It has been a difficult week for Aussies, with the latest inflation figures making another rate hike for weary mortgage holders next week all but certain.
Headline inflation rose to 4.3 per cent in the 12 months to September, the highest level since March and more than economists expected.
The crucial trimmed mean figure also remained above target, rising to 3.6 per cent.
The market now predicts the Reserve Bank of Australia will raise interest rates to 4.85 per cent on Tuesday.
While it is another blow for mortgage holders in a cost of living crisis, there are some glimmers of hope that can be found within the inflation data released on Wednesday.
According to CBA senior economist Trent Saunders, house prices remained steady, with annual inflation in the sector slowing from 5.4 per cent to 4.7 per cent.
“While we have been expecting new dwelling costs to slow due to weaker conditions in the established housing market, this pace of the slowdown exceeded our expectations,” he said.
The ABS data outlines that discounts and promotions offered in response to slowing new-home demand offset the impacts of builders raising costs as labour and materials become more expensive.
AMP economists Diana Mousina and My Bui said there are signs construction costs are beginning to ease and to trickle down into other sectors of the housing market.
“The only silver lining actually comes from housing (which comprises one-fifth of the weight of the CPI basket),” they wrote.
“Monthly rents CPI rose by 0.2 per cent, less than the 0.3-0.4% per cent pace seen in the previous four months,” they said.
“New dwelling prices [were] unchanged in September, a clear downtrend from last month’s 0.2 per cent and prior readings between 0.4-0.9 per cent.
House prices have been falling across Australia since the middle of the year, following the RBA’s first three rate hikes, and changes to negative gearing and capital gains tax announced in the federal budget.
While this may not seem like light at the end of the tunnel, especially since millions of homeowners will be dreading Tuesday’s expected interest rate rise, Bui and Mousina said it could be a sign that things may not be as difficult in the weeks and months ahead.
“Housing inflation tends to respond quickly to economic conditions and can lead broader inflation readings, which should help inflation to moderate from here,” they said.
Saunders also said there were other positive signs in the gloomy data.
“Monthly market services inflation slowed from 0.7 per cent in July to 0.4 per cent in August and 0.2 per cent in September … while key market goods categories recorded price falls,” he said.
“This suggests that some of the unusually strong price increases earlier in the quarter are beginning to ease.”
However, he was quick to point out that it was still going to be some time before inflation – and interest rates – begins to ease.
“The improvement has so far been too small to materially lower underlying inflation momentum,” Saunders said, naming “continued pressure on input prices, the removal of card payment surcharges from 1October and higher fuel prices as ongoing pain points.
“There is a risk that the encouraging moderation evident in parts of the September CPI translates into only a gradual further improvement in underlying inflation over the December quarter.”
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The information on this website is intended to be of a general nature only and doesn't consider your objectives, financial situation or needs.
