Macro (Re)view (29/8) | Dollar unshaken

Risks to Fed independence went up a notch this week following President Trump's actions to remove Governor Cook, though markets are reserving judgment. The US dollar index was essentially flat over the week, and long duration bonds were also little changed. The curve is steeper overall, with the short end firming in preparation for the Fed's easing cycle to recommence in September.  

Despite US inflation remaining elevated, markets continue to expect a rate cut in September after Fed Chair Powell put increased focus on cooling labour market conditions at last week's Jackson Hole speech. The inflation measures that the Fed uses as its benchmark for its 2% target matched expectations in July. The headline PCE deflator held at 2.6%yr while the core rate (that excludes volatile food and energy prices) rose from 2.8% to 2.9%yr - its fastest since February. Inflation elevated to target - even before the full effects of import tariffs have flowed through to prices - is not expected to hold the Fed back from easing. That is because the labour market showed signs of weakening in July, with the unemployment rate rising to 4.2% on a slowing in hiring. The expectation is that next Friday's nonfarm payrolls report for August will reaffirm an easing labour market; however, if conditions were to rebound then cross-asset volatility would likely spike as the rates outlook is reassessed. 

The account of the ECB's July meeting conveyed that the Governing Council voted to leave rates on hold as policy settings were 'in a good place'. Having delivered a total of 200bps of easing since June last year, the view was that rates were at a 'broadly neutral level'. Holding rates gives the ECB time to assess how the economic conditions unfold, with the outlook for the export-oriented euro area heavily clouded by the US's tariff regime. There is a wide range of views amongst Governing Council members on the skew of risks to the inflation outlook; some see downside risks to inflation, but others judge that inflation could come in hotter than forecast.   

The unanimous decision (9-0) of the RBA's Monetary Policy Board to cut rates by 25bps to 3.6% earlier this month was reaffirmed in the meeting minutes. New staff forecasts prepared for the meeting gave the Board confidence to cut given the outlook was consistent with the RBA's dual mandate for 2-3% inflation and full employment - while keeping the economy on track with those objectives would 'likely require some further reduction in the cash rate over the coming year'. Markets anticipate a further 1-2 RBA rate cuts by year-end, pricing that was broadly unchanged despite an upside surprise in this week's inflation data. 

Headline inflation accelerated from 1.9% to 2.8%yr in July according to the monthly CPI gauge, well above expectations for 2.3% (reviewed here). The various measures of underlying inflation also lifted, the key one being CPI ex-volatile items and holiday travel rising from 2.5% to 3.1%yr. A gap in the timing of electricity rebate schemes was the main driver behind higher inflation in July and will likely retrace somewhat in August. That as well as the RBA's antipathy towards the monthly CPI series meant the data had little impact on rates pricing. Next week's GDP growth figures for the June quarter could however move the dial. My Q2 GDP preview (see here) looks into the key dynamics in the domestic economy ahead of the report, where the focus remains around the emerging recovery in household spending. The growth profile is patchy overall, reflected in a stronger-than-expected 3%q/q rise in construction activity (see here) alongside a weak 0.2% lift in private sector capital expenditure (see here).

Preview: Australian Q2 GDP

Next week (3/9) sees the Australian National Accounts published for the June quarter. Australia has been relatively unscathed through the initial period of the US administration's tariff regime, imposed with the 10% baseline tariff on a fairly small (around 6%) share of the country's total exports. That leaves dynamics at home as the key factors behind the expectation for modest economic growth in the June quarter. Growth slowed in the March quarter (0.2%) as households remained reluctant to spend, despite cooling inflation and a robust labour market. Public demand - the key driver of growth over the past year - also showed signs of easing back. More data around government spending, trade and inventories will come to hand before estimates are finalised. Given the recent focus on Australia's weak productivity growth, it would not surprise if the latest estimates in the National Accounts overshadow the GDP outcome itself. However, quarterly productivity estimates should have little bearing on the RBA's short-term reaction function. 

