RBA needs to urgently push stop button on "Xmas Killer" interest rate rises

The RBA has been urged not to increase interest rates next Tuesday, which Australia’s largest independent property group says would be a Xmas killer on the same scale as Governor Philip Lowe’s infamous ‘interest rates won’t rise in 2023” statement.

Kevin Young, President of Property Club, said that any further increases in interest rates would further worsen Australia’s rental crisis at a time when inflation is already showing signs that it is receding. “Give renters some sort of relief for Xmas because inflation can’t be used anymore as the excuse to increase interest rates.”

The latest official figures show that Australia’s annual inflation rate last month dropped from 7.3 per cent to 6.9 per cent.

However, weekly rents continue to surge because of Australia’s rental crisis, and higher interest rates will only make this crisis even worse, leading to higher rents that will feed into higher inflation.

It is very significant that rents comprise around 6% of Australia’s CPI basket, meaning it makes a sizable contribution to Australian inflation in 2023.

Even the RBA Governor publicly acknowledged during the last week that higher rents posed a major risk to an increase in the inflation rate.

Phil Lowe informed the Senate Economics Legislation Committee in Canberra last week that Australia’s rents will continue to soar in 2023 on the back of strong immigration and that this will, in turn, put an upward pressure on inflation:

“The other supply side issue we are focused on is the supply of housing because the rental vacancy rate now is quite low, and the population growth is picking up”.

“I’m imagining that we’ll see increased pressure on rents over the next year as population growth collides with fairly modest growth in the supply of housing”, he was quoted as saying.

Property Club strongly believes that any further increases in interest rates will discourage property investors from buying homes for rent, and that will lead to further rises in rent.

Property Club is predicting that if interest rates continue to rise, then average weekly rents in a number of our capital cities could surge by over 20 per cent during the coming year because the supply of rental property is chronically low at a time of rising demand for rental properties through strong immigration as pointed by the Governor of the RBA.

Rather than reducing inflation, Property Club believes that higher interest rates will, in fact lead to higher inflation because of the upward pressure on rents as property investors hold back from buying additional rental properties.

That is why we are urging the RBA to push the stop button on an increase in interest rates at its December meeting.

Property Club has a bold four-point plan to help resolve Australia’s rental crisis that is revenue neutral for the taxpayers.