Malaysian developer <a href="https://www.apartments.com.au/developers/s-p-setia">SP Setia</a> is the latest to jump into St Leonards booming Transport Oriented Development precinct.

The developer, which has previously delivered Sapphire by the Gardens apartment development in Melbourne, identified the Atchison Street site in 2023. It filed a Scoping Report around 12 months ago, and now has revealed the designs for the new&nbsp;40-storey mixed-use tower.

The State Significant Development Application covers <a href="https://next-portal.urban.com.au/projects/14650/summary">20-22 Atchison Street</a>, a 1,374 sqm site positioned between St Leonards Station and the new Crows Nest Metro station.

Designed by <a href="https://www.apartments.com.au/architects/cox-architecture">COX Architecture</a>, the project would deliver 181 apartments, above a four-storey commercial podium, five basement levels, and new public domain works along Mitchell Street. The apartment mix comprises 35 one-bedroom apartments, 39 one-bedroom-plus-study apartments, 85 two-bedroom apartments, and 22 three-bedroom residences.

The proposal has been lodged as a shop-top housing development under the NSW Government’s TOD planning pathway, which allows increased density around key transport infrastructure. The site sits within the recently rezoned Crows Nest Accelerated TOD Precinct.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b799673d-48e2-46b0-801a-0e33a9330100" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20site.png?VersionId=dPh0UfwfaHpbFL1R7H1cbZNbIW0CHbCC" />

SP Setia acquired the Atchison Street site as part of its continued expansion into the Australian apartment market. In comments made to City &amp; Country (The Edge Malaysia) in 2023, SP Setia President and CEO Datuk Choong Kai Wai described the acquisition as “a strategic move” aligned with the group’s post-pandemic market recovery strategy.

“Our target for this exceptional development is local and overseas buyers, including first-home buyers, downsizers and investors,” Choong said.

The tower has been designed as a slender vertical form rising from a mixed-use podium, with COX Architecture positioning the development as a response to the evolving St Leonards and Crows Nest skyline.

“The purpose of the project is to facilitate the delivery of high-quality housing at a strategically located site and deliver a built tower outcome that is consistent with the desired future character of St Leonards and aligns with the TOD controls,” the design report stated.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b1a85eee-76f7-436c-a6da-73ba827b9b13" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20entry.png?VersionId=dA9jHGPMcm.dDbwk4QfxqWiY5bfh3UVt" />

The podium would incorporate retail uses fronting Atchison Street, commercial tenancies, landscaped communal areas, and pedestrian improvements along Mitchell Street. Vehicle access and loading would be consolidated via Atchison Lane.

Residents would have access to more than 665 sqm of communal indoor and outdoor spaces, while the development proposes 96 parking spaces across five basement levels.

The proposal also includes a commitment for 10 per cent of residential floor space to be allocated toward affordable housing through a monetary contribution.

COX said the tower form responds directly to the emerging high-density character of the precinct while seeking to maximise solar access, cross ventilation, and outlook from apartments.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="2163f85c-f63b-4be3-aafa-f8763976cec5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Article%20Feature%20Image%20%28Grid%29_5.png?VersionId=WiAmtIKJ6.ZQ41EtYEQ1fol7AeorKBlL" />

“The building is orientated towards north,” the Apartment Design Guide compliance report noted, adding that the tower’s slim form was driven by the constrained inner-urban site dimensions.

The design also incorporates landscaped setbacks and communal open space at podium level, intended to soften the interface with surrounding streets and improve pedestrian amenity.

The project adds to a growing wave of redevelopment proposals reshaping St Leonards and Crows Nest following the opening of the Sydney Metro City line and the NSW Government’s push for higher-density housing around major transport nodes.

Last week Stockland filed plans just down the road. They want to build a <a href="https://www.apartments.com.au/new-apartments/601-pacific-highway-st-leonards-nsw-2065">52-storey tower on Pacific Highway</a>.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">First look: Stockland plans 52-storey, 538-apartment St Leonards tower&nbsp;</a>

Joel Robinson

First look: SP Setia targets St Leonards skyline with 40-storey TOD tower

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> has revealed plans for a new mixed-use tower at 10 Dangar Street, Wickham, advancing a proposal that would reshape the southern gateway to Newcastle’s city centre with one of the city’s tallest residential buildings.

