at the northern and southern ends of the site, including a landscaped area at the corner of Herbert and Ella streets designed to improve pedestrian amenity and soften the streetscape.

&nbsp;

The proposal is being progressed through the NSW Government’s Housing Delivery Authority pathway, which was introduced to accelerate housing supply across the state. The application was declared State Significant Development in April 2025 following an expression of interest process.

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="faf6d97d-2671-454f-b85a-fe1c6a7be608" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.49%E2%80%AFAM.png?VersionId=diVd28OBVr5.YV.7prrOz.uAanwwwm7a" />

St Leonards has been particularly active with new developments in recent weeks. Developer SP Setia’s <a href="https://www.apartments.com.au/news/nsw/first-look-sp-setia-targets-st-leonards-skyline-with-40-storey-tod-tower">plans for a new 42-storey tower</a> recently went on exhibition through the same pathway, while <a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">Stockland’s 52-storey tower proposal</a> was also recently unveiled.

Aside from the St Leonards project, which is expected to take around nine months to move through the approvals process ahead of a potential 2027 launch, Aqualand is also preparing to launch Boronia, a new apartment project in Roseville comprising around 111 apartments on Larkin Street.

The developer also has approvals in place for the next stage of the Barangaroo precinct, which will feature new residential, retail, hospitality and community uses, alongside a new metro entry across the five-hectare site.

More than 50 new retail destinations are planned for Central Barangaroo, alongside a 270-metre-long boulevard connecting Hickson Park to Nawi Cove. Together with Harbour Park, more than 50 per cent of the precinct will comprise public open space and parkland.

First look: Aqualand joins St Leonards apartment party

<section data-scroll-anchor="false" data-testid="conversation-turn-5" data-turn="user" data-turn-id="e65dbe94-e3b6-47f7-b62a-9cbb30c9bf79" data-turn-id-container="e65dbe94-e3b6-47f7-b62a-9cbb30c9bf79" dir="auto">Time &amp; Place’s plans to transform the former David Jones factory building in Surry Hills into a mixed-use residential precinct have gone on exhibition through the NSW Government’s In-fill Affordable Housing pathway.</section>

<section data-scroll-anchor="false" data-testid="conversation-turn-6" data-turn="assistant" data-turn-id="request-WEB:f4d533b7-64a5-413d-86fd-5c99649c2b73-2" data-turn-id-container="request-WEB:f4d533b7-64a5-413d-86fd-5c99649c2b73-2" dir="auto">
The Marlborough House proposal, lodged for the <a href="https://www.apartments.com.au/new-apartments/marlborough-house-47-97-marlborough-street-surry-hills-nsw-2010">47-97 Marlborough Street</a> site, would see the adaptive reuse of the heritage-listed warehouse building alongside the construction of new residential additions and a separate apartment building on the northern portion of the site.

The proposal seeks approval for 172 apartments across three buildings, including 15 per cent affordable housing managed by a community housing provider for at least 15 years from occupation.

<img alt="Marlborough" data-entity-type="file" data-entity-uuid="5d1d3c2a-bf13-47d6-a335-7c01102cdee1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.36%E2%80%AFAM.png?VersionId=cjMYrbR.BLUlWH4dar0RVDDo0bG.u2YT" />

Interior view from the Northern Building Penthouse overlooking the park

&nbsp;

The redevelopment is planned for the prominent 3,413 sqm site bounded by Marlborough Street, Goodlet Street and Lansdowne Street, directly opposite Eddie Ward Park and around 200 metres from the Surry Hills light rail stop.

Time &amp; Place acquired the former David Jones building in 2024, marking the first time the property had changed hands in around 50 years.

Designed by Wardle, the proposal centres around the adaptive reuse of the former David Jones factory, originally constructed between 1913 and 1935 in the Inter-War Chicagoesque architectural style.

Wardle noted in its Architectural Design Report that the building “occupies a significant place in the industrial and cultural history of Surry Hills” and at its peak was “the largest department store manufacturing facility in Australia, employing over 800 people and fuelling the growth of Sydney’s fashion and retail industries.”

The practice said the project positions itself “not as an isolated intervention, but as a contributor to the civic, social, and architectural grain of the precinct.”

The proposal would deliver 75 apartments within the retained southern heritage building, 59 apartments within the central addition, and a further 38 apartments within the new northern building fronting Lansdowne Street.

Planning documents show the scheme would comprise a mix of heritage apartments, new-build apartments, townhouses and penthouses.

<img alt="Marlborough" data-entity-type="file" data-entity-uuid="57758518-40a3-4b83-958c-d06e96a2cffa" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.42%E2%80%AFAM.png?VersionId=VerlX9ST5xgBi8.1_YRsqdWTJeT6ygjs" />Interior View of the Heritage Building Apartment

The development would also include a ground-floor retail tenancy on the corner of Marlborough and Lansdowne streets, rooftop communal open space, a landscaped pedestrian link along the western edge of the site, and basement parking accessed from Lansdowne Street via a car stacker system.

&nbsp;

The scheme emerged from a competitive design process run by Urbis, with Wardle ultimately selected as the winning architect ahead of FJC Studio, TZG, Architectus and Wilkinson Eyre.

The Design Integrity Panel later described several aspects of the Wardle scheme as fundamental to the project, including “the stepped character of the new addition to the north of the site”, the landscaped western pedestrian link, and the “garden arrival” experience separating the original Marlborough House from the heritage addition.

Wardle’s design heavily references the site’s industrial and heritage history, while also responding to the surrounding Surry Hills streetscape.

The Architectural Design Report describes Surry Hills as “a finely grained neighbourhood with beautiful and expressive brickworks throughout the suburb,” with the proposal introducing a material palette intended to sit comfortably alongside the existing warehouse fabric and neighbouring terraces.

The report also outlines the project’s relationship with Eddie Ward Park and the broader landscape context of the area.

“Marlborough House occupies a site of deep cultural memory and the neighbouring Eddie Ward Park is of local ecological significance, where natural systems, topography, and stories have long shaped human experience,” Wardle noted in the report.

