The big three construction and real estate organisations have welcomed this week's interest rate cuts, but say further reductions are needed to boost consumer and industry confidence.

Earlier this week the Reserve Bank cut the official cash rate by 25 basis points to 3.5 per cent.

Master Builders Australia chief executive Wilhelm Harnisch said the move should help consumer confidence but the banks must play their part.

“Anecdotal reports from house builders indicate there are several factors contributing to weak homebuyer confidence, including the Euro crisis, minority government and uncertainty arising from the carbon tax,” he said. “Lower interest rates are a vital precursor to a private sector economic recovery, particularly in the housing and commercial building sectors currently facing very difficult trading conditions.”  

Real Estate Institute of Queensland boss Anton Kardash said the rate reduction was necessary given that recent Australian economic data shows the construction and retail sectors in particular are continuing to experience weak conditions.

“The real estate sector has known for quite some time that interest rates were higher than was necessary and this is starting to be reflected in the succession of weak data that is being reported,” he said. “This rate reduction, if passed on in full by lenders, is another vital step in restoring confidence to our economy, which is the envy of our compatriots overseas.”

Housing Industry Association senior economist Andrew Harvey said the decision to cut rates would help confidence and activity in residential construction and the wider domestic economy.

He said the cut sent a clear signal that the Reserve Bank was serious about two things: insulating the Australian economy from volatility in the world economy and improving confidence and activity in the domestic economy.

“When it comes to monetary policy, expectations are every bit as important as the rate moves themselves, so it’s imperative the RBA sends consistent signals about the direction of rates so that borrowers have certainty... the RBA Board has got this exactly right,” Mr Harvey said. “The attention now is on Australia’s banks which have a social obligation in such volatile times to pass through 100 per cent of the official rate cut to businesses and households.”

At the time of production it was not known if any of the major banks had passed on part or all of the Reserve Bank’s cut.

 

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