Perth property prices are expected to fall by 8% next year as the effects of the Reserve Bank of Australia’s interest rate hikes begin.
The Commonwealth Bank’s new forecast for Thursday suggests that the RBA’s tightening will have a huge impact on gross domestic product and the economy as a whole.
The country’s largest lender predicts cuts of 50 basis points in the second half of next year after rates hit a projected high of 2.1% this year.
Australian Chief Financial Officer Gareth Aird said that while no economic downturn was expected and talk of a recession was premature, growth would moderate to “below trend”.
This will end up pulling inflation down and the unemployment rate would rise towards the end of next year.
“The RBA seems very determined to quickly reduce the rate of inflation. But that will come at the expense of growing aggregate demand, especially household consumption,” Aird said.
He said the RBA now appeared to be “primarily fighters against inflation”. His comments come a day after he told The West Australian that the RBA’s actions did not match his language.
“His goal of ‘economic prosperity and the well-being of the people of Australia’ has taken a back seat to his desire to lower the rate of inflation,” he said. Aird Thursday.
“We don’t think the RBA has to fight wage growth by aggressively raising the cash rate … but ultimately, no matter what we think, it’s what they do.”
Nationally, the ABC expects property prices to fall and believes prices peaked in April. In Sydney, Melbourne and Canberra, the most expensive cities in the country, prices are already falling.
The Commonwealth Bank now predicts annual falls of 6% nationwide for this year and up to 11% in Sydney and 10% in Melbourne. Perth prices are expected to grow by 2% and 6% in 2022 in both Brisbane and Adelaide.
For next year, it expects general falls: up 11 percent in Adelaide, 10 percent in Brisbane and 9 percent in Hobart, Darwin and Canberra. Perth and Melbourne will fall by 8% and Sydney by 7%.
It comes after record growth in 2021 of 21 per cent nationwide – 13 per cent in Perth and up to 27 per cent in Brisbane. The fall forecast does not eliminate the average gains experienced last year, which means that buyers expecting lower prices may be looking forward to next year.
Elsewhere, the Commonwealth Bank expects real consumer spending to fall sharply due to higher interest rates.
“Higher-than-expected energy prices will put downward pressure on real consumer spending, especially discretionary consumption for lower-income households,” Aird said.
“Consumer confidence is already in deeply pessimistic territory and we don’t see that image changing any time soon.”
He said the low unemployment would continue for a while and help increase the wages of workers with individual agreements.
Aird urged governments to pull political levers to help address gas and electricity supply problems, which are on the rise in the rest of the country and put enormous pressure on family budgets.
He said it was not the job of the RBA to just tackle inflation.
“The cash rate is a very compelling tool to address some of the supply issues in the national and global economies right now that are contributing to higher inflation,” Aird said.