The architects said the proposal sought to “rebind built form to Country” through landscape, materiality and the adaptive reuse of the heritage structure.

<img alt="Marlborough House" data-entity-type="file" data-entity-uuid="9ae3f2f9-c85f-477a-a6f8-b43f6cb97c41" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.53%E2%80%AFAM.png?VersionId=B.qUCLqRvJOR.n9CvYcTpaknIX9LuqKZ" />

The project is also being progressed under the NSW Government’s in-fill affordable housing provisions, allowing developments that include affordable housing to access additional height and floor space incentives.

Under the plans, 2,593 sqm of the project’s floor space would be dedicated to affordable housing, slightly exceeding the required 15 per cent threshold.

In its Design Excellence Strategy, Urbis said the project aimed to “sensitively adapt and enhance the heritage-listed building on site through alterations and additions that preserve its historical significance” while delivering “high-quality market and infill affordable housing development in Surry Hills.”

Time &amp; Place has been one of the most active developers nationally in the last 12 to 24 months. Late last year they completed&nbsp;The Queensbridge in&nbsp;<a href="https://www.apartments.com.au/developments/southbank-vic-3006">Southbank</a>, a mixed-use tower with 353 apartments and a hotel. They are currently selling Park Modern, 246 apartments near the famous Botanic Gardens in&nbsp;<a href="https://www.apartments.com.au/developments/south-melbourne-vic-3205">South Melbourne</a>, and have future projects, <a href="https://www.apartments.com.au/new-apartments/the-wilmot-173-burke-road-28-hope-street-glen-iris-vic-3146">The Wilmot</a>&nbsp;in&nbsp;<a href="https://www.apartments.com.au/new-apartments/glen-iris-vic-3146">Glen Iris</a>, the redevelopment of the Northcote Plaza, and another tower in South Melbourne.

The developer broke into Sydney just a few years ago with Two Tides in Manly. They have another project nearby, which is at the ultra-luxury end of the market on&nbsp;<a href="https://www.apartments.com.au/buildings/shoreline-manly-beach-89-90-north-steyne-manly">North Steyne</a>, fronting the beach.

It is also continuing to work through the <a href="https://www.apartments.com.au/news/nsw/first-look-time-place-settles-on-design-for-the-chimes-potts-point-redevelopment">redevelopment of The Chimes building</a> on Macleay Street in&nbsp;<a href="https://www.apartments.com.au/developments/potts-point-nsw-2011">Potts Point</a>, as well as a project on <a href="https://www.apartments.com.au/news/nsw/time-place-to-take-on-mosman-apartment-market">Mosman's Redan Street</a>.
</section>

First look: Time & Place unveils Marlborough House redevelopment designs for former David Jones warehouse in Surry Hills

The residential transformation of St Kilda Road is set to continue into with more new apartment plans for the sought-after boulevard.

Wing Tai Asia has lodged plans for a major residential tower at 464-466 St Kilda Road, replacing the former VACC House with an 18-storey mixed-use development designed around a retained heritage podium and a sculpted contemporary tower.

The proposal, prepared under Victoria’s Significant Residential Development with Affordable Housing pathway, would deliver 325 apartments and ground-floor retail across the prominent 4,653 sqm boulevard site in Melbourne’s St Kilda Road North Precinct.

The project centres on the adaptive reuse of the site’s heritage-listed VACC Building, an eight-storey office designed by Bernard Evans that has occupied the address for decades. Planning documents state the development would involve “carefully dismantling and conserving off-site the original metal fabric of the podium visible from St Kilda Road,” before reinstating it as the defining frontage of the new scheme.

Above the restored podium, Wing Tai is proposing a curvilinear residential tower. The scheme includes 172 one-bedroom apartments, 63 two-bedroom apartments, 66 three-bedroom apartments, and 24 four-bedroom apartments, alongside two ground-floor food and beverage tenancies fronting St Kilda Road.

The tower has been designed with substantial articulation and variable setbacks to minimise perceived bulk and maintain view corridors along the boulevard. Urbis, which prepared the planning report, said the design “has been significantly articulated through a curvilinear design” with “an interplay with materials, façade expression and depth” to create visual separation and visual interest.

The proposal also includes 254 basement car spaces, landscaped pedestrian links connecting St Kilda Road and Queens Lane, and a biophilic landscape strategy featuring canopy trees, raised planters, cascading greenery and a glass oculus pool overlooking the eastern frontage.

Planning documents confirm the $270.1 million development will contribute 3 per cent of project costs to the Social Housing Growth Fund as part of the application process.

Wing Tai acquired the St Kilda Road property in 2018 alongside Abacus Property Group for $95.38 million, before later consolidating ownership of the site. The property previously served as the Victorian Automobile Chamber of Commerce headquarters for around 60 years.

The transformation of the St Kilda Rd boulevard is already beginning to materialise, with a number of high-profile projects recently completed, launched, or approaching launch as developers continue to back the long-term appeal of the precinct.

Among the most notable recent completions is Louise by Samuel Property Group, just off the strip on Queens Lane, the same pocket Hirsch &amp; Faigen recently launched The Queensbury. Mirvac is too on the same street with The Albertine, which is approaching completion.

Dexus recently secured approval for its slice of St Kilda Road, while Gurner also has approved plans for the precinct.

