September CPI Data Dashes Hopes for Rate Cut

Oliver Hume Property Group Chief Economist Matthew Bell has provided the following summary after today’s Australian Bureau of Statistics September quarterly CPI data:

Full statement:

“What a difference three days and one inflation data point makes! Just three days ago, markets had placed the chance of a November rate cut around 65%, and that was down from closer to 80% a week before that. Today’s inflation report now has that probability down below 15%, and that still might be too generous.

Underlying inflation is now running at 3.0%, right at the top of the RBA’s target band after the quarterly result came in at 1.0%. This was in line with market expectations, but well above RBA forecasts and well above a number that might have led to another rate cut in 2025.

Not only has any real chance of a cut at the next meeting gone up in smoke, but also probably any chance of a December cut. It also means that there’s a good chance there is only one cut left in the easing cycle.

Mortgage holders and potential property buyers will be disappointed but probably not surprised. The three cuts to date have already delivered eight consecutive months of house price increases and big jumps in land sales and prices in various markets.

And we have to remember that part of the reason for hotter than forecast inflation is the strength of households and consumer spending evident in GDP and Household Spending reports as well as an historically tight labour market.

If there’s just one cut left in the cycle, that may slightly temper the property market outlook for 2025/26 but not change it significantly. Underlying demand remains strong, households are in better and better shape, and we are still in the middle of a generational undersupply in new housing.”