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

Joel Robinson

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

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

WM Residences fills gap in Mordialloc townhouse market

&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.

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 international 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

Reserve Bank

<html><body>
EXPERT OBSERVER
As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 1.50%.
This represents the twenty-second consecutive meeting (last change in August 2016) that rates have been on hold. The previous longest run of steady rates was sixteen consecutive meetings in 1995/96.
There were a number of changes/ additions to the statement following the July meeting. Previously, the Governor had noted the growth outlook being “a bit above 3 per cent in 2018 and 2019”.He repeated that line. But previously  he made no inference as to that impact on capacity. In today’s statement he asserts that the growth outlook “should see some further reduction in spare capacity”. This was borne out in the discussion on the labour market when he noted that the unemployment rate was likely to fall to around 5 per cent over the next couple of years.
Recall that in the May Statement on Monetary Policy, the Bank revised its unemployment forecast from 5 ¼ per cent (end 2018) and 5 ¼ per cent (end 2019) to 5 ½ per cent (end 2018) and 5 ¼ per cent (end 2019). The forecasts that will be updated in the August Statement on Monetary Policy which will be released on August 10 are now likely to include a forecast that the unemployment rate by end 2020 will be 5 per cent. A reasonable criticism of the Bank’s unemployment forecasts and rhetoric around increasing wages growth was that a low-point of 5 ¼ per cent was still comfortably above the generally accepted NAIRU for Australia of 5 per cent. With the unemployment rate staying above the NAIRU, it was questionable as to whether the expected lift in wages growth would occur.
Our view, based on offshore evidence, is that the NAIRU in this cycle is likely to be below 5 per cent, so even with this new lower unemployment forecast, it still seems a big call to expect sustained upward pressures on wages growth.
In July, the Bank noted the increase in short-term wholesale interest rates over recent months. However, it provided little guidance as to the implications. “It remains to be seen the extent to which these factors persist”. Fortunately, that sentence has been deleted, but, still, no real guidance is provided in the current statement. It is observed that retail deposit rates have not risen and some lenders have increased mortgage rates by small amounts. It would have been helpful for the Bank to have given its own view on the sustainability of this move and any implications from the associated tightening in financial conditions.
The Governor notes that “the drought has led to difficult conditions in parts of the farm sector”, but has not clarified whether these developments have any significant implications for risks and growth forecasts.
The August Statement has the benefit of an update on inflation developments. The June quarter inflation report was slightly below market expectations but not sufficient to alter the Bank’s views. Having said that, a literal interpretation of the sentence “the central forecast is for inflation to be higher in 2019 and 2020 than it is currently” would be that the forecasts for inflation in the August Statement on Monetary Policy are set to be lifted. The forecasts for underlying inflation in the May Statement on Monetary Policy were for underlying inflation to be 2 per cent in 2018 and 2 per cent in 2019. That outlook seems consistent with the June inflation report. We would be surprised if the forecast for underlying inflation in either 2018 or 2019 is lifted in the August SOMP.
One clue to this puzzle is that the Governor points out that headline inflation to the September quarter is likely to fall to 1 ¾ per cent. As such, the forecast for headline in the May SOMP of 2 ¼ per cent in 2018 and 2019 indicates a lift from the expected September reading. Such fluctuations in the headline number are unlikely to have any implications for policy.
In July, the Governor referred to “nation-wide measures of housing prices are little changed over the past six months”. The CoreLogic national index was actually down 1% and this index is now down by 1.2%. That sentence has not been repeated in the August Statement, although the easing in Sydney and Melbourne housing markets is confirmed. The Governor has also dropped the comment that “some further tightening of lending standards by banks is possible” and now makes the less controversial comment that lending standards are tighter than a few years ago.
There has been a significant change in the global commentary. In July, the Governor noted “the Chinese economy continues to grow solidly”. In this statement, that is replaced with “growth in China has slowed a little, with the authorities easing policy”.
Conclusion
Westpac has long held the view that the RBA cash rate will remain on hold over the course of 2018 and 2019.
In his statement, the Governor does not provide a convincing commentary that wage pressures can be expected to lift; the housing slowdown and the associated wealth effect will not be headwinds for the economy; any evidence that inflation pressures are likely to build; and why global developments are not pointing to some challenges for Australia. Consequently we see no reason to be persuaded to change our view that rates will remain on hold.
Bill Evans is the Chief Economist for Westpac
</body></html>

