Builders welcome pause on rate hikes

The building and construction industry has welcomed the pause on interest rates amid the difficult economic climate, but is urging further government reform to reduce inflation.

Last week, the Reserve Bank of Australia (RBA) decided to end its record run of 10 rate rises, and Master Builders Australia chief executive officer Denita Wawn said it was the right call.

“Interest rate rises coupled with rising inflation have forced building and construction activity and new homes sales to slow sharply over the last few months.

“A strong building industry is the foundation of a strong economy. The close interdependence between the health of the construction industry and the economy’s fate is clear to see in the current environment”

“We know there’s often a delay for the impact of interest rate hikes or cuts to flow through the economy.”

She said the RBA had recognised the negative impacts of rapidly rising interest rates on accelerating rental prices and construction activity.

“There is now an opportunity for government to step up with bold fiscal policy decisions to complete the job of bringing inflation back into line.

“We hope governments do not miss this moment for reform in upcoming state and federal budgets.

“The government needs to take the necessary steps to ensure we are not overdependent on interest rates as the tool for controlling inflation.

“By doing so, we can help take some of the pressure off the shoulders of mortgage holders and business owners.

“The upcoming federal budget should focus on policies that ensure spending is carefully targeted at boosting productivity for business and allowing for more favourable outcomes when it comes to the cost, quality and quantity of building and construction output.

“There is no silver bullet; this will take a concerted effort by all levels of government working in collaboration with industry.”

The Victorian branch of Master Builders Australia is also pushing for an urgent review of Victoria’s Domestic Building Contracts Act following the collapse of Porter Davis.

Liquidators were called in at Porter Davis on March 31, leaving 1,500 unfinished projects in Victoria alone and affecting hundreds more across Australia, and putting 410 staff out of work.

Master Builders Victoria interim chief executive offce Michaela Lihou said the present lack of flexibility in fixed priced contracts placed unrealistic pressure on builders, which ultimately had a negative affect on homebuyers instead of protecting them.

“The rigid lack of flexibility in these contracts, on top of supply, skills and labour shortages, as well as inflation and interest rate rises are continuing to impact the building and construction industry.

“MBV wants to see an urgent review of the Domestic Building Contracts Act (1995) to include cost escalation clauses and to review the staged payments.

“Our argument is simple. A review of a contract, which may include some fair and reasonable price rises based on data, is better than an unrealistic fixed contract that drives a builder into a wall.

“Nobody wins when a builder collapses, obviously including consumers who clearly aren’t being protected by fixed contracts when they end up with an unfinished build or no home.”

She said the existing payment structure within the building and construction industry needed to be reviewed to better reflect how builders dealt with the challenges in the sector and their impacts on cashflow.