Wing Tai unveils 325-apartment St Kilda Road tower on former VACC House site

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The Reserve Bank of Australia has released a new report titled The Apartment Shortage which identifies costs created by the NSW planning system.
It outlines the resultant shortages in supply driving up prices and has been accepted by experts such as Urban Taskforce CEO, Tom Forrest.
The RBA found that the excessive planning restrictions associated with delivering apartments in inner Sydney were disproportionately high.
By comparing the planning regulation cost of bringing a new home to completion in NSW with other jurisdictions, it highlighted the need for significant reform to planning regulation in NSW.
<img src="https://www.urban.com.au/images/2020/8/6/Apt%20Shortage%201.JPG" alt="">
The Apartment Shortage Report found home buyers will pay an average of $873,000 for a new apartment in Sydney, even though it only costs $519,000 to supply, a gap of $355,000 (68 per cent of costs).
This compares with smaller gaps of $97,000 (20 per cent of costs) in Melbourne and only $10,000 (2 per cent of costs) in Brisbane.
Significantly, the report concluded that "the gap between the supply cost and the delivery to market cost was sustained by planning restrictions and planning risk."
Click <a href="https://www.propertyobserver.com.au/images/2020/8/6/Apt%20Shortage%202.JPG" target="_blank">here to enlarge</a>:
<img src="https://www.urban.com.au/images/2020/8/6/Apt%20Shortage%202.JPG" alt="">
Mr Forrest said, "the additional costs are due to the excessive time taken to obtain approvals in the NSW planning system and the high degree of risk associated with approvals, despite the strong demand for new apartments."
"Given the economic shock created by COVID-19, the RBA's independent confirmation of the excessive costs associated with the NSW planning system presents an opportunity for the NSW Government to cut housing prices by approving more supply and allowing for more height."
"The fact remains that the planning system had slowed the planning approval process even before COVID-19 hit. Planning approvals, particularly for apartments, have now fallen off a cliff."
"This important piece of independent research cannot be ignored by policy makers in NSW", Mr Forrest concluded.
Many projects have also been derailed as confidence sinks and by delivery difficulties, most notably in Melbourne where work sites have been hit by tough restrictions.
You can read the full RBA report <a href="https://www.rba.gov.au/publications/rdp/2020/pdf/rdp2020-04.pdf" target="_blank">here.</a>
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j.ballantyne1990-6AQqhLzZaK

New RBA report finds NSW planning has caused apartment shortage

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Even as the recovery gets under way, the RBA Governor Dr Philip Lowe expects there will still be a shadow cast by the pandemic.
"As a country, we will need to turn our minds as to how to move out of this shadow," Lowe said today.
"A reform agenda that makes Australia a great place for businesses to expand, invest, innovate and hire people would certainly help. For its part, the RBA will maintain its expansionary settings until progress is being made towards full employment and we are confident that inflation will be sustainably within the 2–3 per cent target band."
When answering questions he said the number of job losses has been lower than initially expected.
He described the pandemic as a "black swan event."
He re-affirmed negative interest rates were not on the policy agenda and were "extraordinarily unlikely" to happen in Australia. 
"I don't think they work," he said.
Lowe said, we need to re-examine the way we tax consumption as well as property among a number of other things he mentioned.
In light of APRA's estimated residential mortgage rate buffer of 2.5% he said the odds of the cash rate increasing by such a significant amount wasn't likely
He also discussed his fears of a lack of dynamism in the economy, that we would go too far in the movement towards regulation and impact the future and growth of the economy.
If we want to have a better standard of living for us and our children then dynamism and growth in the economy are vital.
In his opening statement he said, "the evidence so far is that our mid-March package is working as expected and it is helping build the necessary bridge to the recovery."
"The shape and timing of that recovery depends not only on when restrictions are lifted, but also on the confidence that Australians have about their own health and their finances."
"With the national health outcomes better than earlier feared, it is possible that the economic downturn will not be severe as earlier thought. Much depends on how quickly confidence can be restored."
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RBA governor expects long shadow cast by the pandemic as recovery gets underway

