Australian renters are continuing to do it tougher than homeowners, according to the latest inflation data from the Australian Bureau of Statistics (ABS).
Quarterly inflation statistics show the consumer price index (CPI) rose by 1% this quarter. This is a total increase of 3.6% over the 12 months to March 2024.
But the component parts of CPI show things are getting harder for renters faster than homeowners.
Aggregate rental prices have risen 7.7% in the last year, the strongest rise since 2009. New mortgage inflation increased 5.1% over the same period.
Rental inflation has outpaced mortgage inflation since June 2023.
The ABS has started collecting more granular data on rental markets, allowing comparison of rental prices in the cities and regions. This shows rents have risen faster in the cities — 8.5% versus 5.4%.
A spokesperson for the ABS said the period rental inflation peaked varied by proximity to a major urban centre.
“From mid-2021, rental inflation has picked up in the capital cities and continued to accelerate through to 2023. Inner city suburbs less than 12.5km from the CBD that experienced the sharpest decline in rental inflation between 2020 and 2021, are now recording the highest rental inflation across the country,” they said.
“This reflects falls in vacancy rates as many of the COVID-19-related impacts noted above have unwound.
“In general, the further away that area is from the CBD, the earlier the peak in the rental inflation. While still relatively high, rental inflation rates for areas further from the CBD have been moderating since mid-2023, while those closer to the city have continued to rise.”
This may be good news for the rapidly growing number of renters in regional Australia unable to find an affordable place to live, but suggestions are things aren’t going to get easier for the urban poor any time soon.
While some publications have reported this as unexpectedly bad news, headline inflation is not far off predictions made by the Reserve Bank (RBA) and OECD earlier this year.
In the RBA‘s February update, the RBA predicted CPI would be around 3.3% in June this year — a number the current trend suggests will either be met or very nearly met.
A spokesperson for the RBA wrote in February that the global and domestic economies were still unstable, making predictions more unreliable as they get further from the present.
“The squeeze on household finances, including from the increases in interest rates to date, could result in household consumption remaining subdued for longer than expected. This would put more downward pressure on labour demand and wages and see an earlier return to the inflation target than forecast. This could also occur if economic growth among our trading partners is slower than forecast,” they said.
“Household consumption could turn out to be stronger than forecast if households are more willing to maintain a low saving rate or even draw down on their savings to support their spending. Adverse shocks caused by weather-related or geopolitical events that disrupt supply could also put upward pressure on prices of energy and consumer goods and prolong the time spent away from the target.
“The longer it takes to return inflation to target, the greater the erosion of the purchasing power of Australian households, and the greater the risk that inflation and wage expectations drift higher than is consistent with inflation at target. History shows that, should this occur, it would require more monetary policy tightening and a costly period of higher unemployment to stabilise inflation expectations and return inflation to target.”
Other major components of CPI show inflation moderating in areas like food, with increases slowing over the previous five quarters.
Insurance premiums rose by their fastest annual rate in 23 years of 16.4% — a rapid increase on the all time lows of 2019. Education costs rose by 5.2% in the last year, with tertiary education (7.0%) and secondary education (6.1%) the main contributors.
Some “discretionary” items fell in price in the last quarter, including communications, clothing and recreation.
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