Australia urged to spend big while green iron is hot
But there are hurdles to producing green iron in Australia, the report says, and government and businesses need to invest to beat rival nations racing to cash in on the opportunity.
The Superpower Institute released the findings in its Green Iron Plan for Australia report on Monday, analysing potential restrictions and opportunities to establishing a local industry.
The research comes three months after the government announced a $1 billion investment in green iron production, including $500 million to support existing and new developments.
Green iron is produced using renewable energy resources such as hydrogen and electricity generated by the sun and wind rather than coal or gas, and has the potential to cut 90 per cent of emissions from the steelmaking process.
Australia is considered a strong potential green iron producer as it is the world's biggest iron ore exporter, but the report identified three obstacles to its production.
Early investors were not being given enough financial support, infrastructure to support its production was lacking, and the absence of an international carbon price made it hard to compete with fossil fuel-based iron, the report found.
If these issues were addressed, Australia could have a clear pathway to producing green iron, cutting emissions and taking advantage of its natural resources, Superpower Institute chair Rod Sims said.
"If anyone is going to make green iron, it's going to be Australia," he told AAP.
"Every international study I've seen - and I've seen a few - says that if you want green iron, Australia is either one of the small number of top places or is the best place to do it."
Introducing a green iron production tax credit of $170 per tonne could temporarily address the lack of a carbon price, the report found, while grants of up to 30 per cent could help to establish early green iron projects.
Other recommendations include introducing a green hydrogen certification scheme and researching trade opportunities.
Australia could generate up to $386 billion a year from green iron by 2060, the report found.
Mr Sims said the nation should aim to have between two and four projects in operation by 2030.
"Australia is the world's largest producer of gas and coal combined but they will go down as the world moves to net zero, therefore you need a foot in the other camp," he said.
Small green iron plants are already planned in countries including Germany, Sweden and Namibia.
Green iron projects in Australia include Fortescue's Christmas Creek project, expected to begin production before the end of 2025, and a $3.5 billion Gladstone project backed by Quinbrook Infrastructure Partners.
Government commitments to green metals include $750 million from the Future Made in Australia fund and $500 million from the Green Iron Investment Fund.
Productivity Assistant Minister Andrew Leigh said the government would seek to make strategic investments to help establish the industry.
"No one thinks public investment is a substitute for private capital," he said.
"There are moments, especially during structural transitions, when governments can play a useful role in reducing uncertainty, addressing market failures, and de-risking early stage ambition."
Australia has a unique opportunity to trade its dirty coal and gas industry for cleaner green iron market and make four times the revenue from its export by 2060, a study suggests.
But there are hurdles to producing green iron in Australia, the report says, and government and businesses need to invest to beat rival nations racing to cash in on the opportunity.
The Superpower Institute released the findings in its Green Iron Plan for Australia report on Monday, analysing potential restrictions and opportunities to establishing a local industry.
The research comes three months after the government announced a $1 billion investment in green iron production, including $500 million to support existing and new developments.
Green iron is produced using renewable energy resources such as hydrogen and electricity generated by the sun and wind rather than coal or gas, and has the potential to cut 90 per cent of emissions from the steelmaking process.
Australia is considered a strong potential green iron producer as it is the world's biggest iron ore exporter, but the report identified three obstacles to its production.
Early investors were not being given enough financial support, infrastructure to support its production was lacking, and the absence of an international carbon price made it hard to compete with fossil fuel-based iron, the report found.
If these issues were addressed, Australia could have a clear pathway to producing green iron, cutting emissions and taking advantage of its natural resources, Superpower Institute chair Rod Sims said.
"If anyone is going to make green iron, it's going to be Australia," he told AAP.
"Every international study I've seen - and I've seen a few - says that if you want green iron, Australia is either one of the small number of top places or is the best place to do it."
Introducing a green iron production tax credit of $170 per tonne could temporarily address the lack of a carbon price, the report found, while grants of up to 30 per cent could help to establish early green iron projects.
