RBA unlikely to lower rates to rescue Australia’s falling housing market

Central bankers wield significant influence over Australia’s biggest asset class, but the RBA is unlikely to prioritize housing in its upcoming rate decision. Governor Michele Bullock reiterated that the bank’s primary mandate remains inflation control and maintaining economic capacity, leaving property trends as a secondary consideration. Recent data show a continued decline in national house prices, prompting Commonwealth Bank to cut its outlook and Capital Economics to warn of a possible 13% fall.

Policy changes targeting negative gearing and capital gains tax have further dampened investor demand. Economists such as Saul Eslake suggest that lower house prices could aid the inflation target by curbing spending and new-home price growth. Nonetheless, many expect the RBA to focus on recent strong inflation and growth figures, which may lead to additional rate hikes despite the risk of recession.