“We've got a continuing and deepening downturn in the housing market, with house prices off almost 8% from peak to trough. But businesses, because of the AI investment boom, feel that they are going to try and pass on some of these energy price costs. That's the thing the RBA is going to have to respond to, rather than the housing market.”
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Asked whether housing weakness is easing inflation pressure in Australia, McIntyre explains why the central bank still plans to raise rates: confidence from the AI investment boom is letting firms pass on energy costs.
…increase in inflation for those. There's nothing the RBA can do about that. I'm probably going to have to. So there's going to be two lots of tears in our house, I think, interest rate hikes from the services inflation for dad. And I think my daughter might be missing the Disney sometime soon.
So we've talked a little bit about energy and how it's impacting services. But How is the real estate market right now, and is that also being impacted by these inflationary pressures?
The real estate, we've got a continuing and deepening downturn in the housing market. So we've had house prices off almost 8% from peak to trough, and it looks like the data we're going to get for October will show that compared to all of the downturns at the aggregate level since 1980, that this is going to be one of the fastest downturns. ones so far. It came after a big run-up, but we've got these interest rate hikes, so four already this year, a fifth one coming at the November meeting. It's likely that this is going to continue for some time still, but that's not enough to be dissuading the RBA, and it's not only the RBA that needs dissuading. What the issue here for inflation is, is it's more about businesses and inflation expectations. This housing downturn that we've got in the economy, it's hurting consumer spending. There's a negative wealth effect. It's starting to percolate through all of the retail businesses that are linked to consumer spending and housing, right? But what we've got on the other side is the AI investment boom and a whole heap of businesses across the rest of the economy are Because of the…
Okay.
So from there, maybe we can talk a little bit about the labor market right now. You mentioned the build-out of AI infrastructure. Is the labor market healthy as a result of some of that activity?
Parts of the labor market are for sure. So we've got this pressure coming, and you'd be unsurprised to learn that the data centers are driving up demand for electricians. and for air conditioning and ventilation specialists. But across the rest of the economy, the jobs picture is slowing. The…