Matt Grudnoff is senior economist at the Australia Institute. He has published widely on a multitude of subjects, including taxation, the federal Budget, poverty & inequality, free trade agreements, housing affordability, energy economics and climate change.
The Consumer Price Index (CPI) for the month of September has just been released, and it shows that inflation has gone up to 4.6%. This increase has been driven by increasing fuel prices.
The latest data from Cotality has some good news. It shows that rent increases are slowing down. But this is exactly the opposite of what all the self-interested shouting was claiming would happen after the tax changes in the budget.
There are lots of people worried that the housing changes in the federal budget are going to hurt renters by reducing the number of rental properties and pushing up prices. But there is no need to worry. These changes will not increase rents.
The numbers don’t support the claim that migration has caused the housing affordability crisis.
The Reserve Bank of Australia (RBA) has released results of their survey, finding that most Australians believe higher interest rates increase inflation. This has no doubt, led to some tut-tutting from the boffins at the RBA, as they lamented the state of economic literacy in Australia today.
The good news is that headline inflation went down to 3.8%, (from 4% last month) with the trimmed mean (the inflation rate with the most volatile bits removed) unchanged at 3.6%. Both of these were below what the market and the RBA were predicting.
Since the budget passed significant tax reform that is designed, among other things, to make housing more affordable, house prices were flat in May and then dropped by 0.4% in June. Some in the media have lost their minds at the very idea that house prices might not continue increasing. But rapidly rising house prices are the opposite of affordable housing.
The government’s changes to negative gearing and capital gains tax passed the parliament last week. This is a big moment in the fight to make housing more affordable.
Over the weekend, we got some modelling that claimed the changes to negative gearing would increase rents by $2,000 per year, or $40 a week. Now, economic modelling can be a powerful tool to understand the impacts of a policy change. But if it doesn’t properly capture relevant changes, it can produce completely nonsensical results.
Grievance politics is having a real moment in Australia and around the world. There is no shortage of people happy to exploit others and sell them easy answers. And one of the most common scapegoats has always been foreigners.
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