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The Housing Industry Association (HIA) has called on the Reserve Bank to cut the official cash rate when the board meets in August.
HIA senior economist Shane Garrett said a benign inflation outcome for the June quarter and weakness in the labour market provide an environment in which a further rate cut would be appropriate.
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“June’s worrying increase in the unemployment rate to 5.7 per cent indicates a weakening economy in a setting where job security concerns remain a prominent handbrake on residential construction activity,” Mr Garrett said.
“Developments with regard to inflation provide the RBA with considerable room to manoeuvre on interest rates, so why wait and add to the existing uncertain mood as a federal election looms?
“Signs of a new home building recovery are narrowly based and spending on renovations is at a 10-year low. Independent research has demonstrated that a growing residential construction industry has very positive effects on the wider economy.
"A second rate cut for the year on August 6 would bolster the prospects that the body of residential construction demand currently stuck in a pre-election holding pattern can subsequently be released.
“Historically weak levels of home building at a time of an ever-increasing population are constraining Australia's growth and prosperity.
“Commentary is widely focused on another rate cut happening at some point; businesses and households are acutely aware of this. Holding off on a rate cut in August would simply add to the dominating mood of uncertainty.”