bevans-rYk9SxEa4r

RBA remains on hold; with no apparent change in sentiment: Bill Evans

j.ballantyne1990-6AQqhLzZaK

Low inflation keeps the Reserve Bank sidelined: Ryan Felsman

<html><body><div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
EXPERT OBSERVATION
The Reserve Bank Governor Philip Lowe delivered a speech at the Australia-China Relations Institute in Sydney last night.
</div>
</div>
<div class="layoutArea">
<div class="column">
What does it all mean?
Governor Lowe noted that while the ascent of the Chinese economy has been positive for Australia, it is also not without its risks: “If a major economic shock were to originate from China over the coming years, its origin is most likely to be in the Chinese financial system...the experience is that the build-up of financial risks like those seen in China is almost always followed by a marked slowdown in GDP growth or a financial crisis. It is important to point out that these outcomes are not inevitable and that China is able to learn from the experience of other countries, including Australia... one of these concerns is that during the big run-up in debt, a lot of bad loans were made.”
The reform of the Chinese financial system has featured in Reserve Bank statements and indeed it is one of the key international risks for the Australian economy. But it is a case of ‘so far, so good’. The Chinese authorities are dealing with the challenges before they materialise – something many other economies haven’t done, waiting instead until a crisis has developed.
The Chinese economy is rebalancing. The authorities are grappling with an economic juggernaut. Efforts are being made to liberalise and deleverage the financial system. Growth has decelerated but is robust and stable. The current focus is on ‘quality’-type growth which targets unemployment of around 4.5 per cent and reduced pollution through supply-side reforms.
Key points from the speech
China’s economic rise has boosted Australia’s income and prosperity: In his speech entitled “Australia's Deepening Economic Relationship with China: Opportunities and Risks”, Dr Lowe is quick to stress the importance of Australia’s economic ties with its largest trading partner: “The deepening of our economic relationship with China has greatly benefited Australia. It has created new opportunities for us and significantly boosted our national income. It was also one of the factors that helped our economy through the global financial crisis.”
Deep economic ties and cultural respect can bind the two countries. The Governor states, “We will, of course, have differences from time to time, but we will surely be better placed to deal with these if we understand one another well. Building strong connections across business, finance, politics, academia and the community more generally is important to deepening this understanding.”
On trade and protectionism: “Together, we can also be a strong voice for the importance of an open international trading system and for effective regional cooperation.”
On the importance of China as Australia’s largest trading partner: “Our trade with China has expanded very rapidly over the past decade, to the point where China is now Australia's largest trading partner. China accounts for nearly one-third of our exports and around one-fifth of our imports”.
Growing export diversification: While Governor Lowe acknowledged the significant contribution that Australia’s bulk commodities, iron ore and coal (57 per cent combined total exports), make to national income, he stressed that it “... would be a mistake to view the trade relationship solely in these terms. Our exports to China are much more diverse than this.”
On Australia’s services sector bonanza: “Over the past decade, Australia's service exports to China have grown at an average annual rate of 15 per cent...the growth has been particularly strong in the areas of tourism and education.”
Record Chinese tourists flock ‘Down Under’: “Last year there were 1.4 million visitors from China to Australia, up from around 400,000 a decade ago...they now account for around 25 per cent of total visitor expenditure in
Australia, a considerably larger share than any other country.” said Dr Lowe.
The Governor also emphasises that education is Australia’s third largest export: “On the education front, there are currently around 200,000 Chinese students studying in Australia. Education exports to China now account for around one-third of Australia's total education exports.”
The ‘Dining Boom’ continues: “China has become the largest single export market for a range of Australia's manufactured food items. Exports of dairy products and alcoholic beverages have grown especially strongly, as have a range of other food and health-related products (of which vitamin sales are often remarked to be growing strongly).”
On China’s foreign investment: “Chinese investment accounts for only a small share of the total stock of outstanding foreign investment in Australia – just 3 per cent.”
Strengthening financial sector linkages: “The RBA sees first-hand the stronger financial relationship between our two countries. Since 2012, the RBA has had a currency swap agreement with the People's Bank of China, with the goal of giving market participants in Australia confidence that renminbi (RMB) will be available for trade settlement and other payment obligations. The RBA also now holds 5 per cent of our foreign currency reserves in RMB.”
Chinese population growth and growing cultural ties to Australia: “Over the past decade, the Chinese-born resident population in Australia has grown at an average rate of around 8 per cent per year. According to the latest Census, people born in mainland China account for 2 per cent of Australia's population (around 510,000 people).... Mandarin is now the second most commonly spoken language in Australian homes and Cantonese the fourth most common.”
On China’s economic rebalancing: “It is too early to tell whether the authorities will be successful in managing the transition from a growth model heavily dependent upon the accumulation of debt to one where credit is less central. It is a very significant task.”
China’s growing debt load poses significant risks: “If a major economic shock were to originate from China over the coming years, its origin is most likely to be in the Chinese financial system...the experience is that the build-up of financial risks like those seen in China is almost always followed by a marked slowdown in GDP growth or a financial crisis. It is important to point out that these outcomes are not inevitable and that China is able to learn from the experience of other countries, including Australia... one of these concerns is that during the big run-up in debt, a lot of bad loans were made.”
On shadow banks: “Another concern is the growth of the so-called ‘shadow banking’ system... non-bank financing now accounts for 45 per cent of total debt, up from 25 percent a decade ago....the smaller banks have played an important role in the growth of shadow financing. This is evident in the rapid growth of their claims on non-bank financial institutions...the complex web that has developed in China is characterised by opaque risk transfers, implicit guarantees and complex connections.”
China is attempting to deleverage: “At a recent policy meeting convened by President Xi Jinping, the leadership called for a gradual reduction in the debt-to-GDP ratio... these various measures provide a strong signal that the Chinese authorities are serious about addressing the vulnerabilities. Consistent with this, the lower economic growth target for 2018 of 6.5 per cent suggests some tolerance for a gradual slowing in growth.”
 