The State Significant Development proposal, now on exhibition, seeks approval for a <a href="https://www.apartments.com.au/new-apartments/bowline-10-dangar-street-wickham-nsw-2293">43-storey tower</a> immediately adjacent to the Newcastle Interchange. The project would deliver around 200 apartments, including 42 affordable housing dwellings, alongside 99 co-living units, a 171-room hotel, retail space, and new public domain integrated through the site.

The scheme marks a significant escalation of plans previously approved for the site. Urban Property Group took over the prominent 2,904 sqm parcel, where excavation and demolition had already commenced under an earlier consent for a 14-storey mixed-use development.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="58a96dd9-407f-4d20-86b4-94e4bfeef74b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20podium.png?VersionId=LGlf08pdFGAZDzvx_CXC4XakHNZRuEE0" />

Designed by <a href="https://www.apartments.com.au/architects/sjb-architects">SJB</a>, the tower has been conceived as a landmark transit-oriented development anchored to the Newcastle Interchange precinct. The proposal includes 245 build-to-sell apartments across a mix of one, two, and three-bedroom residences, as well as two penthouses. Fifteen apartments and one operational unit are earmarked for NDIS housing. The co-living component would add a further 99 units, while the podium would accommodate retail uses and hotel facilities.

SJB said the site presents “a valuable opportunity to anchor the precinct by setting the standard for design, active ground planes and character at the key southern gateway.”

The architecture responds directly to the site’s position beside major transport infrastructure and within one of Newcastle’s fastest-evolving urban renewal precincts. The tower form sits above a sculpted podium designed to frame new public spaces, including a through-site pedestrian link connecting Station Street to Hannell Street, landscaped plazas, and activated retail edges.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="a7bd6ff0-f7db-4ce8-a6dc-ea56e72c6149" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20lanne.png?VersionId=xzf39VADyhj7zBQY2I9fx9vI62u2tuSb" />

The design report describes the project as part of the broader transition of Wickham into “a vibrant, high-quality mixed-use urban precinct” that leverages proximity to the station, open space, and regional connectivity.

A detailed public art strategy has also been prepared for the development. The strategy positions the project as “a transit-oriented development of state significance at the gateway to Newcastle’s city centre” and outlines a series of integrated artworks responding to Newcastle’s industrial and transport heritage.

Creative Road’s curatorial framework for the project, titled Unveil, draws on “stratified surfaces, carved volumes, and light-filled apertures” while referencing Newcastle’s transformation from an industrial city into a contemporary education and technology hub.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="77a882bb-14b1-4d28-99ff-9438e39508c0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20site.png?VersionId=cevgo_vN0eKPK78P8YcEu3mKPLkpFqE7" />

The proposal is being advanced through the NSW Housing Delivery Authority pathway after being declared State Significant Development in June 2025. The accompanying scoping report states the development aims to “maximise the site’s proximity to the Newcastle Interchange by delivering transit-oriented development” while increasing housing supply and affordable housing provision within the Newcastle LGA.

Urban Property Group’s plans align with the long-term strategic vision established under the Wickham Master Plan, which identified the interchange precinct as suitable for substantial uplift in height and density. The current proposal would significantly intensify that vision, positioning the tower among the tallest developments proposed for Newcastle.

The site sits immediately north of the Newcastle Interchange, bounded by Dangar Street, Hannell Street, and Charles Street. It is surrounded by a rapidly growing cluster of residential towers and mixed-use projects that have emerged following the completion of the light rail and transport interchange.

First look: Urban Property Group unveils Newcastle’s latest tower at Wickham interchange

Bottega House has completed settlement of a landmark riverfront site in Macquarie Street, St Lucia, representing its first major Brisbane development.&nbsp;

Positioned on the banks of the Brisbane River, the <a href="https://www.apartments.com.au/new-apartments/180-macquarie-street-st-lucia-qld-4067">premium site at 180 Macquarie Street</a> features uninterrupted river frontage in one of Brisbane’s most tightly held residential precincts.&nbsp;

The proposed development, currently under assessment with Brisbane City Council, has been designed by <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a> with interiors by <a href="https://www.apartments.com.au/interior-designers/mim-design">Mim Design</a> and will deliver a boutique collection of premium residences positioned specifically for owner occupiers and downsizers.&nbsp;

