Housing reforms more urgent than budget surplus: HIA

15/03/2012 - The housing industry believes the federal government should ditch its pledge to bring the budget back to surplus in 2012/13 and instead concentrate on reforms that would lift the supply of new homes. Colin Brinsden

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New data released on Wednesday showed that building started on just 33,653 homes during the December quarter, 6.9 per cent fewer than the previous three months and a 13.4 per cent decline than a year earlier.

This was the lowest quarterly number since mid-2009 when the economy was just recovering from the shock of the global financial crisis.

Housing Industry Association senior economist Andrew Harvey calculated that there were nearly 22,000 less homes built in 2011 than the previous year, and that detached housing starts in the private sector had now fallen for eight consecutive quarters.

"Rather than focusing on a short-term budget surplus outcome the Commonwealth Government would be better placed looking at how it can reform housing supply in order to lift home building levels, boost economic activity, and secure important productivity benefits," Harvey said in a statement.

He described the pace of reforms in reducing the high cost of new housing as "glacial" and that the unnecessary social and economic costs were "unsustainable".

Westpac chief economist Bill Evans said continuing softness in the housing market, along with weak economic growth, rising unemployment and higher mortgage rates, are all impacting on consumer confidence.

He said the latest reading of the Westpac-Melbourne Institute consumer sentiment index showing a five per cent drop to 96.1 in March was "disappointing".

"Sensitivity to interest rates has clearly been one factor responsible for this weak print," Evans said releasing the data.

He also blamed a three per cent rise in petrol prices between February and March for the index falling below the 100 level. He said this clearly showed pessimists outnumbering optimists.

Evans said the timing of the February confidence outcome had not fully captured the decision by home loan providers to raise their mortgage rates by an average of 10 per cent when borrowers had been expecting a cut by both the Reserve Bank and retail banks last month.

Opposition treasury spokesman Joe Hockey said the fall in confidence highlighted the fragility of the economy, and that consumers clearly do not trust the Labor government to deliver stability.

"The government must immediately act to restore confidence in the Australian economy by repealing the onerous carbon and mining taxes, which will drive up the price of everything and cost Australians jobs," Hockey said in a statement.

The Reserve Bank board will next meet on April 3.

Evans said since the last board meeting there had been a steady stream of disappointing economic data releases.

"We assess that the case has already been made for lower (interest) rates in Australia but expect that, at this stage, the board is not convinced," he said.

However, he expects a rate cut in either May or June.

Source: AAP NewsWire

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Have your say...

sylvia | 15/03/2012 10:22 1

Ron Walker's co holds frequent real estate exhibitions in S-E Asia selling Australian properties. This keeps market prices high and local get pushed to outer fringes where the Baillieu Real Estate company, whoops Baillieu Government develops the outer lands. What a sweet deal for those two! No manufacturing, but lets keeps on building where there is no infrastructure, no work and will be lots of crime. Australians open your eyes, no more immigration until we have work and can afford housing near cities.

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