Australia's core inflationary metrics hit a three-year low, heightening hopes for another round of interest rate cuts next month. But US President Donald Trump's tariffs will likely have a bigger impact on the nation's property markets.
The Australian Bureau of Statistics (ABS), released its quarterly consumer price index (CPI) Wednesday, with the annual CPI numbers holding steady at 2.4%, since the December 2024 reading. But even more telling was the underlying inflation figures, or the trimmed mean inflation, which was the lowest rate since December 2021, falling to 2.9%.
Easing inflationary pressures are another sign that the Reserve Bank of Australia (RBA) will cut the official cash rate (OCR) at its May meeting. Market players, including all four of Australia's Big Four banks, have already come out with forecasts for more rate cuts this year, to the delight of homeowners nationwide.
But Trump is complicating things. The US president's tariffs could indirectly have an even bigger impact on the economy — and Australia's property markets.
"Uncertainty of global trade wars will impact the Australian economy. Not so much due to the direct impacts of tariffs — because Australian exports to the US are only 5% of Australia's total exports — but the uncertainty from world trades creates uncertainty on behalf of Australian consumers and businesses, and this tends to slow down economic growth," Adelaide Timbrell, senior economist at ANZ, told Australian Broker.
"And the tariffs, and not just from the US, but also retaliatory tariffs from other countries, is slowing down global growth," she said. "When the world is growing more slowly, Australia also grows more slowly."
As a result of the tariffs, Timbrell said ANZ downgraded US growth expectations from 2%, year-over-year, to 1.5% in 2025. The bank also downgraded its forecast for Chinese GDP growth to 4.2%, down from 4.8%.
But the tariffs' impacts aren't limited to economic growth and consumer spending. They'll likely cast a shadow over the housing market by way of mixed market forces.
"The uncertain global backdrop is likely to put downward pressure on housing activity. The easing of interest rates is likely to put upward pressure on activity," Timbrell said.
"If the Reserve Bank [does] ease interest rates, then people have more borrowing capacity. And when people have more borrowing capacity, they're able to purchase or bid more for homes. And that's what creates the increased or upward pressure on housing prices," she continued. "But then, if global uncertainty makes people more cautious, it can offset some of that positive or supportive factor for housing prices. So people are more cautious but have more borrowing capacity at the same time."
Amid all the market turbulence, Australia's property markets have been somewhat resilient thus far in 2025, with valuations continuing to trend upwards just not as fast as in 2024.
CoreLogic's March data revealed that Sydney home prices rose 6.8%, year-on-year, while Melbourne was up 3.2%, and Brisbane's market jumped 10.1% annually. Adelaide and Perth also showed strong growth, up 9.3% and 11.7%, respectively.
Timbrell said ANZ is expecting a "very mild increase" in housing prices across the nation's capital cities in 2025.
"That's why we'll need more policy in Australia to support the kind of economic growth we would have expected without these tariffs," Timbrell said.
ANZ is expecting a 25 basis point reduction at the RBA's May meeting.
"The amount of inflation that has occurred in terms of the underlying measure has essentially gone from unacceptably high to just within the acceptable target band," explained the economist. "This is something that will clear the way for a rate cut in May, given the recent uncertainty in the global trade relations."
The nation's central bank held the OCR at 4.10% during its April meeting, much to the frustration of mortgage holders.
Meanwhile, other factors are at play, including Saturday's federal elections, a lack of affordable housing and unemployment rates.
"The [low] unemployment rate continues to be low, which is a bright spots in the Australian economy," Timbrell said. "And that should protect against some of the risks from the external environment, given that the Reserve Bank has some firepower to ease rates from here with a higher starting point. And given the healthy metrics of the Australian economy coming into tariffs."
For mortgage brokers, these developments present both opportunities and challenges. The potential rate cuts may lead to increased client inquiries about refinancing and new loan applications. However, brokers should be prepared to navigate clients through a competitive lending environment, emphasizing the importance of personalized advice and thorough market analysis.