The residences are set to redefine luxury apartment living in the area, with a focus on architectural quality, refined finishes, landscape integration and elevated amenities including curated wellness facilities, resort-style pools and recreation spaces rarely seen in the local market.&nbsp;

Exclusive sales for the project will be led by Keenan &amp; Byrne, ahead of an anticipated launch later this year.&nbsp;

Bottega House Managing Director Nick Malloch said the project reflects the group’s ambition to deliver a highly curated residential offering within one of Brisbane’s most tightly held precincts.&nbsp;

“This is an incredibly rare riverfront opportunity and one we have approached with a long-term perspective,” Malloch said.&nbsp;

“Our vision from the outset was to create a boutique collection of residences that feel more like private homes than traditional apartments, with generous proportions, refined finishes and exceptional amenity throughout."

Malloch says there is a&nbsp;lack of premium owner-occupier stock of this quality in the market, particularly for downsizers wanting space, privacy and a true lifestyle offering without compromise.&nbsp;

"Demand is expected to be strong given the scarcity of premium riverfront opportunities of this nature within Brisbane’s inner-west."&nbsp;

Bottega House secures landmark riverfront site in St Lucia 

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The arrival of the first piling rig officially marks the commencement of construction at SIERA’s new beachside apartment development, Exhale, in Northcliffe.

<a href="https://www.apartments.com.au/new-apartments/exhale-surfers-paradise-8-enderley-avenue-surfers-paradise-qld-4217">Exhale</a>, a glass-encased tower featuring 54 large-scale apartments at 8 Enderley Avenue, is SIERA’s third Gold Coast development. It follows the recently completed PIPIS Bilinga beachfront project, which achieved suburb-record prices, and the soon-to-be-completed Chevron Island development, Tapestry.

[smartcode_project:default project_id=112661 project_image_fid=359603]

<a href="https://www.apartments.com.au/developers/siera">SIERA</a> Founder and Managing Director Brent Thompson said the arrival of the piling rig represented a significant milestone for the development, which is scheduled for completion in late 2028.

Over the next month, around 260 piles are expected to be installed as work progresses on the basement structure. The building is anticipated to rise above ground level early next year, before unveiling its sculptural glass curtain wall, developed in collaboration with specialist façade engineers.

“The façade was designed to maximise panoramic coastal views while creating a distinctive architectural identity,” Thompson said.

[smartcode_project:default project_id=112661 project_image_fid=355935]

Designed by BDA Architecture, Exhale will comprise just 54 two- and three-bedroom residences across 26 levels, a level of low-density living rarely delivered in this beachside pocket between Surfers Paradise and Broadbeach.

The project has been conceived as a resident-only building, with no short-stay accommodation permitted. SIERA says the model is intended to appeal to long-term owner-occupiers rather than transient holiday demand.

[smartcode_project:default project_id=112661 project_image_fid=361052]

Residences have been designed with large-format layouts and expansive glazing, with most apartments featuring more than 30 metres of glass frontage to maximise natural light and ocean views.

The amenity offering spans two levels and centres on wellness and lifestyle, including a heated magnesium pool, sauna, yoga and Pilates studio, gymnasium, private dining facilities, cinema lounge, and dedicated surfcraft storage.

[smartcode_project:default project_id=112661 project_image_fid=359607]

More than half of the apartments have already sold. SIERA has also opened a sales gallery for Exhale at its Chevron Island commercial premises, near its Tapestry tower and the site of its second Chevron Island apartment development, which is slated to launch in early 2027.
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</section>

[smartcode_project_cta:default project_id=112661]

SIERA kicks off construction at Northcliffe tower Exhale

Local Little Bay residents, along with buyers from premium postcodes across Sydney’s affluent Eastern Suburbs, have dominated purchases in developer-builder Urban Property Group’s first Eastern Suburbs apartment development, <a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a>.

The $250 million coastal project, one of the first new developments in the area in several years, has proven particularly popular with downsizers, especially those from Coogee and Bondi. One Double Bay downsizer paid $4.7 million for a four-bedroom penthouse, setting a new local apartment price record in the process.

Buyers have been attracted to the combination of coastal tranquillity, premium design and amenity-rich neighbourhood living. The walkable village setting, along with proximity to three of Sydney’s leading golf courses, New South Wales Golf Club, St Michael’s Golf Club and The Coast Golf Club, has also been a key drawcard.