</div>
</div>
</div>
</div></body></html>

jrobinson-rf4aSBido9

The Reserve Bank are watching China: CommSec

<html><body>
EXPERT OBSERVATION
The Reserve Bank Board decided to leave the cash rate unchanged at 1.5%.
We have been interested to follow the various descriptions of the Bank’s growth forecasts over the last few months.
These have ranged from “a bit above 3%”; “central forecast remains for faster growth in 2018”; “growth above trend”; and today, “Growth to pick-up to average a bit above 3% in 2018 and 2019”.
In our preview of the SoMP, we speculated that the forecast would be modestly shaved to 3% in 2018 and 3 ¼% in 2019.
That would still be consistent with an average slightly above 3% and seems more likely than the 3 ¼%, 3 ¼% which was in the February SoMP. 
In its MYEFO in December the government forecast growth of 3% in 2018/19 and 2019/20 compared to 3.25% for the RBA. In 2018/19 and 2019/20 .
The Bank may choose to “go half way” given it is unlikely the government will change its forecasts in the Budget on May 8.
The other interesting forecast in the May SoMP will be underlying inflation in 2018. In February, the forecast was 1.75%, below the 2-3% target band and following 1.6% in 2016 and 1.8% in 2017 – hardly a vote of confidence in the 2-3% target band.
Commentary in this statement is the same as we have consistently seen with the recent inflation report being described as “in line with the Bank’s expectation”.
That would tend to suggest that it will remain cautious around the inflation outlook and forecast 1.75% for 2018.
Given that the trimmed mean printed 0.5% for the March quarter, the implication is that the Bank does not expect any marked lift in the quarterly pace through 2018.
In the minutes to the April meeting, the Board noted that it was more likely that the next move in rates will be up rather than down.
That sentiment was not in the Governor’s statement in April and did not figure in this statement. In fact, the final paragraph in the May statement is exactly the same as the final paragraph in the April statement.
Commentary in previous statements around the labour market has been unreservedly upbeat. It was therefore interesting to note that the Governor recognised that employment “growth has slowed over recent months”.
Nevertheless, the Governor remains confident that solid employment growth will lead to a gradual reduction in the unemployment rate.
In April, the Governor referred to tightening financial conditions due to the rise in short-term USD interest rates and this observation has been repeated today.
Sentiment around household consumption “source of uncertainty”; housing markets “have slowed”; and the AUD (TWI) “remains within the range it has been in over the past two years”; is consistent with recent statements.
Assessments of the global environment are largely unchanged despite the increase in long-term US bond yields of around 25bps.
Conclusion
We will receive a much more detailed update on the Bank’s views in the Statement on Monetary Policy on Friday. Since the last Statement, housing markets have slowed further; financial conditions have tightened; employment growth has slowed; and equity markets have become more volatile.
All of these factors point to the Bank having even more scope to remain patient with respect to policy.
As we have consistently argued since mid- 2017, Westpac continues to expect that the cash rate will remain on hold in 2018 and 2019.
BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
</body></html>

