Federal Court Judge Perram famously once said "I may eat Wagyu beef every day, washed down with the finest shiraz but, if I really want my new home, I can make do on much more modest fare" in a case between ASIC and Westpac on irresponsible lending.

Well it seems Australians are now "making do on modest fare" as cost of living pressures bite. The latest inflation data (Q1 2024) while lower than the previous quarter (4.1%), came in stronger than forecast at 3.6%. This left economists believing the next move for the Reserve Bank could still be higher interest rates.

When looking at the data, it would seem the RBA has been successful in bringing down discretionary inflation - ie the items that households don't need to buy like Wagyu beef.

However, the problem is people still need to live somewhere or buy a house, and the cost to build has risen which in turn reduces supply and pushes up the cost to rent (rental inflation). With around 1/3 of Australians owning a house and mortgage, and another 1/3 renting - this puts a major dent in household budgets.

The following chart evidences how tough these supply and demand dynamics are when combined with higher interest rates when compared to overseas economies;

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