[smartcode_project:default project_id=112343 project_image_fid=352689]

Built across two low-rise buildings designed by <a href="https://www.apartments.com.au/architects/hill-thalis-architecture-urban-projects-pty-ltd">Hill Thalis</a> and set along a lush, landscaped green spine, designed by leading landscape architect <a href="https://www.apartments.com.au/landscape-architect/arcadia-landscape-architecture">Arcadia</a>, ESTE Little Bay offers a collection of one, two, three and four-bedroom residences with interiors by Richards Stanisich.

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> Sales Director, Tom McIvor said the response to ESTE has been "nothing short of extraordinary."

“Buyers have been quick to recognise ESTE as a rare opportunity to invest in a coastal sanctuary that offers both seclusion and connectivity to the heart of Sydney,” McIvor said.

[smartcode_project:default project_id=112343 project_image_fid=352687]

<a href="https://www.apartments.com.au/project-marketer/srm-residential">SRM Residential</a> Senior Director, <a href="https://www.apartments.com.au/project-marketer/srm-residential">Clayton Ross</a> said the local market has responded incredibly well, driven by ESTE’s exceptional location and the rarity it offers.

“We’ve seen strong interest from a variety of buyer groups, all of whom are drawn to the exclusivity and quality of the build and construction by the 4.5-star iCIRT-rated builder / developer, Urban Property Group. There’s truly nothing else like it along Sydney’s coastline.”

[smartcode_project:default project_id=112343 project_image_fid=352690]

The project also includes robust buyer protections, including Resilience Insurance’s Latent Defects Insurance, providing 10 years of structural cover, and an independent iCIRT-rating of the developer.

“The iCIRT-rating adds another layer of confidence,” Ross added. “Buyers see it as a safeguard for their investment and their lifestyle.” A highlight of ESTE’s offering is its exclusive wellness amenities, including a heated rooftop infinity pool and outdoor heated spa, a state-of-the-art Technogym fitness centre, and a sauna.

<a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a> is topped out and is on track to complete towards the end of 2026, with residents moving in before Christmas.

[smartcode_project_cta:default project_id=112343]

Eastern Suburbs buyers snap up ESTE Little Bay apartments

Shadow Board

<html><body>
Donald Trump’s assumption of the US presidency since the last RBA Shadow Board round two months ago raises important questions about the future health of the global economy.
Domestically, consumer prices rose a little faster, by 1.5% year-on-year in the December 2016 quarter, but still well below the RBA’s 2-3% target band.
The CAMA RBA Shadow Board’s conviction that the cash rate should remain at its current level is stronger than two months ago, reflecting the heightened uncertainty surrounding the Trump presidency.
The Shadow Board attaches a 70% probability to a rate hold being the appropriate policy setting.
The confidence attached to a required rate cut equals 5%, while the confidence in a required rate hike equals 25%.
There is little inflationary pressure emanating from the Australian labour market, with Australia’s official unemployment rate now standing at 5.8%.
Since the participation rate has remained steady, the modest increase in unemployment is primarily due to a smaller increase in the creation of new jobs.
There is no new data on wages growth.
The Aussie dollar, relative to the US dollar, has strengthened again, finding support above 75 US¢.
Yields on Australian 10-year government bonds have slipped to 2.77%, once again nearing their historical low.
Domestic share prices have retreated from their highs in early January, the S&amp;P/ASX 200 stock market index now consolidating between 5,600 and 5,700.
The main global threat remains the uncertainty surrounding the Trump Presidency.
On the one hand, Trump’s promise to drastically increase infrastructure and defence spending, coupled with tax cuts, will exert upward pressure on US, and hence world, interest rates.
On the other hand, Trump’s protectionist and nationalist policies will dampen international trade and generate political uncertainty.
This could further increase global interest rates if risk premia were to rise considerably, or lower interest rates if global demand falls.
Making accurate predictions in such an environment is extremely ambitious; but the heightened uncertainty is damaging to financial markets and the overall economic outlook.
Consumer confidence, as measured by the Westpac-Melbourne Institute Consumer Sentiment Index, has fallen slightly during the past two months.
It now stands at 97.4 (down from 101.3 two months ago).
The manufacturing and services PMI, which measure the performances of the manufacturing and services sectors, continue to bounce around without clear direction.
It is now equaling 51.2 (down from 54.2 two months ago) and 54.5 (up from 50.5), respectively.
The AIG Performance of Construction Index (PCI), after its recent blip up, fell again, edged up for the second month in a row, from 45.9 in October to 47 in December.
Building permits declined again in December, by 1.2%, though November saw an interruption in this trend, with an increase of 7.5%.
The Shadow Board’s preference for the optimal interest rate has strengthened.
It now attaches a 70% probability (56% in December) that “no change” is the appropriate policy, a 5% probability (2% in December) that a rate cut is appropriate and a 25% probability (43% in December) that a rate rise, to 1.75% or higher, is appropriate.
The probabilities at longer horizons are as follows: 6 months out, the estimated probability that the cash rate should remain at 1.50% equals 24%, three percentage points up from the previous round.
The estimated need for an interest rate decrease remains unchanged at 9%, while the need for a rate increase equals 67% (71% in December).
A year out, the Shadow Board members’ confidence that the cash rate should be held steady equals 17% (unchanged from December), while the confidence in a required cash rate decrease (7%) and in a required cash rate increase (77%) are also virtually unchanged.
<a href="https://www.propertyobserver.com.au/images/2017/02/07/Screen%20Shot%202017-02-07%20at%2011.37.05%20am.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/07/Screen%20Shot%202017-02-07%20at%2011.37.05%20am.jpg" alt="">
For more information, <a href="https://cama.crawford.anu.edu.au/" target="_blank">click here</a>
</body></html>

