Easing inflation helps maintain steady interest rates

Good news for property investors and those watching interest rates …

Inflation figures came in today and the the headline rate of annual inflation eased back to 2.3 per cent in the September 2014 quarter, a significant drop from the 3.0 per cent rate during the previous three month period to June.

This reaffirms the widely held view that interest rates will remain at record lows for some time to come.

Shane Garrett, HIA Senior Economist made the following comments on today’s figures:

“While today’s figures show a rather large reduction in the pace of inflation, this has been assisted by the one-off influence of the carbon tax repeal.

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The housing component of the Index provides a good example of the impact the carbon tax was having on households.

The electricity price level dropped 4.4 per cent in the September 2014 quarter, and by 5.1 per cent over the year,

The sub-component of CPI that tracks movements in the price of new homes purchased by owner occupiers (excluding land), increased by 1.1 per cent in the September quarter and by 3.8 per cent over the year.

This modest growth provides a stark contrast to the aggregate price growth which is predominantly driven by established homes and the land on which they sit,”

Policy makers must address the high cost of delivering residential land to market if we are to make meaningful inroads into the housing affordability challenge.

For as long as economic growth remains below par, labour markets remain soft, governments maintain a firm grasp on to the purse strings and businesses lack an appetite to invest, we are not likely to see inflationary pressures emerge that would sway the RBA to commence a rate tightening cycle.”



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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au

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