Government policy and central bank clash, fuelling a housing inflation crisis

RBA Governor Michele Bullock will make a rates announcement today. Picture: Christian Gilles ANALYSIS There’s one key measure of inflation that the RBA is powerless to move against. Even when the central bank hikes rates, prices in this category seem to just carry on rising. And Labor’s newest tax policies are actually making this measure worse. The inflation category I refer to is housing. Even as headline inflation fell for the third straight month to sit at 3.8 per cent, according to the latest consumer price index (CPI) released by the ABS, housing kicked ahead, rising for the third straight month to hit 6.8 per cent. MORE: RBA to make Aussies lose $100k today But how is this possible? Everyone knows house prices have been coming down. The downturn has been well publicised with abysmal auction results and the threat of negative equity dominating the news cycle. It’s possible because house prices aren’t measured in the inflation basket. Rather, the housing category is made up of construction costs, utilities and rents. Ray White Group chief economist Nerida Conisbee pointed out that a large contributor to the housing inflation number was electricity, with costs rising more than ...