A recap: Momentum slows in early 2025  

Australian GDP growth weakened to 0.2% in the March quarter, slowing the momentum built up over the back half of last year. Annual growth was steady at 1.3% - barely half its cruising pace. Key dynamics in the March quarter included ongoing caution amongst households and firms holding back spending and investment, public demand unexpectedly slowing, and adverse weather events - notably Cyclone Alfred in south east Queensland - causing major disruptions. Australian exports to the US accelerated as orders of goods such as non-monetary gold and beef were brought forward ahead of the US administration imposing sweeping trade tariffs. However, exports on the whole weighed on growth - unlike in the UK, euro area and Canada where exports underpinned growth in the quarter.   

Over the past year, public demand has overwhelming driven growth. This stems back to the pandemic recovery when spending on public programs (health and aged care) and investment in infrastructure was ramped up by governments and the state and federal levels. The cost of living and higher interest rates have kept households quiet for an extended period, reflected in the saving rate rising to a 2½-year high of 5.2%. Residential construction and business investment - both interest-sensitive areas of the economy - remained soft, with elevated uncertainty around the economic outlook a contributing factor. Net exports have been broadly growth neutral; adverse weather events hampered resources exports while overseas travel supported imports.      

June quarter preview: Resilience as trade headwinds intensify  

Economic uncertainty offshore increased significantly as the US administration announced its new regime of tariffs on its trading partners, later deferred under a 90-day extension. Australia attracted a 10% tariff, the baseline rate imposed by President Trump on Liberation Day. Volatility in trade flows and inventories led to swings in growth outcomes. After contracting in Q1, US GDP growth rebounded in the latest quarter (0.7%) but on the other hand growth slowed in the UK (0.3%), euro area (0.1%) and Canada (0%). 

In Australia, some signs of positivity around the consumer emerged. A clear uptick in household spending was notable over May and June, sparked by sales events and new product launches. This was also assisted by the RBA continuing its easing cycle with a 25bps rate cut in May. Meanwhile, real income growth was boosted by inflation slowing to lows since 2021 at 2.1% year-on-year in headline terms and 2.7% year-on-year on an underlying basis.  

Surveyed business conditions were soft for much of the June quarter but improved late in the period. Ongoing concerns around margin pressures were evident, though labour costs have eased over the past year. Business confidence had been weighed by economic and policy uncertainty but had also shown signs of improvement. 

Key dynamics in June quarter 

Household consumption — Discretionary-related spending lifted household consumption to modest growth in the quarter. Spending on big ticket items including furniture and electronics was supported by mid-year sales and the RBA's May rate cut.   

Dwelling investment — Looks to have lost some of its recent momentum with both the construction of new homes and alteration work slowing in the quarter. 

Business investment — The capex cycle stalled over the first half of the year. Margin pressures and softer demand have weighed on business investment, while uncertainty over the global economic outlook and higher interest rates have also played a role.  

Public demand — Slowed in the March quarter and this looks to have continued into the June quarter. Public sector construction activity contracted in the quarter, while details on public spending are due early next week. 

Inventories — Added modestly to GDP growth over the past couple of quarters, with no noticeable impact from the volatility in global trade as yet. Partial data on inventories is due early next week. 

Net exports — Export revenue declined slightly across the quarter, weighed by a fall in export prices as uncertainty around global trade and growth prospects saw commodity prices weaken. Import spending advanced supported by consumption and capital goods.

Australian Capex 0.2% in Q2; 2025/26 investment plans $175bn

Australian private sector capital expenditure lifted modestly by 0.2% in the June quarter, underwhelming expectations for a 0.9% rise. The outcome reverses the decline seen in the March quarter, leaving capex flat through the first half of the year. Forward-looking capex plans rose 12% in the latest estimate to $175bn for 2025/26 but are subject to considerable uncertainty.  