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EXPERT OBSERVER
The Reserve Bank has released its quarterly Statement on Monetary Policy (SMP). The report rounds out a full week for RBA communication that has also included the Governor’s decision statement following the Board’s February policy meeting, a speech on “the year ahead” and this morning’s semi-annual testimony to Parliament. The key themes throughout have been: a surprisingly confident outlook, notwithstanding a weaker recent performance and near term outlook due to bushfires and the emerging coronavirus shock; relatedly, a more positive view on the housing outlook, most notably around construction; a continued preparedness to cut rates further, particularly if labour markets were to weaken; but with a little more weight in the ‘balance of risks’ assessment being placed on the potential for further rate cuts to drive a renewed increase in household debt.
The SMP provides the fullest account of the RBA’s assessment and risks to the outlook. The central message here is that despite some downward adjustments to near term estimates: “…the medium-term outlook for the Australian economy is broadly unchanged from three months ago.” The bank’s point forecasts have GDP growth of 2% for 2019, 2.7% for 2020 and 3% 2020 (December quarter on December quarter growth rates). That compares to 2.3%, 2.8% and 3.1% in the previous SMP released in November. The medium term ‘central case’ view is of a gradual return to ‘around trend’ this year and rising slightly above trend in 2021. Similarly, the unemployment rate is expected to hold in the 5-5¼% range near term before gradually declining heading into 2021.
As we noted when these new forecasts were first revealed in the Governor’s statement following the Board meeting on Tuesday (see here), it is surprising that the RBA has retained its ‘around trend’ growth forecast for 2020 given the weaker momentum apparent in the September quarter national accounts; developing questions around the global economy; and the softer tone from a range of labour market lead indicators. Westpac’s forecast is considerably more downbeat, with growth now expected to come in at 1.9% this year, factoring in the impact of bushfires (more here) and a preliminary assessment of the impact from the coronavirus (more here). That in turn is expected to see the unemployment rate track higher, drawing a further easing response from the RBA with 25bp cuts forecast in April and August followed by quantitative easing measures.
Note that the RBA’s latest forecasts do include preliminary assessments of the impact of both bushfire and the coronavirus, although the high degree of uncertainty around the latter is stressed. It’s more detailed forecasts show a material downgrade to the first half of 2020 with annual growth of 1.9%yr over the year to June compared to a 2.6%yr forecast back in November. As the largely unchanged calendar year forecasts imply, this is largely offset by a rebound in the second half.
Key to the RBA’s more positive outlook are signs that last year’s policy easing is working to generate a lift in momentum – especially in the housing sector – and a view that this will continue as the ‘long and variable lags’ flow through to other sectors, consumer demand in particular. From the SMP: “The transmission of monetary policy is evident in established housing markets … It is too soon to see any response to this in household spending, but over time the drag on consumption growth from the earlier decline in housing prices and activity should wane.”
The global backdrop is also seen as more positive than a few months ago although here the messaging has been a little uneven. The emphasis in the Governor’s decision statement and speech was that “global growth is expected to be a little stronger this year and next than it was last year”. That jars slightly with the SMP commentary, which notes that “overall growth in Australia’s major trading partners is expected to be a little lower in 2020” – the difference possibly reflecting some late changes to allow for the emerging coronavirus shock.
On the bank’s more detailed forecasts, the 2020 outlook for business investment has been upgraded to 9.3% from 6.2% in November. The text suggests that this is around mining investment, “Growth (in mining investment) is expected to pick up noticeably over 2020 and 2021 as work commences on a number of sustaining and expansionary projects.” The RBA acknowledges that non-mining business investment was (1) weaker than expected in the September quarter, led by equipment spending; and (2) “the capex survey indicates equipment investment is likely to be weaker than previously expected over the remainder of 2019/20”. This had led to “the forecast for non-mining investment has been lowered over the next few quarters” Beyond that, “from late 2020, non-mining business investment growth is expected to increase modestly, in line with the broader pick-up in private demand”.
On household income, it is striking that real household disposable income growth for Dec 2020 has been downgraded to 1.4% from 2.3% previously. The figure for Dec 2019 is as before at 1.6%. The downgrade to consumer spending for Dec 2020 is more modest, 2.4% to 2.0% - suggesting in our minds downside risks given this weak income outlook. In the Overview of the Statement, consumption growth is expected to recover gradually, with “the low level of interest rates, a somewhat faster rate of income growth than in recent years and the recovery in household wealth are all expected to contribute to this turnaround”. The mix implies a significant decline in the household savings rate over the year.
On housing, “the trough in dwelling construction is expected to occur in the second half of 2020, before a recovery in residential construction gets underway through 2021”. The forecast profile for home building activity has been upgraded a little: with the Dec 2019 figure, to -9.8% from -11.3%; the Dec 2020 figure, to -1.9% from -2.6%; while for Dec 2021 the figure is unchanged at 9.2%.
Around the assessment of policy, the Bank clearly remains open to further policy easing. The board again considering the case for additional easing in February with the main concern being: “… the only gradual nature of the progress [towards the inflation target and full employment]” and “ongoing uncertainties” (i.e. around household balance sheet adjustments and from the near terms shocks from bushfires and the coronavirus). More specifically, the Bank is prepared to ease further “if the unemployment rate were to be moving materially higher and there was no further progress being made towards the inflation target.”
However, there has been a notable shift in the way the Board is assessing the case for further easing, which came more to the fore in the Governor’s speech, Parliamentary testimony and in the SMP than in Tuesday’s decision statement. Whereas back in late November the RBA Governor indicated that he was not particularly worried about the resurgence in house prices, the February SMP now explicitly notes that in considering the case for further policy easing “… a balance needs to be struck between the benefits of lower interest rates and the risks associated with having interest rates at very low levels.”, namely that lower rates could “encourage more borrowing by households eager to buy residential property at a time when housing debt is already quite high and there is already a strong upswing in housing prices in place. … [which] could increase the risk of problems down the track.”
Conclusion
Westpac continues to expect that a combination of a more moderate growth outlook and a deterioration in the labour market will require a further policy response. However, the RBA’s surprisingly confident forecasts and uncertainty around what the bank views as temporary shocks impacting near term casts doubt over how they will respond. The case for further policy accommodation will become clear to the RBA as its overly-optimistic expectations are not met. Currently we have April pencilled in for the next cut but recognise that the Governor may need more time to be convinced that further action will be required.
MATTHEW HASSAN is a Senior Economist for Westpac
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RBA's surprisingly confident view despite weaker recent performance: Westpac's Matthew Hassan

