Although house prices in Australia made further gains in May, we don't think that's a sign that the broader economy will remain resilient in the face of monetary tightening. Indeed, residential building work declined by 2% q/q last quarter, and we expect it to keep falling through the year, which should translate into dwellings investment falling by 13% from peak to trough. Although the slump in residential investment will be deflationary in the near term, it will put upward pressure on rental inflation further ahead, complicating the RBA's ability to take its foot off the brake.
We are publishing this Weekly one day earlier than usual because the Singapore office is closed for Vesak Day on Friday, 2nd June 2023.
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