Rate shift puts new pressure on east-coast market

ANZ now expects the Reserve Bank of Australia to lift the cash rate 25bp in May, before holding at 4.1 per cent for an extended period, citing a series of higher-than-expected inflation figures and a slower deceleration in the January trimmed mean.

The RBA has signalled it is not on a predetermined path, and a March move is still unlikely, ANZ Research says.

Speaking just after the forecast change, ANZ Senior Economist Adelaide Timbrell said the housing market, especially Sydney and Melbourne, has become sensitive to the rate outlook. “We’ve only had one hike in February and expect one more in May, but even the pause in expected 2025 cuts was enough to take the momentum out of Sydney and Melbourne housing markets,” she said.

She contrasted that with Perth (and Brisbane), where supply shortages are likely to continue “pushing prices up” despite expected reductions in borrowing capacity.

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Figure 1. Slowing, but not quite enough (three month annualised trimmed mean inflation)

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Figure 2. The increase in the AUD Trade Weighted Index will also have an influence on the economy

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Alicia Muling is a Senior Journalist at ANZ.