Rate cut must be passed on

Australia’s peak residential building industry association, the HIA, is urging banks to insure the recent interest rate cut reaches customers.

WITH the RBA cutting its benchmark cash rate to a new record low of 0.75 per cent, the third cut in four months, HIA’s Senior Economist, Geordan Murray said that lending institutions need to pass this on to both households and businesses if it is to have the intended impact.

“The RBA cited a number of concerns about the economic outlook that justify its further easing,” Mr Murray said.

“A key concern relates to underutilised labour force capacity and the impact of subdued demand from the household sector in the face of persistently low wage growth.
“The recent uptick in the market for established homes should allay concerns that further falls in home prices and the housing wealth effect could continue to apply a brake on household spending.
While successive rate cuts have improved the market for existing homes, those same conditions have not yet translated into improved demand for new homes.
“If passed on, the rate cut will be great news for homebuyers, particularly first home buyers pursuing their home ownership aspirations,” Mr Murray said.
“If the rate cut is passed on to business customers it will go a long way to supporting those businesses in the residential building industry enduring challenging trading conditions.”

Mr Murry said that passing on the rate cut in full would not just improve residential building, non-residential building or engineering construction, it would create employment.

“Any increase in demand for construction will generate more jobs,” he said.

He also called for other measures to stimulate growth the in the building sector.

“This recent interest rate cut must be complemented by further action from State and Federal governments to address the concerns about the broader economic outlook raised by the RBA,” Mr Murray said. “The construction sector can play a bigger role in lifting the Australian economy.
“There is an opportunity for government to invest in infrastructure that enables the private sector to improve productivity and lifts the living standards of the community.”