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GUEST OBSERVATION
In public, the government is crab-walking away from its commitment to a budget surplus, saying since the bushfires that other things have become more important.
Asked directly on Tuesday whether he was prepared to sacrifice this year’s projected surplus to help the bushfire recovery effort, Treasurer Josh Frydenberg said:
Our focus is on delivering the services and support to people in need. That’s what we’ve been doing.
But less-publicly, and little noticed in the pre-Christmas release of the mid-year economic and fiscal outlook, the government has quietly buried long-standing targets for restraining spending.
Jettisoning these targets provides it with more wriggle room to increase spending to respond to things such as the bushfires and to boost the economy should it need to in 2020 and beyond.
Under the Charter of Budget Honesty Act 1998 every government must release a fiscal strategy statement alongside the Budget.
The statement is a list of the government’s budget targets. One long-standing target is “to achieve surpluses on average over the economic cycle”. Others relate to spending, tax collections, and public debt.
They are not binding but they provide a useful guide to the government’s thinking.
A looser straitjacket
Revisions to these targets can signal changes to the government’s approach.
In the pre-Christmas Mid-Year Economic and Fiscal Outlook (MYEFO), the government significantly scaled back its targets – both in number and ambition.
For example, the budget repair strategy it adopted in 2014 committed it to “deliver budget surpluses building to at least 1% of GDP by 2023-24”.
The strategy has been reproduced in every budget since then, although in 2017 the 2023-24 deadline was extended to “as soon as possible”.
In December’s MYEFO more wriggle room was added, with the surpluses of at least 1% of GDP to be reached only “when economic circumstances permit”.
<hr>
Spot the difference
<a href="https://images.theconversation.com/files/311051/original/file-20200121-187130-1h42ojy.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/311051/original/file-20200121-187130-1h42ojy.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a> <a href="https://budget.gov.au/2019-20/content/bp1/download/bp1_bs3.pdf">2019 Budget</a> <a href="https://images.theconversation.com/files/311072/original/file-20200121-117917-jev67o.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/311072/original/file-20200121-117917-jev67o.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a> <a href="https://budget.gov.au/2019-20/content/myefo/download/MYEFO_2019-20.pdf">2019 MYEFO</a>
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Another component of the original repair strategy was that “new spending initiatives will be more than offset by reductions in spending elsewhere in the budget”.
In other words: if the government wanted to announce a new spending policy, it had to find savings elsewhere to cover the cost.
Targets missing
This target does not appear in MYEFO. A softer replacement says the government intends to “pursue budget savings to make room for spending priorities”.
This relaxing of the purse strings is already evident: the new spending measures in MYEFO on aged-care home packages, bringing forward infrastructure spending, and drought assistance are significant costs that were not paid for by spending reductions elsewhere.
Nor has the government provided any indication that its bushfire relief measures will be funded through savings.
<hr>
Gone: the commitment to cut the government’s share of the economy over time
<a href="https://images.theconversation.com/files/311074/original/file-20200121-117962-1swvsvs.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/311074/original/file-20200121-117962-1swvsvs.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a> <a href="https://budget.gov.au/2019-20/content/bp1/download/bp1_bs3.pdf">2019 Budget</a>
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The budget repair strategy also required improvements in the budget position due to favourable economic circumstances to be “banked to the bottom line”. That target has now been removed all together.
The medium-term (10-year) fiscal strategy has also been amended to remove some of the more ambitious spending-control targets.
One was to reduce the government’s share of the economy over time.
That target has now gone, even though shrinking government spending as a share of the economy is crucial to the budget projections of growing surpluses and declining net debt over the decade.
The obvious question is – why?
The government is making big spending easier
The government might argue that it no longer needs a budget repair strategy because it expects to a deliver a surplus this year.
But its strategy was always more ambitious than a single surplus.
It wanted to reach continuing surpluses of 1% of GDP. Surplus forecasts of between 0.2% and 0.4% of GDP over the next four years indicate it is still well short of achieving them.
More likely is that it recognises that some of its targets were going to be difficult to meet.
It has already failed on <a href="https://theconversation.com/more-mirage-than-good-management-myefo-fails-to-hit-its-own-targets-108830" target="_blank">a number of occasions</a> to offset new spending with savings. Around <a href="https://theconversation.com/5-things-myefo-tells-us-about-the-economy-and-the-nations-finances-128843" target="_blank">half</a> of this year’s upside from stronger-than-expected commodity prices and employment growth was used to fund tax cuts and extra spending rather than banked to the budget bottom line.
As the <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Budget_Office/Publications/Research_reports/Medium-term_budget_projections" target="_blank">Parliamentary Budget Office</a> has pointed out, it becomes even harder to hold down spending as the budget improves.
This is all the truer amid the need for bushfire reconstruction.
It’s better to shift goal posts than repeatedly fail to score
Another possible explanation is that the government is clearing the way for fiscal stimulus. To date it has relied on the efforts of the Reserve Bank and state governments to boost lacklustre economic growth.
Reserve Bank governor Phil Lowe, <a href="https://theconversation.com/we-asked-13-economists-how-to-fix-things-all-back-the-rba-governor-over-the-treasurer-126283" target="_blank">along with many economists</a>, has argued that it should do more.
In taking off its self-imposed spending straitjacket, it is giving itself room to heed the governor’s call.
<a href="https://theconversation.com/profiles/danielle-wood-147710" target="_blank">Danielle Wood</a>, Program Director, Budget Policy and Institutional Reform, <a href="http://theconversation.com/institutions/grattan-institute-1168" target="_blank">Grattan Institute</a>; <a href="https://theconversation.com/profiles/nathan-blane-934089" target="_blank">Nathan Blane</a>, Analyst, <a href="http://theconversation.com/institutions/grattan-institute-1168" target="_blank">Grattan Institute</a>, and <a href="https://theconversation.com/profiles/shelby-so-934091" target="_blank">Shelby So</a>, Researcher, <a href="http://theconversation.com/institutions/grattan-institute-1168" target="_blank">Grattan Institute</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/new-year-new-strategy-unheralded-change-to-budget-targets-creates-space-for-stimulus-129690" target="_blank">original article</a>.
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New year, new strategy? Change to budget targets creates space for stimulus

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EXPERT OBSERVER
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The minutes of the December monetary policy meeting of the Reserve Bank Board have made it clear that the Board will be reassessing the economic outlook next February. Whilst it seems reasonable at the end of the year to note that a review will occur at the beginning of the next year, this has not been specifically noted in December minutes in previous years.
Further evidence of the importance of this signal is that the minutes note “economic growth and the unemployment rate remain broadly consistent with the forecasts, but members agreed that it will be concerning if there were a deterioration in the outlook”.
These two observations from the minutes strongly point to the unusual importance of the data flow over the next two months.
The Board has already noted that since the November economic forecasts were finalised “The Capex survey ( showed) … non-mining investment in 2019/20 was expected to be weaker than previously envisaged”.
We were not surprised that the Board did not repeat the comment in the November minutes that “a case could be made to ease monetary policy at this meeting”. Although that language strengthens the signal that the Board is open to cutting rates further, it loses its impact if repeated for every meeting.
The Board also resolved their views on the impact of lower rates on confidence. The November minutes noted that “they recognised the negative effects of lower interest rates on savers and confidence and… that a further reduction in interest rates could have a different effect on confidence than in the past”. However, in these minutes, the Board resolved that: “the impact of these effects [negative confidence] was unlikely to outweigh the stimulus to the economy of lower interest rates”.
Concerns about weak wages growth remain central to the Board: “it was noted that the current rate of wages growth was not consistent with inflation being sustainably within the target range… nor was it consistent with consumption growth returning to trend”. It was also observed that private sector wages growth “had levelled out in recent quarters, following its gentle upward trend of the previous couple of years”.
Last month, the RBA complimented its standard stated benefits of lower rates — the exchange rate and household and business cash flow — with the boost to house prices lifting wealth and expenditure on household goods. That theme is repeated, although while higher house prices are a benefit in the near-term, it “could be become a source of concern if borrowing were to run too quickly ahead of income growth”. Note that the emphasis is on the risk of higher debt rather than actual house prices, and given the current trend for borrowers to lift repayments to contain debt levels, it is unlikely that the Board will become concerned with rising house prices for some time yet.
With the unemployment rate being such an important source of attention for the Board, it is notable that “employment intentions among the Bank’s  liaison contacts had generally been moderate”. Westpac expects that the unemployment rate will drift higher to around 5.6% in the June quarter from the current 5.3%.
On the international front, there is an improved outlook with the noting that “some of the downside risks had receded”, although the Board remains quite cautious around the outlook for China.
Conclusion
These minutes strengthen our conviction that the Board would be comfortable easing rates further at the February meeting. The flow of economic data over the next six weeks will be critical to that decision, particularly the labour market; retail sales and confidence.
Given our forecasts, Westpac is comfortable with our current view that the RBA will reduce the cash rate from 0.75% to 0.50% at the February Board meeting. 
BILL EVANS is the Chief Economist at Westpac
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RBA highlight importance of February 2020 meeting: Bill Evans

