Surging inflation raises RBA rate hike risk, threatening worst housing slump since 1987

The threat of more interest rate hikes has created uncertainty among buyers that is contributing to falling home prices. Picture: Jane Dempster Heartbreaking inflation figures released Wednesday could spell disaster for the Australian housing market, deepening the current downturn into the worst price slump this century. Alarming ABS figures released Wednesday showed underlying inflation, the main metric the Reserve Bank uses to guide monetary policy, was 3.6 per cent in the year to September. This was up from a revised figure of 3.5 per cent the month prior and well above the 2-3 per cent RBA target band, suggesting a strong case for more interest rate hikes. Headline inflation (CPI) was 4.3 per cent, up from 4 per cent over the 12 months to August. It follows warnings from RBA deputy governor Andrew Hauser last week that prolonged above-target inflation was a “central banker’s nightmare” and that further rate hikes remained firmly on the table. Markets are currently pricing in a roughly 62 per cent chance of a rate hike on Melbourne Cup day next week. Another 0.25 per cent hike would take the cash rate to 4.85 per cent, the highest in 18 years. National home prices have already f...