RBA rate hike: The Federal and state governments’ role should not be overlooked

RBA rate hike: The Federal and state governments’ role should not be overlooked

RMIT property expert comments on the RBA’s increase of its official interest rate to 4.1 percent in a bid to tackle high inflation.

Dr Peng Wong, Senior Lecturer, School of Property, Construction and Project Management 

Topics: RBA, inflation, cash rate hike, housing market 

“We might have been paying too much attention to RBA’s cash rate decisions and forgetting about other key players in the current crisis: The Federal and state government. 

“The latest cash rate hike did not come as a surprise in lieu of the latest inflation rate of 6.8% – which was higher than the market expectation of 6.3%.  

“The recent rate hikes did not result in the housing market retreat as expected. Reversing a downtrend since the beginning of the RBA cash rate hike, national home values rose by 1%.

“This marks the first quarterly lift in home values since May 2022 and is expected to continue to be resilient in the remainder of 2023 and into 2024. 

“This might be attributed to the shortage in housing supply. 

“Inadequate supply means that the housing quantity is not enough to satisfy the market demand, thus rising housing and rental market stress.  

“As a result, consumers need to adjust to more expensive housing.  

“The Federal and state governments’ responsibilities and actions have a great impact on the housing market.

“The housing market supply is directly related to the nation’s fiscal policy implementations, has the government done enough to address the shortage? 

“No wonder the RBA’s governor expressed dismay at the lack of action by policymakers. 

“Housing is only one of the many components in CPI computation and inflation. 

“Over the last few months, along with housing, the most significant price rises were gas and household fuels (+14.3%), medical and hospital services (+4.2%), tertiary education (+9.7%) and domestic holiday travel and accommodation (+4.7%).  

“Energy costs will soon be added to the rise, posing the question: Is the government going to do anything to ease this most fundamental “cost of everything”?” 

Dr Peng Wong is a lecturer in the School of Property, Construction and Project Management at RMIT University.  

***

General media enquiries: RMIT Communications, 0439 704 077 or news@rmit.edu.au

07 June 2023

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07 June 2023

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