Monthly update Mar 2025: Rates, population, and housing - What happens from here?
Lower than expected inflation, allowed the Reserve Bank of Australia (RBA) to drop the cash rate in February and all eyes are now turned to April 1, to see if they will back it up again. The RBA did somewhat push back on expectations for further cuts in the future, given the tight jobs market and persistent inflation levels. The jobs data released for February 2025, shows the unemployment rate is still the same as what it was the month before. Population growth has come down from this time last year but still proves to be a challenge with the housing shortage still evident. Federal and State Governments are trying to change this level of supply, and NSW in particular with their Transport Orientated Development plan, is evidence of these initiatives. When you combine lower rates, population growth and a continued lack of supply, you’re likely to see an uptick in property prices.
Will the RBA back it up with another cut?
With the next RBA meeting just over a week away, the question on everyone’s lips is: will we see another rate cut?
After February’s reduction, the RBA made it clear that further cuts were not guaranteed. It's expected by economists that the RBA will want to wait and see how the February cut will influence spending and how our tight jobs market evolves. Experts suggest the RBA will likely watch to see how international policy changes such as the Tariffs in the US, may impact Australia.
Sarah Hunter, the RBA’s Chief Economist and Assistant Governor (Economic), reinforced this in a speech this week, saying, “the February decision reflected a judgement by the Board that it was the right time” to cut rates — but she also noted a more cautious approach going forward.
Australian jobs - still a tight market
Meanwhile, job data surprised markets this week, showing a drop of 53,000 jobs when an increase of 30,000 had been expected. Despite this, the unemployment rate held steady at 4.1 per cent, largely due to fewer people participating in the workforce, with more older Australians now entering retirement.
ANZ economists Adam Boyton and Madeline Dunk said this data, on its own, is unlikely to shift the RBA’s view. They believe the labour market remains strong and expect the next rate cut to come in August. Economist Justin Fabo echoed this, suggesting that the RBA won’t overreact to a one-off fall in employment, particularly while the jobless rate remains in line with forecasts.
“Our view is that the next rate cut will be in August 2025”
Population growth slowing – but still driving demand
According to the ABS, Australia’s population grew by 1.8 per cent year-on-year in the September quarter, down from 2.5 per cent the year prior. A big part of this slowdown is due to net overseas migration, which has fallen from 560,000 to 380,000 over the same period.
State by state, growth rates vary. Western Australia led the pack with 2.5 per cent growth, while Tasmania lagged at just 0.3 per cent. In NSW, population growth fell from 2.3 per cent to 1.4 per cent year-on-year — though in real terms, that still meant an increase of around 100,000 people, bringing the state total to 8.5 million.
Even with population growth slowing, demand for housing remains strong — and supply still isn’t keeping up. That’s part of why prices continue to rise, despite high construction costs and elevated interest rates.
CoreLogic’s March 2025 Housing Chart Pack shows NSW dwelling values are up around 1.1 per cent over the past year. In high-demand areas, homes are selling quickly — often within 15–20 days. That speaks to strong underlying demand, particularly in well-located suburbs.
NSW government planning changes
To tackle the supply shortfall, the NSW Government has introduced new planning reforms, including the Transport Oriented Development (TOD) program. These changes focus on increasing housing supply within 400m of 37 train stations, aiming to deliver more affordable, well-designed homes close to public transport. While this initiative is a step in the right direction, experts believe this is not enough for our population.
Governments have committed to building 1.2 million new homes between mid-2024 and mid-2029. But industry body UDIA (Urban Development Institute of Australia) has warned we’re likely to fall short by nearly 400,000 dwellings.
This ongoing undersupply, combined with high construction costs and continued demand, is expected to keep upward pressure on prices. Developers and investors still need to make projects stack up, which means those costs are likely to be passed on.
Final thoughts
While governments are taking steps to address the housing shortage — particularly in NSW — we’re still a long way from solving the problem. When you combine population growth and the prospect of lower interest rates with continued supply constraints, property prices are likely to rise in 2025. That said, growth may be more modest in areas where affordability is already stretched, especially given ongoing cost-of-living pressures.
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