⚠️ Rise: The RBA has raised the cash rate by 25 basis points to 4.85%, its fifth increase this year and the highest level since late 2008.

Halloween might be over, but the scary stuff isn’t.

Inflation is back on the rise. Unemployment is creeping up. Consumer confidence is taking a beating. And Australia’s property market? Well, that’s another story altogether.

While we’ve been pointing fingers at global conflicts and rising fuel prices, Australia’s biggest economic problem might actually be much closer to home… and it isn’t something the RBA can simply fix by moving interest rates.

In this month’s RBA and Economic Update, Ben Kingsley and economist Evan Lucas unpack the November rate decision and why we could be heading for a much harder landing than anyone originally hoped.

This Month’s Update:

  • The property correction may have further to run. Ben expects the most significant correction in four decades. That’s a risk for some and an opportunity for others.
  • Rents aren’t coming down any time soon. Housing is still the largest contributor to inflation, and private data shows rents rising.
  • Building a home takes far longer than it used to. Construction productivity has gone backwards over 25 years, which makes new supply harder to deliver.
  • Inflation is heading the wrong way. Headline inflation rose to 4.3% in September and annual trimmed mean inflation reached 3.6%, both above the RBA’s 2–3% target.
  • The job market is softening. Unemployment is 4.7%, the highest since October 2021.
  • December matters. The RBA meets again on 8 December, and the data between now and then will shape what comes next.

Why Rents Aren’t Coming Down

Housing makes up roughly a quarter of the CPI basket. Housing inflation eased to 5.2% in September, but it’s still the largest contributor to inflation. New dwelling prices rose 4.7% over the year as builders passed on higher material and labour costs.

Rents are a big part of that story. In the episode, Ben points to the lag between official rent inflation figures and private rental market data, citing Cotality’s Tim Lawless. That private data suggests rents are still rising, even if growth has slowed, and Ben sees little reason to expect a significant decline in the near term.

For renters, that’s tough news. And it sits on top of what Evan calls ‘life admin’: rent, council rates, maintenance, utilities, fuel, public transport, insurance and childcare. According to the data Evan presents, those costs are rising at around 5.45% a year, and some have increased by as much as 37% since COVID.

Why It Takes So Long to Build a Home

This is one of the problems interest rates can’t fix.

Construction productivity has gone backwards over the past 25 years. According to Ben and Evan, an apartment block that took 17 months to deliver can now take 31. A house-and-land package has gone from seven or eight months to as much as 17.

Ben pointed to a building code that runs to thousands of pages and differs between states, growing red and green tape, restrictive workplace conditions and a shortage of skilled tradespeople.

That makes it much harder to deliver the new housing Australia needs. Raising interest rates can slow demand, but it won’t build homes any faster. That’s why both Ben and Evan see productivity reform as critical in 2027.

The Bigger Picture: Inflation and the RBA’s Call

September’s inflation figures, released on 28 October, set the scene for this month’s decision. Prices rose 0.8% in the month and 4.3% over the year, driven by a 23.6% annual rise in fuel prices.

But it isn’t just an oil shock. Australia’s core inflation is running well ahead of comparable economies, and the pressure is strongest in things we can’t import, such as rent, education and healthcare. Even cafés and restaurants are running at around 5% inflation.

Ben and Evan weighed up both sides:

  • The case for a rise: Underlying inflation is too high, the outlook has deteriorated and waiting risks higher inflation expectations becoming entrenched.
  • The case for a hold: This year’s four rises are still flowing through, unemployment is already at 4.7%, and some of the recent jump is volatile fuel prices that may prove temporary.

Either way, the RBA only has one blunt tool. In Evan’s words, it’s a “sledgehammer doing fine art”.

Could This Be the Property Buying Opportunity of a Decade?

Now for the part property buyers and investors will want to pay particular attention to.

Ben believes Australia’s property market could experience its most significant correction in 40 years, with further price declines possible before the market stabilises. That’s not exactly comforting news if you’re already feeling the pressure of a mortgage or watching your property’s value fall.

But there’s another side to the story. How it lands depends on where you sit:

  • Living in your own home? Falling values aren’t necessarily a problem if you’re not planning to sell.
  • Close to negative equity? Selling into a weaker market could create additional challenges, so understanding your options is important.
  • In a position to buy? Ben believes these could be some of the best buying conditions in years, possibly even a decade.

Of course, that doesn’t mean everyone should rush out and buy. Not every market or property will move the same way. It’s about knowing your own position, and whether you’re ready to take advantage of the opportunities or withstand the risks.

It Pays to Know Where You Stand

Economic uncertainty is a given, but how you respond to it is within your control.

Now is a good time to:
✔ Make sure your rate is still competitive
✔ Understand your borrowing power in today’s market
✔ Explore what a tailored investment strategy could look like for your next move

If you’re wondering what all this means for your mortgage, borrowing power or next property move, you don’t have to figure it out alone.

Our friends at Empower Wealth (who also happen to be our sister company!) can help you make sense of your options and build a strategy around your financial and lifestyle goals. Book a free, no-obligation initial consultation and see what’s possible.