The latest ABS figures show that Australian inflation is on the rise, with quarterly headline inflation reaching 1.9% in December, an increase from 1.8% in the September quarter. This is close to the Reserve Bank of Australia’s (RBA) forecast of 8% headline inflation over the year. However, the most important reading on inflation, the underlying core inflation, actually fell in the quarter, from 1.9% in September to 1.7%. Although core inflation is still far from the RBA’s 2-3% target range, this was the first fall in quarterly core inflation since March 2021.


Despite the surprising increase in headline inflation, the worst may be over as inflation across the OECD has slowed down. The OECD forecasts a fall in inflation across most major economies in 2023 as global economic demand starts to decline. In Australia, the housing market is also showing signs of slowing, with metrics such as new build costs, rents, and property prices all slowing down. This is a key factor that should support a reduction in both core and headline inflation.


The housing market is taking some heat out of the economy as housing costs, while still up 1.9% in the quarter, have declined from 3.2% in the three months to September. Additionally, the demand for household goods has eased, and the tight labour market and increased interest rates have also led to a slowdown in new dwelling approvals and commencements. Growth in rents has also slowed, with growth in capital city rents slowing to 2.3% in the December quarter, down from 2.7% in the previous quarter.


In 2023, the extent to which inflation slows down will determine the RBA’s next move on interest rates. The inflation outlook is subject to both falling global demand and rising demand from China, as well as the potential for extreme weather events. Given the slightly stronger than expected headline inflation result for December and the continued high core inflation, further interest rate hikes in February and March seem likely. This will lead to further falls in housing demand and values, but interest rates are expected to peak lower than previously forecasted.


Once interest rates stabilize, consumer sentiment and housing prices are expected to improve. It is important to keep an eye on the inflation outlook and how it affects the housing market in the year ahead. The slowing housing market and the potential for lower interest rates could mean good news for both buyers and sellers in 2023.


Having realistic price expectations is crucial for a successful sale, and this is where a professional appraisal can be very valuable. I will provide you with an accurate market analysis and help you determine the best asking price for your property. Additionally, a high-quality marketing campaign that showcases your property’s unique features and benefits is essential to attracting the right buyers and securing a successful sale.

Prepared by

Peter Hunt