Reserve Bank chief economist Sarah Hunter has warned that living standards of Australian households are set to be hit anew, as inflation spreads beyond petrol in coming months.

She said the three interest rate rises this year were expected to soften the housing market and construction activity and warned that the effect could be compounded by property tax changes announced in the budget last week.

There was some good news from the RBA yesterday. Minutes of its board meeting of two weeks ago, when it lifted the cash rate from 4.10 per cent to 4.35 per cent, said the bank, subject to data, could take pause to consider how three rate rises in four months hits the real economy.

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Greed-o-meter

Super funds delivered a strong April, with the median growth fund (61–80% growth assets) up 2.6%, buoyed by a sharp rebound in global share markets.

Source: Chant West

Fear & Greed Q+A today

On what to expect from the housing market in the wake of the federal budget:

 

We already were in an uneven phase of the housing market and prices were already starting to moderate. We’ve had three cash rate hikes this year and we’re expecting another one to come through, so we’re already edging into a downturn in our big capital cities.

 

I think these policies might do a little bit to prices in a negative way — maybe you see a two or three percent drop — but I don’t think it suddenly makes the median-priced house affordable for a first home buyer.

 

What I think we’ll actually see is more of a change in ownership. I do think we’ll see more Australians owning their own homes, but I don’t think it dramatically fixes affordability.

News in brief

Consumer sentiment has ticked up, albeit from low levels, as the fuel shock eases according to the latest Westpac-Melbourne Institute Sentiment Bulletin. Broadly, sentiment among baby boomers and gen Xers is very pessimistic, while millennials are modestly pessimistic while gen Zers are optimistic.

Prime Minister Anthony Albanese yesterday said the government’s contentious new taxes on trusts could take longer to draft, and put to parliament, than changes to capital gains tax and negative gearing.

Beef farmers are having a good time of it with agribusiness bank Rabobank estimating that cattle inventory has built to around 160,000 head at a time when prices are at historical highs, thanks to global demand particularly from the US. However a looming drought hovers over the sector.

A federal court in California has dismissed claims filed against OpenAI and its top executives by Elon Musk, who accused them of betraying a shared vision for it to guide artificial intelligence’s development as a non-profit dedicated to humanity’s benefit.

Fear-o-meter

In their own words - the minutes of the RBA board's last meeting:

“Having decided by majority to raise the cash rate target by 25 basis points, members considered what their deliberations implied for upcoming decisions. Members judged that, while it was still uncertain, financial conditions would probably be somewhat restrictive after this decision. They therefore agreed that the decision would give the Board space to see how the conflict in the Middle East develops and Australian households and businesses respond. They also agreed that any assessment of how the incoming data could change the outlook should acknowledge that monetary policy could not alter the near-term trajectory of inflation and, additionally, that output growth would likely be lower than potential growth for some time.

“In finalising its statement, the Board agreed to remain attentive to the data and the evolving assessment of the outlook and risks when making its decisions. The Board will remain focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.”

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