Skip to content

Weakness in Australia’s residential construction industry set to continue says HIA

According to the Housing Industry Association, the voice of Australia’s residential building industry, the RBA had the option to reduce rates and deliver badly needed support to businesses and households but by failing to move, the weaknesses in the residential construction industry will merely be prolonged.

‘Outside of the mining sector, growth in other sectors of the economy is quite weak. This includes residential construction where activity is at its lowest in almost a decade. Lower interest rates are badly needed to help place the industry on a sustainable growth path and to give businesses a bit of breathing space in terms of interest costs,’ said Shane Garrett, HIA’s senior Economist.

‘Our economy needs a strong residential building sector to substitute for declining construction activity in the mining sector. The scope for further reduction in the cash rate exists, despite the RBA’s concerns about inflation. It must be remembered that the inflationary impacts of the recent dollar decline will be limited by the considerable slack that exists across sections of the economy as well as the use of fixed price contracts with suppliers,’ he explained.

‘Accordingly, the RBA should not allow worries about inflation to hold it back from providing necessary stimulus to the economy. Since November 2011, the banks have withheld up to 35 basis points of rate reductions from small business and mortgage borrowers. The RBA’s failure to move means that the banks now have the opportunity to seize the initiative. A unilateral rate cut from them over the next couple of days would add to the prospects for a decent and a sustainable residential construction recovery, which would directly or indirectly benefit tens of thousands of business, including the banks themselves,’ he added.

Meanwhile, the HIA has expressed little surprise at the news that a survey of community service providers lists housing availability and affordability as the biggest problem facing the sector and the greatest drain on resources.

The survey by ACOSS of 500 service providers states that a lack of affordable housing is having a ‘devastating impact’ and that nearly 70% of housing and homeless service providers report that they struggle to meet demand.

‘There has been a failure by successive governments at a state and federal level to address the fundamental constraints to housing delivery,’ said HIA chief executive for industry policy Graham Wolfe.
 
‘Residential construction is currently experiencing its longest trend decline in post war history, which is being driven in part by the excessive and inefficient taxation on housing, a tight credit supply and state planning systems that constrain the timely and cost effective delivery of housing,’ he pointed out.

‘When there is shortage of homes being built, this impacts on the rental market at all levels. Families that would have otherwise been owner occupiers instead now compete for rental properties. This places cost pressures on those already in the rental market. Families that can now no longer afford the rental accommodation they need due to more competition, move to a lower price point and so on it goes,’ he explained.

‘At the end of this cascading effect is the people who are the most vulnerable, but they have nowhere else to go and this has a social and economic cost to the entire community,’ he added.

Related