The Economy, Interest Rates and Why Property Still Matters (Especially in Regional Australia)

There is a lot of noise out there right now.

Interest rates are rising again. Fuel prices are climbing. The word “recession” is getting thrown around like it is the new buzzword of the month. If you only listened to headlines, you would think the sky is about to fall.

But when you take a step back and actually look at the facts, the story is a lot more balanced.

Let’s start with interest rates.

Yes, rates have increased again recently. But what often gets missed is that we are still not above where we peaked in late 2023. The cash rate today sits slightly below that previous high. So while things feel tight, we are not in completely new territory. We have literally been here before, not even that long ago.

Now, if rates do increase again and we hit a new peak, the bigger question becomes how long the RBA holds them there. Based on the RBA’s own outlook, inflation is expected to peak around mid 2026 before gradually easing. That suggests the RBA is not trying to keep rates high forever. It is more a case of holding steady long enough to get inflation under control, then reassessing.

In simple terms, it is not “rates up forever.” It is more “rates up until things settle.”

So… are we heading for a recession?

This is where things get interesting.

A lot of people talk about a recession, but very few actually understand what it means. Technically, a recession is defined as two consecutive quarters of negative economic growth. It is not just “things feel expensive” or “my grocery bill hurts more than it used to.”

The last time Australia officially went into recession was during COVID, when the economy literally shut down. Before that, during the Global Financial Crisis, Australia actually avoided a recession altogether, which is something many people forget.

During the GFC, we saw a slowdown. We saw uncertainty. But we did not see the sort of dramatic housing crash that people often assume happens every time things get tough. Property values in Australia largely plateaued or softened slightly in parts, rather than falling off a cliff.

History shows us that while markets can slow, they do not automatically collapse every time there is economic pressure.

The real issue: Supply vs Demand

If you had to sum up the current economy in one sentence, it would be this:

Demand is still outpacing supply.

This applies to almost everything right now, but especially housing.

According to national housing forecasts, Australia is still not building enough homes to meet demand. We are projected to fall significantly short of the government’s housing targets over the coming years.

At the same time, our population keeps growing. Household sizes are getting smaller. More people are living alone or in smaller family units, which means we actually need more homes per person than we used to.

So even if sentiment dips, people still need somewhere to live.

You can delay buying. You can rent longer. You can move back in with mum and dad for a bit. But eventually, you still need a roof over your head. That fundamental doesn’t change.

Zoom out and look at the long game

One of the biggest mistakes people make is looking at property over a 6 or 12 month window.

If you actually zoom out over 20 to 30 years, the trend is clear. Property in Australia has consistently grown over time, averaging strong annual increases despite multiple cycles, downturns and rate changes along the way.

It has never been a straight line. There are always bumps. But the long-term direction has been pretty consistent.

We saw a slowdown during the GFC.

We saw a sharp dip and then a massive rebound during COVID.

And post-COVID, we saw some of the strongest growth on record.

That is the nature of cycles.

What the demographers are saying

This is where it gets really interesting.

Bernard Salt has long spoken about the role of demographics in driving economic and property cycles. His work focuses on population trends, migration, household formation and generational shifts.

The consistent theme from demographers like Bernard Salt is that population growth and demographic trends drive long-term demand.

When you combine that with limited housing supply, it paints a pretty clear picture.

Even more recently, after multiple conferences and high-level economic discussions, the broader sentiment from leading demographers and economists is that Australia is still positioned for solid growth over the next 5 to 10 years on a national level.

Not because everything is perfect, but because the underlying drivers are still there.

Why regional areas continue to hold strong

Now let’s bring this a bit closer to home.

Regional areas, like Tamworth, tend to behave differently to major metro markets.

We do not have the same level of speculation. We are not as heavily driven by investor sentiment or overseas money. Our markets are more grounded in local demand, employment and lifestyle.

Historically, when things get tough, regional areas tend to hold their value more steadily, rather than experiencing the same level of volatility as major cities.

We saw that during the GFC.

We saw it again through COVID.

And we are seeing it continue now, with regional markets still performing strongly compared to some capital cities.

What’s happening in Tamworth right now

Tamworth is a perfect example of why regional areas continue to hold strong.

We are not just relying on one industry. We have multiple major players investing heavily into the region. Companies like Baiada are putting hundreds of millions into expansion. Logistics giants like Qube are building out freight infrastructure that connects Tamworth directly to global markets. Large-scale processors like Thomas Foods and Teys are operating right here in our backyard.

On top of that, aviation continues to grow, with flight schools and training facilities expanding, and even QantasLink running major maintenance operations locally.

Then you layer in infrastructure like Inland Rail, renewable energy investment across the New England region, and suddenly you are not looking at a small regional town anymore. You are looking at a genuine economic hub.

Tamworth is still seen as the central CBD for a 250km+ radius, and when you look at everything happening around it, it is not hard to see why.

And let’s be honest, more people are moving regionally because life is just better.

Less traffic. More space. A stronger sense of community. And you can actually get a coffee without lining up behind 47 people in activewear.

Yes, things are getting tighter

Now, none of this is to say everything is easy.

Fuel prices are high, and that flows into everything. Groceries, transport, construction, daily living. When fuel goes up, everything follows.

Cost of living pressure is real. There is no denying that.

And yes, I do think we are heading into a period where people will feel that pressure more.

What actually matters for clients right now

This is where I think our role as brokers becomes even more important.

There are a lot of “experts” out there who will say things like:

“Never consolidate small debt”

“Never roll short-term debt into a longer loan”

“Always do this, never do that”

The reality is, finance is not one-size-fits-all.

If a client is under pressure, and we can restructure their lending to reduce repayments, improve cash flow and keep them in control, that can be the difference between staying on track and falling into hardship.

Because the alternative is not some perfect textbook scenario.

The alternative can be missed repayments, defaults, and long-term damage to their credit file that follows them for years.

I know what I would prefer for my clients.

Final thoughts

The economy is definitely in an interesting phase.

• Rates are higher than people would like.

• Costs are rising.

• Confidence is a bit shaky.

But the fundamentals still matter.

We are still below recent rate peaks.

• We still have a housing shortage.

• Our population is still growing.

• People still need somewhere to live.

And regional areas like Tamworth continue to be supported by strong local economies, infrastructure and lifestyle appeal.

So while things might feel uncertain in the short term, the long-term story is far from broken.

And if things do get a bit tight along the way, that is where the the right structure and the right strategy can make all the difference.

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This information is general in nature and does not take into account your personal objectives, financial situation or needs. It is not intended as financial advice. You should consider whether it is appropriate for you and seek independent financial advice where necessary.