As expected, the RBA kept the base interest rate unchanged at 4.35% today. But while interest rate chatter gets the headlines, Australia’s biggest economic and social disaster remains the worsening housing crisis. Michael Pascoe on the RBA calling bullshit on the Government’s housing rhetoric.
The RBA on Tuesday gave the Federal Government reason to hope for an interest rate cut or two before the May election. That dominates the usual headlines and immediate politics.
But tucked away in the bank’s Statement on Monetary Policy (SMP) was a ticking social and economic bomb: our housing crisis is only going to worsen for as far as anything like a credible forecast can. Anthony Albanese’s housing accord target is a joke one month into its five-year time frame.
In the fine print of the SMP, the RBA downgraded its best guess of housing investment over the next two financial years, in the process amplifying its forecasters’ biggest disagreement with Jim Chalmers’ Budget hopes.
The standout disagreement between the Treasury and the RBA in the budget forecasts was what’s supposed to happen with dwelling investment next financial year.
The bank and government more-or-less agreed dwelling investment would remain flat this year, but for 2025-26, Jim Chalmers was seeing rainbows, lollipops and very busy brickies.
Chalmers forecast dwelling investment would suddenly soar by 6.25 per cent. It would need to if there’s to be any hope of meeting Albanese’s brave “one million new homes in five years” pledge, let alone his crazy-brave 1.2 million stretch target.
The week before the budget, the RBA thought dwelling investment this financial year would increase by just 0.2 per cent (i.e. bugger all) and by just 1.8 per cent in 2025-26 (i.e. only a bit more than bugger all).
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RBA revised housing forecast
Now though, the RBA reckons dwelling investment will fall by 0.7 per cent this year (less than bugger all) and increase by only 1.1 per cent next year (closer to bugger all). The one million target is shot.
Just 163,000 housing applications were approved in 2023-24. The dwelling investment forecast is about money, not dwelling numbers, so the same sort of money invested over the first two years of the accord will mean fewer housing starts than last year,
nowhere near the 200,000 needed each year for five years to meet the promise.
If our preeminent independent forecaster is correct (as opposed to Jim Chalmers trying to head off Green inroads built on housing), rents will keep rising, homelessness will keep growing, affordability will keep worsening, and the biggest single cause of our “cost-of-living” pain will remain.
In short, “we’re going to need a bigger boat”. The housing monster eating people won’t be tamed by present policy. Given population growth, we will continue to go backwards.
Ahead of the budget, the National Housing Supply and Affordability Council – the government’s new, independent expert housing intelligence source – forecast that over the accord’s five years, there would be gross new supply of 903,056, but net new supply of only 869,126 while new demand for dwellings would be 1,079,302. Thus way short of the politicians’ promise and 1,897 dwellings worse off than we are now.
Huge gap between promises made and houses built. What’s the scam?
And now the RBA says it will be worse again.
If the bank was more than a waver of the big interest rate stick, it would be making a case for radical government investment in housing. But in fact, it’s nothing more than a waver of the interest rate stick.
As for the alternative, forget it. The Coalition’s announced housing policy makes Labor’s efforts look brilliant. It is simply too dreadful to contemplate.
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Michael Pascoe is an independent journalist and commentator with five decades of experience here and abroad in print, broadcast and online journalism. His book, The Summertime of Our Dreams, is published by Ultimo Press.