Australia’s home prices are nearly 4% below their peaks, but the Reserve Bank is widely expected to raise rates for a fourth time next Tuesday, to 4.6% from 4.35%. Economists say persistent inflation may delay rate relief for households.
Economists increasingly expect home prices to fall 10% from peak to trough in this cycle; HSBC forecasts a 13% decline if rates rise twice more. RBA Assistant Governor Sarah Hunter said a sustained 10% fall would be needed to have a substantial effect on household spending.
The RBA has identified the US-Israeli war on Iran and the data-centre boom as inflation risks. Oil is above $100 a barrel, and economists expect government spending to remain elevated. Markets have priced in a further rate rise to 4.85%, with a 70% chance rates will reach 5.1%.