No rate change in 2018 and 2019: Westpac's Bill Evans

<html><body>
GUEST OBSERVER
The Reserve Bank of Australia should have a board member whose job it is to “represent the poor”, says Catholic Social Services Australia in a report released this week.
This hasn’t been tried before but it’s an interesting proposal and worth considering – particularly as recent central banking programs like quantitative easing have inflated the value of assets belonging to the very rich, exacerbating inequality and even threatening democracy.
The report is part of a continued effort by Catholic Social Services Australia to draw attention to those disenfranchised by an increasingly winner-takes-all society.
In fact, the entire notion of “trickle-down economics”, in which poorer sections of society supposedly benefit from policies that help the rich, is increasingly disputed.
Central bankers overlook inequality
Central bankers historically have not considered economic equality to be a key concern, and have been described (somewhat generously) as “innocent bystanders”. This does not really make sense, as central bank policies have statistically significant impacts on aspects of inequality including household income and consumption.
Central bankers tend to have a narrow focus, restricted to managing a small set of macroeconomic variables, and inflation in particular (which they refer to as “price stability”). Unfortunately, even after the global financial crisis, many central banks have continued to focus on inflation at the expense of a more complex economic picture, including inequality.
Central bankers are also very conscious of the need to maintain credibility. This involves presenting the board of a central bank as a group of “experts” with a long-term economic focus. Their expertise tends to be heavily tilted towards traditional economics, and they are influenced by traditional economic ideologies that do not emphasise inequality.
For example, central bank policies that focus on inflation and economic output (GDP) are limited by the fact that they do not capture the nature of unequal social conditions.
As we can see from the minutes of central bank board meetings, members do disagree and present dissenting views. However, having a representative for the poor on the board would challenge the general consensus in a new way.
A seat for the poor
In arguing for a “seat for the poor” there are several elements that need to be unpacked.
The first is the question of central bank accountability. Having a seat for the poor means that there would be a person on the board constantly questioning and challenging the other members. This is known as horizontal accountability because it is a type of oversight among equals.
As central banking involves involves deliberation among policymakers of equal rank, horizontal accountability can be an effective way for them to regularly check one another’s actions. If an “ambassador of the poor” regularly questions other board members it could keep them on their toes even if it doesn’t always sway their decisions.
The next question is around the tools and metrics that a board member representing the poor would use to present dissenting views. If the board member draws on the usual metrics that central bankers monitor, such as labor market figures and general price levels, they might arrive at similar viewpoints to their peers.
On the other hand, if this board member used metrics centered on inequality, it could be extremely beneficial to the deliberations and help to realign policy. These metrics could include income distribution, savings behaviour, welfare dependency, and socioeconomic variables - including healthcare and education outcomes.
How would we pick a representative of the poor? How would this person display and maintain their professional credibility? How would they juggle broader macroeconomic concerns with their own ideological inclinations?
The idea that a person appointed by the church should intercede in deliberations over monetary policy is antiquated at best. So the mechanisms for appointing such a person need to be carefully addressed.
Where the poor really need representation
The past few years have shown that central bank policy has a large impact on inequality. If anything, in Western countries it has made inequality much worse, as the benefits of stimulus programs have disproportionately gone to the very richest.
But it is actually fiscal policy (otherwise known as government taxation and spending), and not central bank policy, that is the best tool for addressing inequality.
This is because decisions on taxation and payments are a more direct method for addressing inequality. Progressive programs such as basic incomes, universal healthcare and public education directly impact peoples’ lived experience.
If anything, it is fiscal policy that most needs a “representative of the poor”.
Fiscal policy is so abjectly political and so deeply entrenched that a “depoliticized” fiscal regime only exists in the fantasies of academics (my own included).
<img src="https://counter.theconversation.com/content/85992/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">Nevertheless, if we want to make a real dent in inequality, it is only possible when fiscal policy is fully committed as well.
Usman W. Chohan is an economist at UNSW.
This article was originally published on <a href="https://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/should-central-banks-have-a-representative-of-the-poor-85992" target="_blank">original article</a>.
</body></html>