Other recommendations include introducing a green hydrogen certification scheme and researching trade opportunities.
Australia could generate up to $386 billion a year from green iron by 2060, the report found.
Mr Sims said the nation should aim to have between two and four projects in operation by 2030.
"Australia is the world's largest producer of gas and coal combined but they will go down as the world moves to net zero, therefore you need a foot in the other camp," he said.
Small green iron plants are already planned in countries including Germany, Sweden and Namibia.
Green iron projects in Australia include Fortescue's Christmas Creek project, expected to begin production before the end of 2025, and a $3.5 billion Gladstone project backed by Quinbrook Infrastructure Partners.
Government commitments to green metals include $750 million from the Future Made in Australia fund and $500 million from the Green Iron Investment Fund.
Productivity Assistant Minister Andrew Leigh said the government would seek to make strategic investments to help establish the industry.
"No one thinks public investment is a substitute for private capital," he said.
"There are moments, especially during structural transitions, when governments can play a useful role in reducing uncertainty, addressing market failures, and de-risking early stage ambition."
Australia has a unique opportunity to trade its dirty coal and gas industry for cleaner green iron market and make four times the revenue from its export by 2060, a study suggests.
But there are hurdles to producing green iron in Australia, the report says, and government and businesses need to invest to beat rival nations racing to cash in on the opportunity.
The Superpower Institute released the findings in its Green Iron Plan for Australia report on Monday, analysing potential restrictions and opportunities to establishing a local industry.
The research comes three months after the government announced a $1 billion investment in green iron production, including $500 million to support existing and new developments.
Green iron is produced using renewable energy resources such as hydrogen and electricity generated by the sun and wind rather than coal or gas, and has the potential to cut 90 per cent of emissions from the steelmaking process.
Australia is considered a strong potential green iron producer as it is the world's biggest iron ore exporter, but the report identified three obstacles to its production.
Early investors were not being given enough financial support, infrastructure to support its production was lacking, and the absence of an international carbon price made it hard to compete with fossil fuel-based iron, the report found.
If these issues were addressed, Australia could have a clear pathway to producing green iron, cutting emissions and taking advantage of its natural resources, Superpower Institute chair Rod Sims said.
"If anyone is going to make green iron, it's going to be Australia," he told AAP.
"Every international study I've seen - and I've seen a few - says that if you want green iron, Australia is either one of the small number of top places or is the best place to do it."
Introducing a green iron production tax credit of $170 per tonne could temporarily address the lack of a carbon price, the report found, while grants of up to 30 per cent could help to establish early green iron projects.
Other recommendations include introducing a green hydrogen certification scheme and researching trade opportunities.
Australia could generate up to $386 billion a year from green iron by 2060, the report found.
Mr Sims said the nation should aim to have between two and four projects in operation by 2030.
"Australia is the world's largest producer of gas and coal combined but they will go down as the world moves to net zero, therefore you need a foot in the other camp," he said.
Small green iron plants are already planned in countries including Germany, Sweden and Namibia.
Green iron projects in Australia include Fortescue's Christmas Creek project, expected to begin production before the end of 2025, and a $3.5 billion Gladstone project backed by Quinbrook Infrastructure Partners.
Government commitments to green metals include $750 million from the Future Made in Australia fund and $500 million from the Green Iron Investment Fund.
Productivity Assistant Minister Andrew Leigh said the government would seek to make strategic investments to help establish the industry.
"No one thinks public investment is a substitute for private capital," he said.
"There are moments, especially during structural transitions, when governments can play a useful role in reducing uncertainty, addressing market failures, and de-risking early stage ambition."
Australia has a unique opportunity to trade its dirty coal and gas industry for cleaner green iron market and make four times the revenue from its export by 2060, a study suggests.
But there are hurdles to producing green iron in Australia, the report says, and government and businesses need to invest to beat rival nations racing to cash in on the opportunity.
The Superpower Institute released the findings in its Green Iron Plan for Australia report on Monday, analysing potential restrictions and opportunities to establishing a local industry.
