Housing supply becomes key as rate cut hopes wane
Housing-related costs, particularly rents and new dwelling prices, remain key contributors to the increase in annual inflation, which reached 3.5% in September 2025, the highest level in over a year.
Shane Garrett (pictured top left), chief economist at Master Builders Australia, said the figures were troubling for the construction sector. “The fact that rents and new home costs are again moving in the wrong direction is a big worry,” he said.
“The cost of a new dwelling is now 1.5% higher than 12 months ago, the fastest pace of increase since February. Rental prices rose 3.8% annually, down from 4.5% in June, but the latest figures show rental inflation accelerated in September for the first time in 11 months.
“The ongoing mismatch between housing supply and demand continues to push rents higher. Property rates and charges jumped 6.3% over the year, the fastest in a decade, adding more pressure on households already battling rising housing costs.”
The inflation data follows confirmation of a 60,000-home shortfall for 2024-25, the first full year under the National Housing Accord. According to Garrett, these figures highlight persistent structural challenges that affect affordability for both renters and buyers.
“When we don’t build enough new homes, affordability deteriorates for both renters and owner-occupiers,” he said. “To turn this around, we must urgently tackle our industry’s poor productivity performance and ensure new home building remains viable.”
Denita Wawn (pictured top right), chief executive of Master Builders Australia, called for policy measures that address supply constraints. “We’re in a housing crisis,” she said. “Demand is strong, but people are holding off building because of high costs and interest rate uncertainty.
“A period of declining interest rates is needed to lift home building and keep the economy growing, but today’s figures pour cold water on hopes of a rate cut next week.”
Leanne Pilkington (pictured right), president of the Real Estate Institute of Australia, meanwhile, emphasised the need for policymakers to base decisions on evidence. “We’re in a phase where the RBA’s next move carries real consequences for both confidence and affordability,” she said. “Stability in economic settings is essential to support investment, construction, and a sustainable housing supply.”
She added that while the RBA is widely expected to hold rates this week, it must consider the financial pressures facing Australian families.
For Wawn, however, boosting housing supply is the only way to bring stability back to the market. “That means moderating building costs, cutting red tape, and getting more projects off the ground,” she said.
“We need to fast-track reforms that simplify regulation, lift productivity, and get the economy moving. We also need to boost labour supply so builders can get on with building. Government must back apprentices, support employers, and fix migration settings so we can get the skilled workers we need now.”
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