Today's report feeds into economic growth calculations ahead of next week's national accounts and indicates that business investment was subdued in the June quarter. Capex spending in real terms lifted by just 0.2% in Q2, rising by a modest 1.7% through the past year. Within this, buildings and structures rose 0.2% (4.3%Y/Y) and equipment, plant and machinery firmed 0.3% (-1.1%Y/Y).  

The capex survey provides a large amount of detail, so extracting the key themes is the focus. The overarching theme at present is that momentum in the capex cycle has stalled, with economic and policy uncertainty and higher interest rates all in the mix. Capex expanded by 1.7% over the back half of last year - almost all of that growth came in the September quarter - but has then gone on to slow to be flat (0%) over the first half of this year. 

The slowdown has been driven by the non-mining sector, which after rising by 3% for the back half in 2024 dipped by 0.2% for the first half of 2025 - notwithstanding a 0.9% lift in the latest quarter. Equipment investment by the sector has seen a clear pullback, down 2.3% in 1H 2025 (from 0% in 2H 2024), while buildings and structures investment slowed to growth of 2.2% in the period (from 6.9%).  

Over in the mining sector, capex - despite falling 1.4% in Q2 - was up 0.6% for the first half this year, partially rebounding from a 1.5% fall for the second half of 2024. Capex in the sector has remained at fairly stable levels through this cycle even with elevated commodity prices.

Today's report included firms' latest estimates for planned capex spending (in nominal terms). Firms' 3rd estimate of capex spending for 2025/26 came in at $175bn, an upgrade of 12% on estimate 2 that was put forward 3 months ago. This figure implies capex is on track to rise by 3.1% compared with spending in 2024/25. Given the high level of uncertainty around the global economic outlook following the US administration's new tariff regime, forecasts for capex plans probably carry less weight than usual. Investment plans in the non-mining sector lifted to $122.1bn, up 14.6% on estimate 2. Meanwhile, plans in the mining sector rose to $52.7bn, an upgrade of 6.4%.      

Australian construction activity rises 3% in Q2

Construction work done in Australia expanded by 3% in the June quarter, far exceeding the 1% increase expected. However, the underlying detail showed that growth was narrowly concentrated in the resources sector in the Northern Territory, underpinning a 6.1% rise in engineering activity. However, building work slowed as momentum that had built up in residential construction was relinquished. 

After declining by 0.3% in the March quarter, construction activity rallied to rise strongly by 3% in the June quarter, its fastest increase since Q1 2023. This lifted year-on-year growth from 3% to 4.8%. Growth was overwhelmingly driven by a 6.1% acceleration in engineering activity, which reflected new projects in the resources sector (55%), notably in the Northern Territory. Building work came close to stalling in the quarter as growth eased to 0.2% from 0.8% in the March quarter, with year-ended growth stepping down from 2.5% to 1.6%. 

 

Residential work had been gaining in momentum since the start of last year; however, that all but came to a pause as activity slowed to rise by just 0.1% in the June quarter. Private sector new home building did in fact stall in Q2, while alterations eased to 0.2%. The non-residential segment - the other component of building work - saw output rise modestly by 0.3% in the quarter after declining in each of the previous 3 quarters.   

On the whole, private sector construction activity rose by 4.3% in the June quarter, its best outturn since the September quarter of 2022. Engineering work surged (13.5%) to offset weakness in residential (0%) and non-residential work (-2.6%). By contrast, public sector work is unwinding after ramping up coming out of the pandemic. Work done by the public sector edged 0.4% lower following a 4.7% decline in Q1. Engineering work fell 2.5% but was moderated by a 6.4% rebound in building work.  

Australian CPI 2.8% in July

Electricity rebates saw Australia's headline inflation rate spike from 1.9% to 2.8%yr on the monthly CPI gauge in July, well above the 2.3% outcome expected. The extension of the federal government's rebate scheme on power bills did not come into effect in all states and territories in July, and with annual reviews also occurring, electricity prices surged 13% in the month. That increase will partially reverse in August. Because of this - and with the RBA having essentially dismissed the monthly CPI indicator as a reliable guide on quarterly inflation - markets continue to price in a further 1-2 rate cuts by year-end. 

