RBA Downgrades Economic Growth Forecasts Amid Weakening Housing Market

The Reserve Bank of Australia (RBA) has revised its economic growth forecasts downwards due to the weakening housing market. According to the RBA, property prices have already fallen by 1.6% since their March peak and are expected to decline further. This will weigh on GDP growth in 2026, which is forecast to ease below 2%. The RBA also expects inflation to get back to its target range of 2-3% by early 2028.

ANZ Bank economists have doubled their expectations for the decline in property prices in 2026, predicting a 10.6% fall from peak to trough in capital cities during 2026 and 2027. Sydney is expected to lead the way down with a 14.5% loss, reducing median values by nearly $190,000.

The RBA says that weaker housing prices will reduce household wealth and lower economic activity through reduced turnover of homes. However, it also notes that data centre investment is expected to boost business investment and offset some of the negative effects of the housing market decline.