RBA rate cut will help residential construction: HIA's Harley Dale

The further reduction in interest rates by the RBA boosts the prospects of the residential construction industry mounting a sustainable recovery.

As we enter mid-2013 there is still no evidence of a sustainable national recovery in residential construction, despite such evidence being crucial to a successful rebalancing of Australia's economic growth.

Today’s move is therefore welcome news for the industry and a prudent decision by the RBA.

Australia's banks now need to pass this 25 basis point cut on in full and in rapid time, to business as well as household customers.

Meanwhile, the federal government needs to act decisively to complement easier monetary policy by using next week’s budget to begin reforming the excessive tax and regulatory cost base which acts as a major constraint on new housing activity.

Policies to reduce inefficient taxation and excessive regulation on new home building will unlock billions of dollars of economic activity and generate much needed revenue for the government.

A 1% reduction in red tape would alone generate $1.15 billion worth of economic activity per annum while obviously improving the nation's productivity.

A week out from the federal budget it is disappointing that amidst the fiscal options available, the silence around reform measures that could boost the nation’s revenue base is deafening.

Harley Dale is chief economist at the Housing Industry Association.