Housing industry says latest interest rate increase could be NT’s economic tipping point

The Territory’s housing industry has slammed the latest interest rate hike, saying a recent phenomena is distorting the economy. Read what it is.

The Territory’s housing industry has slammed the Reserve Bank’s latest interest rate hike.

Housing Industry Association executive director Luis Espinoza said the nation’s “fastest” rate increases in a generation would hit economic activity in the Northern Territory and stymie future growth.

“With all the signs that economic growth will continue to slow down in 2024, there is little to gain with the continuing rate rises by the Reserve Bank of Australia,” Mr Espinoza said.

“We are currently at the fastest rate increase of a generation and it’s evident that the consumer is hurting as economic activity slows further down and halts future growth.

“Although the RBA’s aggressive strategy of rising the cash rate since May 2022 is yet to impact unemployment or inflation, this latest rate hike seems unnecessary and will further slow the housing construction market.

Luis Espinoza, executive director Housing Industry Association. Picture Julianne Osborne

Mr Espinoza said the housing crisis continued to be a “major issue” amid record high migration growth, putting pressure on homeseekers finding suitable accommodation.

“It is a fact that state and territory governments are looking at ways to get land and homes to market as soon as possible and the NT is no different with the formation of the NT Housing Alliance by the Chief Minister,” he said.

“The aim is to cut away red tape, but the biggest hurdle at the moment is consumer confidence as the economy keeps slowing down and prices keep rising.

“Skilled trades shortages are still hampering and slowing down current projects.”

He said boom and bust cycles were not the way to keep the building construction industry stable.

“The Reserve Bank of Australia should have waited until 2024 when the true impact of the pandemic was felt before their next rate adjustment,” Mr Espinoza said.

The Reserve Bank on Tuesday announced Australia’s 13th consecutive rate rise by 25 basis points to 4.35 per cent, the highest rate since 2011.

Tim Reardon, HIA Chief Economist.

Mr Espinoza’s comments align with HIA’s senior economist Tim Reardon who described Tuesday’s RBA interest hikes as “unnecessary” and blamed an immigration surge in part on the increase.

“Today’s rate rise is unnecessary and will cause further contraction in new home building, constraining the supply of new homes,” Mr Reardon said.

“The impact of strong population growth on the national economy and home building cannot be overstated.

“It is helping restore government finances, sustaining retail activity and addressing shortages of skilled workers and it will support new home starts over the course of the decade.

“But strong migration is also obscuring the adverse impact of rising interest rates on key economic data, such as GDP, retail expenditure and house prices.

“Stable and reliable migration has been a cornerstone of Australia’s economic growth.

“This has been disrupted by two years without migration and then two years of catch up.

“This disruption to migration is now distorting the RBA’s decision making.”