Today's release of the ABS March quarter inflation figures show a welcome deceleration in the inflation rate, particularly in new home purchase costs, but more needs to be done to address entrenched inflation in the sector.
Master Builders Australia chief economist Shane Garrett says the annual inflation rate slowed to 7.0 per cent during the March 2023 quarter. The quarterly pace of price expansion is now at its weakest since late 2021.
"Encouragingly, there has been a significant deceleration in new home purchase costs. Previously, this had been one of the biggest sources of inflation pressures.
"It shows that further efforts to reduce the cost of creating new homes will have much wider benefits in terms of dampening inflation.
"Less favourably, rental inflation surged to 4.9 per cent and is now rising more quickly than at any time since 2009.
"Higher interest rates have contributed to worsening rental costs as many landlords have passed mortgage interest increases on to tenants," said Mr Garrett.
Master Builders Australia CEO Denita Wawn says shortages in the rental market have been exacerbated by the limited number of higher-density homes built over recent years.
"Medium and high–density home building is much more sensitive to interest rate fluctuations.
"In addition to higher interest rates, supply of new housing continues to be impeded by a range of factors including insufficient supply of titled residential land, high developer charges, inflexible planning laws, ongoing community opposition to development and long lead times for delivering new supply.
"For many builders and developers, initiating large-scale home building projects in the current environment is simply too risky. Governments need to act to address this major problem.
"The Housing Accord will assist with national coordination to boost housing supply, but we can't wait until 2024; state action is needed now," said Ms Wawn.
