Media Release
6 October 2009
PREMATURE RATE RISE RISK
Statement by Peter Jones, Chief Economist
Australia’s peak building and construction industry association, Master Builders Australia,
expressed disappointment with today’s decision by the Reserve Bank of Australia to raise the
official cash rate by one quarter of a percentage point.
Mr Peter Jones, Chief Economist, Master Builders Australia, said “A rate rise is
premature
given the weak state of the economy, rising unemployment and a building and construction
industry struggling to keep its head above water.”
Mr Jones said, “Higher rates threaten to unravel previous good work done via the aggressive
easing of monetary policy and fiscal stimulus packages such as the schools program and
social housing initiatives that were working to prevent a collapse in construction activity.”
He said, “An early rate rise is disappointing given the industry faces major stumbling blocks
and the likelihood of a volatile period ahead.”
“The credit squeeze and economic slowdown caused a massive fall in building approvals that
is now starting to translate into falling construction output and employment, despite
the
Government’s well targeted stimulus measures.”
Mr Jones said, “Higher interest rates can only dent home buyer confidence and could take
the rug out from under a still fragile housing market.”
“Master Builders calls on the banks to limit any rate rise to the official quarter of a percentage
point increase announced by the Reserve Bank today.”
“Residential builders had recently become more optimistic about where activity was heading
but they will now have to overcome the hurdle of higher interest rates
as well as sluggish
investor activity, tight bank lending practices and the phasing out of the first home owners
boost scheme.”
“If RBA rate
rises
work to dampen house prices, incentives to undertake investor-driven
building will be affected and Australia’s chronic housing shortage will become even worse.”
“Master Builders Australia has for many years stressed the need to increase the supply of all
forms of the housing stock by removing cumbersome and costly planning and development
requirements and to do something about uncoordinated and inequitable urban infrastructure
funding policies.”
For further information contact:
Peter Jones, Chief Economist: Mobile 0403 440 838
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