Housing cost measures in the National Accounts



Australian housing costs have changed significantly in recent years, partly reflecting the disruptions from, and associated response to the COVID-19 pandemic. The flow on effects of the pandemic to population growth and fiscal and monetary policy decisions are among the factors influencing the change.

Owner-occupiers, renters and housing investors are all affected by housing cost changes. This article outlines the national accounts measures of housing costs, and how to interpret them, including interest paid on mortgages, rents and income earned on dwellings. Insights into the impact of inflation and rising interest rates on housing costs are also provided.

Interest payments

Mortgage (loan) interest payments made to banks and similar financial institutions by households are divided into two components within the National Accounts: a loan service charge, and a ‘pure’ loan interest flow.

The loan service charge is based on the interest margin (differences between loan interest rates and a reference rate) multiplied by the outstanding loan balance[1]. The loan service charge covers activities associated with financial institutions channelling funds from depositors to borrowers. The ‘pure’ loan interest flow is derived as the difference between the mortgage interest payment and the loan service charge.

The loan service charge is included in Gross Domestic Product (GDP), as gross value added (GVA) of the Finance industry, Gross operating surplus (GOS) of financial corporations, and an expense item of GOS of dwellings owned by persons. The ‘pure’ loan interest flow is recorded in the household income account as dwelling interest payable[2].

Cash rate changes made by the Reserve Bank of Australia (RBA) lead to changes in dwelling interest payable. This series began to rise in June quarter 2022, when the RBA started to increase the cash rate to control rising inflation. The loan service charge has remained relatively stable throughout the time series reflecting relatively stable margins, however in September quarter 2022, financial institutions increased their margins on their loan products as shown by the uptick in the loan service charge. In March quarter 2023, total households’ mortgage interest payments were $28.0b, made up of dwelling interest payable of $22.2b and loan service charge of $5.8b.

Recent trends in dwelling interest payable

Dwelling interest payable by households increased 11.5% in the March quarter 2023 and was more than double the amount paid a year ago as reflected by the through the year growth of 106.8%. Prior to June quarter 2022, quarterly growth in dwelling interest payable decreased for a sustained period, especially through the COVID-19 pandemic. In June quarter 2020, during the height of the pandemic, dwelling interest payable by households was 80% of the amount payable in June quarter 2019.

During 2020, the RBA reduced the cash rate from 0.75% at the start of the year to a record low of 0.10% in November 2020 to support the Australian economy during the COVID-19 pandemic. The 0.10% cash rate remained until April 2022. Lenders passed on the RBA’s cash rate cuts to their mortgage products and provided additional discounts to compete for borrowers. The mortgage rate cuts were facilitated by financial institutions’ access to low-cost term funding provided by the RBA.

Mortgage loan balances saw rapid growth in the period from March quarter 2020 to March quarter 2022[3]. This increase coincided with the record low interest rates, and government policies that supported first home buyers.

Despite the considerable growth in mortgage loan balances over the two-year period to March quarter 2022, dwelling interest payable decreased as interest rates continued to decline. During this period, many new and existing borrowers took out or refinanced to fixed-rate mortgages, at a time where fixed-rate mortgage interest rates were at record lows. The stronger preference for fixed-rate loans contributed to dwelling interest payable declining prior to June quarter 2022.

Dwelling interest payable increased substantially over the past year following ten cash rate increases, from 0.10% to 3.60% in March 2023. Banks passed these rate increases on to borrowers. The rapid increase in interest rates translated into a surge in dwelling interest payable, despite ongoing competition among mortgage lenders.

As low-rate fixed-rate loans that were taken out through the COVID-19 pandemic expire over 2023 and 2024, borrowers will move on to higher interest rate loans, which will put upward pressure on household dwelling interest payable[4].

Household consumption of rental services

In the National Accounts, residential dwellings are classified as unincorporated enterprises that produce output in the form of housing services. These housing services are consumed by the household sector and are recorded in Household final consumption expenditure (HFCE) of Rent and other dwelling services.