The research comes three months after the government announced a $1 billion investment in green iron production, including $500 million to support existing and new developments.
Green iron is produced using renewable energy resources such as hydrogen and electricity generated by the sun and wind rather than coal or gas, and has the potential to cut 90 per cent of emissions from the steelmaking process.
Australia is considered a strong potential green iron producer as it is the world's biggest iron ore exporter, but the report identified three obstacles to its production.
Early investors were not being given enough financial support, infrastructure to support its production was lacking, and the absence of an international carbon price made it hard to compete with fossil fuel-based iron, the report found.
If these issues were addressed, Australia could have a clear pathway to producing green iron, cutting emissions and taking advantage of its natural resources, Superpower Institute chair Rod Sims said.
"If anyone is going to make green iron, it's going to be Australia," he told AAP.
"Every international study I've seen - and I've seen a few - says that if you want green iron, Australia is either one of the small number of top places or is the best place to do it."
Introducing a green iron production tax credit of $170 per tonne could temporarily address the lack of a carbon price, the report found, while grants of up to 30 per cent could help to establish early green iron projects.
Other recommendations include introducing a green hydrogen certification scheme and researching trade opportunities.
Australia could generate up to $386 billion a year from green iron by 2060, the report found.
Mr Sims said the nation should aim to have between two and four projects in operation by 2030.
"Australia is the world's largest producer of gas and coal combined but they will go down as the world moves to net zero, therefore you need a foot in the other camp," he said.
Small green iron plants are already planned in countries including Germany, Sweden and Namibia.
Green iron projects in Australia include Fortescue's Christmas Creek project, expected to begin production before the end of 2025, and a $3.5 billion Gladstone project backed by Quinbrook Infrastructure Partners.
Government commitments to green metals include $750 million from the Future Made in Australia fund and $500 million from the Green Iron Investment Fund.
Productivity Assistant Minister Andrew Leigh said the government would seek to make strategic investments to help establish the industry.
"No one thinks public investment is a substitute for private capital," he said.
"There are moments, especially during structural transitions, when governments can play a useful role in reducing uncertainty, addressing market failures, and de-risking early stage ambition."
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The Advertiser
16 hours ago
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'Standard practice': summiteers play down Treasury leak
Economists and business groups have joined the prime minister in insisting an upcoming economic roundtable can still produce big ideas. Leaked Treasury advice reportedly showed a list of proposals to be reviewed by cabinet after the meeting of business, union and other leaders at a productivity roundtable on Tuesday. Among them were proposals to speed up approval times for housing and reduce environmental red tape, according to the ABC. Prime Minister Anthony Albanese denied the result of the summit had been locked in before it began. "You'd expect Treasury to be giving advice about a forum that's about the economy," he told reporters in Brisbane on Thursday. "Next week, though, is an opportunity for people to advance their ideas, to advance policies, and that's a really constructive thing." The government has ruled out major changes in some areas, including tax policies, before the three-day summit despite calls for widespread reform to bolster Australia's lagging productivity rates. Independent economist Saul Eslake said suggestions the roundtable's outcome had been agreed upon because of the leaked document should be disregarded. "It's standard Treasury practice to brief its minister for any serious discussions or conversations he might be about to have," he told AAP. "It would be astonishing if Treasury wasn't at least thinking about how the treasurer should respond to some of the ideas that have been flagged by participants in the summit that they're going to put." The advice should not be read as particular policies getting a green light, Mr Eslake said. Treasurer Jim Chalmers also dismissed concerns the summit's outcomes had been pre-empted. "Those that have been reported today are just a few of the many ideas which have been put to us and they're all welcome on the table," he said. Opposition Leader Sussan Ley said the coalition would examine suggestions from the roundtable, but had concerns about how the event was being handled. "I wonder whether people who are attending this roundtable are indeed wasting their time," she said. "What we won't do is accept an agenda that raises taxes on hardworking Australians, particularly because that's