THE RBA IS WELL AHEAD OF ITS FORECASTS, SO CAN WE EXPECT THE SAME FOR THE PROPERTY MARKET?

In the final week of January, the ABS released the latest inflation figures for Australia over the December 2021 quarter. Inflation measures the change in the price of a basket of goods over time, and is a good measure of how supply and demand pressures are playing out in the economy. It has been one of the key economic metrics to watch out for in the housing sector, because a rise in inflation could be the trigger for the Reserve Bank of Australia to lift the cash rate target. 

At 3.5% over the year, the outcome for the December quarter inflation read is once again beating forecasts from the RBA, exceeding the November forecast by 25 basis points, and the May 2020 forecast by 225 basis points. 

The ‘trimmed-mean’ inflation figure (which strips out volatility from headline figures) is an important indicator of underlying inflation. Trimmed-mean inflation was 2.6% in the year to December 2021, exceeding the latest RBA forecast by 35 basis points. Figures 1.1 to 1.3 show ABS figures on annual inflation, trimmed-mean inflation and the unemployment rate (where low unemployment can mean additional pressure on wages and inflation). The graphs compare these actual figures with RBA forecasts over time. 

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