<\/p>\n
Construction costs are soaring to skyscraper-like heights.<\/p>\n
A February rate hike is a live option for the RBA\u2019s first meeting of the year, with the 28 January release of the December inflation numbers to play a pivotal part in the decision.<\/p>\n
And in a strange case of irony, if the Consumer Price Index (CPI) shows we\u2019ve been spending too much money on housing, the RBA will seek to rectify this by making us spend even more on housing.<\/p>\n
Wait, what?<\/p>\n
See, the housing costs measured in the CPI are for rent and construction, both of which have been up by a significant amount in recent years.<\/p>\n
The November CPI release from the Australian Bureau of Statistics (ABS) had housing costs up 5.2 per cent year on year.<\/p>\n
REA Group executive manager of economics Angus Moore said housing played a major role in the still too high inflation numbers.<\/p>\n
MORE:Shock as 53 banks hike interest rates out of cycle<\/a><\/p>\n \u201cHousing costs have a big impact on inflation,\u201d Mr Moore said. \u201cIncreases to rents and construction costs have contributed to rising inflation over recent years.\u201d<\/p>\n He noted that asking rents were up 4 per cent in the year to November, but said the rental market was easing.<\/p>\n \u201cRents broadly speaking have slowed down compared to a year ago, when they were at 6 per cent in the November 2024 CPI,\u201d he said. \u201cThat\u2019s helping bring inflation back down towards target.<\/p>\n REA Group\u2019s Angus Moore said housing had a big impact on inflation.<\/p>\n \u201cConstruction costs surged through the pandemic. They are still growing.\u201d<\/p>\n Mr Moore noted the irony that high spending levels on housing, which are out of the control of mortgage holders, would result in further spending on housing in the form of higher loan repayments for mortgage holders if the RBA was to hike rates.<\/p>\n MORE:Clive Palmer\u2019s $215m legacy grows<\/a><\/p>\n \u201cIt\u2019s nasty when you put it like that, but that\u2019s basically correct,\u201d he said.<\/p>\n A look at the most recent CPI shows housing costs were weighted at 21.4 per cent of the entire CPI basket; a significantly larger proportion than most other measures.<\/p>\n Because of this, the 5.2 per cent housing cost increase accounted for 1.12 percentage points out of a total 3.4 per cent inflation figure for the month, nearly double the next biggest contributor, which was food and non-alcoholic beverage at 0.58 percentage points.<\/p>\n \u201cHousing is one of the largest statistical weights in the CPI basket, and it has been the most persistent driver of inflation over the last year,\u201d said Graham Cooke, head of consumer research at Finder. \u201c(Rental) vacancy rates remain low but have been rising along with the cost of building.\u201d<\/p>\n<\/p>\n