The RBA minutes just out included a discussion about the case to raise the cash rate further. It centred on the observation that it would take some time for inflation to return to target and the labour market to full employment. Inflation was expected to take a further two years or so to return towards the midpoint of the target range under the central forecast. In the end, they held the cash rate target unchanged at 4.35 per cent, and the interest rate on Exchange Settlement balances unchanged at 4.25 per cent. But this is an important signal.
Yet the 13 RBA driven rate hikes have had a perverse impact on property. Since January last year, Australian property prices have been rising in many parts of the country, recouping almost all the losses incurred after the Reserve Bank of Australia began raising interest rates in 2022. They might be slowing a bit, now, but that was not meant to happen.
In fact, there is strong demand for property, buoyed both by increased population and a resurgence in demand from cashed-up older generations. Yet supply is not keeping up, and mortgage lending is tighter now for many as the costs of a mortgage rise. The signals are clear – we have a major crisis in housing. Renters are caught in the cross-fire, but purchasers are also in the firing line too.
Housing rapidly is becoming a lightning rod for a generation staring down the prospect of having next to no hope of buying a residence under their own steam. We may see ourselves as an egalitarian society with a universal education and health system that provides opportunities for anyone willing to have a go. Housing is broken, and politicians won’t tackle the real issues.
Could it be that the fact they are much more likely to own investment property stop them from acting, or is it the fact that this would require real action, not political spin?
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