Should central banks have a 'representative of the poor'?: Usman W. Chohan

Australians have borrowed a lot to purchase housing: Philip Lowe

<html><body>
<img src="https://counter.theconversation.edu.au/content/82580/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Is the Reserve Bank of Australia’s monetary policy on a collision course with itself? Quite possibly.
The key data and evidence this week were employment figures in Australia, retail sales in the United States, and minutes from the Reserve Bank of Australia board and US Federal Open Market Committee (FOMC).
First, the data. ABS figures released Wednesday provided more evidence of sluggish wage growth. 
Wages nationally grew 0.5% in the June quarter, translating to 1.9% year on year. Worse still, private-sector wages grew only 1.8%, compared with 2.5% for government employees. All of this puts increased pressure on family budgets at a time when energy prices are rising rapidly.
Meanwhile, the RBA board minutes seemed like they were describing a different economy. In terms of consumer spending, the RBA pointed to the rising values of retail sales in April and May and growth in consumption in the June quarter. The minutes also noted:
"Beyond the June quarter, rising employment and stronger household income growth were expected to support consumption growth, which was forecast to be a little above its average of recent years."
The minutes were also rosy when it came to the labour market, stating that employment had increased in every state since the start of the year, including in states with mining. The RBA noted:
"This provided further evidence that the drag on economic activity from earlier declines in the terms of trade and falling mining investment were running their course. Over this period, around 165,000 full-time jobs had been created, labour force participation had risen and average hours worked had increased."
Figures released by the Australian Bureau of Statistics on Thursday showed that employment itself rose in July, with 27,900 jobs created. Unemployment rate fell from 5.7% to 5.6%, and labour force participation was a healthy-ish 65.1%.
I guess the only wrinkle is that these workers aren’t getting paid very much.
Markets and commentators widely interpreted these minutes and various other remarks by governor Philip Lowe as suggesting that the next interest rate move would be an upward one.
But then there’s the problem of the massive household debt Australians hold. RBA figures showed that as of March this was 190% of annual disposable income. Combine that with the fact that one-third of mortgage holders don’t have a one month buffer of payments and it makes an interest rate rise look rather risky.
The RBA knows this, of course, noting in the minutes:
"Members regarded conditions in the housing market and household balance sheets as continuing to warrant careful monitoring."
To summarise: growth and inflation seem to point to an interest-rate rise in the medium term; unemployment rates do too. Sluggish wages growth points to a cut, but a cut might further fuel housing prices. 
And those high prices have left Australian households so highly leveraged that a modest rate rise could cause a wave of financial distress and perhaps mortgage defaults. That would lead to fire sales, damage bank balance sheets, and wipe billions of the market capitalisation of the four largest ASX listed companies.
The RBA has to raise, but it has to cut. That’s what I mean by a collision course.
In the US, some brighter news. Retail sales shot up 0.6% last month. This was the largest gain since December 2016, and further evidence of a strengthening economy.
This was reflected in the minutes of the FOMC which observed that:
"…economic conditions would evolve in a manner that would warrant gradual increases in the federal funds rate, and that the federal funds rate was likely to remain, for some time, below levels that are expected to prevail in the longer run."
The bottom line from the long FOMC minutes was that things appear to be on track, with monetary policy still helping to bolster the labour market and get inflation back in the target zone.
The US isn’t in the clear yet, but it looks like the Federal Reserve under Janet Yellen may have pulled off a remarkable rebuilding of the US economy.
In Australia it’s much less clear. With huge household debt, low wage growth, and rising energy prices, the path back to “normal” economic conditions may take longer than in the US.
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a> is Professor of Economics and PLuS Alliance Fellow, UNSW and author for The Conversation.
</body></html>

