Homeowners can finally see the light at the end of the rate-rise tunnel after inflation drops to its lowest point since 2021.
According to the latest data from the Australian Bureau of Statistics, the consumer price index (CPI) came in at 4.1 per cent in the final three months of 2023, well below the peak of 7.8 per cent in late 2022.
For the quarter alone, CPI rose 0.6 per cent, or half the pace of the September quarter, to 3.4 per cent, which was lower than the 3.7 per cent figure predicted by most economists.
The treasurer, Jim Chalmers, welcomed the CPI figures. “What we’re seeing here is inflation is slowing, real wages [are] growing, and from the first of July, we will see tax cuts flowing,” he told reporters on Wednesday.
“This is not mission accomplished, but it’s really welcomed and it’s really encouraging progress.”
Master Builders Australia chief economist Shane Garrett said that ahead of the RBA’s first meeting on rates next Tuesday, yesterday’s promising figures should have homeowners cautiously optimistic that they’ve seen the last of rising rates.
“However, there are a number of grounds for caution in terms of the latest inflation figures,” he said.
“The cost of new dwelling purchase was up by +1.5 per cent in the December 2023 quarter alone. Cost pressures here are still much stronger than anyone would like and are being prolonged by the labour shortages in our industry.”
Despite the better-than-expected figures, many economists still don’t expect the first cuts until the second half of the year.
Housing builds remain a constant pressure
Mr Garret also pointed towards housing as a constant pressure on the CPI figures and called on the federal government to significantly increase housing builds and industry activity over the coming period to continue the downward trend of inflation.
“Rents rose marginally, at 0.9 per cent, during the December 2023 quarter. This outcome was helped by recent enhancements to government rent assistance, which partly muffled market-driven rental price growth,” said Mr Garret.
“The imbalance between demand and supply in the rental market still represents a major challenge. It has resulted from years of underbuilding on the higher-density side of the market and can only be resolved by significantly increasing the output of new homes over a sustained period.
“The latest inflation figures clearly show that housing costs are still a source of pressure. As well as hurting living standards, excessive housing costs tend to restrict the supply of labour, force wages higher and hurt our economic competitiveness.
“Labour productivity in our industry is 18 per cent lower than it was a decade ago. Better outcomes here would be a winner for everyone.
“Government policy needs to focus on building productivity rather than dismantling it.”