j.ballantyne1990-6AQqhLzZaK

February rates are on hold as uncertainty about Trump continues: RBA Shadow Board

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GUEST OBSERVER
After the RBA’s decision in August to cut the cash rate to a historic low of 1.5 percent, there is good reason to pause.
Unemployment fell slightly, but only because of a large increase in part-time employment. With consumer price inflation equalling 1.0 percent year-on-year, well below the RBA’s 2-3 percent target band, and wage growth a modest 2.1 percent year-on-year, there exist little immediate inflationary pressures.
The CAMA RBA Shadow Board clearly believes that the cash rate should not be cut any further. The Shadow Board attaches a 57 percent probability to a rate hold being the appropriate policy setting. The confidence attached to a required rate cut equals a mere 5 percent, while the confidence in a required rate hike equals 38 percent.
Australia’s unemployment rate fell ever so slightly, to 5.7 percent, according to the Australian Bureau of Statistics, as did the participation rate, which stands at 64.88 percent. June’s (revised) increase in full time employment of 44,000, was completely reversed in July.
Furthermore, part-time employment, after falling by 33,200 in June, increased by a whopping 71,590 in July. The overall increase in part-time employment, relative to full-time employment, may be cause for concern. While it may reflect a flexible, nimble labour market, it could also be a sign that the labour market is softening, capturing a degree of underemployment. The seasonally adjusted wage price index increased by 2.1 percent year-on-year in the second quarter of 2016, unchanged from the previous quarter.
For the last month the Aussie dollar, relative to the US dollar, has been range-bound, trading between 75 US¢ and 77 US¢. Yields on Australian 10-year government bonds rarely budged, remaining at their historic lows below 2 percent.
Domestic share prices peaked on 1 August and have retreated slightly since then. Worldwide, after the three-week rally in July, most stocks have been going sideways, confirming the old adage that August is a slow month for the share market.
Absent any major surprises in the world economy, prospects for economic growth in the major economic regions continue to be modest. Jobs growth in the US has been solid in June (292,000) and July (255,000), but predictions for the August statistic, to be announced on 2 September, are smaller. US investment numbers continue to be relatively weak and these are unlikely to improve significantly prior to the US election in November.
Brazil’s economic fortunes, after the recent deposition of its President, Dilma Rousseff, remain highly uncertain. Germany’s fiscal surplus of 1.2 percent of GDP for the first half of 2016 is not matched by the periphery’s economies. The imbalances between Germany and its Eurozone partners will generate further pressure for Germany to increase spending and provide stimulus for the region.
Consumer confidence, as measured by the Westpac-Melbourne Institute Consumer Sentiment Index, rose slightly. The manufacturing PMI, which measures the performance of the manufacturing sector based on surveys of 200 industrial companies, fell dramatically last month, from 56.40 to 46.90, the lowest reading since June 2015. Numbers for this month’s Services PMI have yet to be released. Capacity utilization remains just above 81 percent; after a big gain in June, the AIG Construction Performance Index receded slightly, from 53.2 to 51.6 in July.
The Shadow Board attaches a 57 percent probability (54 percent last month) that “no change” is the appropriate policy, a 5 percent probability (28 v last month) that a rate cut is appropriate and a 38 percent probability (18 percent in the previous month) that a rate rise, to 1.75 percent or higher, is appropriate. The substantial increase in the confidence attached to a rate rise (and the corresponding fall in the probability confidence attached to a rate cut) reflect the Shadow Board’s mild disagreement with the RBA’s decision to cut the cash rate in August.
The probabilities at longer horizons are as follows: 6 months out, the estimated probability that the cash rate should remain at 1.50 percent is virtually unchanged at 24 percent, one percentage point up from the previous month. The estimated need for an interest rate decrease equals 11 percent (29 percent in August), while the need for a rate increase equals 65 percent (48 percent in August).
A year out, the Shadow Board members’ confidence that the cash rate should be held steady equals 18 percent (16 percent in August), while the confidence in a required cash rate decrease equals 10 percent (26 percent in August) and in a required cash rate increase 72 percent (58 percent in August).
<a href="/images/2016/09/06/Screen%20Shot%202016-09-06%20at%2010.31.20%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/09/06/Screen%20Shot%202016-09-06%20at%2010.31.20%20AM.png" alt="">
For more information, <a href="https://cama.crawford.anu.edu.au/rba-shadow-board" target="_blank">click here</a>.
</body></html>

