Macro Business chief economist Leith van Onselen, joining Catherine Cashmore on the Land Cycle Investor 'Macro and the Mortgage' show, said the combination of three back-to-back RBA rate hikes, a hawkish Reserve Bank pivot and a sharp lift in new property listings is shaping into the most painful housing correction Australia has seen in four decades.
The RBA raised the cash rate to 4.35% on Tuesday, marking the third consecutive hike and putting policy back at the peak from which the central bank started cutting in February 2025. Van Onselen said futures markets are still pricing in at least one more move and that Governor Michele Bullock's commentary was the most hawkish he had heard in this cycle.
"I honestly think that we're looking at the biggest housing correction in 40 years," van Onselen said. "It's obviously a perfect storm gathering. We've just had three consecutive rate hikes. We've got rates back up at where they were at last year's peak before the RBA started cutting in February last year. The markets are still tipping at least one more rate hike."
He pointed to a subtle but important shift in Reserve Bank language. "In their media release and the commentary afterwards they were very concerned about inflation, and they used the word that the Reserve Bank is focused on bringing inflation back to the target band. Before it was 'we remain committed' or something like that. It's a slight change in language, but they're certainly concerned about inflationary pressures."
Bullock, he noted, has flagged that the hikes so far address the inflation already in the system rather than what is still to come if the Iran-driven oil shock keeps building. Van Onselen said second-round effects are already showing up in construction costs. "We've already seen some of that with the construction sector — the input costs into construction, whether that's PVC pipes, concrete, masonry, timber, all that stuff is rising."
He extended the logic to the wider economy. "If you're a plumber who's just had Reece hike up your plumbing supplies by 30% and you're driving a diesel ute, which most of them do, and your costs have gone up, well then you're going to pass on some of that to your customers and that leads to second-round inflation impacts and that's true across the entire economy. Australia is one of the most diesel-dependent economies on earth. Every single thing that's in your shop has come here on diesel — marine diesel or bunker fuel which has gone up in cost — it then gets put on a train or a truck running on diesel."
The demand picture is matching the cost shock. Van Onselen said new property listings have spiked across the country at the same time auction clearance rates and Cotality transaction counts have weakened. "There's been a big spike in listings across the country, or new listings, which sort of tells you that people are now looking to cash up, especially probably investors. There's also been a decline in actual transactions according to Cotality. That means demand's dropping a bit and we've seen with auction clearance rates and all that sort of stuff. It's all sort of been shaping up for a perfect storm for the housing market."
Cashmore, who runs the Land Cycle Investor research desk and has just released a paper through Prosper Australia, said her own work had pencilled in a downturn between late 2026 and 2027 for years. "This is all playing out is quite exciting for me," she said. "Although we've got a lot of analysts that are now coming out and saying yeah, we're going into a correction, that's almost logic because we can see that happening. We can see that rates are going up and as soon as transactions start to drop that starts to impact all the sectors."
Further tax changes are next on the calendar. "We're only a week out now from the budget which is likely to give another bit of a whack to property investors through tax changes," Cashmore said. "It's all go on the ground in the property sphere."