The monthly CPI indicator clocked headline inflation at 2.8% for the 12 months ending July, its fastest pace since July last year and up sharply from 1.9% in June. Given the details within the report, very little weight should be placed on this rise. That said, the measures of underlying inflation also moved higher: trimmed mean 2.1% to 2.7%yr and CPI less volatile items (food and energy etc) and holiday travel 2.5% to 3.1%yr, but that could easily reverse next month such is the volatility of the series. 

The key driver of higher inflation in July was electricity prices. The federal government has extended its rebate scheme ($150 paid in two quarterly installments) for the 6 months through December 2025. However, the extension does not commence in New South Wales and the Australian Capital Territory until August. Factoring this in, together with earlier rebate schemes having been used up by households in other states, and after annual price resets, electricity prices were measured to have accelerated by 13% in the month of July. That swung the annual pace from -6.3% to 13.1%.  

Housing inflation rose from 1.6% to 3.6% at an annual rate on the back of higher electricity prices, though it is key to recognise that rent inflation slowed from 4.2% to 3.9%yr, its lowest since late 2022. Meanwhile, new home building costs were unchanged at 0.4%yr.  

Another category that saw a notable rise was recreation and culture, up from -3.7% to 3.3%yr. This was a seasonally driven rise coinciding with the July school holidays. Domestic holiday travel prices lifted by 4.7% in the latest month.  

Taking a wider view of inflation in July, goods prices elevated from 1.1% to 2.3%yr, a 12-month high. That, though, mostly reflects the impact of the rise in electricity prices. Services inflation lifted to 3.5% after dipping to 2.7% in June. The July update however includes only a limited range of service price updates, so little can be drawn from this. 

Macro (Re)view (22/8) | Fed pivot opens September cut

The Jackson Hole Symposium looks to have again delivered a policy pivot, with the Fed poised to recommence its easing cycle. The Fed has maintained a patient and cautious approach throughout 2025 that has seen rates left on hold. That stance was reiterated just days earlier in the minutes of the Fed's July meeting. With tariffs only just starting to flow through to prices, the Fed was clearly hesitant to cut, holding firm against political pressure. However, the weak payrolls report for July appears to have driven a reappraisal. In his keynote speech, Fed Chair Powell highlighted a 'shifting balance of risks' in the US economy, with the labour market starting to raise concerns despite tariffs posing inflationary risks, 'may warrant adjusting our policy stance'. Markets interpreted that as guiding towards a 25bps cut in September, with a total of 2-3 cuts by year-end being worked into calculations. Treasury yields and the US dollar were taken lower on Friday while US equity markets rallied, largely reversing declines from earlier in the week.  

With Chair Powell signaling the labour market demands more attention going forward, markets have run with the idea that the Fed will need to recommence removing policy restriction. The 3-month average for payrolls has slowed to just 35k after large downward revisions were made to the gains in May and June, while the 73k rise in July - also subject to revision - underwhelmed expectations (106k). The unemployment rate is low but pushed up from 4.1% to 4.2% in July. Tariffs look like having a gradual influence on prices. As reported last week, CPI inflation for the moment is relatively contained in and around 3%, but is still elevated to the Fed's 2% target. Meanwhile, producer prices (3.3%) are starting to accelerate, pointing to pressures in the pipeline if firms start to pass on higher costs due to tariffs rather than fully the increase in their margins. As Chair Powell noted with inflation risks skewed to the upside and downside risks to employment, the Fed is confronting a 'challenging situation', let alone the external pressure.     

