KEY POINTS:
- Reserve Bank boss says we need more people sharing the same dwellings.
- Rental costs are expected to spike further.
- The RBA has tipped inflation to come down to 3 per cent by 2025.
Reserve Bank governor Philip Lowe says Australians should find housemates or stay with their parents to bring down rent prices, which are expected to rise even further.
And fears over another interest rate rise have heightened after confirmation inflation has spiked again, partly due to rising rental prices.
Mr Lowe also warned Senate estimates on Wednesday that "may not be within the realm" of the federal government's control due to strong population growth.
“As rents go up, people decide not to move out of home, or you don’t have that home office, you get a flatmate,” he said.
“Higher prices do lead people to economise on housing .... Kids don’t move out of home because the rent is too expensive, so you decide to get a flatmate or a housemate because that’s the price mechanism at work.”
since the COVID-19 pandemic, with Australia's population growth expected to rise another 2 per cent as migrant workers and international students return to the country.
And with , Mr Lowe said a supply was not keeping pace with that growth, warning rental prices were expected to rise by 10 per cent.
"Are there 2 per cent more houses? No ... We’ve got a lot of people coming into the country, people wanting to live alone or move out of home," he said.
"The way that this ends up fixing itself is, unfortunately, through higher housing prices and higher rents.
"We need more people on average to live in each dwelling, and higher prices do that."
Greens senator Nick McKim suggested inflation was creating a "vicious cycle" for renters, with high inflation driving rents even further.
"So high rents equals higher inflation, equals higher interest rates, equals higher rents. There's a hole in the bucket, isn't there, dear Dr Lowe," he said.
Greens senator Nick McKim said inflation was creating a "vicious cycle" for renters. Source: SBS News
"The solution to all these problems in the housing market is: supply, supply, supply," he said.
Labor and the Greens remain in a stand-off over the government's $10 billion housing future fund, which it claims could see 30,000 social and affordable homes built in half a decade.
The Greens insist that does not go far enough and are demanding $5 billion every year for public housing.
Positive signs on inflation: Philip Lowe
Just after Mr Lowe's appearance ended, it was revealed inflation has risen again - to 6.8 per cent in the year to April - partly driven by rent rises.
The rise has sparked fears of another interest rate rise, and Mr Lowe accepted previous increases were "difficult" but necessary to curb inflation.
He repeated expectations that inflation would return to 3 per cent by 2025, though he said attempts to move more quickly would undo Australia's recent strong job growth.
But he warned it would be "premature" to view inflationary pressures as over.
"We are not going to declare victory until victory is achieved," he said.
He described the May budget, Labor's second since taking office, as "broadly neutral" regarding its impact on Australia's economic outlook.
But he pushed back at suggestions from Liberal senator Jane Hume that it had added to inflation.
"I don't think the budget is adding to inflation. It is reducing inflation by the next financial year."
