RBA Warns of Weaker Housing Market Conditions Weighing on GDP Growth

The Reserve Bank of Australia (RBA) has warned that weaker housing market conditions will weigh on GDP growth in 2026. The central bank's economists say property prices have already fallen by 1.6% since their March peak and are expected to continue declining due to tightening monetary policy, tax changes, and global uncertainty.

According to the RBA's updated forecasts, GDP growth is expected to ease below 2% in 2026, which will help get inflation back down towards the bank's 2-3% target range. Both headline and underlying inflation are forecast to return to the point target of 2.5% by early 2028.

The RBA relies on estimates produced by market economists at major banks, including ANZ Bank, which has doubled its expectations for how far property prices will fall in 2026. ANZ economists predict a 10.6% decline from the peak of prices to the trough in capital cities during 2026 and 2027.

The bank's revised growth forecasts also take into account a stronger outlook for data centre investment, which is expected to boost business investment despite the AI boom not yet yielding productivity benefits.