exactly what the government promised it would not do." Australian Industry Group chief executive Innes Willox said the roundtable would be a "legacy moment" for reform. "It is Treasury's role to provide advice to the government and that is the case here - and we shouldn't assume it automatically becomes government policy. They are doing their job," he told AAP. "Next week's roundtable is an opportunity for the government and, while it may not be getting consensus, it will give clear understandings around the big challenges that we face around productivity and investment." Part of the reason productivity growth has been so poor is because competition has fallen since the mid-2000s, costing Australia up to $3000 per person, the Reserve Bank found in a report released on Thursday. If Australia could get competition back to where it was two decades ago, it could boost productivity by one to three per cent, said report authors Jonathan Hambur and Owen Freestone. The Productivity Commission released its final report before the summit, calling for a national screening system for care workers, greater collaboration between health services and a major shift towards preventive health investment. Commissioner Alison Roberts said care was a rapidly growing sector and proposed reforms would seek to break through the government's siloed approach to decision-making. The interim report urges the government to better align quality and safety regulations across the care economy. That could include a streamlined national clearance process for workers in aged care, the NDIS, veterans' care and the early childhood education sector. Economists and business groups have joined the prime minister in insisting an upcoming economic roundtable can still produce big ideas. Leaked Treasury advice reportedly showed a list of proposals to be reviewed by cabinet after the meeting of business, union and other leaders at a productivity roundtable on Tuesday. Among them were proposals to speed up approval times for housing and reduce environmental red tape, according to the ABC. Prime Minister Anthony Albanese denied the result of the summit had been locked in before it began. "You'd expect Treasury to be giving advice about a forum that's about the economy," he told reporters in Brisbane on Thursday. "Next week, though, is an opportunity for people to advance their ideas, to advance policies, and that's a really constructive thing." The government has ruled out major changes in some areas, including tax policies, before the three-day summit despite calls for widespread reform to bolster Australia's lagging productivity rates. Independent economist Saul Eslake said suggestions the roundtable's outcome had been agreed upon because of the leaked document should be disregarded. "It's standard Treasury practice to brief its minister for any serious discussions or conversations he might be about to have," he told AAP. "It would be astonishing if Treasury wasn't at least thinking about how the treasurer should respond to some of the ideas that have been flagged by participants in the summit that they're going to put." The advice should not be read as particular policies getting a green light, Mr Eslake said. Treasurer Jim Chalmers also dismissed concerns the summit's outcomes had been pre-empted. "Those that have been reported today are just a few of the many ideas which have been put to us and they're all welcome on the table," he said. Opposition Leader Sussan Ley said the coalition would examine suggestions from the roundtable, but had concerns about how the event was being handled. "I wonder whether people who are attending this roundtable are indeed wasting their time," she said. "What we won't do is accept an agenda that raises taxes on hardworking Australians, particularly because that's exactly what the government promised it would not do." Australian Industry Group chief executive Innes Willox said the roundtable would be a "legacy moment" for reform. "It is Treasury's role to provide advice to the government and that is the case here - and we shouldn't assume it automatically becomes government policy. They are doing their job," he told AAP. "Next week's roundtable is an opportunity for the government and, while it may not be getting consensus, it will give clear understandings around the big challenges that we face around productivity and investment." Part of the reason productivity growth has been so poor is because competition has fallen since the mid-2000s, costing Australia up to $3000 per person, the Reserve Bank found in a report released on Thursday. If Australia could get competition back to where it was two decades ago, it could boost productivity by one to three per cent, said report authors Jonathan Hambur and Owen Freestone. The Productivity Commission released its final report before the summit, calling for a national screening system for care workers, greater collaboration between health services and a major shift towards preventive health investment. Commissioner Alison Roberts said care was a rapidly growing sector and proposed reforms would seek to break through the government's siloed approach to decision-making. The interim report urges the