Immigration, Rent Rises May Cause Rate Hike: Report

Immigration, rent rises may cause rate hike: report

ABC News
Posted Mon Oct 22, 2007 7:00am AEST

Rising rents and increased immigration are forecast to put more pressure on inflation and possibly force the official interest rate higher next year.

While housing construction remains depressed, a new report from forecasting firm BIS Shrapnel predicts that the number of people migrating to Australia will reach record levels this financial year.

The firm says immigration will boost the underlying requirement for new homes to 182,000 annually, much higher than the 151,000 which were actually started last financial year.

The report says there is unlikely to be any pick-up in construction this year.

BIS Shrapnel senior manager Jason Anderson says there is already very strong demand for rental accommodation and the housing deficiency will see rents continue to accelerate.

“Because the rental component of the CPI is about 5 per cent, that could actually push up the inflation rate by as much as 0.2 percentage points,” he said.

Mr Anderson says that could make it a factor in another official interest rate increase next year.

Tags: economic-trends, building-and-construction, housing, community-and-society, immigration, australia


Audio: Rate rise would 'stifle' housing market recovery (AM)