“Today’s (June 4 2019) decision by the RBA, combined with fiscal stimulus and the retention of current capital gains tax arrangements, will go a long way to supporting confidence in the housing market,” stated HIA’s Chief Economist, Tim Reardon.
“An easing of interest rates is necessary in light of the slow rate of economic growth.
“On their own, a cut to interest rates will not be sufficient to stop the downturn in building activity.
“The credit squeeze gathered momentum throughout 2018 and accelerated the downturn in building activity. This will continue to impact the level of home building and the wider economy until these lending restrictions are eased.
“The amount of money that banks are prepared to lend households has been slashed by around 15 per cent over the past year.
“APRA’s regulatory restrictions and increasingly conservative lending practices by banks are the cause of the credit squeeze.
“The impact of these restrictions are now being seen in the wider economy. Households have clearly tightened their belts in light of falling house prices which have been exacerbated by the tight credit limits.
“If banks do not pass on the full rate cut they will have magnified the impact of APRA’s rule changes and stifled the ability of the RBA to use monetary policy to rectify the damage caused by the credit squeeze.
“Federal income tax cuts, the First Home Loan Deposit Scheme and public infrastructure investments will also be necessary to assist in stimulating employment growth and help drive the residential building industry out of this downturn,” concluded Mr Reardon.
Source: HIA
