Today’s monthly inflation indicator for February 2023 is another reminder of how we risk entrenching inflation without appropriately addressing supply-side hurdles, says Master Builders Australia CEO Denita Wawn.
“The annual rate of inflation has eased back to 6.8 per cent, down from 7.4 per cent in January. While this is a welcome sign that the inflation figures look to have peaked, the rate of decline is happening far too slowly.
“Over the year to February, the cost of new dwelling purchases was still up by 13 per cent and serves as a reminder of how tackling home building cost pressures more aggressively could contribute to lowering inflation across the economy,” said Ms Wawn.
“Inflation is a hidden tax on everything. It makes people and businesses poorer by eating into our savings and making investments by business less attractive.
“It is particularly bad for construction because of the higher capital requirements for the work we do and how closely construction activity is tied to private sector investment decisions.
“The cost of housing is not determined in isolation and is heavily influenced by the delivery of critical infrastructure and key non-residential building activity which enables it,” said Ms Wawn.
“Unlike most cost items, rental prices have failed to decelerate during February and are now 4.8 per cent higher than a year ago.
“While monetary policy using interest rate rises is starting to show fruits with consumer spending power, the most sustainable solution to the inflationary problem lies on the supply side, by bringing down the cost of doing business.
“This requires issues like labour shortages, materials costs, and the regulatory burden to be dealt with in a focused and urgent manner.
“We need to speed up the rollout of new housing stock on the medium and high-density side of the market to help bring rental inflation down. Housing affordability in the rental market is a growing source of stress for many households.
“Insufficient supply of titled residential land, high developer charges and inflexible planning laws are also preventing new home building projects from getting off the starting blocks.
“We hope all levels of government pull out all stops to tackling this very real challenge and ensure legislation that supports housing affordability and home building, like the Housing Australia Future Fund Bill is passed without delay,” said Ms Wawn.