Australia: Housing is a key issue for inflation – ANZ

According to ANZ analysts, Australian inflation has been weak for a few years and trimmed inflation has missed the RBA’s inflation target band since 2016.

Key Quotes

“During this time, housing-related inflation has deteriorated sharply, which has significantly impacted aggregate inflation.”

“We show that if rental inflation and new-dwelling purchase prices (which measures construction costs for homes and apartments) had grown at trend over recent years, trimmed mean inflation would now be in the target band.”

“In our view, the most likely upside risk to inflation over the coming few years is housing prices rebounding sharper than we anticipate, resulting in housing sector construction picking up sooner than we anticipate. The prospect of this seems greater than wages or aggregate demand surprising on the upside.”