government to better align quality and safety regulations across the care economy. That could include a streamlined national clearance process for workers in aged care, the NDIS, veterans' care and the early childhood education sector. Economists and business groups have joined the prime minister in insisting an upcoming economic roundtable can still produce big ideas. Leaked Treasury advice reportedly showed a list of proposals to be reviewed by cabinet after the meeting of business, union and other leaders at a productivity roundtable on Tuesday. Among them were proposals to speed up approval times for housing and reduce environmental red tape, according to the ABC. Prime Minister Anthony Albanese denied the result of the summit had been locked in before it began. "You'd expect Treasury to be giving advice about a forum that's about the economy," he told reporters in Brisbane on Thursday. "Next week, though, is an opportunity for people to advance their ideas, to advance policies, and that's a really constructive thing." The government has ruled out major changes in some areas, including tax policies, before the three-day summit despite calls for widespread reform to bolster Australia's lagging productivity rates. Independent economist Saul Eslake said suggestions the roundtable's outcome had been agreed upon because of the leaked document should be disregarded. "It's standard Treasury practice to brief its minister for any serious discussions or conversations he might be about to have," he told AAP. "It would be astonishing if Treasury wasn't at least thinking about how the treasurer should respond to some of the ideas that have been flagged by participants in the summit that they're going to put." The advice should not be read as particular policies getting a green light, Mr Eslake said. Treasurer Jim Chalmers also dismissed concerns the summit's outcomes had been pre-empted. "Those that have been reported today are just a few of the many ideas which have been put to us and they're all welcome on the table," he said. Opposition Leader Sussan Ley said the coalition would examine suggestions from the roundtable, but had concerns about how the event was being handled. "I wonder whether people who are attending this roundtable are indeed wasting their time," she said. "What we won't do is accept an agenda that raises taxes on hardworking Australians, particularly because that's exactly what the government promised it would not do." Australian Industry Group chief executive Innes Willox said the roundtable would be a "legacy moment" for reform. "It is Treasury's role to provide advice to the government and that is the case here - and we shouldn't assume it automatically becomes government policy. They are doing their job," he told AAP. "Next week's roundtable is an opportunity for the government and, while it may not be getting consensus, it will give clear understandings around the big challenges that we face around productivity and investment." Part of the reason productivity growth has been so poor is because competition has fallen since the mid-2000s, costing Australia up to $3000 per person, the Reserve Bank found in a report released on Thursday. If Australia could get competition back to where it was two decades ago, it could boost productivity by one to three per cent, said report authors Jonathan Hambur and Owen Freestone. The Productivity Commission released its final report before the summit, calling for a national screening system for care workers, greater collaboration between health services and a major shift towards preventive health investment. Commissioner Alison Roberts said care was a rapidly growing sector and proposed reforms would seek to break through the government's siloed approach to decision-making. The interim report urges the government to better align quality and safety regulations across the care economy. That could include a streamlined national clearance process for workers in aged care, the NDIS, veterans' care and the early childhood education sector. Economists and business groups have joined the prime minister in insisting an upcoming economic roundtable can still produce big ideas. Leaked Treasury advice reportedly showed a list of proposals to be reviewed by cabinet after the meeting of business, union and other leaders at a productivity roundtable on Tuesday. Among them were proposals to speed up approval times for housing and reduce environmental red tape, according to the ABC. Prime Minister Anthony Albanese denied the result of the summit had been locked in before it began. "You'd expect Treasury to be giving advice about a forum that's about the economy," he told reporters in Brisbane on Thursday. "Next week, though, is an opportunity for people to advance their ideas, to advance policies, and that's a really constructive thing." The government has ruled out major changes in some areas, including tax policies, before the three-day summit despite calls for widespread reform to bolster Australia's lagging productivity rates. Independent economist Saul Eslake said suggestions the roundtable's outcome had been agreed upon because of the leaked document should be disregarded. "It's standard Treasury