Australian Housing Slump Deepens Pre-Budget as Rates and Reforms Bite

Australian home prices are cooling faster amid Labor’s negative-gearing changes and three RBA rate hikes, with the combined capitals index already down 0.1% in May. Sydney and Melbourne led declines of 0.9% and 0.8%, pushing auction clearance rates below 50-55% and prompting Morgan Stanley to cut its consumer sector view to Cautious on 3 June. Real GDP growth slowed sharply to 0.3% in the March quarter while unemployment rose to 4.5%, reinforcing forecasts of 5-10% national price falls and 20-30% lower turnover through FY2027. Treasury and AMP now see an additional 2-5 percentage-point drag, though long-term supply shortages may limit the damage once rates ease.