Higher interest rates could make housing inflation harder to control, not easier, according to Ray White Group chief economist Nerida Conisbee (pictured). She argues that government policy is adding to building costs and discouraging investment in rental housing.
Conisbee was responding to the RBA’s fifth rate increase of the year, which took the cash rate to 4.85% on 3 November. The five increases this year have added about $584 a month to repayments on an average $731,000 loan, according to Compare the Market. The decision followed September figures showing headline inflation at 4.3% and underlying inflation at 3.6%, both well above the RBA’s target.
Conisbee said inflation remains high even though the economy is clearly slowing. Employment fell by almost 40,000 in September, and unemployment has risen to 4.7%.
“This makes further interest rate increases increasingly difficult to justify as previous increases continue to work their way through the economy,” she said.
Housing is the largest contributor to inflation, rising 5.2% over the year, even though prices for established homes are falling.
“Builders are increasingly relying on discounts to attract buyers, despite facing higher costs,” Conisbee said.
She said large state infrastructure projects are competing with home builders for tradespeople, pushing up construction costs, while higher borrowing costs for developers could delay new supply.
Conisbee also said the Federal Budget’s changes to negative gearing and capital gains tax are discouraging investors. New investor loan commitments fell 8.6% in the June quarter, and rents have kept rising at an annual rate of 3.6% since May.
“Ultimately, the RBA cannot be expected to bring housing inflation under control while government policies are making housing more expensive to build and discouraging investment,” she said.
Experian’s latest Housing Pressure Report found the number of home loan accounts under strain grew 7.3% in the first half of 2026, more than three times the rate a year earlier, with the strain concentrated in regional areas and among borrowers aged 35 to 54. Of the Australians Experian surveyed, 42.4% said they weren’t confident they could absorb a further 10% rise in repayments without cutting back on essentials or taking on more debt.
“This rate rise could increase repayment pressure for some households, and our data suggests that pressure isn’t landing evenly,” said Barrett Hasseldine, Experian’s head of data science for Australia and New Zealand.
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