jchancellor-FAypfDUnLy

RBA rates decision stuck between jobs growth and household debt: Richard Holden

<html><body>
finder.com.au’s monthly cash rate survey shows all 35 economists and experts surveyed are forecasting the Reserve Bank to leave the cash rate untouched today, on August 1.
Experts and economists were asked to shed light on the direction of the next rate move, and the majority (87%, 26) think the next rate movement will be in a positive direction. Only four experts (13%) are expecting a rate cut. 
Graham Cooke, Insights Manager at finder.com.au, says a rate hike is in the pipeline.
“It looks as though April and May next year may be the most likely months a rate cut will be enforced.
“If the economy continues to stabilise, we can expect to see more rate rises throughout 2018,” he says. 
The panellists do not agree with the view of former RBA board member, John Edwards, that eight rake hikes over the next two years is “distinctly possible.” 
The majority surveyed on this topic (69%) expect three or fewer hikes over the next two years, while one in four (23%) expect four hikes. Just one economist, John Caelli from ME Bank, agrees with Mr Edwards that eight hikes may take place over the next two years. 
Panellists were asked to identify their greatest economic concerns for Australia right now, and the two highest ranked concerns were household debt and wage growth, cited by six experts each. 
“Wage growth is at record lows, currently sitting at about a quarter of inflation. Meanwhile, house prices continue to soar in the capitals and credit is cheaper than ever. This combination could be troublesome,” Mr Cooke says.
Since the Australian dollar hit a two-year high against the USD this month, it’s no surprise the high AUD was the third most cited concern, mentioned by three economists.  
“A high Aussie dollar could harm our exports as goods become more expensive for foreigners to buy,” Mr Cooke says.
Panellists were divided about the future of the AUD, with a slight majority (55%, 12) saying it peaked last week at 80 US cents. Just under half (45%, 10), however, said the dollar may reach 85 US cents by the end of this year.
“However, the strength of the local currency against the greenback is good news for travellers heading to the US as they'll find their dollar will go that little bit further.
“Anyone importing or buying goods from US sites, such as eBay or Amazon, will be get better value for money,” Mr Cooke says. 
Other concerns raised among panellists were the unemployment rate, the future of the Chinese economy, and a lack of entrepreneurial innovation in Australia.
Here’s what our experts had to say:
Jordan Eliseo, ABC Bullion (Hold): "The RBA has made it clear it thinks that it has the appropriate monetary policy settings in place. None of the data that we've seen come out this month (on inflation, business confidence, employment etc) will have meaningfully impacted that view. As such, notwithstanding their renewed concern regarding the strength of the AUD, we think they will keep rates on hold when they meet next week."
Tim Nelson, AGL Energy (Hold): "Low wages growth means inflation is largely in check. High levels of household debt mean increasing rates is challenging."
John Hewson, ANU (Hold): “[Insufficient] info to move one way or the other."
Shane Oliver, AMP Capital (Hold): "While growth was weaker than expected in the March quarter, recent data suggests its back on track reducing pressure to cut rates again but risks around the consumer, weak inflation and a rebound in the $A indicate its way too early to hike rates. So best to remain on hold."
Alison Booth , Australian National University (Hold): "Little change in the main indicators." 
Peter Munckton, Bank of Queensland (Hold): "Cash rate is at the right level."
Darryl Gobbett, Baillieu Holst Ltd (Hold): "The RBA doesn't see the current cash rate as necessarily all that expansionary and remains concerned about the impact of rate rises on households with the very high gearing, stagnant wages and rising utilities prices."
Richard Robinson, BISoxford economics (Hold): "Although RBA would like to cut rates to take upward pressure off the Aus dollar, it can't cut rates as it fears re-stoking the residential property market. With inflation low and particularly wages growth very low, there is no need to raise rates for at least 2 years."
Paul Dales, Capital Economics (Hold): "The RBA does not want to cut interest rates for fear of boosting the housing market and debt levels, but equally the economy and inflation aren't strong enough to warrant interest rate hikes. 
Savanth Sebastian, Commonwealth Bank (Hold): "Inflation remains well contained. RBA would be concerned about the lift in the Aussie dollar. Focus will be on how economy tracks over the next few months."
Saul Eslake, Corinna Economic Advisory (Hold): "The RBA would clearly prefer not to have to cut rates any further, but is also in no hurry to start raising them (even if central banks elsewhere in the world do). Economic data since the last board meeting (more good data on employment, business conditions, offset by another quarter of very low inflation, softness in household spending) don't present a strong case to move in either direction."
