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According to ANZ’s Stateometer, which examines trends across 24–37 economic indicators using principal component analysis, Australia’s economic activity is decelerating.
The data showed Australia’s economic activity is showing signs of deceleration, with the consumer side of the economy rapidly weakening due to inflation and rising interest rates.
The Reserve Bank of Australia (RBA) has indicated that the rate hiking cycle may not be over, as persistent inflation continues to be a concern.
ANZ holds its forecast that the RBA will raise the cash rate to 4.1 per cent in this cycle, citing concerns about labour market tightness and ongoing inflation.
However, the latest Labour Force data released by the Australian Bureau of Statistics (ABS) indicates that the labour market remains tight, with unemployment rates in the 3s across all states and territories except for South Australia.
According to ANZ’s Stateometer, housing activity has declined in most states and territories, remaining below trend.
The strong population growth is putting pressure on housing supply, leading to skyrocketing rental costs in all states except the ACT.
Advertised rental growth nationwide increased by 11.7 per cent year on year as of April 2023.
The deceleration in economic activity in the largest states, NSW, Victoria, and Queensland, is attributed to significant declines in consumer, housing, and trade components.
Despite rate hikes and cost-of-living pressures, pockets of strength can be seen in the NSW economy.
While housing prices across the state fell by 0.5 per cent in the past three months, the capital city saw a 1.8 per cent increase, reflecting factors such as low housing supply, strong population growth, a tight rental market, and limitations in the transmission of rate hikes to mortgage rates.
“Several factors seem to be behind this including low housing supply, strong population growth, the tight rental market and limitations in the flow through from a rise in the cash rate to a rise in mortgage rates,” senior economist Bansi Madhavani said.
“We expect Sydney house prices to end 2023 about 2 per cent higher than the start of the year, versus a national average change of 0 per cent through the year.”
In contrast, housing prices in Melbourne continue to decline, down by 1.8 per cent in the same period, according to earlier CoreLogic data, despite strong population growth and low vacancy rates.
It comes following Victoria’s budget 2023–24, which showed the government was raising revenue to offset its COVID-19 debt, announcing the tax-free threshold for investment properties would reduce to $50,000.
Brisbane experienced a 2.4 per cent decline in housing prices in the three months to April, higher than the national average of a 1.1 per cent fall.
The city also faced the highest quarterly inflation rate in March, up 1.9 per cent q/q among major capital cities.
However, inflation in the construction industry in Queensland has eased from 17.4 per cent year on year in June 2022 to 9.1 per cent year on year in March 2023, aligning with the national rate.
In Adelaide, housing prices declined by 0.8 per cent over the three months to April, smaller than the national average.
The number of days a dwelling stays on the market decreased in Adelaide, while other cities experienced an increase. This can be partially attributed to the tight rental market in Adelaide.
Western Australian businesses remain confident, according to NAB’s April Business Survey. House prices in Western Australia fell marginally by 0.3 per cent in the three months to April 2023.
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