Steady RBA rate is only part of the story: HIA's Harley Dale

Steady RBA rate is only part of the story: HIA's Harley Dale
Steady RBA rate is only part of the story: HIA's Harley Dale

GUEST OBSERVATION

A widely expected ‘no change’ decision has now been announced over three consecutive months.

There is still the possibility of a further rate cut this cycle and chatter about this prospect will ebb and flow through the remainder of 2015.

A very low mortgage rate environment is very supportive of new home construction activity. The RBA’s signal that they won’t be taking rates higher in 2015/16 is obviously welcome.

Governments can complement the RBA’s current interest rate environment by progressing vital economic and taxation reform. The imperative for supply-side reforms in housing around planning timelines, land supply, infrastructure delivery, and inefficient taxation has never been greater.

Successful reform outcomes would generate improved economic and productivity growth, greatly assisting the rebalancing of Australia’s economic growth.

The credit rationing to residential investors and higher barriers to new foreign property investment is, however, a different story entirely. These moves will have some adverse impact on new home building activity.

You wouldn’t want these controls to get out of hand given new home construction is the key driver of domestic growth through the economy’s current rebalancing.

Harley Dale is chief economist at the Housing Industry Association and can be contacted here.

Tags: 
Interest Rates Reserve Bank

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