While it appears (at the time of writing) we are about to get an idea of what the new centre-right coalition will look like over the next three years, we are still in the dark over how negotiations have progressed, which policies will be shelved, and what compromises will be made.

Property investors have been eagerly waiting for reversals to policies such as Labour’s rule around not allowing mortgage interest to be deducted as an expense, the shortening of bright-line and bringing back the ability to terminate tenancies without cause.

We will have to see how this plays out over the next few months and how aggressively the incoming government will look to cut regulations such as the CCCFA and other unnecessary red tape.

Another point to watch will be government decisions around fiscal policy and how this works alongside the Reserve Bank’s aggressive raises to the official cash rate over the last two years in order to bring inflation under control.

War On Inflation

The Reserve Bank would have been pleased to see better than expected inflation data a month ago also being backed up with some upward movement in the unemployment rate. These factors are backed up by nearly unanimous agreement between economists that there will be no movement to the cash rate at the next review towards the end of this month (November 29) which is likely to give some relief to many in retail and hospitality.

What is interesting is that this is where agreement ends, with some economists believing the Reserve Bank’s job has been done as there are many signs of financial stress starting to appear alongside media cover of business failures and job losses. This suggests the war on inflation has been won, although others feel inflation is more inbuilt, and with immigration showing the largest gain over the last 12 months and the housing market showing green shoots, at least one more hike may be required.

Key Date

Even though the Reserve Bank has not increased the cash rate since its May review, we have seen local mortgage rates trending upwards on the back of increased oil prices and data coming out of the United States.

However, recent data has shown that the US may be getting on top of their own inflation concerns with their most recent numbers lower than expected.

A key date to see which of the above groups of economists is correct is January 24. This is the next update we will see on local inflation and will be a major determining factor regarding whether we have seen the peak or whether the Reserve Bank will have to tighten further next year.