All eyes are on the latest quarterly consumer price index (CPI) data, which is set to be released Wednesday, as updated inflation details hold significant implications for mortgage holders and interest rate movements.
At the last quarterly reading, or the 12 months leading up to December 2024, the CPI rose 2.4%, compared with an increase of 2.8% during the September quarter. The results were within the Reserve Bank of Australia's (RBA) target inflation range of 2% to 3%.
Meanwhile, the monthly trimmed mean inflation — which measures underlying inflation by stripping out goods with volatile prices changes and what many consider a better indicator of inflationary pressures — stood at 2.7% in February, down from 2.8% in January. The annual trimmed mean inflation was 3.2% in December, down from 3.6% in September. Both figures suggest a gradual easing of underlying inflationary pressures.
But despite the easing of inflation, the RBA held the official cash rate (OCR) at 4.10% during its April meeting, citing "notable uncertainties about the outlook for domestic economic activity and inflation."
The news came to the dismay of mortgage holders and investors, many of whom were banking on some added rate relief.
Since then, unpredictability, both domestically and globally, have not only persisted, but seem to be mounting. Australia's unemployment rate, which sits at 4.10%, is expected to rise in coming months, while an upcoming election and continued volatility abroad, most notably in relation to US President Donald Trump's ongoing tariffs disputes, have only served to add to the uncertainty.
A lack of affordable housing also continues to be an issue, which is driving up prices. Commonwealth Bank (CBA) is anticipating a 0.2% rise in house prices in April, following a 0.4% lift in March. At the same time, building approvals have declined, and the construction industry continues to grapple with labor shortages and rising costs, limiting the market's ability to keep up with demand.
"It's challenging to get new housing," Brenden Lowbridge, a Newcastle-based director and mortgage broker at Money Links, told Australian Broker. "And the housing supply we have now in this country is not going to increase anytime soon."
Amid all the market noise, there could be a silver lining, however. Market players — including all four of Australia's Big Four Banks — are now anticipating a rate reduction at the RBA's upcoming May 19 to 20 meeting.
"Slow global growth and added uncertainty may trigger additional interest rate cuts than currently expected, supporting the housing market," Belinda Allen, senior economist at CBA, wrote in a note.
In recent weeks brokers say market conditions have been mixed. Some report increased activity, particularly in the investor segment, where markets like Sydney with high-priced coastal suburbs are increasingly in demand. Others say prospective borrowers are holding off.
"Uncertainty is the biggest problem in the market," said Lowbridge, who added that the market is "lacking motivation. It's not the same level. People are doing things more slowly," much of which he attributes to the run up to Saturday's Federal elections.
"With inflationary pressures, it's more so showing up with the applications we receive," he continued. "It's mostly double income, or higher earners who are applying. We're not seeing a lot of single first-time home buyers because they usually can't meet the requirements that the banks have put out, or have the income to come up with the deposit.
"But that's our job as brokers, to guide [borrowers] through that process; walk people through the possibilities of what it means to be looking [to purchase] now," Lowbridge said.
