Housing-related costs push inflation out of the RBA’s target

Annual inflation hit 3.5 per cent in September 2025, the worst result in 14 months, with underlying measures of inflation also accelerating. Disappointingly, both rental inflation and new dwelling costs worsened during the month. 

Master Builders Australia Chief Economist Shane Garrett said the figures were deeply concerning for the building and construction industry. 

“The fact that rents and new home costs are again moving in the wrong direction is a big worry. The cost of a new dwelling is now 1.5 per cent higher than 12 months ago, the fastest pace of increase since February. 

“Rental prices rose 3.8 per cent annually, down from 4.5 per cent in June, but the latest figures show rental inflation accelerated in September for the first time in 11 months. 

“The ongoing mismatch between housing supply and demand continues to push rents higher. 

“Property rates and charges jumped 6.3 per cent over the year, the fastest in a decade, adding more pressure on households already battling rising housing costs,” Mr Garrett said. 

Today’s data follows confirmation of a 60,000-home building deficit in 2024–25, the first full year of the National Housing Accord’s term. 

Mr Garrett said the latest figures underscore the structural pressures driving up housing costs. 

“When we don’t build enough new homes, affordability deteriorates for both renters and owner-occupiers. 

“To turn this around, we must urgently tackle our industry’s poor productivity performance and ensure new home building remains viable,” he said. 

Master Builders Australia CEO Denita Wawn said housing-related inflation must be brought under control through policies that lift supply, not stifle it. 

“We’re in a housing crisis. Demand is strong, but people are holding off building because of high costs and interest rate uncertainty. 

“A period of declining interest rates is needed to lift home building and keep the economy growing, but today’s figures pour cold water on hopes of a rate cut next week. 

“Boosting housing supply is the only way to bring stability back to the market. That means moderating building costs, cutting red tape, and getting more projects off the ground.” 

Ms Wawn said the latest inflation figures make it even more urgent to implement the Economic Reform Roundtable priorities. 

“We need to fast-track reforms that simplify regulation, lift productivity, and get the economy moving. We also need to boost labour supply so builders can get on with building. 

“Government must back apprentices, support employers, and fix migration settings so we can get the skilled workers we need now.” 

Media contact: Dee Zegarac, National Director, External Affairs and Engagement
0400 493 071 | dee.zegarac@masterbuilders.com.au