Andrew Wilson, Domain Group (Hold): "The RBA is clearly determined to leave rates at current level taking a more medium-term view of the macroeconomy regardless of the current insipid intransigence of key economic performance indicators. 
Scott Morgan, Greater Bank (Hold): "No indication of likely move from recent commentary."
Mark Brimble, Griffith Uni (Hold): "Bias remains to the down side as the economy struggles to gain any traction.  The dampening impact of credit controls (while assisting with medium term risk around credit risk and elements of the property market) and retail interest rate rises by financial institutions have not helped.  Indeed the puzzling comments from the RBA that have related to a spike in the AUD also have a dampening impact.  Despite this, the RBA is unlikely to move rates for some time." 
Paul Bloxham, HSBC (Hold): "Inflation is still below the target band, so no immediate move in sight." 
Alex Joiner, IFM Investors (Hold): "Robust labour markets and a soft headline CPI outcome for Q2 (and 'core' measure being inline with the RBA's forecasts) underscores there is no economic rationale to move rates in either direction. Financial stability concerns seemingly prevent further easing. And a higher A$ deters premature hiking." 
Michael Witts, ING Bank (Hold): "The RBA will be concerned about the rise in the AUD and will not be looking to add fuel to the fire." 
Nicholas Gruen, Lateral Economics (Hold): "[The rate will hold because] Philip Lowe said so!"
Leanne Pilkington, Laing+Simmons (Hold): "The RBA has indicated its intention to cautiously manage inflation to the preferred 2-3% range while at the same time appears reticent to reduce rates further. The weak inflation forecast in the June CPI figures point to a steady rate scenario for the short term. With employment levels also steady, this is good news for the property market on the whole.” 
Matthew Tiller, LJ Hooker (Hold): "There has been little discernible change in economic indicators since last month’s RBA meeting." 
John Caelli, ME (Hold): "With the high dollar, low inflation and low wage growth there is no rush to put up rates just yet."
Michael Yardney, Metropole Property Strategists (Hold): "The RBA can't raise rates as it would stifle our fragile economy and would lead to a higher AU$. Similarly, it can't lower rates as this would  fuel the Sydney and Melbourne property markets." 
Mark Crosby, Monash University (Hold): "Probably the strongest signal in history that the RBA will sit on its hands for the next couple of meetings, particularly given the latest inflation outcome." 
Jessica Darnbrough, Mortgage Choice (Hold): "Last month, the Reserve Bank of Australia made it clear that its current monetary policy setting is appropriate for the time being and I believe this will continue to be the case at the August Board meeting.”
Chris Schade, MyState Bank (Hold): "Interest rate settings remain appropriate. Economy performing a little below trend, inflation remains at the lower end of target, and the Aussie dollar is higher than the RBA would like. Holding rates at their current highly accommodative level is appropriate to allow the economy to continue to gain momentum as the unwind of the mining boom ends, the housing construction peak passes (but activity remains at a robust level for some time – i.e. no major drop) and, hopefully, other sectors pick up." 
Alan Oster, NAB (Hold): "Still too early, watching wages and the labour market.” 
Noel Whittaker, QUT (Hold): "I think we are at the bottom of the cycle but don't see any urgent need to raise rates."
Nerida Conisbee, REA Group (Hold): "While earlier in the month strong jobs growth figures suggested that the economy was on track, the strengthening Australian dollar put a dampener on the need for an increase. Inflation figures out today are likely to further cemented the RBA’s decision to take a wait and see approach with these figures continuing to be below the target of between 2 and 3%. Despite the RBA likely to hold, it is likely that banks will continue to increase the rates they charge home owners. This is partly because their costs of wholesale funding have increased but also because there is continued pressure from APRA to moderate their lending. The banking tax announced in the budget is also likely to be passed on to homeowners.”
Janu Chan, St.George Banking Group (Hold): "RBA will still have concerns about spare capacity and low inflation. However, risks of another rate cut have clearly dissipated." 
Brian Parker, SUNSUPER (Hold): "No signs in the data that they need to change their views of the world or their policy stance."
Nicki Hutley, Urbis (Hold): "Current settings are appropriate for employment and inflation settings."
Clement Allan Tisdell, The University of Queensland (Hold): "RBA statements and the increase in the value of the AUD [indicate no change]."
Other participants: Bill Evans, Westpac (Hold), Jonathan Chancellor, Property Observer (Hold).
</body></html>

