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RBA Governor Michele Bullock will make a rates announcement today. Picture: Christian Gilles<\/p>\n
ANALYSIS<\/p>\n
There\u2019s one key measure of inflation that the RBA is powerless to move against.<\/p>\n
Even when the central bank hikes rates, prices in this category seem to just carry on rising.<\/p>\n
And Labor\u2019s newest tax policies are actually making this measure worse.<\/p>\n
The inflation category I refer to is housing.<\/p>\n
Even as headline inflation fell for the third straight month to sit at 3.8 per cent, according to the latest consumer price index (CPI) released by the ABS, housing kicked ahead, rising for the third straight month to hit 6.8 per cent.<\/p>\n
MORE: RBA to make Aussies lose $100k today<\/a><\/p>\n But how is this possible? Everyone knows house prices have been coming down. The downturn has been well publicised with abysmal auction results and the threat of negative equity dominating the news cycle.<\/p>\n It\u2019s possible because house prices aren\u2019t measured in the inflation basket. Rather, the housing category is made up of construction costs, utilities and rents.<\/p>\n Ray White Group chief economist Nerida Conisbee pointed out that a large contributor to the housing inflation number was electricity, with costs rising more than 22 per cent over the year as government rebates ended. <\/p>\n MORE: Thousands of Aussies on brink of losing homes<\/a><\/p>\n Ray White Chief Economist Nerida Conisbee.<\/p>\n \u201cHowever, the pressure extends beyond energy,\u201d Ms Conisbee wrote in a report on inflation and policy. \u201cNew dwelling costs rose 5.8 per cent as builders continued to pass on higher labour and materials costs, while rents increased by 3.6 per cent.\u201d<\/p>\n Ms Conisbee points out that rate hikes are useless against this type of inflation.<\/p>\n \u201cThey do not reduce construction costs or create more homes,\u201d she observed. \u201cInstead, they increase financing costs for developers and make some new projects less viable.\u201d<\/p>\n While this is happening, Labor\u2019s budget night policies around negative gearing and capital gains tax have already begun to work, in the sense they\u2019ve dissuaded investors from entering the market.<\/p>\n<\/p>\n