Urban Taskforce Australia CEO Tom Forrest (pictured) has issued a warning following the latest inflation figures from the Australian Bureau of Statistics (ABS), saying the data could derail future interest rate cuts and place additional pressure on housing supply—particularly in New South Wales.
“The Albanese government has done a good job to pull inflation down and put downward pressure on interest rates – but this is at risk,” Forrest said.
The ABS data showed a 0.9% rise in the consumer price index (CPI) for the March quarter, up from just 0.2% in the two previous quarters. While the annual inflation rate remains steady at 2.4%, the sharper quarterly increase has raised concerns about a possible shift in monetary policy.
“Hopefully this increase is an anomaly, but it could reflect a burst in spending arising from the interest rate cut on February 18,” Forrest said. “If inflation stays high, the Reserve Bank would be under pressure not to cut interest rates, and to even consider increasing them.”
The latest CPI figures have renewed calls for state governments to take action on housing affordability.
Forrest warned that states can no longer rely on lower interest rates to offset their own rising development costs.
“The focus will be renewed on the States to reduce the cost of new housing production,” he said. “The hopes of interest rate cuts saving the states from their relentless push to add costs to housing supply will be back in the spotlight.”
Forrest also stressed the overlooked connection between CPI movements and housing affordability, noting that increases in essential costs hit households harder when rent and mortgage obligations are already high.
“One of the factors often missed by statisticians, pollsters, and analysts is the close inter-relationship between the cost of living as measured by the CPI and housing prices (the cost of mortgages and rents),” he said.
“Small changes to the CPI have a much greater impact on household budgets when mortgages and rents are high because these costs are fixed. There is no generic cheaper brand option. It’s not like you can just move to a cheaper rental – there’s simply nothing available!”
The problem is most acute in Sydney, where housing costs are 30% higher than in Melbourne or Brisbane, according to Forrest. That means families are more vulnerable when everyday expenses rise.
“So, when supermarket shopping prices go up, or school fees, insurance costs, electricity or petrol prices rise, the impact is much greater on families in Sydney than elsewhere,” Forrest said.
Forrest expressed concern about what he described as a sluggish response by governments at all levels to reduce regulatory barriers and excessive fees tied to housing construction.
“That is why the sleepy response from politicians on the multiple causes of housing costs at all levels of government to take decisive action ... is so concerning,” he said.
“The flurry of political announcements from both sides of politics on housing costs and housing supply shows the penny has dropped with our political leaders – but it is taking too long to flow through to housing supply.”
Recent ABS data appears to support these concerns, showing that total dwelling approvals fell 0.3% in February. While approvals for private houses rose 1%, higher-density housing approvals—critical for urban supply—dropped 1.5%, indicating persistent challenges in scaling up housing where it’s most needed.
Forrest concluded by framing the latest inflation data as a clear call to action.
“Today’s inflation data is a wakeup call for action on all areas which impact on housing costs,” he said.
