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The Real Estate Institute of Australia (REIA) has acknowledged the most recent Consumer Price Index (CPI) data, and what it could mean for the Reserve Bank of Australia’s (RBA) future decision-making, and ultimately, the cash rate.
The latest release of data from the Australian Bureau of Statistics (ABS) follows on from the RBA’s decision to keep the cash rate at 4.35 per cent at its meeting last week.
It showed that the CPI had risen 3.4 per cent in the 12 months to February 2024, which was on par with data from both January 2024 and December 2023.
Weighing in on the data, REIA president Leanne Pilkington acknowledged that while the figure does remain unchanged, “we need to remember, as the Treasurer reminded us earlier this week, that the monthly figures bounce about and are less reliable than the quarterly data”.
Even so, she pointed out that “the downward trend in inflation is undeniable, with monthly figures not having increased since the peak of 8.4 per cent in December 2022”.
Adding that the trend is even more evident barring volatile items, she raised that “the annual movement for the monthly CPI excluding fruit and vegetables, automotive fuel and holiday travel and accommodation, rose 3.9 per cent in February, down from 4.1 per cent in January, and showing decreases every month since March last year”.
With the RBA board stating that it would be relying upon the data and “evolving assessment of risks”, Pilkington shared that the “latest CPI provides an important piece in that jigsaw”.
“Others, including retail trade, household spending, unemployment and the March quarter CPI, will be available before the next meeting in early May.”
Honing in on the CPI’s annual increase, housing was one of the biggest contributors to the latest result, with housing up 4.6 per cent, while insurance and financial services were up by 8.4 per cent.
Rents were also a huge factor, having increased by 7.6 per cent in the 12 months to February, a lift from the January increase of 7.4 per cent.
Pilkington was not the only high-profile housing industry commentator to remark on the contribution of housing to continuing CPI pressures.
Master Builders Australia CEO Denita Wawn also noted that “housing costs remain one of the central sources of inflationary pressure across the economy”.
Pointing to rental inflation and the price of new dwellings, Wawn stated it’s all “further evidence that if we are to win the battle against inflation, we need to pull out all stops to build new homes”.
Stressing that more needs to be done to encourage supply, the CEO said “whether it’s detached housing or higher density, the same constraints apply, including planning restrictions, lack of capacity to undertake critical infrastructure so land is home-building ready, high taxes and charges, slow approval processes, and workforce shortages”.
According to Pilkington, while the 13 rate hikes have stemmed “the inflation tide”, it’s not the only impact they’ve had.
She flagged that they are “also slowing the economy”.
Once again referring to the pieces of the RBA’s jigsaw, she forecasts “the expectation is that the RBA will provide home buyers some interest rate relief later this year”.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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