Housing industry push to ease credit squeeze

State and Territory Governments must seize the opportunity presented by the RBA rate cut to to get the housing market moving again, says Master Builders Australia. “Today’s reduction in the RBA cash rate brings it to a new all-time low of 1.25 per cent," Master Builders Australia chief economist Shane Garrett said. "Never before have we gone for almost a decade without an increase in interest rates. The RBA has cut interest rates 12 times since late 2011." Combined with the recent APRA review of lending criteria and the new FHB Deposit Scheme, today’s decision represented more good news for those seeking to become home owners for the first time, Mr Garrett said. “With over 350,000 small businesses operating in the residential and commercial building sector, we urge lenders to pass today’s rate cut on to them fully and without delay,” he said. “A real opportunity now exists for dragging the housing market back in the right direction. In finalising their budgets over the coming days and weeks, state and territory governments should seize the chance to get the housing market firmly back on its feet by enhancing incentives for First Home Buyers and taking initiatives to support new home building.” The Housing Industry Association urged the banks to move in step with the RBA. “Today’s 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,” HIA chief economist Tim Reardon said. “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." If banks did 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, Mr Reardon said. “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,” he said. https://www.i-q.net.au/main/key-lessons-from-the-property-downturn

Housing industry push to ease credit squeeze

Industry Queensland

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