Australian House Prices Fall Faster as RBA Readies Another Rate Hike

what happened

According to Analysis, the Reserve Bank of Australia's policy board is all but certain to raise the official cash rate to 4.85% at the close of its two-day meeting on Tuesday, the highest level in 18 years. Policymakers are also leaving room for another increase in December or February.

Property prices are sliding at a pace not seen in over four decades. Cotality said prices fell 1.2% in October from September, the seventh straight monthly drop, and earlier figures were revised lower. Inflation remains above 4%, well beyond the 2.5% target, so the RBA is expected to focus on that rather than on housing.

Signs of strain are also showing up in the labor market. Unemployment sits at 4.7%, close to historic lows, but manufacturing contracted in October at its fastest rate since late 2024, and firms have cut staff for a second month running.

why it matters

The dilemma for the central bank is sharp: hiking risks pushing the economy into recession, while holding off could unsettle inflation expectations, according to HSBC chief economist Paul Bloxham. Judo Bank economist Matt De Pasquale expects house prices to bottom in early 2027, and slower building-cost inflation could ease underlying inflation, leaving the RBA room to cut rates later.

market impact

AUD/USD: higher rates support the Australian dollar, while the housing slump weighs on local banks and construction

• ▲AUD/USD pressure up — a higher policy rate draws yield-seeking capital into Australian assets
• ▼Australian banks pressure down — falling home values and slowing growth raise credit risk for lenders

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