Australia's latest inflation rate: what it means for real estate

May 2, 2023

In the latest financial news to affect every Australian, inflation figures have fallen for the second consecutive quarter and now stand at 7%.

The Australian Bureau of Statistics' (ABS) released its March 2023 quarterly figures on April 26, and showed the latest 7% figure followed a 30-year high, 7.8% rate in the December 2022 quarter.

The even more significant "trimmed-mean measure" - in which the lowest and highest 15% of weighted price changes are excluded from ABS inflation calculations - is also looking better this quarter at 6.6%, compared to that of the December quarter's 6.9% figure.

"While prices continue to rise for most goods and services, these rises have moderated in the most recent quarter, resulting in lower annual inflation," the ABS commented in its March quarter press release.

Day-to-day decisions: what details contributed to inflation changes

The most significant contributors to the March quarter's 7% figure were:

  • Medical and hospital services (4.2%)
  • Tertiary education (9.7%)
  • Gas and other household fuels (14.3%), and 
  • Domestic holiday travel and accommodation (4.7%).

House sector inflation changes

Within the housing sector, weighted average figures across the nation's eight capital cities revealed a 1.9% quarterly drop and across the year, a 9.8% easement.

This figure is down from 10.7% in the 2022 calendar year.

Within the housing sector, owner-occupiers' new dwellings purchases and rental prices led these changes.

However, the former group is seeing an easement in costs with its 12.7% annual uplift, following a record annual rise of 20.7% in the September 2022 quarter.

In its March quarterly inflation press release, the ABS noted these changes were due to improvements in construction material supply and a softening in new demand as well as fewer government grant programs and schemes.

"While new dwelling prices remain high, reflecting increased labour and material costs, the rate of price growth has continued to ease this quarter due to subdued new demand and improvements in the supply of materials," the ABS commented.

"Fewer grant payments this quarter from the Federal Government's HomeBuilder program and similar state-based housing construction grants also contributed to the rise."

CoreLogic's head of residential research, Eliza Owen, has also pointed to the research industry's Cordell Construction Cost Index (CCI) slowing in the year to March for the same reasons,

The CCI - which tracks the cost to build a typical new home - returned a growth rate of 0.9% for the first three months of 2023 - a level not seen since March 2021.

"The good news is that embarking on renovations, or building a new home, could soon become more feasible, as the rise in construction costs slow down. " Ms Owen noted.

However, the bad news in ABS' latest inflation rate figures was that rents across the nation are continuing to accelerate.

Across our capital cities, rents rose 1.6% in the March quarter, with this change driven by tight rental markets, strong demand, and low vacancy rates across the country, said ABS.

Rents also rose 4.9% across Australia in the year to March - the highest annual rise since 2010 - while Sydney (4.8%) and Melbourne (3.1%) have recorded their strongest annual rises since 2012.

However, the highest annual rent changes have been in Perth (7.6%), Brisbane (7%), and Darwin (6.3%).

Ms Owen pointed out that the 4.9% figure followed a 4% increase in the 2022 calendar year.

Australia's latest inflation rate
Increasing households' struggle to afford rent and mortgage payments, and other cost-of-living pressures are the rising prices of gas and electricity.

Household utility charges on the up

    Increasing households' struggle to afford rent and mortgage payments, and other cost-of-living pressures are the rising prices of gas and electricity.

    According to the ABS, the housing group sector's quarterly inflation figure of 1.9% was due in large part to 5.2% increases in utility prices.

    These prices were in turn driven by gas and other household fuels (14.3%) and electricity (3%).

    The ABS noted that:

    • gas and other household fuels rose in all capital cities, particularly Melbourne (22.7%), reflecting higher wholesale gas prices being passed on by retailers
    • The annual rise in gas prices of 26.2% is the largest on record, reflecting this quarter's rise as well as the annual price reviews in September quarter 2022
    • The annual rise in electricity (15.5%) also reflects price reviews in the September quarter, which were driven by higher wholesale prices. 
    • However, price rises in the September quarter were partially offset by the introduction of electricity rebates in Western Australia, Queensland and the ACT. 
    • The unwinding of these rebates has seen the full effects of higher electricity prices reflected in the March quarter.

    We're always happy to help

    There are plenty of people - CoreLogic included - to believe we've passed the peak of inflation heights.

    It's also important to note that the RBA - both the current system and the newly planned one - is still targeting a 2%-3% inflation figure.

    But meanwhile, we're always happy to help with all the dramas and stressors of house buying and selling.

    And if you're particularly tired of house-hunting, we've even partnered with buyer advocates who can check out homes for you and organise sales assessments and negotiations.

    Our off-market and pre-market marketplace gives you VIP access to properties so you can get in first.

    Just sign up at Listing Loop or download our app.


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