The Reserve Bank of Australia delivered its fourth rate hike this year, more than reversing last year’s cutting cycle and bringing the benchmark cash rate up to 4.6 per cent, its highest level since late 2011.

“Higher interest rates are reducing the capacity of households to purchase a home and the volume of new homes the industry builds,” added Mr Devitt. 

“New home sales have fallen for four consecutive months to August, down by almost 20 per cent for the quarter. 

“Interest rates and tax increases appear set to reduce the number of new homes that would have otherwise been built, without reducing the number of households seeking accommodation. 

“Rising rates make the task of all three tiers of government increasingly urgent.

“It is possible that Australia will experience falling home prices, falling new home construction and worsening housing affordability.

“If interest rates are to remain restrictive because aggregate demand is too strong, governments cannot simultaneously leave untouched all of the structural costs of producing housing and expect to build 1.2 million homes.

“Reducing taxes, infrastructure charges, regulatory costs and delays imposed on new housing would improve affordability while increasing supply.

“The Productivity Commission has identified that the next wave of major productivity gains in housing increasingly need to come from outside the building site.

“Housing productivity should be measured by how quickly and at what cost governments can turn land, labour and capital into a completed home.

“Productivity gains onsite cannot offset the cumulative growth of regulatory changes, taxes and charges that make projects unviable.

“If government taxes on housing are left untouched, then monetary settings will reduce the supply of housing today while inadvertently reducing housing affordability for future first home buyers,” concluded Mr Devitt.

For more information please contact: