Don't punish property investors + Mounting rate rise evidence

Hi everyone,

A lot is happening this week when it comes to your money so let’s get straight into it.

In this newsletter:

• Rising interest rates great for savers.

• Australia’s economy lagging the world.

• More evidence another interest rate rise is on the way.

• Health Insurance premiums set to rise... how to fight back.

• In-depth look at how changing CGT concessions will hit renters.

• Regional property outperforming capital cities.

• The stunning rise in gold compared with other commodities.

Rising interest rate is great for savers

The focus of a rise in interest rates is always on the pain for borrowers paying more for their loans. Often the gain for savers is ignored.

Good old-fashioned term deposits are offering some really attractive rates at the moment but, in a rising interest rate environment, you have to be careful of locking yourself into what looks like a great rate today, but could look very ordinary in a few months’ time.

New research by Canstar shows that after the RBA cash rate increase this month, the average one-year term deposit now pays an interest rate of 4.27 per cent - well above the average rates for regular savings accounts, bonus saver accounts and introductory accounts.

But locking into a four- or five-year term right now could be costly if the RBA keeps lifting interest rates. Financial markets, at this point, are factoring in another rate rise at the May RBA board meeting.

One strategy could be to stagger term deposit investments over different time periods so there is always money rolling over to take advantage of higher returns in the future.

Australia’s economy lagging the world

Despite all the supposedly crazy financial and economic decisions of President Trump, the US economy is performing really well - inflation is down, interest rates are trending lower, and economic growth remains strong.

It’s a stark contrast to Australia.

The US economy grew at an annual rate of 4.4 per cent in the third quarter of 2025 - more than double Australia’s 2.1 per cent. It was the fastest pace in two years, driven by strong consumer spending and a solid rebound in exports.

There was more good news when the US Labor Department reported that annual inflation had fallen to 2.4 per cent.

4.4 per cent GDP at end of year, 2.4 per cent inflation, record high stock market … that is a strong set of numbers.

By contrast, Australia’s inflation rate is much higher as mortgage holders brace for another rate hike.

Australia’s Consumer Price Index rose 3.8 per cent over the 12 months to December 2025, up from 3.4 per cent in November and well above the Reserve Bank of Australia’s 2–3 per cent target range.

The US – along with Canada, New Zealand and much of western Europe – is still in an interest rate easing cycle, and those new inflation figures mean financial markets are expecting another three more cuts.

More evidence another interest rate hike is on the way

It is a tough two-edged sword when it comes to the Australian jobs market at the moment. No one wants to see people unemployed - we want anyone willing to work to have a job and earn an income for their family. Unemployment can be devastating for a family.

But if unemployment is too low, and there are more jobs than there are workers, it feeds inflation and leads to higher interest rates.

Australia's unemployment rate remained at 4.1 per cent in January, suggesting the labour market remains relatively tight and the economy is still operating close to capacity.

It provides another reason for the Reserve Bank to keep increasing interest rates.

According to Australian Bureau of Statistics data, the number of employed people increased by 17,800 in January. Full-time employment rose by 50,000 people, which was partly offset by a fall of 33,000 people in part-time employment.

The economic theory is that when there’s a shortage of workers, employers have to offer higher wages to attract staff - which can then fuel inflation.

The quarterly Wage Price Index, which essentially tracks wage growth, rose again this week. The increase was led by the healthcare and education sectors, as the government passed on wage rises to workers in those industries.

But here’s the conundrum for governments: they win voter support by giving public sector workers higher wages — yet that can feed into higher inflation. And if wage growth still isn’t keeping pace with inflation, workers can actually end up worse off when it comes to paying the bills.

On top of that, pay rises can push some workers into a higher tax bracket, meaning they don’t get to keep as much of their increased income.

Health insurance price hike could add hundreds to premiums

Millions of Australians are set to pay hundreds more each year for their private health insurance, after the Federal Government confirmed the largest round of premium increases since 2017.

From 1 April, private health insurance premiums will rise by an industry average of 4.41 per cent.

The average increase has come in well above the rate of inflation, as funds grapple with rising treatment costs and industry pressures.

BUT - and this is a big but - this magic 4.41 per cent figure is the average increase. Not all private health insurance funds are imposing the same premium hike. So it pays to check what your fund is doing and, if it’s lifting premiums above the average, shop around for a better deal.

For example, the team at Compare the Market tells me AIA has confirmed the largest average increase at 5.98 per cent, while GMHBA recorded the smallest average rise, at just 1.98 per cent. That’s a significant difference.

When your premium update hits your inbox, run a comparison. Check and see how you’ll really be affected, then use the average as a benchmark to see if you’re getting a rough deal. If your fund’s increase is above average, it may be time to shop around for better value.

Aussies who stay loyal to their health insurer may be paying for the privilege, according to Compare the Market’s Household Budget Barometer. Survey respondents who had been with the same insurer for more than a decade were paying, on average, 29 per cent more in premiums than less than a year ago.

The message to consumers facing pricing pain is pretty clear: switch – don't ditch – your cover.

If private health cover is important to you, it’s worth shopping around for a better deal. Remember, you don’t need to re-serve any waiting periods you’ve already completed if you switch to the same level of cover - or a lower one.

With public waitlists stretching to months for some elective surgeries, private health cover can be life-changing if it means being treated sooner.

See whether you can maintain the same level of cover with a different provider at a lower price, or if you can lock in cheaper premiums by getting rid of cover you don’t need.

Tips for tackling health insurance hikes

• Lock in a cheap rate early. If your own personal cash flow allows it, you can effectively turn back time on the rate rise by paying your annual premium before changes kick in on 1 April.

• Look for special offers. Many insurers roll out perks and incentives to attract new members. These can include waived waiting periods, bonus coverage, or even free months of insurance.

• If you don’t use it, lose it. Top-tier policies come with plenty of benefits, but they also come with a hefty price tag. If your health needs have changed, consider whether a lower level of cover provides what you need without unnecessary costs.

• Don’t fear the waiting period. If you change insurers, your new provider will honour waiting periods you’ve already served. However, you’ll need to wait for any new or upgraded benefits.

The implications of changing the GGT concession

I wrote last week about the Federal Government flagging potential changes to capital gains tax concessions as part of the broader housing affordability debate. The argument centres on improving access to home ownership and reshaping incentives within the housing market.

I thought their justification for the changes was incredibly simplistic and didn’t account for the far-reaching consequences.

This week, I was interviewing Ray White chief economist Nerida Consibee about the proposed changes, and she broadly agrees with my stance. She then sent me her research report on what the changes would mean for renters.

Here’s what we think the proposed CGT changes could mean for housing crisis.

Renters will be hit hard.

While much of the debate focuses on house prices and investor tax settings, renters - and the rental supply they rely on - have largely been left out of the conversation. Yet renters are currently facing the most acute pressure in the housing system. Investor policy cannot be separated from rental outcomes; the two are directly linked.

If investor participation falls, rental supply tightens. When rental supply tightens, rents rise. The mechanism is straightforward.

Housing markets respond to incentives. Changes to capital gains tax concessions are designed to influence investor behaviour - that is their purpose. But investor behaviour directly affects the amount of rental housing available. Rental housing in Australia exists because investors buy it, and almost every rental property in the country is owned by an investor.

When investor purchases slow, the pipeline of rental stock slows with them. Unlike owner occupiers, who buy to live in a property, investors buy to provide rental housing. If they retreat from the market, fewer properties are added to the rental pool.

At a time when vacancy rates remain tight and rental growth has been strong, any policy discussion that affects investor participation must consider rental supply consequences.

Rental affordability is not separate from investor policy. It is a direct outcome of it.

In policy debates, rental housing is often treated as if it simply exists, rather than being actively provided by someone.

In Australia, that ‘someone’ is overwhelmingly small, private investors, often referred to as ‘mum and dad investors’. These are households who typically own one or two properties, frequently as part of retirement planning.

The data shows that individual investors own the vast majority of rental properties in Australia. Institutional or government ownership remains a very small share of total stock.

Private investors have also carried most of the burden in expanding rental housing over time.

This structure matters. It means changes to taxation, regulation or holding costs do not affect a marginal group, they affect the core of rental supply.

Victoria provides a useful example of how investor taxation settings shape housing outcomes.

In recent years, Victorian property investors have become the most heavily taxed in the country. Additional land taxes and other measures have significantly increased holding costs. The impact has been measurable.

Investor participation has fallen and rental listings have declined. As holding costs rise and confidence weakens, some investors exit while fewer new investors enter.

Capital is mobile. When returns are compressed in one jurisdiction, it moves elsewhere — to other states or into different asset classes. The consequence isn’t theoretical: rental supply contracts.

Over the past five years, Melbourne house prices have increased by approximately 20 per cent. Over the same period, rental prices have risen by 34.9 per cent. Rents have significantly outpaced capital growth.

Higher taxes on investors have contributed to slower price growth relative to other markets. From a buyer perspective, that moderation may appear positive. But for renters, the outcome has been very different.

While price growth has been restrained, rental growth has accelerated. Higher holding costs, reduced investor participation and fewer new rental properties have tightened supply. When supply tightens in the context of ongoing population growth, rents rise.

Home owners have experienced slower capital gains while renters have experienced faster rental increases.

Build-to-rent is often presented as an alternative to relying on private investors. Institutional capital funding purpose-built rental housing does have a role to play, and the development pipeline is strengthening.

However, scale and timing matter. Even with a significant number of projects underway, build-to-rent will account for approximately 0.58 per cent of total rental stock in Melbourne for many years to come, and even less in Sydney. That is not insignificant in isolation, but it is negligible in the context of total rental demand.

Housing affordability - for buyers or renters - ultimately comes down to supply. If population growth continues and housing supply doesn’t keep up, prices and rents rise. And if investor participation slows while rental demand remains strong, rents rise even faster.

Encouraging more investment in new housing, particularly new dwellings, increases rental supply. Discouraging participation reduces it. If the objective is to improve rental affordability, policy focus must be on expanding supply.

Watering down CGT concessions will not help the supply shortage.

Regional property performing better than capital cities

Regional Australia has extended its lead over the capital cities, with dwelling values rising 3.2 per cent over the three months to January, compared with a 2.1 per cent increase across the combined capitals.

The result marks a clear shift in market momentum as affordability, renewed internal migration and competitive conditions direct more buyers towards regional areas.

Cotality’s February Regional Market Update shows almost three in five of the country’s largest regional Significant Urban Areas (SUAs) recorded a faster pace of growth than the October reading, underscoring the breadth of the upswing.

Affordability remains a powerful driver of buyer behaviour. With capital city prices still near record highs and stock levels tight, many households are once again looking to regional Australia for greater value and liveability.

Regional Western Australia recorded the strongest uplift of any state, with values rising 6.1 per cent over the three months to January, up from 4.9 per cent previously. Albany (7.7 per cent), Kalgoorlie-Boulder (7.6 per cent) and Busselton (7.0 per cent) were standout performers, with Bunbury and Geraldton also exceeding the average rate of growth. In contrast, Broome (0.8 per cent) and Port Hedland (1.6 per cent) delivered comparatively softer results.

Wagga Wagga in NSW was the strongest individual performer across the country, posting an 8.1 per cent rise in values over the quarter.

Queensland and South Australia also recorded stronger conditions compared with October, led by Toowoomba, Bundaberg and Cairns for the former and Victor Harbor–Goolwa for the latter.

By comparison, growth was more subdued in New South Wales (2.5 per cent) and Victoria (2.3 per cent), with both states showing little change from the previous quarter. These were also the only states to record localised declines, including Bowral–Mittagong (-2.1 per cent), Warrnambool (-0.4 per cent) and Batemans Bay (-0.4 per cent).

Rents also rose faster than their city counterparts in the three months to January, with regional rents rising 1.6 per cent, slightly ahead of the capital cities (1.4 per cent).

Over the past five years, regional rents have risen 41.9 per cent, far outpacing wage growth of 17.5 per cent and reinforcing mounting affordability pressures.

Only four of the 50 largest regional markets recorded a fall in rents in the quarter, led by Hervey Bay (-0.5 per cent). Tasmania saw some of the fastest increases, with Devonport (5.0 per cent), Launceston (4.3 per cent) and Burnie-Somerset (3.2 per cent) all posting strong gains.

Albany (16.9 per cent) and Devonport (11.8 per cent) led annual rental growth.

Chart of the week: Gold’s massive run

Between December 2023 and January 2026, gold prices surged an astonishing 135 per cent - a sharp contrast to other commodities. In just the past year to January, gold climbed 75 per cent.

Over the same period, the broader commodities index fell 0.2 per cent, energy prices dropped 6.8 per cent, and food prices fell 7.26 per cent.

Have a great week, everyone.