PodcastsThe Property CouchRBA Oct 2023 | To Stick or Slip? Inflation Trend, Property Supply, and an Overlooked Lesson

RBA Oct 2023 | To Stick or Slip? Inflation Trend, Property Supply, and an Overlooked Lesson
The Property CouchMon Oct 02 2023
Inflation:
- Mixed economic signals on inflation
- Sticky inflation challenging compared to desired downward trajectory
- Deeper dive into sticky inflation and its implications
Property Supply:
- Focus on supply within each market
- Advertised supply levels in Adelaide, Brisbane, and Perth around 40% below previous five-year average
- Melbourne and Sydney seeing significant increase in new listings
Behavioral Economic Lesson:
- Instant gratification often trumps delayed gratification in mass behavior
- Government stimulus leads to increased spending rather than saving, which can be inflationary
- Need for individuals to practice good money management and hold onto appreciating assets during periods of higher costs
RBA Cash Rate Announcement:
- Cash rate kept on hold at 4.1%
- Potential further rate increase before year-end due to sticky inflation and high energy costs
National Accounts Data:
- GDP grew by 0.4% in June quarter with productivity challenges
- Labor costs continue to grow while productivity weakens, adding to inflation pressures
Consumer Sentiment:
- Consumer sentiment index fell 1.6% in September reflecting entrenched weakness despite RBA rate pause
- Concerns about impact of inflation on household income and wealth contributing to pessimism
Retail Sales:
- Retail sales increased by 0.2% in August, but aggregate growth remained soft with weakest annual growth rate in two years
- Household spending under pressure from elevated inflation and higher interest rates
Business Conditions:
- Business conditions rose three index points to +13 in August indicating resilient conditions despite consumer confidence weakness
- Cost pressures moderated but capacity utilization remains high, posing inflation risks unless demand slows down
Property Market:
- CoreLogic National Home Value Index recorded 0.8% growth in September with eighth consecutive month of growth nationally
- Adelaide, Brisbane, and Perth have supply constraints with advertised levels below previous five-year average
- Melbourne and Sydney saw significant increase in new listings in past three months
Overall Economic Outlook:
- Need for fiscal policy to complement monetary policy in managing inflation and economic growth
- Importance of households practicing prudent money management during periods of higher costs and potential interest rate increases