Home prices dip another speed bump for slowing economy
Contentious tax changes that are hurting activity in the housing market could slow the Australian economy and deter the Reserve Bank from raising interest rates again.
The new data likely shows that gross domestic product grew fairly quickly at the start of the year, but a slowdown is on the way.
Wednesday’s national accounts statement is likely to be the last time annual growth is ahead of two for a while, which could persuade the central bank to pause further rate hikes.
Economists at National Australia Bank expect the Australian Bureau of Statistics to show the economy grew by 0.3% in the March quarter; This shows that the annual growth rate will increase to 2.4 percent.
In May, the Central Bank predicted that GDP would increase by 2.6 percent.
NAB’s estimated downgrade is largely the result of a sharp increase in imports, resulting in Australia’s first trade deficit since December 2017.
NAB chief economist Sally Auld said imports were rising due to high fuel prices and the AI boom.
The data center structure, which has led to a huge increase in business investments, is largely dependent on imported server racks, while the increasing use of artificial intelligence software has also led to an increase in service imports.
Dr Auld said Wednesday’s figures were already “pretty historic”.
The RBA’s three rate hikes in 2026 and the ongoing effects of the Strait of Hormuz blockade will be only partially felt in data covering January-March.
But he said it would provide a baseline of where the economy was before the Middle East conflict and budget tax changes affected sentiment in the housing market.
“Growth is clearly slowing and that will give the Reserve Bank confidence that they are on the right track to achieve a better balance between aggregate demand and aggregate supply,” Dr Auld told AAP.
Westpac is also forecasting growth of 0.3 per cent, while ANZ is expecting a slightly stronger rise of 0.5 per cent and the Commonwealth Bank is forecasting a flat result.
If predictions of a 0.8 percent slowdown in the December quarter are correct, it bodes poorly for the rest of the year.
While some analysts, including HSBC chief economist Paul Bloxham, believe Australia is heading for negative growth of at least a quarter, Dr. Auld said it was too early to tell.
“We feel like we’ve had a pretty significant change in housing policy as a result of what’s been announced in the budget and that’s clearly had a sentiment impact on the housing market,” he said.
“The question we are thinking about is how big the correction in the housing sector might be and what that might mean for activity, not so much in the current quarter but probably in the back half of the year.
“Does this present some downside risks to the economy from an operating perspective that maybe weren’t there even just a month ago?”
Morgan Stanley economists predict property values will fall between 5-10 percent.
Prices fell 0.9 per cent and 0.8 per cent respectively in Sydney and Melbourne in May, according to Cotality.
Finance Minister Jim Chalmers said that given current conditions, any economic growth with two points ahead would be welcomed.
“(This) will be a very welcome reminder that we are facing a period of significant global economic uncertainty and volatility with a real economic force,” he told reporters on Tuesday.
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