Media Release
Master Builders NSW has warned thar reckless government spending is driving up
inflation and interest rates making housing supply and affordability even worse.
Matthew Pollock, Executive Director of Master Builders NSW said the latest rate hike
by the Reserve Bank of Australia was the entirely predictable consequence of
prolonged inflationary pressure driven by a lack of fiscal discipline and that the
housing and construction is bearing the cost.
“The continued reliance on interest rate rises to counter inflation is placing severe
strain on new housing delivery, particularly medium and high-density residential
projects that are essential to addressing NSW’s housing shortfall,” he said.
“This rate hike did not happen in a vacuum. The Reserve Bank has been clear that
inflation remains too high, and it’s also been explicit that elevated public spending is
adding to demand pressures in the economy. Interest rates policy is a blunt
instrument and its now being forced to do the heavy lifting, Matthew Pollock said.
“The construction sector is increasingly being used as the pressure valve for inflation
that has been fuelled up well beyond the control of builders and developers,” he said.
“High inflation, compounded by repeated rate rises, is eroding project feasibility
across the board, Matthew Pollock said.
“For apartment and mixed-use developments where funding costs, holding costs and
risk profiles are already high these settings are pushing more projects into non-viable
territory,” he said.
The latest ABS Consumer Price Index confirms housing is now the single largest
contributor to inflation, driven by rising construction costs, rents, energy prices and
financing expenses.
“Housing inflation is now the biggest driver of overall inflation, yet the policy
response continues to restrict new supply. The policy settings are not working,”
Matthew Pollock said.
The Minns Government is having a real crack at implementing a microeconomic
reform agenda to speed up getting new houses out of the ground, but their efforts
are being blunted by rising inflation. They have now walked away from the Federal
Government’s $3 billion New Homes Bonus program because it is simply not having
the impact needed to meet the Federal Government’s own housing targets,” he said.
“The residential construction sector is caught in a negative feedback loop driven by
ineffective policy. Last week’s inflation data coupled with this second consecutive
rate rise shows that the housing crisis is now spilling over into a broader problem for
the economy,” Matthew Pollock said.
“When projects don’t stack up, homes don’t get built and shortages worsen,” he said.
“The Reserve Bank Governor’s recent comments acknowledging the inflationary
impact of sustained public spending highlight the need for greater balance between
fiscal and monetary policy,” Mathew Pollock said.
“If public spending and ineffective housing policy continues to add fuel to inflation,
interest rates will remain higher for longer,” he said.
“That outcome disproportionately harms sectors like construction that rely on
long-term investment certainty and affordable capital,” Matthew Pollock said.
“We are already seeing price rises for construction materials and fuel levies placed
on certain items given the exposure of construction supply chains to transport costs,”
he said.
“Master Builders NSW is now calling for a reset in economic coordination, with
greater emphasis on fiscal restraint and supply-side reform to relieve inflation without
crippling new housing deliver,” Matthew Pollock said.
“You cannot spend your way out of inflation and then expect interest rates not to
rise,” he said.
“Without improved fiscal discipline, the burden will continue to fall on households,
builders and future home buyers through higher borrowing costs and fewer homes,”
Matthew Pollock said.
Media contact: Ben Carter | Head of Government Relations, Marketing & Corporate Affairs |
0447 775 507 | bcarter@mbansw.asn.au