Call for interest rates to be cut to boost Australian new homes sector

Interest rate cuts and renewed action on supply side reforms are needed in Australia to halt the on going decline in residential construction activity, it is claimed.

The Housing Industry Association, the voice of Australia’s residential building industry, says there are a range of policies that could help.

‘The residential building industry is a key barometer of Australia’s economic health, but regrettably there is unequivocal evidence of a further deterioration in conditions following a very weak 2011,’ said HIA managing director, Shane Goodwin.

‘Business closures and job losses are mounting and thousands of small businesses face an even more challenging 2012 than last year. The RBA needs to cut rates and the banks need to follow suit in the national interest,’ he added.

He pointed out that there are also a range of government policies deserving urgent attention, including a strategy to encourage state and territory governments to reduce stamp duty on new homes, a highly inefficient tax which contributes to new housing being one of the most heavily taxed sectors of the Australian economy.

The HIA would like to see the introduction of a Building Industry Financing Guarantee to offset the credit crunch which is preventing commercially viable residential developments from proceeding and an amendment of capital allowance provisions to enable accelerated depreciation of new rental dwellings.

It also wants to see the reinvigoration of a programme of structural reform to housing supply which includes extending and enhancing the existing Housing Affordability Fund (HAF); simplifying COAG reforms to focus on tied funding related to reduced planning delays; funding residential infrastructure through the issuance of Federal infrastructure bonds; and providing support for pilot residential projects to be funded by a mix of State infrastructure bonds and Tax Incremental Finance (TIF) programmes.
‘Housing is shelter, a necessity of life. Reducing the cost base of new housing, increasing housing supply, and boosting affordability are not only laudable policy aims, they are essential to a more productive Australian economy,’ added Godwin.