This article is from the Australian Property Journal archive
WITH inflation surging 1.2% over the September quarter, exceeding previous predictions, further interest rate hikes at the next RBA meeting look more likely.
According to the latest ABS data, Australia’s Consumer Price Index (CPI) was up 1.2% over the third quarter of 2023, reflecting a 5.4% bump for the year.
Though increases are tracking lower than rises seen throughout 2022, the September quarter rise is building on the 0.8% increase seen in the June quarter.
ANZ is predicting the RBA will increase the cash rate by a further 25bp in November, bring the rate to 4.35% after a four month pause at 4.1%.
“We had been highlighting the risk that the Bank could act either late this year or early next, and we now think it more likely than not that risk will be realised,” said Adam Boyton, head of Australian economics at ANZ.
“Beyond the November meeting we expect the RBA to return to an extended pause. While 4.35% should mark the peak in the cash rate, there is a risk it could tighten beyond that. Any easing remains a very long way off.”
Boyton noted that the quarter’s CPI results were likely above the expectations of the RBA of around 0.9%.
“The RBA has also highlighted risks of inflation expectations becoming embedded given ongoing shocks to energy prices, with consumers’ inflation expectations typically being quite responsive to petrol prices,” said Boyton.
“While an additional interest rate increase will put further pressure on already strained finances across some households, the RBA’s most recent Financial Stability Review observed that households and businesses in Australia have, overall, coped reasonably well with the 400bp of cash rate hikes so far.”
Federal Treasurer Dr Jim Chalmers said while inflation is moderating overall, it is proving to be more persistent around the world and more persistent here in Australia.
“Today’s data proves our 10-point cost-of-living plan is working as intended. The ABS said that without the government policies for childcare, electricity and rent, CPI would have been around half a percentage point higher through the year.
“We shouldn’t be surprised to see some volatility in inflation figures going forward, particularly given the global uncertainty from the conflict in the Middle East and the war in Ukraine. We understand that inflation and higher interest rates that are already in the system are biting households hard and we’re acting to make things a little easier,”
Chalmers said the Albanese government’s primary focus is rolling out $23 billion in cost-of-living assistance that’s been especially designed not to add to inflation.
ABS data revealed prices for new dwellings rose 1.3% this quarter, while electricity prices were up 4.2% and food prices saw their softest increase since September 2021 at 0.6%.
On the other hand, childcare fell 13.2% over the quarter and was the largest contributing fall over the period.
While annually, with the CPI up 5.4%, new dwellings were up 5.2%, rents 7.6%, electricity, 14.5% and automotive fuel up 7.9%.
Denita Wawn, CEO at Master Builders Australia, noted the impact that housing costs continue to have on inflationary pressures, including wages.
“Taking decisive action to speed up the delivery of the new homes we need will help us win the battle against inflation more quickly,” said Wawn.
“The cost of building homes continues to be inflated through unnecessary delays and barriers including planning impediments, lengthy approvals processes and high developer charges.”
Wawn is calling on state and territory governments to deliver on their commitments on planning reforms in the space.
“For many builders and developers, initiating large-scale home building projects in the current environment is simply too risky,” she added.
“Despite all the work at a Federal level to pass housing legislation and invest in skills, the Government risks magnifying costs and regulatory obstacles with its far-reaching ‘Closing Loopholes’ Bill. The IR Bill means businesses will have even more of their time absorbed by compliance and red tape issues – instead of being out there building new homes.”
