WILHELM Harnisch, chief executive of Master Builders Australia, warned of risks to the building and construction industry arising from yesterday’s decision by the Reserve Bank of Australia to raise the official cash rate by a further one quarter of a percentage point, the fourth increase in six months after rates bottomed at three per cent in April 2009.
Harnisch said, “The RBA is embarking on a risky strategy for the building industry considering the still weak state of the economy and the weak housing recovery. Maintaining low interest rates is essential if the interest rate sensitive building and construction industry is to play a positive role in Australia’s economic recovery.
“A higher interest rate policy puts at risk a private sector led building recovery to complement the benefits now flowing from the schools program and social housing initiative that are working to prevent a collapse in the building and construction industry. The rate rise can only exacerbate the credit squeeze facing builders and developers as more commercial and residential projects are put on hold. Higher interest rates will dent home buyer confidence and could pull the rug out from the private housing market as investors stay on the sidelines.
“The rate rise will hold back much needed investment in new residential building and will worsen Australia’s chronic housing supply short-fall. The rate rise will put even more pressure on all levels of government to confront the chronic housing shortage. Governments should not wait until housing becomes more unaffordable and the undersupply worsens before tackling the hard structural reform issues in the areas of planning, developer charges and regulatory costs being planned for housing.
“Master Builders Australia has stressed for many years the need to remove cumbersome and costly planning requirements and solve the problem of state and local government developer charges. This must be the number one issue for COAG in 2010,” concluded Harnisch.
