The Commonwealth Bank of Australia, Australia’s largest lender, has issued a warning: a “new economic era” marked by slower growth, higher borrowing costs, and structural change is upon us. For those living and investing in Melbourne, this is a moment to reassess financial strategies, property holdings and future plans.
At Roger Boghani, we keep a close eye on announcements and work with clients every day to navigate the changing landscape.
In this post, we’ll unpack what CBA is warning, explore where Melbourne sits in the shifting landscape, and offer practical steps you can take to stay ahead.
What CBA Is Warning About
CBA’s chief economist, Luke Yeaman, says we have entered a new economic era “with rules that are very different to the last.” Here are the key themes:
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Higher living and borrowing costs: CBA predicts that household and business borrowers should expect more persistent pressure on interest rates and cost of living.
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Slower productivity and growth: The forces that boosted growth during the decades of globalisation—outsourcing, low interest rates, stable inflation—are no longer a given.
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Global geopolitics and structural shifts: Yeaman argues that the centre of gravity has shifted. The era of cheap capital, frictionless trade and seamless supply chains is giving way to higher geopolitical tension, industrial policy, supply-chain rewiring and national economic security.
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Implications for property, households & investors: As the backdrop changes, there are knock-on effects for homeowners and property investors — particularly in cities like Melbourne.
What This Means for Melbourne
The Property Angle
Melbourne is currently navigating a complex property environment. With median house prices north of $1 million and household debt at high levels, the margin for error is narrower than in prior decades. For example, data suggests Melbourne’s median is rising steadily even as growth slows.
In an environment of elevated interest rates and slower income growth, property holders in Melbourne face some specific challenges:
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Greater servicing pressure: Even a small interest-rate rise or income stagnation can have outsized effects.
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Affordability for first-time buyers: The “budget hole” between earning capacity and entry price is widening.
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Slower capital growth: While Melbourne hasn’t experienced the extreme boom of Sydney, this also means it may not bounce as sharply, making strategy and structure more important than hoping for rapid price jumps.
Local Examples
Consider a household in Melbourne’s middle ring (say Glen Waverley or Preston) buying for $800,000 at a 5.5% interest rate over 30 years. If rates remain elevated or even increase, the repayments could exceed the budget that those buyers had assumed, and cost-of-living pressures (utilities, transport, childcare) squeeze them further. On the investment side, take a flat in Melbourne’s outer-west (Werribee or Melton) where rental growth is cooling and vacancy rates are creeping up. If an investor has high leverage and a minimal financial buffer, the combination of slower rent growth, higher costs, and slower capital growth becomes risky.
Comparison: Melbourne vs Sydney
Sydney often dominates headlines for its high median prices (~$1.7–$2 m+). That also means greater vulnerability to rate rises and global shocks. Melbourne offers somewhat more “breathing room”, though it’s still high by historic standards. The difference: Melbourne may offer slightly more margin for strategy rather than speculation, but it still requires disciplined planning.
Why the Warning Is Important Right Now
There is still a risk of rising interest rates. CBA says that the neutral interest rate (the rate that keeps inflation and unemployment stable) may be higher than many people think. This means it may take time to get back to the “old normal” of very low credit rates.
- Household resilience is being put to the test: Many families have less money saved up and more debt than they did in previous cycles. This makes it harder for them to handle shocks.
- The property market may slow down: prices may not crash, but the rate of growth may slow down a lot. People who own property or invest in it should change their expectations.
- The “buy, hold, hope for strong growth” strategy is no longer as reliable. Instead, the focus is now on cash flow, flexibility, buffers, and long-term growth.
What to Look For: Important Signs
- Wage growth vs. inflation: If wages stay low and costs keep going up, families will have less money to spend.
- Unemployment and underemployment: Melbourne’s housing market needs a strong job market to stay strong.
- Signals for housing supply and demand: More listings and less demand may mean that the market is slowing down.
- Interest-rate path and policy settings: There is no clear agreement on rate cuts. The CBA thinks that cuts might be less severe or take longer to happen.
- Trends in capital growth: Pay attention to how prices actually change, not just what people say.
- Global risk events: In this new economic era, a shock (geopolitical, supply chain, or energy) could cause problems in a lot of places at once.
Practical Steps for Families & Investors in Melbourne
For Owner-Occupiers
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Review your budget assuming no interest-rate cuts for 12-18 months.
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Build a buffer: ideally, cover 3-6 months of repayments.
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Avoid stretching your entry point; treat borrowing conservatively.
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If you have variable rates, consider whether locking part of your loan makes sense — especially in high-cost suburbs.
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If possible, direct extra payments to reduce principal sooner rather than later.
For Property Investors
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Stress-test your investment: what happens if rental income falls 5-10% or interest rises 1%?
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Prioritise cash flow over pure capital growth hope. Melbourne’s outer regions may still yield, but the margin is thinner.
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Consider diversification: don’t rely solely on one suburb or one type of asset.
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Keep an eye on operational costs (maintenance, risk of vacancy, regulatory pressures).
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Review your exit strategy: If you assumed high growth would bail you out, revise that expectation.
For Any Long-Term Planning
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Use this environment as a chance to lock in better financial habits: consistent savings, low non-mortgage debt, and flexibility.
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Keep your horizon long. In slower-growth regimes, compounding returns and patience matter more.
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Seek tailored advice — especially in Melbourne’s varied market — so your structure aligns to your situation, not generic assumptions.
Why This Matters to Melbourne’s Market
Melbourne remains distinctive: a large owner-occupier base, many suburbs still underpinned by infrastructure investment (e.g., metro rail, suburb gentrification and regeneration), and a strong services economy. But it also faces headwinds: affordability concerns, interstate migration patterns (some buyers moving to Queensland or WA for value), climate adaptation costs (flood/sea-level risk in some bayside suburbs), and supply-chain inflation pushing costs of construction higher.
When a major bank like CBA issues a warning of structural change, it isn’t speculation — it reflects deep and broad conditions. For Melbourne homeowners and investors, that means the “easy decades” may be behind us. The next chapter requires more planning, not less.
Final Thoughts
The era of ultra-cheap money, rapid property inflation and carefree borrowing is waning. Australia is entering a period where discipline, flexibility and realistic expectations matter more than guesswork.
For Melbourne—still one of Australia’s most liveable cities, but also one of its most expensive—this doesn’t mean retreating from property or borrowing altogether. It means adjusting your strategy: borrow less, buffer more, and plan longer.
At Roger Boghani Finance & Property Advice, we believe this is the moment to pause, assess and act intentionally. Whether you’re buying your first home, upgrading, or reviewing an investment portfolio, now’s the time to revisit your assumptions.
Because when everyone else hopes for a return to the old normal, being ready for what’s next gives you the head start.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult a qualified financial advisor before making any investment or financial decisions.