UK inflation data was stronger than expected in July; however, pricing for an additional 50bps of BoE rate cuts has remained broadly intact. Headline CPI rose 3.8%yr in July, coming in firm relative to the 3.7% pace expected and up from 3.6% previously. Core CPI also printed at 3.8%yr, up from 3.7% prior against expectations to hold steady. Services prices - the key area of the inflation basket under the BoE's scrutiny - backed up to a 5%yr pace from 4.7% in June, its highest since April. An unusually large rise in airfares (30.2%) in the month - the fastest rise since 2001 - was a key driver of higher inflation in July, allowing markets to remain sanguine on the data. The SONIA curve continues to point to the BoE's easing cycle taking Bank Rate down to 3.5% from its current 4% level, with a 25bps cut still seen as likely to come at the November meeting. Expectations for further easing reflect a softening labour market and a weak growth backdrop. 

   

In Europe, August's PMI readings indicated activity was continuing to hold up despite its export-oriented economy facing the new tariff regime imposed by the US. The key reading at 51.1 for the composite gauge indicated a slight pick-up in momentum from July (50.9), while manufacturing activity also improved (49.8 to 50.5). More details of the trade agreement struck between the US and the EU came to light this week. The deal leaves most European goods exported to the US facing tariffs in the order of 12-16%. Speaking during the week, ECB President Lagarde said the deal was somewhat better than the more severe outcome of 20%+ tariffs assumed in the ECB's economic forecasts. But uncertainty remains prevalent, especially around key goods (pharmaceuticals and semiconductors), and the ECB expects growth to slow.

Macro (Re)view (18/8) | Calm descends

Low cross-asset volatility driven by a view that tariff-driven inflation will not stand in the way of Fed rate cuts saw high-flying equities make further gains this week. On the back of US CPI data - despite being above the Fed's target - traders are weighing up 2-3 rate cuts before year-end. As a result, the 2-year Treasury yield touched lows since May seen in the aftermath of Liberation Day during the week. The US dollar declined, though the Australian dollar was weaker following a dovish rate cut from the RBA. 

A Fed rate cut in response to labour market concerns firmed to a near lock in market pricing at the September meeting, with signs of tariff-driven inflation remaining inconclusive. Key inflation outcomes in July were on expectations at 0.2%m/m for headline CPI and 0.3%m/m on a core (ex-food and energy) basis. In annual terms, headline CPI held at 2.7% - a touch below the 2.8% consensus - while core CPI lifted from 2.9% to 3.1%, surprising to the upside (3%). Components exposed to tariffs (including appliances, furniture etc) showed limited signs of price rises, up 0.2%m/m. The annual pace firmed from 0.4% to 0.7%, a subdued pace but a contrast nonetheless on 12 months ago when core goods were pushing down on inflation (-0.6%). 

Although consumer prices are yet to show the clear effects of tariffs, those pressures look to be building in the pipeline. Producer prices rose well above expectations from 2.3% to 3.3%yr (vs 2.5% exp), raising the likelihood that firms facing higher costs will start passing this through via price increases in order to preserve margins. The Fed does expect this process to play out, but it shouldn't overly hinder easing prospects, at least in the near term due to its view that tariffs are unlikely to spark a broader inflationary episode. 

Over in the UK, further signs of weakness in the labour market were seen with payrolled employment falling for the 8th time in the past 9 months, down this time by 8k in July. The unemployment rate held at 4.7%. Much of the weakness in the labour market is being attributed to the government's increase in payroll tax and by a larger-than-usual rise in the minimum wage. Labour market conditions are likely to keep the BoE easing cycle rolling into next year. On a more positive note, June quarter GDP growth surprised to the upside at 0.3%q/q (1.2%Y/Y).     

The RBA's decision to cut the cash rate by 25bps to 3.6% was expected, but the overall tone was a bit more dovish than anticipated (see here). Market pricing for the continuation of the easing cycle to a terminal cash rate in and around 3% was given soft validation by the RBA's new forecasts in the August Statement on Monetary Policy. Based on that market pricing for the cash rate, the RBA's revised forecasts have inflation holding around the midpoint of the 2-3% target and the unemployment rate remaining in the low 4s across the projections, an outlook consistent with both sides of its policy mandate. This was the main story from the RBA this week, despite questioning in the press conference focusing on a reduction in the central bank's assumption for productivity growth. 