practice to brief its minister for any serious discussions or conversations he might be about to have," he told AAP. "It would be astonishing if Treasury wasn't at least thinking about how the treasurer should respond to some of the ideas that have been flagged by participants in the summit that they're going to put." The advice should not be read as particular policies getting a green light, Mr Eslake said. Treasurer Jim Chalmers also dismissed concerns the summit's outcomes had been pre-empted. "Those that have been reported today are just a few of the many ideas which have been put to us and they're all welcome on the table," he said. Opposition Leader Sussan Ley said the coalition would examine suggestions from the roundtable, but had concerns about how the event was being handled. "I wonder whether people who are attending this roundtable are indeed wasting their time," she said. "What we won't do is accept an agenda that raises taxes on hardworking Australians, particularly because that's exactly what the government promised it would not do." Australian Industry Group chief executive Innes Willox said the roundtable would be a "legacy moment" for reform. "It is Treasury's role to provide advice to the government and that is the case here - and we shouldn't assume it automatically becomes government policy. They are doing their job," he told AAP. "Next week's roundtable is an opportunity for the government and, while it may not be getting consensus, it will give clear understandings around the big challenges that we face around productivity and investment." Part of the reason productivity growth has been so poor is because competition has fallen since the mid-2000s, costing Australia up to $3000 per person, the Reserve Bank found in a report released on Thursday. If Australia could get competition back to where it was two decades ago, it could boost productivity by one to three per cent, said report authors Jonathan Hambur and Owen Freestone. The Productivity Commission released its final report before the summit, calling for a national screening system for care workers, greater collaboration between health services and a major shift towards preventive health investment. Commissioner Alison Roberts said care was a rapidly growing sector and proposed reforms would seek to break through the government's siloed approach to decision-making. The interim report urges the government to better align quality and safety regulations across the care economy. That could include a streamlined national clearance process for workers in aged care, the NDIS, veterans' care and the early childhood education sector.
West Australian
a day ago
- West Australian
Interest rates Australia: Further rate cuts by Reserve Bank at risk as rent pushes up inflation
Rising construction costs and rental increases may prove to be stumbling blocks for further rate cuts from the Reserve Bank. The latest data from Cotality shows there are concerns for housing inflation and its knock-on effects off the back of rental re-acceleration picking up in state capitals for the first time in two years. The capital city rental value index has increased by three per cent to July 2025, up from 2.7 per cent a month before, according to Cotality's August monthly housing chart pack. That has marked the end of 16-straight months of moderating or stable rental growth. It was a trend worth keeping an eye on, Cotality economist Kaytlin Ezzy said. 'The re-acceleration that we've seen in rent value growth and construction costs more recently are an indication that maybe the housing component of inflation has sort of hit its floor in terms of the pace of growth,' she told AAP. 'And that we would see that component of the CPI basket shift higher moving forward. 'If it does continue to trend higher, it could put future rate cuts at jeopardy.' The consumer price index (CPI) basket is goods and services used to track changes in cost of living. The housing component made up more than one-fifth of the basket and rents accounted for 6.6 per cent, Ms Ezzy said. Another concern for housing inflation is an uptick in construction costs shifting to 2.9 per cent to June 2025, from 2.6 per cent in the 12 months to June 2024. Labour was a major factor in driving increased construction costs, Ms Ezzy said. 'We recently put out our CCCI Index report, which covers off the increase in construction costs over the June quarter ... it does suggest that we are seeing a little bit more pressure in construction costs, particularly residential projects competing for that labour with infrastructure projects,' she said. Sydney and Brisbane have led the re-acceleration in capital city rental growth with their unit markets driving the uptick. Annual changes in dwelling rents in the NSW capital have gone from a recent low of 1.8 per cent to 2.4 per cent in the 12 months to July. Brisbane's annual rental trend has risen by 1.4 percentage points following lows in February of 3.2 per cent to 4.6 per cent. Melbourne's healthy flow of new housing stock to the market had kept the trend in rent growth a little bit lower in recent years, Ms Ezzy said. The Reserve Bank cut interest rates for a third time in six months on Tuesday.
