Industry leaders welcome RBA move but reiterates structural changes are needed
The Reserve Bank of Australia’s (RBA) latest interest rate cut has been met with cautious optimism by leaders in the building and construction sector, who say the move could ease pressures on businesses and households, but warn that deeper reforms are needed to address ongoing productivity and housing challenges.
According to Denita Wawn (pictured left), chief executive of Master Builders Australia, lower interest rates are necessary to reduce operating costs for construction businesses and stimulate demand in the market. “Over the past several months, we’ve heard from builders that consumers are still reluctant to pursue new home building,” she said. “Hopefully, today’s announcement gives them a bit more reassurance.
“The monetary policy settings have achieved their objective of lowering inflation, now we need to look at the industry’s capacity to respond to higher demand and get consumers the best bang for buck.”
Wawn noted that the RBA has highlighted weak productivity growth as a factor that could keep interest rates elevated. She emphasised that unless productivity issues such as labour shortages, regulatory barriers, and inefficient planning systems are addressed, the cost of borrowing will continue to impact businesses and households.
“The industry’s ability to build is constrained by declining productivity including labour shortages, stifling red tape, and poor planning systems,” Wawn said. “With the Economic Reform Roundtable just days away, building and construction industry productivity must be front and centre of discussions, as it is in the national interest to ensure we can deliver the housing and infrastructure Australia needs.”
Tom Devitt (pictured right), senior economist at the Housing Industry Association, believes the rate cut will help support home building activity and maintain employment in the sector.
“Another reduction in borrowing costs will provide a further boost to home building activity across the country that will ensure ongoing jobs growth and economic activity,” he said. “One in 10 employed Australians are engaged in the sector. It provides an important contribution to economic activity.”
Devitt pointed out that while recent rate cuts have made new home construction more attractive, the Reserve Bank’s policy settings remain restrictive and continue to limit spending by households and businesses. He also noted that despite ongoing tax increases and regulatory hurdles, new home starts are expected to rise, supported by population growth and government employment initiatives.
“These same factors are also likely to keep inflationary pressures higher than last decade ensuring that this cutting cycle is relatively short-lived,” Devitt said. “Policymakers cannot rely on the RBA to achieve 1.2 million homes over the five years. More significant structural reforms to regulation and taxation of homes are required to address Australia’s housing shortage.”
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