Australia: Housing subdues inflation – Westpac

Elliot Clarke, Research Analyst at Westpac, suggests that this week, inflation and the housing market have been in focus for Australia and inflation being an enduring disappointment for the market, with actual outcomes having come in below expectations quarter by quarter for close to two years.

Key Quotes

“The September quarter continued this trend, with headline and the average of the core measures again sub-consensus at 0.4% (market 0.5%) and 0.3% (market 0.4%). More significant for policy, annual headline and core inflation again fell below the 2.0%yr lower bound of the RBA’s inflation range, now 1.9%yr and 1.7%yr.”

“Though petrol will remain inflationary in coming months, persistent weakness in housing costs will limit the net effect for headline inflation.”

“The soft housing inflation pulse is a consequence of declining house prices and rising supply (restricting rental growth). This week, the October CoreLogic house price data showed that this national decline in house prices is continuing.”

“Dwelling approvals data for September was also released this week. While a bounce was seen in the month, approvals are still down 14% over the year.”

“Given this trend decline in prices and approvals, it is unsurprising that housing credit growth continues to decelerate.”