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Beyond the headlines of yesterday’s 5.1% CPI result, the contribution of new dwelling purchase price and rents are useful bellwethers, says Anna Hong from Pendal’s Income and Fixed Interest team.
“New dwelling prices came in at 5.7% for this quarter — the highest since the turn of the century. Builders are finding it difficult to quote given the cost pressures they’re facing.”
Meanwhile rents turned the corner, contributing 0.6% this quarter. “Rent growth is accelerating across capital cities and there is more to come.”
This means increased pressure on the RBA to hike rates during the election campaign, says Anna.
“Markets have already priced in aggressive rate hikes in 2022 and a cash rate forecast above 3% by end of 2023. This may come as a shock to mortgage holders.
“The RBA is increasingly looking like it must join other central banks in dampening demand to rein in inflation rather than waiting for supply to fix itself.”
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