Today鈥檚 monthly inflation indicator for February 2023 is another reminder of how we risk entrenching inflation without appropriately addressing supply-side hurdles, says Master Builders Australia CEO Denita Wawn.
鈥淭he annual rate of inflation has eased back to 6.8 per cent, down from 7.4 per cent in January. While this is a welcome sign that the inflation figures look to have peaked, the rate of decline is happening far too slowly.
鈥淥ver the year to February, the cost of new dwelling purchases was still up by 13 per cent and serves as a reminder of how tackling home building cost pressures more aggressively could contribute to lowering inflation across the economy,鈥 said Ms Wawn.
鈥淚nflation is a hidden tax on everything. It makes people and businesses poorer by eating into our savings and making investments by business less attractive.聽
鈥淚t is particularly bad for construction because of the higher capital requirements for the work we do and how closely construction activity is tied to private sector investment decisions.
鈥淭he cost of housing is not determined in isolation and is heavily influenced by the delivery of critical infrastructure and key non-residential building activity which enables it,鈥 said Ms Wawn.
鈥淯nlike most cost items, rental prices have failed to decelerate during February and are now 4.8 per cent higher than a year ago.
鈥淲hile monetary policy using interest rate rises is starting to show fruits with consumer spending power, the most sustainable solution to the inflationary problem lies on the supply side, by bringing down the cost of doing business.聽
鈥淭his requires issues like labour shortages, materials costs, and the regulatory burden to be dealt with in a focused and urgent manner.聽
鈥淲e need to speed up the rollout of new housing stock on the medium and high-density side of the market to help bring rental inflation down. Housing affordability in the rental market is a growing source of stress for many households.
鈥淚nsufficient supply of titled residential land, high developer charges and inflexible planning laws are also preventing new home building projects from getting off the starting blocks.
鈥淲e hope all levels of government pull out all stops to tackling this very real challenge and ensure legislation that supports housing affordability and home building, like the Housing Australia Future Fund Bill is passed without delay,鈥 said Ms Wawn.聽