Rapid RBA rate hikes will run builders into ground, industry body warns
The building industry's peak body has urged the Reserve Bank to ease off rate hikes or risk the financial ruin of already-strained companies in the construction sector.
After the RBA imposed its third rate rise in as many months, taking the official cash rate to 1.35 per cent, Master Builders Australia boss Denita Wawn claimed the central bank was now "turning the economic dial too far" and moving too fast.
The RBA spikes have left millions of Australian households paying hundreds of dollars more every month on their mortgage, while others who were considering building or buying a new home may now be recalculating the viability of such a move.
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Australia's central bank has triggered a third interest rate hike in as many months. Peter Rae
"Our industry is disproportionately affected by interest rises," Wawn said.
A hard economic landing would "put at risk the viability" of many builders who survived the pandemic and were now being tested by severe supply chain pressures, she said.
"Many now lack the resilience to withstand more sharp economic shocks," she said.
The RBA hikes have caught everyone by surprise, because throughout all last year the bank's governor Philip Lowe had said interest rates would not likely rise until 2024.
Yesterday Lowe said more rate rises were likely in the coming months.
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Wawn said the building association acknowledged the RBA had to tackle the dire effects of inflation, but she queried Lowe's aggressive pulling of levers.
"We are concerned that a continuing regime of steep rate rises risks turning the economic dial too far in the opposition direction and stalling economic growth needed to for the continuing recovery from COVID," she said.
"Time should be given to observe the impact of the monetary policy changes in the economy."
Most market analysts have predicted the cash rate could end up somewhere between 2 per cent and 3 per cent.
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The RBA has been increasing the cash rate in an effort to tackle high and rising inflation. Scott McNaughton
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Many building and construction companies have struggled in turbulent headwinds since 2020, where the rising costs of materials, worker shortages and unviable fixed-cost contracts have sunk major players across Australia.
As construction giants like Probuild and Condev collapsed, a cloud of doubt has been over billions of dollars of major projects.
Sub-contractors and tradies have been left out of pocket in the fallout, and many would-be homeowners have watched projects stall and lie dormant.
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