In this week’s Property Insider chat with Dr Andrew Wilson, I explore a topic that’s on the mind of every property investor, homeowner, and economic enthusiast: the role of the Reserve Bank of Australia in our dynamic property market.
In recent times, we’ve seen the RBA take bold steps, but are these moves truly hitting the mark?
That’s the big question.
The RBA, with its mandate to ensure financial stability, employment, and economic prosperity, has been juggling interest rate decisions, inflation control and a post-pandemic economic recovery.
However, despite their best efforts, there’s a growing sentiment that they might not be succeeding as well as we’d hoped.
Why is this the case?
Are the traditional levers of monetary policy losing their effectiveness, or are there other underlying factors at play?
These are some of the questions I ask Dr. Andrew Wilson, chief economist of My Housing Market in this week’s Property Insiders chat.
RBA minutes reveal a raft of failures
Watch this week’s Property Insider chat as Dr Andrew Wilson discusses a raft of failures as he unpacks the latest Reserve Bank of Australia (RBA) minutes.
We discuss how the RBA has had its fair share of challenges in curbing inflation, a tale that’s not unique to Australia.
However, in the latest minutes of the RBA, there’s a common thread: a barrage of economic surprises that have outpaced expectations and, implicitly, outmanoeuvred policy responses.
Dr Wilson explains how the RBA admits underlying inflation was stronger than anticipated.
This isn’t just a number—it’s a measure of living costs biting into wallets more than many predicted.
The reasons? Robust demand pressures, for one.
The economy’s been hotter than expected, driven by consumers who just keep on spending, even when most economists thought they’d tighten their purse strings.
Then there’s growth and investment, both private and public, flexing more muscle than the RBA foresaw.
Couple this with a population growth sprint, and you’ve got a recipe for persistent inflationary pressures.
As Dr. Wilson explains as for the job market, the RBA was hoping for a rise in unemployment, which traditionally cools wage demands and, by extension, inflation.
But their forecast’s been dialled back.
Jobs are sticking around more than expected, and while that’s great for workers, it’s another complexity in the inflation puzzle.
On the wages front, there’s an interesting twist.
Wages have risen a little more than the RBA hoped, but still below the rate of inflation meaning in “real” terms wages haven’t kept up with inflation.
Usually, softer wage growth would ease inflation, but the RBA believes it’ll take longer to balance out demand and supply, so any relief from modest wage growth might be a drop in the ocean.
Mortgage stress, a bellwether for financial strain, hasn’t hit the red zone yet, according to the banks.
This means most households are still coping with repayments despite rising mortgage rates—a mixed signal when you’re trying to take the heat out of the housing market.
And speaking of rates, the RBA’s forecasts imply they’d be staring at even higher inflation if not for the expected rate hikes. This tells us they’re banking on higher borrowing costs to do some of the heavy lifting.
Lastly, there’s the global look.
In this week’s Property Insiders chat you’ll hear Dr. Wilson explain that Australia’s cash rate is playing catch-up.
Other countries, facing similar economic tempos, have pushed their rates higher. It suggests the RBA’s been a step behind the global curve.
So, what’s the read here?
It seems the RBA’s been grappling with an economy that’s outperforming in ways that complicate their inflation-fighting playbook.
It’s not just about errors but about the difficulty of steering a ship in uncharted waters, where economic currents are stronger than the charts suggest.
What are the RBA’s next moves?
They’ll be a mix of art and science, trying to tame inflation without snuffing out the growth that’s surprising them at every turn.
It’s a delicate balance, and the RBA’s navigation of this will be watched closely by markets and households alike, but you’ll hear Dr Wilson thinks we’ll have further rate rises.
Spring auction market ends with typically higher listings & lower clearance rates
Capital city weekend auction markets have ended spring in the usual fashion with surging listings placing downward pressure on clearance rates.
Adelaide had the strongest auction clearance rate of 73.6%.
Auction clearance results for the other capitals were:- Melbourne – 62.3%; Sydney – 68.3%; Brisbane – 44.3% and Canberra – 51.9%.
The national auction market reported a clearance rate of 60.1% at the weekend which was lower than the 63.3% reported over the previous weekend – and now also lower than the 62.5% recorded over the same weekend last year.
National auction numbers were slightly lower at the weekend with 2215 listings compared to the previous weekend’s 2308, but well above the 1905 listed over the same weekend last year.