jchancellor-FAypfDUnLy

No need for rates to go lower after last month’s cut: RBA Shadow Board

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GUEST OBSERVER
After the Reserve Bank of Australia’s cut the cash rate to 1.75 percent in May due to unusually weak inflation, recent figures show GDP growth, in the March quarter, rose to 1.1 percent, higher than expected.
The unemployment rate remained steady at 5.7 percent, while the global economy continues to paint a motley picture. Relative to last month, the CAMA RBA Shadow Board’s policy preferences have become more hawkish; however, this reflects last month’s divergence between its preferred interest rate setting and the RBA’s actual decision. The Shadow Board attaches a 52 percent probability to a rate hold being the appropriate policy setting. The confidence attached to a required rate cut equals 11 percent, while the confidence in a required rate rise equals 37 percent.
Australia’s unemployment rate stood firm at 5.7 percent. The participation rate remained virtually steady at 64.8 percent. Nominal wage growth at 2.1 percent year-on-year is the lowest it has been in 18 years, reflecting slackness in the labour market and a replacement of high-wage jobs in the mining industry with lower paying jobs elsewhere in the economy.
Last month’s rate cut pushed the Aussie dollar four cents lower, relative to the US dollar; it is trading between 72 US¢ and 73 US¢. For the same reason yields on Australian 10-year government bonds have fallen to under 2.3 percent.
Domestic share prices rose to new highs. The S&amp;P/ASX200 last week closed above 5400, the highest since August 2015. Global stocks markets have been similarly buoyant.
Australian GDP growth was unexpectedly high in the first quarter of 2016, clocking in at 1.1 percent, compared to 0.7 percent in the previous quarter. At this rate, annual GDP growth for the 201⅚ fiscal year will equal around a healthy 3 percent.
The US economy is continuing to grow near potential but the most recent unemployment figures disappointed. Other countries are faring less well. Russia is hoping its economy will start growing again later this year while Brazil just announced its economy contracted by 5.4%, year-on-year, in the first quarter. China’s growth rate is expected to be between 6 percent and 7 percent; recent announcements by the Chinese government of large-scale infrastructure projects are no doubt meant to breathe new life into the Chinese economy. Europe’s economies are expanding modestly, Japan is standing still and there remains uncertainty surrounding the resilience and strength of the world’s developing economies, especially those carrying large debt burdens.
Consumer confidence, as measured by the Westpac/Melbourne Institute Consumer Sentiment Index, leapt from 95 in April 2016 to 103 in May. Business confidence, according to the NAB business survey, fell slightly from 6 to 5 in April. The AIG manufacturing index fell slightly, but the services index, also a leading economic indicator, rose.
The Shadow Board’s confidence measures have shifted considerably. It attaches a 52 percent probability (63 percent last month) that “no change” is the appropriate policy, an 11 percent probability (29 percent last month) that a rate cut is appropriate and a 37 percent probability (8 percent in the previous month) that a rate rise, to 2.00 percent or higher, is appropriate.
It must be borne in mind, however, that the Shadow Board, in contrast to the RBA which lowered the cash rate last month, preferred to keep the cash rate on hold in May. Hence, the current probabilities overall reflect a more hawkish stance relative to the RBA.
The probabilities at longer horizons are as follows: 6 months out, the estimated probability that the cash rate should remain at 1.75 percent equals 24 percent (29 percent in May). The estimated need for an interest rate decrease has fallen from 29 percent to 16 percent, while the need for a rate increase has risen 18 percentage points to 60 percent. A year out, the Shadow Board members’ confidence that the cash rate should be held steady equals 14 percent (19 percent in May), while the confidence in a required cash rate decrease equals 16 percent (19 percent in May) and in a required cash rate increase 70 percent (61 percent in May).
<a href="/images/2016/06/07/Screen%20Shot%202016-06-07%20at%2010.28.31%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/06/07/Screen%20Shot%202016-06-07%20at%2010.28.31%20AM.png" alt="">
For more information, <a href="https://cama.crawford.anu.edu.au/rba-shadow-board" target="_blank">click here</a>.
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The nadir of the interest rate cycle is probably reached: RBA Shadow Board

