Australian rental crisis to drive interest rates even higher

The Australian Bureau of Statistics (ABS) yesterday released CPI rental data, which showed that rents across the combined capital cities rose 0.7% over the quarter:

ABS quarterly rents

ABS rental growth rising.

Over the 2021-22 financial year, rents rose a tepid 1.6% across the combined capital cities, according to the ABS:

ABS annual rental growth

Annual rental growth still weak.

Thus, rents grew at around one-quarter the headline inflation rate of 6.1% in the 2021-22 financial year, meaning rents have actually been disinflationary.

The situation is certain to change. Private data providers are recording annual rental growth closer to 10%. For example, CoreLogic reported that Australian capital city rents grew by 9.1% in the year to June 2022 – the highest rate of growth since December 2007:

Australian rental growth and vacancy rates

Strong rental growth on low vacancy rates.

The ABS measures rents paid across the market, whereas CoreLogic and the other private data providers measure newly signed rents.

Eventually, the ABS will update its rental series to match the actual market. And when it does, rents will rise sharply and add to Australia’s inflationary pressures, in turn forcing the RBA to respond with higher interest rates.

Unconventional Economist
Latest posts by Unconventional Economist (see all)

Comments

  1. Surely the RBA would ignore the rental component of CPI. It’s not like having a roof over your head is a discretionary expenditure that needs to be dampened.

  2. Display NameMEMBER

    Add 200K migrants to
    – A rental crisis
    – Overrun hospitals crisis
    – Energy crisis

    Welcome to Australia, the economic zone where citizens work to ensure the economy stays afloat for the few.

    • Strange EconomicsMEMBER

      The few – are bank/fund executives.
      Q? Why do financiers, and Public service RBAs, earn double the salary of other mid level execs….700k for APRA head to write 1 letter a year? Or a fund manager to buy CommBank shares with your super and charge 2% for the idea.

      A) So someone can buy those 5 million houses in East Sydney.

Leave a reply

You must be logged in to post a comment. Log in now