The building and construction industry and retailers have expressed disappointment with the Reserve Bank of Australia’s decision to keep interest rates on hold today, saying the nation’s central bank missed an opportunity to bolster business and household confidence.
Housing Industry Association chief economist Harley Dale said a rate cut would have been appropriate for the current economic conditions.
“The global and domestic economic outlook remains clouded, within which new housing activity in Australia faces the risk of re-visiting GFC lows,” Dr Dale said.
“Today’s steady interest rate decision follows widespread expectation for a cut and an increasingly aggressive debate regarding what Australia’s banks would and should do with such a cut.
“Against this backdrop, leaving rates unchanged has the potential to weigh down on confidence and non-resource economic activity.”
The Master Builders Association also expressed its concern with the decision to keep rates on hold.
MBA chief executive Wilhelm Harnish said monetary policy needed to be more supportive to underpin activity in the sector, which was “clearly stuck in the slow lane of the economy”.
“Lower interest rates are needed to restore confidence in the building industry and drive a private sector recovery in the housing and commercial building markets,” Mr Harnish said.
“Master Builders is concerned that today’s non decision will mean that the Reserve Bank’s interest rate policy is not contributing to lifting the confidence of new home buyers and investors.
Perth's second largest home builder ABN Group said the Reserve's decision was disappointing for homebuyers.
“The Board’s decision does nothing to improve customer sentiment and provides no extra incentive for homebuyers to take the plunge and get back into the market," said ABN Group managing director Dale Alcock.
However, he believes it is still a good time to build in Western Australia.
“These include the fact that the rental market in WA continues to tighten, which is pushing up rental returns for investors and is culminating in a very low rental vacancy rate of only three per cent, which is well below average.
“In addition, strong employment forecasts for the state remain and trades people are readily available, while construction times continue to be extremely reasonable compared with what we saw during the boom times."
The Australian Retailers Association said its members were reeling after the decision.
ARA Executive Director Russell Zimmerman said the decision was a shocking blow for retailers at a time when there was a desperate need to stimulate consumer spending.
“Over the past 12 months there have been more store closures and retailers going into administration than I’ve seen over the past 30 years. This has a devastating impact on jobs – including employment for those who need the flexible working environment retail offers such as students and working parents.
“Today the RBA served retailers their second blow in two days after December retail trade figures released yesterday confirmed all the signs of conservative consumers, with heavy discounting and interest rate reductions not even enough to convince Christmas shoppers to spend."
UDIA WA chief executive Debra Goostrey was more conciliatory, saying: “While a rate cut would have been welcomed by the development industry as a much needed stimulus to the sector, the RBA has demonstrated its confidence in the fundamental strength and stability of Australia’s economy, and that’s important".
“Keeping interest rates on hold should at least give buyers the confidence that inflation is low, the economy is growing and that it’s a good time to be buying a new home.”