The Advertiser
a day ago
- The Advertiser
Further rate cuts at risk as rent pushes up inflation
Rising construction costs and rental increases may prove to be stumbling blocks for further rate cuts from the Reserve Bank. The latest data from Cotality shows there are concerns for housing inflation and its knock-on effects off the back of rental re-acceleration picking up in state capitals for the first time in two years. The capital city rental value index has increased by three per cent to July 2025, up from 2.7 per cent a month before, according to Cotality's August monthly housing chart pack. That has marked the end of 16-straight months of moderating or stable rental growth. It was a trend worth keeping an eye on, Cotality economist Kaytlin Ezzy said. "The re-acceleration that we've seen in rent value growth and construction costs more recently are an indication that maybe the housing component of inflation has sort of hit its floor in terms of the pace of growth," she told AAP. "And that we would see that component of the CPI basket shift higher moving forward. "If it does continue to trend higher, it could put future rate cuts at jeopardy." The consumer price index (CPI) basket is goods and services used to track changes in cost of living. The housing component made up more than one-fifth of the basket and rents accounted for 6.6 per cent, Ms Ezzy said. Another concern for housing inflation is an uptick in construction costs shifting to 2.9 per cent to June 2025, from 2.6 per cent in the 12 months to June 2024. Labour was a major factor in driving increased construction costs, Ms Ezzy said. "We recently put out our CCCI Index report, which covers off the increase in construction costs over the June quarter ... it does suggest that we are seeing a little bit more pressure in construction costs, particularly residential projects competing for that labour with infrastructure projects," she said. Sydney and Brisbane have led the re-acceleration in capital city rental growth with their unit markets driving the uptick. Annual changes in dwelling rents in the NSW capital have gone from a recent low of 1.8 per cent to 2.4 per cent in the 12 months to July. Brisbane's annual rental trend has risen by 1.4 percentage points following lows in February of 3.2 per cent to 4.6 per cent. Melbourne's healthy flow of new housing stock to the market had kept the trend in rent growth a little bit lower in recent years, Ms Ezzy said. The Reserve Bank cut interest rates for a third time in six months on Tuesday. Rising construction costs and rental increases may prove to be stumbling blocks for further rate cuts from the Reserve Bank. The latest data from Cotality shows there are concerns for housing inflation and its knock-on effects off the back of rental re-acceleration picking up in state capitals for the first time in two years. The capital city rental value index has increased by three per cent to July 2025, up from 2.7 per cent a month before, according to Cotality's August monthly housing chart pack. That has marked the end of 16-straight months of moderating or stable rental growth. It was a trend worth keeping an eye on, Cotality economist Kaytlin Ezzy said. "The re-acceleration that we've seen in rent value growth and construction costs more recently are an indication that maybe the housing component of inflation has sort of hit its floor in terms of the pace of growth," she told AAP. "And that we would see that component of the CPI basket shift higher moving forward. "If it does continue to trend higher, it could put future rate cuts at jeopardy." The consumer price index (CPI) basket is goods and services used to track changes in cost of living. The housing component made up more than one-fifth of the basket and rents accounted for 6.6 per cent, Ms Ezzy said. Another concern for housing inflation is an uptick in construction costs shifting to 2.9 per cent to June 2025, from 2.6 per cent in the 12 months to June 2024. Labour was a major factor in driving increased construction costs, Ms Ezzy said. "We recently put out our CCCI Index report, which covers off the increase in construction costs over the June quarter ... it does suggest that we are seeing a little bit more pressure in construction costs, particularly residential projects competing for that labour with infrastructure projects," she said. Sydney and Brisbane have led the re-acceleration in capital city rental growth with their unit markets driving the uptick. Annual changes in dwelling rents in the NSW capital have gone from a recent low of 1.8 per cent to 2.4 per cent in the 12 months to July. Brisbane's annual rental trend has risen by 1.4 percentage points following lows in February of 3.2 per cent to 4.6 per cent. Melbourne's healthy flow of new housing stock to the market had kept the trend in rent growth a little bit lower in recent years, Ms Ezzy said. The Reserve Bank cut interest