CPI suggests favourable outlook for interest rates

by Julia Corderoy23 Jul 2015
The latest CPI figures from the Australian Bureau of Statistics suggest the market can expect a sustained period of low interest rates, which is good news for home owners.

In the June quarter, the CPI rose by 0.7% and an annual rate of 1.5%. These figures are below the RBA’s target zone of 2-3% and should not put pressure on the interest rate outlook. 

The housing group increased by 0.7% for the June quarter and recorded an annual rate of increase of 2.5%. The main increases in the June quarter for the housing group was for new dwelling purchases, which increased by 4.8%. Rents increased by 0.4% for the quarter and 1.9% for the year.

According to the Real Estate Institute of Australia’s chief executive, Neville Sanders, rental prices are growing at historically low levels.

“The impact of increased investor activity in the housing sector is flowing through to lower increases in rents. The increase in the past twelve months in Sydney at 2.5% was the lowest yearly increase since the September quarter of 2006,” he said.

With inflation below the RBA’s target zone, Sanders says everyone in the housing market – both buyers and renters – can expect low interest to stick around for a sustained period. 

“With inflation under control combined with a slowdown in housing finance, it’s reasonable to expect that the RBA Board will not be increasing interest rates in the medium term, providing a stable outlook for home buyers.”