The real estate industry is urging the Reserve Bank to take its foot off the interest rate pedal for Christmas after the government statistician this week revealed inflation fell in October. 

 The inaugural monthly Consumer Price Index (CPI) indicator rose 6.9% in the year to October 2022, according to the latest data from the Australian Bureau of Statistics (ABS)[i].

October’s annual movement of 6.9% is lower than the 7.3% change in September, with the most significant contributors to inflation being new dwellings (+20.4%) that have been impacted by labour and materials shortages, automotive fuel (+11.8%) and fruit and vegetables (+9.4%).

“The latest monthly data shows a decline from the September quarter, which recorded an annual rate of 7.3%. The current rate is below the Budget forecast of 7.75% and the RBA’s forecast of 8.0%,” said REIA President Hayden Groves.

“Rent prices increased further this month from an annual increase of 2.9% in September to 3.5% in October, reflecting the persistent low vacancy rates.

 “With signs that the CPI has peaked, it is time for the RBA to ease up on its interest rate hikes at its meeting next Tuesday. There are lags between the RBA raising its cash rate and lenders passing on these increases to borrowers. Further, it takes many months for any shifts in household spending behaviour to show up in economic data,” Hayden added. 

Angus Raine, Executive Chairman of Rane & Horne, agreed. “I urge the RBA to wait until next year and assess the impact of successive interest rate hikes since May on inflation and consumer confidence before taking further action on interest rates.”

He continued, “There is little doubt that seven successive rate hikes have had their desired effect.”

According to research from AMP, Since April, a buyer on average full-time earnings with a 20% deposit has seen a 25% decline in their home buying power. 

 “The RBA Governor this week took the unprecedented decision to apologise to RBA governor says sorry to homebuyers who acted on the central bank’s rates forecast, and I applaud him for his candour.

“However, coming into Christmas, it’s time for the Central Bank to consider a pause on rate hikes. 

“The risk is that further increases in mortgage rates will start to push total mortgage payments and place too much strain on household budgets. 

“This is likely to result in a sharp rise in mortgage stress – particularly as fixed rate loans reset next year,” Angus cautioned. 

[i] https://www.abs.gov.au/media-centre/media-releases/monthly-cpi-indicator-rose-69-cent-12-months-october-2022