rates for a third time in six months on Tuesday. Rising construction costs and rental increases may prove to be stumbling blocks for further rate cuts from the Reserve Bank. The latest data from Cotality shows there are concerns for housing inflation and its knock-on effects off the back of rental re-acceleration picking up in state capitals for the first time in two years. The capital city rental value index has increased by three per cent to July 2025, up from 2.7 per cent a month before, according to Cotality's August monthly housing chart pack. That has marked the end of 16-straight months of moderating or stable rental growth. It was a trend worth keeping an eye on, Cotality economist Kaytlin Ezzy said. "The re-acceleration that we've seen in rent value growth and construction costs more recently are an indication that maybe the housing component of inflation has sort of hit its floor in terms of the pace of growth," she told AAP. "And that we would see that component of the CPI basket shift higher moving forward. "If it does continue to trend higher, it could put future rate cuts at jeopardy." The consumer price index (CPI) basket is goods and services used to track changes in cost of living. The housing component made up more than one-fifth of the basket and rents accounted for 6.6 per cent, Ms Ezzy said. Another concern for housing inflation is an uptick in construction costs shifting to 2.9 per cent to June 2025, from 2.6 per cent in the 12 months to June 2024. Labour was a major factor in driving increased construction costs, Ms Ezzy said. "We recently put out our CCCI Index report, which covers off the increase in construction costs over the June quarter ... it does suggest that we are seeing a little bit more pressure in construction costs, particularly residential projects competing for that labour with infrastructure projects," she said. Sydney and Brisbane have led the re-acceleration in capital city rental growth with their unit markets driving the uptick. Annual changes in dwelling rents in the NSW capital have gone from a recent low of 1.8 per cent to 2.4 per cent in the 12 months to July. Brisbane's annual rental trend has risen by 1.4 percentage points following lows in February of 3.2 per cent to 4.6 per cent. Melbourne's healthy flow of new housing stock to the market had kept the trend in rent growth a little bit lower in recent years, Ms Ezzy said. The Reserve Bank cut interest rates for a third time in six months on Tuesday. Rising construction costs and rental increases may prove to be stumbling blocks for further rate cuts from the Reserve Bank. The latest data from Cotality shows there are concerns for housing inflation and its knock-on effects off the back of rental re-acceleration picking up in state capitals for the first time in two years. The capital city rental value index has increased by three per cent to July 2025, up from 2.7 per cent a month before, according to Cotality's August monthly housing chart pack. That has marked the end of 16-straight months of moderating or stable rental growth. It was a trend worth keeping an eye on, Cotality economist Kaytlin Ezzy said. "The re-acceleration that we've seen in rent value growth and construction costs more recently are an indication that maybe the housing component of inflation has sort of hit its floor in terms of the pace of growth," she told AAP. "And that we would see that component of the CPI basket shift higher moving forward. "If it does continue to trend higher, it could put future rate cuts at jeopardy." The consumer price index (CPI) basket is goods and services used to track changes in cost of living. The housing component made up more than one-fifth of the basket and rents accounted for 6.6 per cent, Ms Ezzy said. Another concern for housing inflation is an uptick in construction costs shifting to 2.9 per cent to June 2025, from 2.6 per cent in the 12 months to June 2024. Labour was a major factor in driving increased construction costs, Ms Ezzy said. "We recently put out our CCCI Index report, which covers off the increase in construction costs over the June quarter ... it does suggest that we are seeing a little bit more pressure in construction costs, particularly residential projects competing for that labour with infrastructure projects," she said. Sydney and Brisbane have led the re-acceleration in capital city rental growth with their unit markets driving the uptick. Annual changes in dwelling rents in the NSW capital have gone from a recent low of 1.8 per cent to 2.4 per cent in the 12 months to July. Brisbane's annual rental trend has risen by 1.4 percentage points following lows in February of 3.2 per cent to 4.6 per cent. Melbourne's healthy flow of new housing stock to the market had kept the trend in rent growth a little bit lower in recent years, Ms Ezzy said. The Reserve Bank cut interest rates for a third time in six months on Tuesday.
