Builders claim rate rise too early

The decision to increase the cash rate by a further quarter of 1% is disappointing and too early, according to Master Builders Australia, the peak body for the building and construction industry.

MBA’s Chief Executive Officer Wilhelm Harnisch says the November rate rise has had an effect on consumer behaviour in the housing market.

“The impact of the November rate rise should have been given more time to flow through before action was taken to increase interest rates further given the particular sensitivity on consumer behaviour because of the current high levels of current household debt.”

Harnisch says the challenge for the RBA in managing down the residential property market to what it believes to be a more sustainable level is not to induce an industry-wide bust at the same time.

“A recent survey of builders conducted by Master Builders shows that expectations of future activity were already softening in late October/early November. This finding is also supported by anecdotal evidence that the residential sector is slowing down.”

He says these trends will no doubt be accelerated by the combined effect of the interest rate increases of November and December 2003.

“The Reserve Bank must now hold back and should monitor developments in the building industry very closely over coming months to assess the impact of the rate rises to date.

“The rate rise of 0.25%age points will see monthly mortgage payments increase by a further $30 on an average variable home loan of $180,000 over 25 years.”