CPI Reform Won't Fix Housing

Introduction

There is a growing chorus of voices arguing that Australia's Consumer Price Index is broken. The CPI, they say, fails to capture the real cost of living because it excludes house prices – the single largest purchase most Australians will ever make. The frustration is genuine. The lived experience of millions of Australians – particularly younger ones, renters, and aspiring first home buyers – diverges sharply from what the headline inflation number suggests. When the Treasurer announces that inflation is under control and real wages are growing, people who cannot afford to buy a home, or who are watching mortgage repayments consume an ever-larger share of their income, are understandably sceptical.

But the argument that the CPI should be reformed to include house prices, land costs, or mortgage repayments rests on a fundamental confusion about what housing affordability actually is. Housing is not one problem. It is three distinct problems, each driven by different forces, each requiring different policy responses, and each moving in different directions in response to the same policy lever. No single price index can combine all three in a way that remains conceptually coherent, policy-usable, and suitable as a monetary target – and trying to force them into one would produce a measure that misleads more than it illuminates, while damaging one of the most important instruments in Australia's macroeconomic framework.

Underlying the whole debate is a confusion between two things that are not the same: a headline indicator of lived economic pressure, and a target variable for monetary policy. The public wants the first. The Reserve Bank needs the second. Forcing a single number to do both jobs is the source of most of the confusion – and it cannot be resolved by reforming the CPI, because the two purposes are structurally in tension.

Let's start with the three housing affordabilities.

Energy Prices Update

 Global prices

From December through late February, all four benchmarks traded in a tight \$60–70 band, with Brent carrying its usual small premium over WTI and the Middle East grades clustered nearby. The Hormuz closure changed that almost instantly. Within days, prices spiked \$50–100 across the board – but the move was not uniform. WTI and Brent priced in a global supply shock; Oman and Dubai appear to have priced in that plus the direct disruption of their primary export route.

Australia's Oil Reserve in America

A Country Running on Empty

For years, Australia has been embarrassingly non-compliant with its International Energy Agency (IEA) obligations. As an IEA member, Australia is required to hold emergency reserves equivalent to at least 90 days of net oil imports. Yet for well over a decade, the country has consumed more oil than it produces, and its emergency reserves have been consistently among the lowest of any IEA member country.

Energy costs are rising

Why Housing is (Primarily) a Supply Problem

Australia's Population Growth is Extraordinary – and Hard to Justify

The Australian housing debate has a favourite villain: immigration. Too many people, not enough homes. It's an intuitively appealing argument, and the population data is genuinely striking. But it's the wrong diagnosis – and wrong diagnoses lead to wrong policy.

Let's start with what the data actually shows. By any international comparison, Australia's population growth rate is remarkable. Since 2000, Australia's population has grown to an index of 142 against a base of 100 – well above the OECD mean of 117 and median of 115. Since 2022 alone, Australia has grown at around 2.2% per year, second only to Saudi Arabia and Canada among OECD-monitored nations, and roughly double the OECD average.

The Most Dangerous Scenario – and Why It Explains This War

The Eight Rationales – designed to obfuscate

On 28 February 2026, the United States and Israel launched Operation Epic Fury, killing Supreme Leader Ali Khamenei and triggering the most significant military engagement in the Middle East since the 2003 invasion of Iraq. Within days, the Trump administration had offered not one explanation for the war but eight – a proliferation of justifications that, far from clarifying the mission, seemed designed to obscure it.

Those eight rationales, as catalogued by commentators and confirmed by officials in overlapping and sometimes contradictory statements, were:

1. To ward off an imminent Iranian threat – a claim rejected by Iran, by the Pentagon, and by US intelligence assessments that found no evidence of an impending Iranian attack.
2. To enforce a publicly drawn red line – Trump had warned the regime against shooting protesters. Once crossed, the logic of his public identity required a response regardless of strategic calculation.
3. To pre-empt Iranian retaliation against US forces following an expected Israeli strike – Secretary of State Rubio’s candid admission: “We knew that there was going to be an Israeli action. We knew that that would precipitate an attack against American forces.”
4. To destroy Iran’s missile and military capabilities – a degradation objective with operational logic, even if it falls well short of a strategic rationale for war.
5. To prevent Iran from obtaining a nuclear weapon – Trump’s stated casus belli in the State of the Union Address, though the IAEA reported no evidence of a structured nuclear weapons programme at the time strikes commenced.
6. To secure Iran’s natural resources – an objective floated by administration officials and widely noted, though rarely elaborated upon.
7. To achieve regime change and bring the Iranian opposition to power – a goal with broad Israeli support and a long tail of strategic complications.
8. Force protection by pre-emption – the US joining the strikes not from independent strategic conviction but to control escalation dynamics before an ally’s action forced a reactive entry.

Australia's Fuel Reserves

Australia's fuel vulnerability didn't begin when the first US strikes hit Iran. It began around 2012, when Australia quietly fell below the 90-day oil reserve requirement it had been treaty-bound to meet since joining the IEA in 1979 – and stayed there.

By the time the current crisis started, Australia's reserves sat at around 36 days of petrol, 32-34 days of diesel, and 29-32 days of jet fuel – figures the government has cited as the highest in 15 years. That context matters, but so does what those numbers actually mean. Multiple non-comparable metrics, different inclusions for ships on-route and/or in Australia's exclusive economic zone, and the question of what is continuing to arrive and what has been released since make it surprisingly difficult to pin down the true usable buffer at any given moment. The fact that we can't get a clean number after a crisis has already started is itself part of the story.

Once fuel already in transit is stripped out, the usable buffer may be materially closer to four weeks. The critical reserve appears to be jet fuel. China – which supplied roughly 32 per cent of Australia's jet fuel imports in 2025 – has instructed refiners to halt new fuel export contracts, a move expected to cut Australian supply from April.