Central bank should take time to assess the impact of 10 previous rate rises, says peak body head
Evidence suggests that the Reserve Bank of Australia should continue to hold interest rates at their current level of 3.6%, according to the Real Estate Institute of Australia.
Data from the Australian Bureau of Statistics shows that the Consumer Price Index (CPI) rose 1.4% in the March quarter and 7% over the past 12 months.
“This is down on the annual figure for the December quarter of 7.8% and is the lowest quarterly increase since the December 2021 quarter, and clearly confirms a slowing down in the rate of increase,” REIA president Hayden Groves said.
The steepest price rises were for medical and hospital services (up 4.2%), tertiary education (up 9.7%), gas and other household fuels (up 14.3%), and domestic holiday travel and accommodation (up 4.75).
“The rate of price growth for new dwellings has continued to ease this quarter, following a record annual rise in the September 2022 quarter, reflecting improvements in the supply of construction materials and an easing in demand,” Groves said. “Rents increased by 4.9% annually on a weighted capital city basis, the largest annual rise since 2010, and compares to the 4.0% rise for the 12 months to December. In Sydney and Melbourne the annual increases were 4.8% and 3.1%, respectively. These are the largest annual increases since 2012. Annual growth in rent prices for the remaining capital cities continues to outpace price growth in Sydney and Melbourne.”
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Groves said the measure of rents in the CPI included prices for both the public and private rental market and accounted for rental assistance in the private market.
“This is in contrast to other measures, which measure rents in the private rental market only and exclude rental assistance. As such, the CPI measure of rents will be lower than other measures,” he said.
Time for a pause
The RBA held the cash rate steady at 3.6% this month after 10 consecutive increases. Groves said the latest numbers suggest that the central bank should continue to hit pause on rate increases.
“With the CPI having peaked late last year, as was forecast by the RBA, it is time for it to continue to keep a pause on further rate rises at its meeting next week, allowing additional time to consider additional data showing the lagged impact of the previous 10 rate increases and assess the outlook for the economy,” he said.
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