What do consumer prices tell about interest rates in Australia?

By Gerv Tacadena

Interest rates are set to remain steady for the rest of the year

The latest consumer price index (CPI) figures released by the Australian Bureau of Statistics seem to suggest that the historically low interest rates will remain steady. 

In a statement, Real Estate Institute of Australia (REIA) president Malcolm Gunning said the All Groups CPI increased by 0.4% in the past quarter, giving an annual increase of 1.9%. 

Meanwhile, the Housing Group increased by 0.7% in the said quarter and 3.3% over the year to March 2018, boosted by electricity and gas/other household fuels segments. 

The rent segment only recorded a 0.2% improvement for the quarter and 0.8% for the year. Gunning explained that the increase in rents slowed down from 2013 when investment in housing started to pick up. 

"The latest CPI figures show that the increases investment in housing has kept growth in rents lower than they have been historically and is clear testament that the current taxation arrangements benefit renters and that any change would see an increase in rents," Gunning said. 

He added: "With the RBA meeting next week, the latest inflation data together with a cooling in the housing market eliminating that source of concern, would suggest that home buyers can be comfortable in the knowledge that interest rates will remain stable for 2018."