The Reserve Bank of Australia’s decision to increase the official cash rate by one quarter of a percentage point has been deems a “miscalculation” by the housing industry.
The increase, announced yesterday, will do nothing to alleviate the chronic undersupply of new housing in Australia, claims the Housing Industry Association (HIA).
“There is a big risk that the increase in official rates will blunt consumer and business confidence that is crucial to the prospects for an economic recovery,” HIA chief economist Dr Harley Dale said.
Although there were some encouraging signs, it is still “far too early” to be called an economic recovery, Dale said.
“It was not that long ago we were told that Australia faced the worst economic conditions since the Great Depression. Either that assessment was a dramatic overstatement or the Reserve Bank has miscalculated,” he said.
Master Builders Australia was disappointed with the decision, saying it was “premature” given the weak state of the economy, rising unemployment and a struggling building industry.
Higher rates are threatening to the “unravel previous good work” of the fiscal stimulus packages, MBA chief economist Peter Jones said.
“An early rate rise is disappointing given the industry faces major stumbling blocks and the likelihood of a volatile period ahead,” he said.
“Higher interest rates can only dent home buyer confidence and could take the rug out from under a still fragile housing market,” Jones said.
Master Builders urged the banks not to pass on the rate rise to borrowers.
