Sydney―Australian property prices fell faster in the past year than at any time since the global financial crisis, a closely watched report said Wednesday, fueling speculation of a pre-election interest rate cut.
House prices continued to tumble across the country in April, with Sydney declining 11.8 percent over the past 12 months and Melbourne falling 12.6 percent, according to leading property analyst CoreLogic.
While the slide slowed in April from the month before―raising hopes that the market may be reaching its nadir―analysts warned of knock-on effects across the economy.
“Ongoing home price falls will depress consumer spending,” said AMP Capital chief economist Shane Oliver.
The Australian economy grew just 0.2 percent in the last three months of 2018, wage growth has remained soft and inflation has come in below the central bank’s target.
Taken alongside the decline in the housing market, analysts are predicting up to two quarter-point rate cuts this year.
The first rate may come as early as next week, ahead of a May 18 election being fought over economic management and housing affordability.
“An earlier rate cut in May could bring forward the bottom in house prices as in the last two cycles they bottomed around four months after the first cut,” Oliver added.
Stewardship of the economy has been at the center of a bitter election campaign with Prime Minister Scott Morrison warning voters it could collapse should the center-left opposition Labor party be elected.
But any rate cut could undermine Morrison’s claim that the economy is chugging along perfectly well.
Opposition leader Bill Shorten has been targeting voter discontent with low wage growth, promising to address a housing affordability crisis for young voters with restrictions on long-held tax incentives for property investors.
The cooling housing market has weighed on the profits of Australia’s ANZ bank, which on Wednesday posted a five percent slide in half yearly net profit to Aus$3.2 billion (US$2.25 billion).
“Home loan demand in Australia has slowed significantly and this continued during the half,” bank CEO Shayne Elliott said.
Elliott said the lender had taken a more “risk averse” approach in the wake of a damning royal commission into the banking sector, which had seen it “step back” from some segments, contributing to the losses.