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Philip Lowe, Governor of the RBA said in a speech on Tuesday that Australia was seeing a further shift away from cash and cheques.
The RBA recently undertook the latest wave of our three-yearly consumer payments survey and cheque use in Australia has been in sharp decline for some time as seen in the graph below.
<img src="https://www.rba.gov.au/speeches/2019/images/sp-gov-2019-12-10-graph07.gif" alt="Graph 7: Cheque Payments per Capita" width="" height="">
They found that over the past year, the number of cheques written has fallen by another 19% and the value of cheques written has fallen by more than 30%, as the real estate industry has continued to shift to electronic property settlements, highlighted in the graph above.
"At some point it will be appropriate to wind up the cheque system, and that point is getting closer," Lowe said.
"Before this happens, though, it is important that alternative payment methods are available for those who rely on cheques.
"Using the NPP infrastructure for new payment solutions is likely to help here."
Lowe said that, as expected, there has been a further trend decline in the use of cash, with cash now accounting for just around a quarter of day-to-day transactions, and most of these are for small-value payments.
"I forecast that this trend will continue," he concluded. 
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RBA boss questions future of cheques for home purchases

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EXPERT OBSERVER
Westpac now expects two rate cuts next year from the RBA with the cash rate cut to 0.25% in June 2020. Quantitative Easing is also expected to begin in the second half of 2020.
Westpac has not changed its rate call for the RBA since July 24 this year. At that time we envisaged two more cuts from the RBA in October 2019 and in February 2020. That would have seen the terminal cash rate in this cycle at 0.5%.
We expected that the final cut in February would have been insufficient to provide the RBA with enough comfort that the economy was moving into line with their growth; inflation; and unemployment targets.
Consequently, we expected that the RBA would have seen the need for unconventional policies, largely centred around the purchase of Australian government securities and clear forward guidance, to maintain the emphasis that it was still easing policy.
That emphasis was going to be important to maintain downward pressure on the Australian dollar, in particular.
Of course there was always the option to push the cash rate even lower than 0.5% but we assessed that the RBA would see the impact on confidence and inflationary expectations of even lower rates to be counter-productive.
The minutes of the November RBA Board meeting provided some support to our view when it was noted the Board “also discussed the possibility that a further reduction in interest rates could have a different effect on confidence than in the past, when interest rates were at higher levels”.
That observation was certainly consistent with the 5.5% fall in the Westpac MI Consumer Sentiment Index following the announcement of the rate cut in October. Concerns around the implications of ultra- low rates for the state of the economy along with negative publicity around the limited impact of rate cuts on private sector rates are likely to have largely explained that development.
Indeed, since the RBA started this current easing cycle, the Index has fallen by 4.2% to now be firmly in the range where pessimists outnumber optimists.
However in a speech to the Australian Business Economists last night the Governor stated, “Our current thinking is that QE becomes an option to be considered at a cash rate of 0.25%, but not before that.” During the presentation he noted that 0.25% represents the Effective Lower Bound of the cash rate as the interest rate paid on reserves at the RBA is 25bp under the prevailing cash rate and therefore would mean the “Reserve Bank would already be at zero”.
Read full report <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/November/er20191127BullRBACutCashRate.pdf">'RBA cut cash rate' (PDF 91kb)</a>
<div>
BILL EVANS is the Chief Economist for Westpac
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RBA will cut cash rate to 0.25% by June 2020: Bill Evans

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EXPERT OBSERVER
The minutes of the November monetary policy meeting of the Reserve Bank Board give us no significant reason to change our view that the next rate cut will occur in February.
While some forecasters have been promoting the idea of a move in December, the minutes provided the flavour of a Board that is in no hurry to make the next cut. The minutes conclude that “the Board would continue to monitor developments”. It also referred to “having already delivered a substantial monetary stimulus in recent months, there was a case to wait and assess the effects of this stimulus, especially given the long and variable lags”.
Nevertheless, the minutes do not want to leave the reader in any doubt that the Board continues to have a clear easing bias. The minutes concluded that the Board “was prepared to ease monetary policy further if needed” and also noted that “members reviewed the case for a further reduction at the present meeting”.
Some commentaries interpreted the latter remark as indicating that the Board was close to cutting rates at the meeting. However, my view is that it was used to emphasise a strong easing bias, particularly aimed at containing any upward drift in the AUD rather than any serious risk of an unexpected move in November.
The second important issue around the policy outlook is the “effective lower bound” (ELB) of the cash rate. Westpac has argued since July that the ELB will prove to be 0.50% and will be reached in February 2020. One factor that has been important to our thinking has been the response of the Westpac-MI Consumer Sentiment index to the rate cuts that began in June 2019. The index has been on a clear downward trend ( see Figure 1) since that first cut and the Board has recognised that by noting that “a further reduction in interest rates could have a different effect on confidence than in the past”. Put another way, the Board “recognised the negative effects of lower interest rates on savers and confidence”.
There are two elements to this downward pressure on confidence through these recent cuts; firstly the impact on consumers of the explanation behind very low rates and, secondly, the media coverage around the banks’ responses to ultra-low rates.
In that regard, the Board was informed that it appears that banks still have adequate scope to pass on future rate cuts. The minutes noted that “while close to a quarter of deposits were estimated to be earning interest at rates between 0-50bps, most deposits earned interest at rates over 1%”. The RBA reports that banks’ response to the cumulative 75bp reduction in the cash rate was to lower interest on at-call retail deposits by an average of 60-70bps.
As noted above, this reduction in deposit rates is affecting the confidence of savers, whereas the data also showed that borrowers had been repaying existing loans at a faster pace. This observation puts one of the most important channels of monetary policy, a boost to spending from the increased cash flows of borrowers, at some risk.
<a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2019/2019-11-05" target="_blank">Read full report </a><a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/November/er20191122BullRBADecemberOnHold.pdf" target="_blank">'RBA December on hold' (PDF 129kb)</a><a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2019/2019-11-05" target="_blank"> </a>
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BILL EVANS is Chief Economist for Westpac
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Ideas for unconventional monetary policy: Bill Evans