Australian data this week also helped shore up pricing for further rate cuts. Employment matched expectations rising by 24.5k in July, seeing the unemployment rate fall back to 4.2% after it had risen to a 3½-year high in June (4.3%). The report steadied the ship after the labour market looked to be softening more rapidly than expected through May and June (see here). Meanwhile, wages growth also matched expectations at 0.8%q/q, 3.4%Y/Y in the June quarter, a pace in the RBA's comfort zone (see here). In other news, housing finance showed signs of heating up posting a 2% rise in the June quarter (see here). 

Australian employment 24.5k in July; unemployment rate 4.2%

An improved reading on Australian labour market conditions saw employment rising in line with expectations by 25k in July. The unemployment rate fell to 4.2% after hitting a 3½-year high in June of 4.3%. There was minimal reaction in markets, with the report only shoring up expectations that further rate cuts are on the table, as RBA Governor Bullock indicated following the 25bps cut announced on Tuesday.  

By the numbers | July

• Employment lifted by a net 24.5k in July, all but matching the 25k consensus after a 1k rise in June (revised from 2k). Full time employment (60.5k) surged by its most since February last year, but part time employment fell (-35.9k).   
• The unemployment rate fell from 4.3% to 4.2%, in line with expectations. Declines were also seen in underemployment (6% to 5.9%) and total underutilisation (10.3% to 10.1%). 
• Labour force participation came in at 67.0%, unchanged after a downward revision was made to the 67.1% figure initially reported for June. Rounding saw the employment to population ratio rise from 64.1% to 64.2%.  
• Hours worked rose by 0.3% month-on-month in July, partially rebounding from a 0.9% fall in June. After revisions, annual growth remained at 2.1%. 

The details | July

Employment posted its best result in 3 months rising by 24.5k in July (0.2%), an outcome that steadies the ship after the disappointing figures for May (-3k) and June (1k). The gain was driven entirely by a 60.5k increase in full time employment (0.6%), the strongest gain by the segment in 17 months. This was partially offset by a 35.9k fall in part time employment (-0.8%), its 4th monthly decline this year. Due to the earlier weakness, employment gains over the past 3 months averaged just 7.5k - well below its 20-40k range through most of last year. 

Following the pick up in employment and helped by the participation rate holding at 67% - a lower level than earlier reported for June - the national unemployment rate fell to 4.2% from 4.3%. Recall, the unemployment rate shocked markets after rising from 4.1% to 4.3% in June, its highest level since November 2021. This was a factor in the RBA's decision to cut the cash rate by 25bps earlier this week, though the RBA still saw the labour market as tight. The partial reversal of the increase in the unemployment rate was also backed up by falls in the underemployment rate from 6% to 5.9% and in total underutilisation from 10.3% to 10.1%.    

Hours worked rose by 0.3% in July, a positive result on the surface but a little underwhelming coming on the back of the sharpest fall in more than 2 years in June (-0.9%). Growth in hours worked was 2.1% over the 12 months to July, an unchanged pace from June. Reflecting the employment outcomes, full time hours increased by 0.7% (2.3%yr) while part time hours fell by 1.5% (1.1%yr). 

In summary | July  

Today's report was welcome after the data for May and June had raised concerns that the labour market was cooling at a faster pace than previously thought. There is still a lot of choppiness in the jobs figures in particular, so rushing to conclusions - in either direction - would be unwise. The decline in the unemployment rate to 4.2% is the main story today. Overall, this is indicative of a labour market that remains in fairly robust shape; however, as the RBA noted in its decision on Tuesday, further rate cuts are likely to be needed to keep it ticking along. 

