The RBA's hawkish turn has led us to revise up our forecast for the peak cash rate to 4.85%, from 4.35% previously. The resulting rise in mortgage rates means that housing affordability will soon become the most stretched it's been since the early 90s. As a result, we're more convinced than ever that house prices will start to fall again in the coming months. The housing downturn will only add to the woes of the Australian consumer, who was already reeling from falling real disposable incomes and a plunging savings rate.
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