Rent and other dwelling services consists of actual and imputed rents, as well as water and sewerage services. For dwellings rented to other households, the market value of rents paid to the landlord is recorded in HFCE as actual rents. For dwellings which are owner occupied (with or without a mortgage), the value of rents which would be paid for a dwelling with the same characteristics (such as size, location and quality) is recorded in HFCE as imputed rents. The imputation of rent paid by owner-occupiers of dwellings enables the housing service provided by dwellings to their owner-occupiers to be treated consistently with the housing services provided by rented dwellings to their tenants. In effect, the owner-occupier is considered to be a landlord renting to themselves.

The National Accounts treatment of owner-occupied housing differs from the treatment for the CPI, which measures owner-occupied housing on a net acquisitions basis. This approach measures the transaction price of the dwelling (excluding land). For more information, see the recent feature article on CPI International Comparisons.

Actual and imputed rents are published separately in the Australian System of National Accounts. Rent and other dwelling services accounted for just over 20% of total HFCE in the past 15 years, with imputed rents the largest component (Figure 3).

Annual current price estimates of HFCE rents are derived from the 5-yearly Census of Population and Housing, while the quarterly series are derived using the ABS Building Activity Survey (quantity) and the Consumer Price Index (prices).

Annual chain volumes measures of HFCE rent reflect the stock of residential dwellings in Australia and are estimated using the perpetual inventory method. This method estimates the stock by accumulating investment in dwellings and adjusting for retirements and depreciation. For further information on the perpetual inventory method, refer to Chapter 14 of Australian System of National Accounts: Concepts, Sources and Methods. Annual estimates are converted to quarterly estimates using linear trend interpolation. HFCE rents are usually one of the most stable HFCE series in volume terms and generally align closely with quarterly growth in Estimated Resident Population (ERP).

Recent trends in HFCE Rents

Rental prices have been the predominant driver of growth in HFCE Rents (actual and imputed) in current price terms in recent years. An Implicit Price Deflator (IPD) is a National Accounts price measure derived by dividing a current price estimate by the corresponding volume measure. The IPD for HFCE Rents aligns closely with the published CPI Rents series (Figure 4), with recent increases reflecting tightness in the rental market.

Rental market conditions can vary significantly between states due to different supply and demand conditions. Since 2020, rental prices in Western Australia, Tasmania and the Australian Capital Territory have grown more strongly than in other states. Conversely, rental prices in New South Wales and Victoria have been subdued until recent quarters due to a higher prevalence of rent reductions, higher vacancy rates and larger declines in net internal and overseas migration in Sydney and Melbourne (Figure 5). For further information, see the joint RBA and ABS information paper New insights into the rental market.

Income earned on dwellings

As noted above, homeowners in the National Accounts are regarded as operating businesses that produce housing services. Dwellings Gross Operating Surplus (GOS) owned by persons measures the net contribution to the value of production, which accrues to owner occupiers. It is calculated as gross rent (actual and imputed) less operating expenses.

Operating expenses associated with owning a dwelling include repair and maintenance, building insurance and the loan service charge.

Recent trends in Dwellings GOS owned by persons

Prior to December quarter 2019, quarterly growth in Dwellings GOS was relatively stable. Dwellings GOS fell 1.4% in the June quarter 2020, aligning with the first recorded decrease in CPI Rents. A number of states introduced policies to limit rental price increases during the pandemic due to the containment policies negatively affecting employment.

Over the past 12 months, dwelling rents have increased significantly, coinciding with low vacancy rates nationally. Demand for rental properties increased as overseas migration picked up, particularly through the return of international students. Homeowners’ operating expenses also increased over this time but have not experienced the same rate of growth as rents. Consequently, Dwellings GOS owned by persons grew 2.7% in March 2023, the highest quarterly growth since December quarter 2009.


  1. The reference rate for banks in the Australian National Accounts is calculated as the midpoint between interest rates charged on loans and deposits.
  2. GVA volume measures are available from Table 6 Gross Value Added by Industry, Chain volume measures, and current price estimates from Table 45 Gross Value Added by Industry, Current prices. Financial corporations GOS and GOS of Dwellings owned by persons are available from Table 7 Income from Gross Domestic Product, Current prices. Household dwelling interest payable is available from Table 20 Household Income Account, Current prices.
  3. See Australian National Accounts: Finance and Wealth, December 2022, Table 52 Financial Accounts Summary of Loan Outstandings to Households for Housing by Type of Lending Institution.
  4. See How Are Households Placed for Interest Rate Increases? (RBA, 2022), Graph 10.
Back to top of the page