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The minutes of the November monetary policy meeting of the Reserve Bank Board give us no significant reason to change our view that the next rate cut will occur in February.
While some forecasters have been promoting the idea of a move in December, these minutes provide the flavour of a Board that is in no hurry to make the next cut.
The minutes conclude that “the Board would continue to monitor developments”. It also referred to “having already delivered a substantial monetary stimulus in recent months, there was a case to wait and assess the effects of this stimulus, especially given the long and variable lags”.
Nevertheless, the minutes do not want to leave the reader in any doubt that the Board continues to have a clear easing bias.
The minutes concluded that the Board “was prepared to ease monetary policy further if needed” and also noted that “members reviewed the case for a further reduction at the present meeting”.
The second important issue around the policy outlook is the “effective lower bound” (ELB) of the cash rate.
Westpac has argued since July that the ELB will prove to be 0.50% and will be reached in February 2020. One factor that has been important to our thinking has been the response of the Westpac-MI Consumer Sentiment index to the rate cuts that began in June 2019.
The index has been on a clear downward trend since and the Board has recognised that by noting that “a further reduction in interest rates could have a different effect on confidence than in the past”. Put another way, the Board “recognised the negative effects of lower interest rates on savers and confidence”.
On the other hand, the Board was informed that it appears that Banks still have adequate scope to pass on future rate cuts. The minutes noted that “while close to a quarter of deposits were estimated to be earning interest at rates between 0-50bps, most deposits earned interest at rates over 1%”.
The Banks’ response to the cumulative 75bp reduction in the cash rate was to lower interest on at-call retail deposits by an average of 60-70bps.
As noted above, this reduction in deposit rates is affecting the confidence of savers, whereas the data also showed that borrowers had been repaying existing loans at a faster pace. This observation puts one of the most important channels of monetary policy, a boost to spending from the increased cash flows of borrowers, at some risk.
In our preview to these minutes, we were hopeful that the minutes might cast some light on the sentence in the November Statement on Monetary Policy (SMP), “the Board was mindful that rates were already very low, and that each further cut brings closer the point at which other policy options might come into play”.
The issue here is whether these “other policy options” refer to unconventional monetary policy, fiscal policy, or both. It is most likely “both”. So more details on the unconventional side would have been helpful. The Governor is speaking on “Unconventional Monetary Policy: Some Lessons from Overseas” on November 26.
No doubt, he will cast some light on his thinking in that speech. It is also the last day before the blackout for the December RBA Board meeting.
If he wanted to signal to the market that the very disappointing labour force and wages reports from last week, which printed after the November Board meeting, had swayed his thinking towards a December move, that speech would be the time. However, we would be very surprised, given the earlier discussion about these minutes, to see such a move from the Governor.
The November Board meeting also discusses the Staff’s revised growth outlook. As we noted in the discussion of the SMP, there were very few changes in the RBA’s forecasts. The RBA continues to forecast trend growth (2.8%) in 2020, and above-trend growth (3.1%) in 2021.
Westpac is forecasting 2.4% growth in 2020, with the major differences being around the outlook for business investment and dwelling construction. In fact, the minutes highlight that the RBA remains uncertain about the pace of recovery in the dwelling cycle with one of the key factors being the impact of rising prices in the established market on new construction.
Commentary around the international outlook continues to point to risks being tilted to the downside. However, a key reason justifying the decision not to move in November was around the “decline in pessimism” which had been signalled by global financial markets.
A further reason to delay any more cuts is to await outcomes for the global economy, with the developments around the US-China trade conflict being front of mind.
Conclusion
The case for a December rate cut is heavily downplayed in these minutes, although, as discussed, the meeting occurred before the disappointing wages and employment prints from last week.
We certainly do not believe that those prints will be sufficient to move the RBA away from its current “monitoring” approach and so confirm our forecast that the next cut will occur in February 2020.
The discussion around the impact of low rates on confidence is clearly very significant and gives some support to our view that 0.5% will be the effective lower bound of the cash rate in this cycle. 
<a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2019/2019-11-05" target="_blank">Read the full RBA Minutes</a>.
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BILL EVANS is Chief Economist for Westpac
 
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RBA minutes signal that the Board is in "monitoring" mode: Bill Evans