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GUEST OBSERVER
Former Bank of England Governor Sir Mervyn King famously wrote that, “a successful central bank should be boring”.
The recent consensus in monetary policy, given the absence of major news about the Australian and overseas economies to inform policy makers, appears to be just that.
The unemployment rate, according to the latest ABS figures, fell to 5.8 percent, and inflation, at 1.7 percent, remains below the RBA’s target band of 2-3 percent. 
Economic growth came in at an annual 3.0 percent at the end of 2015, fuelled by stronger household spending and government expenditure, while investment declined by 0.6 percent in the fourth quarter, subtracting from GDP growth. Yet real domestic income increased by only 0.1 percent in the fourth quarter, reflecting a decrease in Australia’s terms of trade.
Overall, the outlook for the Australian economy looks much the same as the previous month. The CAMA RBA Shadow Board’s policy preferences remain virtually unchanged from last month. It continues to have a strong preference for keeping the cash rate on hold, attaching a 69% probability to this being the appropriate policy setting. The confidence attached to a required rate cut equals 23%, while the confidence in a required rate hike only equals 8 percent.
The fall in Australia’s unemployment rate can be almost entirely attributed to a fall in the participation rate from 65.1 percent to 64.9 percent. There has been no new data on real wage growth, which remains worryingly subdued.
The weakening of the US dollar has seen the Aussie dollar rebound to above 77 US¢. The trade balance remains firmly in deficit, equalling $2.9 billion in January (down from $3.5 billion in December 2015). Yields on Australian 10-year government bonds have inched up to 2.53 percent. The yield curve thus remains relatively flat.
Global stocks have rebounded spectacularly since the rout at the beginning of this year, while commodity prices have also gained some ground. Conversely, volatility, as measured by the VIX volatility index, has been declining steadily since its peak in early February. The last month has brought little in the way of news about the health of the world economy. The US economy still looks to be the pacemaker, with Europe, Japan, the BRICS countries and other developing economies expanding only modestly. High indebtedness in many countries remains a concern, even at historically low interest rates.
The Shadow Board’s confidence measures are virtually unchanged from the previous month. It attaches a 69 percent probability that “no change” is the appropriate policy, a 23% probability that rate cut is appropriate and an 8% probability that a rate rise, to 2.25 percent or higher, is appropriate.
The probabilities at longer horizons are as follows: 6 months out, the estimated probability that the cash rate should remain at 2 percent remains at 30 percent. The estimated need for an interest rate decrease has risen to 25 percent (23 percent in March), while the need for a rate increase has fallen to 45 percent (47 percent in March). A year out, the Shadow Board members’ confidence that the cash rate should be held steady dropped three percentage points, from 22 percent to 19 percent, while the confidence in a required cash rate decrease equals 18 percent (16 percent in March) and in a required cash rate increase 62 percent (63 percent in March).
To access the comments made by the RBA Shadow board <a href="https://cama.crawford.anu.edu.au/sites/default/files/outcome/attachments/2016-04/shadow_board_comments_april2016.pdf" target="_blank">click here</a>.
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