The annual rate of inflation dropped to 4.1 per cent during the December 2023 quarter, the lowest since December 2021.
After a peak of 7.8 per cent in late 2022, price pressures have steadily abated over the course of 2023.
Master Builders Australia chief economist Shane Garrett said ahead of the RBA’s first meeting on rates next Tuesday, today’s figures will bolster hopes that the last of the rate increases is behind us.
“However, there are a number of grounds for caution in terms of the latest inflation figures.
“The cost of new dwelling purchase was up by +1.5 per cent in the December 2023 quarter alone. Cost pressures here are still much stronger than anyone would like and are being prolonged by the labour shortages in our industry.
“Rents rose marginally, at 0.9 percent, during the December 2023 quarter. This outcome was helped by recent enhancements to government rent assistance, which partly muffled market-driven rental price growth. Without these government supports, rental price increases would have been much bigger.
“The imbalance between demand and supply in the rental market still represents a major challenge. It has resulted from years of underbuilding on the higher density side of the market and can only be resolved by significantly increasing the output of new homes over a sustained period.
“The latest inflation figures clearly show that housing costs are still a source of pressure. As well as hurting living standards, excessive housing costs tend to restrict the supply of labour, force wages higher and hurt our economic competitiveness.
“Labour productivity in our industry is 18 per cent lower than it was a decade ago. Better outcomes here would be a winner for everyone.
“Government policy needs to focus on building productivity rather than dismantling it.”