Preview: Labour Force Survey — July

Australia's monthly read on the labour force is due to be published this morning (1130 AEST), today's report covering July. The unemployment rate ended a 5-month stretch at 4.1% rising to 4.3% last time out after employment growth effectively came to a standstill over May and June. The RBA continues to assess the labour market as tight, but signs of easing played a role in its decision to cut the cash rate by 25bps to 3.6% earlier this week. In its updated outlook, the RBA retained its forecasts for the unemployment rate, which it expects to rise no higher than its current level on a sustained basis, based on further cuts to the cash rate. Markets are pricing in at least an additional 50bps of easing. 

July preview: Can employment rebound? 

Employment gains have largely dried up after back-to-back months of disappointing outcomes, but a rebound of 25k is expected to be reported today for July. The range of forecasts sits between 15-50k, once again remaining wide reflecting the elevated volatility in the monthly employment series over recent times.  

On the basis of the expected rebound in employment, markets look for the unemployment rate to fall back to 4.2% in July from its current level of 4.3% (range: 4.2-4.4%). Because labour force participation is elevated near record highs at 67.1% - assuming that holds today - a solid to strong employment outcome will be needed to push the unemployment rate down again.    

June recap: Unemployment rate rises to its highest since late 2021  

The June Labour Force Survey delivered a shock as employment failed to meet expectations for the second month running, lifting the unemployment rate to a 3½-year high. Employment rose by just 2k on net in June (full time -38.2k/part time 40.2k) - well below the 20k rise forecast - after falling by 1.1k in May. While employment effectively went nowhere in May and June, it still rose by a fairly robust 86.4k (0.6%) across the quarter due to a strong figure in April (85.5k).   

Stalling employment growth alongside an increase in labour force participation to 67.1% (from 67%) saw the unemployment rate rise for the first time since the beginning of the year. Headline unemployment lifted from 4.1% to 4.3% in June to stand at its highest since November 2021. In addition, underemployment rose from 5.9% to 6%, driving total underutilisation 0.3ppt higher to 10.3%. 

Rounding out a weak report, hours worked declined by 0.9% in June, slowing annual growth from 3.1% to 1.8%. The weakness centred in full time hours (-1.3%), with part time hours rising (0.8%). Hours worked in the June quarter lifted by a modest 0.4%.

Australian housing finance rises 2% in Q2

Conditions in the Australian housing market warmed in the June quarter, with lending commitments rising by 2% to $87.7bn on a 1.9% lift in underlying loan volumes to 130k, their first increase since the September quarter last year. Increased activity follows the RBA commencing its easing cycle back in February this year, the Board going on to cut rates twice more since - including at yesterday's meeting (see here). Both the owner-occupier and investor segments of the market contributed to the uplift in the quarter. 

Lending commitments saw their fastest rise in the June quarter (2%) since Q3 last year, lifting the total value of lending to its highest level in more than 3 years at $87.7bn. The headline gain was driven by the owner-occupier segment, with lending rising 2.4% in the quarter to $54.7bn - more than rebounding from a 1.8% fall in the prior quarter. Within the segment, lending picked up across upgraders (non-first home buyers) (4.4%) and first home buyers (5.7%), both posting their strongest outcomes in a year. The investor segment played a supporting role seeing commitments rise 1.4% to $32.9bn. This followed declines of 0.1% and 2.6% in the previous two quarters. 

Turning to loan volumes, the total number of mortgages written rose 1.9% in the June quarter to 130k. But this outcome comes after a combined fall of 3.4% over the previous two quarters. At the peak of the cycle in the pandemic, volumes hit a high of 157k in consecutive quarters in mid 2021. Loan growth was driven by the investor segment, up 3.5% to 49.1k, albeit not recovering the declines from Q1 (-3.2%) and Q4 (-4.1%). Owner-occupier approvals have swung from quarter since unwinding from its pandemic highs. In the latest quarter, the segment saw a 0.9% rise in approvals to 80.9k, little changed on 12 months ago (-0.2%).