Rates on hold, with next move up: finder.com.au survey

<html><body><div class="cq-article-content-paras section">
The Reserve Bank of Australia governor Philip Lowe has indicated he is in no hurry to join other central banks around the world in hiking rates any time soon.
The low inflation – which fell back below the Reserve Bank's 2-3 per cent target range last quarter – and a low probability of any rapid blowout in wages meant that offshore hikes had "no automatic implications for monetary policy in Australia," Dr Lowe said in a speech on Wednesday.
He noted these central banks lowered their interest rates to zero and also expanded their balance sheets greatly.
"We did not go down this route.
"Just as we did not move in lockstep with other central banks when the monetary stimulus was being delivered, we don't need to move in lockstep as some of this stimulus is removed."
His remarks came just hours after the official ABS figures that showed headline inflation slowed to 1.9 per cent from 2.1 per cent.
Dr Lowe's speech, to the Anika Foundation in Sydney, noted even with current rates of productivity growth, the nation "could sustain some increase in wages growth over time".
Titled The labour market and monetary policy, Dr Lowe used the speech to warn that the lack of wages growth was making households more reluctant to spend, and mean that debt levels are likely to stay higher for longer than was originally expected. 
</div></body></html>

RBA governor Philip Lowe says any rate hike will be on Australia's timetable

<html><body>
<img src="https://counter.theconversation.edu.au/content/80457/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
The Reserve Bank of Australia once again left official interest rates on hold this week - leaving the cash rate at an historically low 1.5%.
That certainly wasn’t a surprise, but the language used in governor Philip Lowe’s official statement on the decision was definitely interesting.
Gone were the predictions of 3% plus GDP growth, with the statement striking a much more cautionary note. Lowe noted slower growth in the March quarter, lower levels of mining investment but improved business conditions and investment when not related to mining. He said:
"At the same time, consumption growth remains subdued, reflecting slow growth in real wages and high levels of household debt."
Former RBA board member, John Edwards, made a splash by suggesting that there would be eight interest rate increases, in fairly short order, because the cash rate was “way below where it will need to be in years to come”.
I don’t know if Dr Edwards was just setting his hair on fire to get an audience (if so, well played), but let’s assume he was being serious when he said:
"If inflation does indeed return to 2.5%, as the bank now expects, if growth does indeed return to 3% ‘within a few years’, as the minutes of the June board meeting predict, if the world economy is indeed picking up, then a policy rate of 1.5% is too low."
That’s a lot of “ifs”, and it’s fair to say that the June RBA board minutes suggesting 3% growth were rather surprising. Even if that were to be the growth rate, population growth in Australia is quite high by medium-term (and also international advanced economy) standards, as the following chart shows.
<a href="https://www.propertyobserver.com.au/images/2017/07/06/Screen%20Shot%202017-07-07%20at%208.56.44%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/06/Screen%20Shot%202017-07-07%20at%208.56.44%20AM.png" alt="">
source: <a href="https://tradingeconomics.com/australia/population-growth-annual-percent-wb-data" target="_blank" style="font-size: 12.16px;">tradingeconomics.com</a>
Surely it’s real GDP per capita that we should care about instead.
In any case, it seems that Dr Edwards is reflecting back on the macroeconomic recoveries of the past. Perhaps he’s right, but I don’t think so.
It’s quite likely that Australia, like other advanced economies, is suffering from “secular stagnation”. This view, most recently argued by former US Treasury Secretary Larry Summers, holds that the speed limit of advanced economies has been permanently lowered because of a fire hose of global savings chasing too few productive investment opportunities.
In a world where a laptop and a good idea can create a company more valuable than Australia’s Big Four banks combined (Facebook), people just don’t need the same volume of investment capital as in past eras. This drives down what economists call the “equilibrium real interest rate” - and ultimately limits potential GDP growth.
This has probably been the case for many years, but was masked in the US by a massive real estate bubble which burst a decade ago, and in Australia by the commodities boom.
So Dr Edwards prediction of a return to old normal in terms of growth, and hence interest rates, seems more aspirational than likely to me.
Importantly, the RBA statement also pointed again to the financial stability risks in the Australian housing market, saying:
"Growth in housing debt has outpaced the slow growth in household incomes. The recent supervisory measures should help address the risks associated with high and rising levels of household indebtedness. Lenders have also announced increases in mortgage rates for investor and interest-only loans."
Let’s hope that those supervisory measures, which have provided some of the impetus for banks raising rates on interest-only loans, do the trick.
Yet as the RBA itself has pointed out, one-third of Australian mortgage holders do not have a month’s buffer. Stopping questionable new borrowing is one thing, but with slow wages growth it is hard for household to “delever” themselves.
And it’s for that reason that wages growth and the labour market are such a central part of the problem - and a big reason for the RBA not to raise rates any time soon.
Perhaps that also explains the unusual remarks governor Lowe made at the ANU recently, where he basically wished for higher wages growth.
In any case, I wouldn’t bet on eight rapid-fire rate hikes any time soon.
<a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">Richard Holden</a> is Professor of Economics and PLuS Alliance Fellow, UNSW and author for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
 
</body></html>

Reserve Bank

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Reserve Bank

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News