Australia’s annual inflation rate dropped to 2.8 per cent in the September quarter, marking the first time it has fallen within the Reserve Bank of Australia‘s target band since 2021.
However, Master Builders Australia warns that this figure masks underlying housing-related inflationary pressures that continue to strain the economy.
While headline inflation has decreased, measures of underlying inflation paint a different picture.
The trimmed mean inflation, which provides a more accurate view of inflationary trends, remains elevated at 3.5 per cent.
This suggests that core inflationary pressures persist despite the overall decline.
The housing sector continues to be a significant contributor to inflationary pressures:
- Rents have surged by 6.7 per cent over the past year
- The cost of new dwelling purchases has increased by 4.8 per cent
Shane Garrett, Chief Economist at Master Builders Australia, emphasised that “Australia’s rate of inflation would be markedly lower if housing cost pressures weren’t so strong”.
Denita Wawn, CEO of Master Builders Australia, highlighted several factors hampering the industry’s ability to increase housing supply:
- High building costs
- Labour shortages
- Union disruptions and pattern enterprise bargaining agreements
- Planning delays
Wawn stressed the urgency of addressing these supply-side barriers, stating: “We can’t keep dragging our feet with the housing crisis. Meaningful action to address supply-side barriers in the housing market is not happening fast enough.”
Master Builders Australia is calling for a coordinated approach across government portfolios to tackle the housing crisis.
Wawn emphasised that solutions extend beyond the housing portfolio and require collaboration between ministers.
The industry is particularly eager for the outcomes of reviews into the apprenticeship incentives system and the skilled migration core skills occupation list, which are crucial for addressing labour shortages in the construction sector.
As Australia grapples with persistent housing-related inflation, the need for comprehensive and swift action to increase housing supply becomes increasingly apparent.
The coming months will be critical in determining whether the government can effectively address these challenges and alleviate the pressure on Australian households.