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EXPERT OBSERVER
Sweden’s central bank ways it will no longer invest in assets from governments with large climate footprints, even if the yields were high.
What’s happening?
Suddenly, at the level of central banks, Australia is regarded as an investment risk.
On Wednesday Martin Flodén, the deputy governor of Sweden’s central bank, announced that because Australia and Canada were “<a href="https://www.riksbank.se/globalassets/media/tal/engelska/floden/2019/monetary-policy-in-a-changing-world.pdf" target="_blank">not known for good climate work</a>”.
As a result the bank had sold its holdings of bonds issued by the Canadian province of Alberta and by the Australian states of Queensland and Western Australia.
<a href="https://images.theconversation.com/files/301897/original/file-20191115-47128-1s2eoc3.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/301897/original/file-20191115-47128-1s2eoc3.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.riksbank.se/globalassets/media/tal/engelska/floden/2019/monetary-policy-in-a-changing-world.pdf" target="_blank">Martin Flodén, deputy governor Sveriges Riksbank Central Bank of Sweden</a>
Central banks normally make the news when they change their “cash rate” and households pay less (or more) on their mortgages.
But central banks such as Australia’s Reserve Bank and the European Central Bank, the People’s Bank of China and the US Federal Reserve have broader responsibilities.
They can see climate change affecting their ability to <a href="https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2018/climate-change-and-the-macro-economy-a-critical-review.pdf" target="_blank">manage their economies</a> and deliver <a href="https://www.rba.gov.au/publications/fsr/2019/oct/box-c-financial-stability-risks-from-climate-change" target="_blank">financial stability</a>.
<h2>There’s more to central banks than rates</h2>
<a href="https://images.theconversation.com/files/301909/original/file-20191115-47147-486lgx.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/301909/original/file-20191115-47147-486lgx.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=237&amp;fit=clip" alt=""></a> Reserve Bank deputy governor Guy Debelle. Extreme events not cyclical. DAVID MOIR/AAP
As an example, the new managing director of the International Monetary Fund Kristalina Georgieva warned last month that the necessary transition away from fossil fuels would lead to significant amounts of “<a href="https://www.afr.com/policy/economy/central-banks-tune-in-to-climate-change-20191020-p532ev" target="_blank">stranded assets</a>”.
Those assets will be coal mines and oil fields that become worthless, endangering the banks that have lent to develop them. More frequent floods, storms and fires will pose risks for insurance companies. Climate change will make these and other shocks more frequent and more severe.
In a speech in March the deputy governor of Australia’s Reserve Bank <a href="https://www.rba.gov.au/speeches/2019/sp-dg-2019-03-12" target="_blank">Guy Debelle</a> said we needed to stop thinking of extreme events as cyclical.
"We need to think in terms of trend rather than cycles in the weather. Droughts have generally been regarded (at least economically) as cyclical events that recur every so often. In contrast, climate change is a trend change. The impact of a trend is ongoing, whereas a cycle is temporary."
And he said the changes that will be imposed on us and the changes we will need might be abrupt.
"The transition path to a less carbon-intensive world is clearly quite different depending on whether it is managed as a gradual process or is abrupt. The trend changes aren’t likely to be smooth. There is likely to be volatility around the trend, with the potential for damaging outcomes from spikes above the trend."
Australia’s central bank and others are going further than just responding to the impacts of climate change. They are doing their part to moderate it.
<h2>No more watching from the sidelines</h2>
<a href="https://images.theconversation.com/files/301911/original/file-20191115-47176-x91igv.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/301911/original/file-20191115-47176-x91igv.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=237&amp;fit=clip" alt=""> </a>Peter Zöllner of the Bank for International Settlements launched the Green Bond Fund. BIS
Over thirty central banks (including Australia’s), and a number of financial supervisory agencies, have created a <a href="https://www.ngfs.net/en" target="_blank">Network for Greening the Financial System</a>.
Its purpose is to enhance the role of the financial system in mobilising finance to support the transitions that will be needed. The US Federal Reserve has not joined yet but is <a href="https://www.bis.org/review/r191111a.pdf" target="_blank">considering how to participate</a>.
One of its credos is that central banks should <a href="https://www.bis.org/review/r191111a.pdf" target="_blank">lead by example</a> in their own investments.
They hold and manage over A$17 trillion. That makes them enormously large investors and a huge influence on global markets.
As part of their traditional focus on the liquidity, safety and returns from assets, they are taking into account climate change in deciding how to invest.
The are increasingly putting their money into “<a href="https://www.bis.org/publ/qtrpdf/r_qt1909f.pdf" target="_blank">green bonds</a>”, which are securities whose proceeds are used to finance projects that combat climate change or the depletion of biodiversity and natural resources.
Over A$300 billion worth of green bonds were issued in 2018, with the total stock now over A$1 trillion.
<h2>Central banks are investing, and setting standards</h2>
While large, that is still less than 1% of the stock of conventional securities. It means green bonds are less liquid and have higher buying and selling costs.
It also means smaller central banks lack the skills to deal with them.
These problems have been addressed by the <a href="https://www.bis.org/" target="_blank">Bank for International Settlements</a>, a bank owned by 60 of the central banks.
In September it launched a <a href="https://www.bis.org/press/p190926.htm" target="_blank">green bond fund</a> that will pool investments from 140 (mostly central bank) clients.
Its products will initially be denominated in US dollars but will later also be available in euros. It will be supported by an advisory committee of the world’s top central bankers.
It is alert to the risk of “<a href="https://en.wikipedia.org/wiki/Greenwashing" target="_blank">greenwashing</a>” and will only buy bonds that comply with the International Capital Market Association’s <a href="https://www.icmagroup.org/green-social-and-sustainability-bonds/green-bond-principles-gbp/" target="_blank">Green Bond Principles</a> or the Climate Bond Initiative’s <a href="https://www.climatebonds.net/standard" target="_blank">Climate Bond Standard</a>.
Launching the fund in Basel, Switzerland, the bank’s head of banking Peter Zöllner said he was
"confident that, by aggregating the investment power of central banks, we can influence the behaviour of market participants and have some impact on how green investment standards develop."
It’s an important role. Traditionally focused on keeping the financial system safe, our central banks are increasingly turning to using their stewardship of the financial system to keep us, and our environment, safe.<img src="https://counter.theconversation.com/content/126766/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
<a href="https://theconversation.com/profiles/john-hawkins-746285" target="_blank">John Hawkins</a>, Assistant professor, <a href="http://theconversation.com/institutions/university-of-canberra-865" target="_blank">University of Canberra</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/climate-change-why-swedens-central-bank-dumped-australian-bonds-126766" target="_blank">original article</a>.
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