The Reserve Bank of Australia should cut interest rates now to avoid confidence and property market activity spiralling any lower, according to the Housing Industry Association.
A catalyst is needed to remove the risk of a rout, the HIA claimed, with interest rate cuts the quickest and most appropriate way to provide this catalyst, according to HIA chief economist Dr Harley Dale.
“Uncertainty and confusion are further damaging falling confidence and will act to aggravate softness in the domestic economy in the absence of interest rate relief,” said Dr Dale.
“New housing hit a wall in mid-2011 and residential building activity was heading towards one of the lowest levels in the last fifteen years - and this is before the latest bout of weakness hit the global economy.”
New building approvals are down by 15.5 per cent on a year earlier and down by 13.5 per cent in the first half of 2011 when compared to the first half of 2010.
New home lending is down by 2.3 per cent on a year earlier and down by 13.7 per cent in the first half of 2011 when compared to the same period in 2010. Furthermore, land sale volumes are at a ten year low, Dr Dale said.
"The risk is that new home starts could fall lower than their level during the GFC trough," Dr Dale said.
"HIA has long highlighted the need to consider housing stimulus measures. New housing weakness was already accelerating mid-year and no further delay can be afforded. HIA has called on the Treasurer to implement a range of stimulus measures to resuscitate the home building industry."