On Tuesday, the Reserve Bank of Australia (RBA) released its Minutes of the latest monetary policy meeting, which showed that it is worried about rising house prices and rents.
Below are the key extracts, alongside some added charts for context:
“Together with the current low level of new housing starts and completions, relative to population growth, the still-tight conditions in the rental market suggested that rents would be an ongoing source of inflationary pressure over the year ahead”…
“Members observed that the turnaround in the established housing market had continued in recent months. Upward revisions to earlier data meant that nationwide housing prices were only slightly below their April 2022 peak”…
“Members noted that the stronger-than-expected recovery in the established housing market might provide some support to household consumption in the period ahead”…
“Members also considered the implications of developments in asset prices for monetary policy. They noted that while rising housing prices alone would not warrant tighter policy, the associated rise in household wealth could support consumption by more than currently assumed, especially if housing turnover were to pick up more quickly than expected”.
“The rise in housing prices could also be a signal that the current policy stance was not as restrictive as had been assumed”.
The driver of the surge in rents and house price rebound is obvious: the Albanese Government’s record immigration program, which added a record 454,000 net migrants in the year to March, with flows increasing even further since:
The Albanese Government’s unprecedented net overseas migration is adding massive demand to the economy and is working against RBA efforts to slow demand and inflation via interest rate hikes.
The impact is being felt most obviously via the housing market and will require the RBA to keep rates higher for longer.
These higher rates will, in turn, add to the pain of mortgage holders as well as counteract a housing supply response, which will add to rental inflation.
The solution is to moderate immigration flows to a level that is below the nation’s ability to supply housing and infrastructure, and in keeping with the nation’s environmental carrying capacity (including water supplies).
In short, the Albanese Government must stop stoking inflation and hurting the working class by running immigration at such extreme levels.
