I reported this week how the Reserve Bank of Australia (RBA) disagrees with the federal budget’s forecast of new housing investment, suggesting that the government may be overestimating housing supply by more than 10,000 homes over two years.
The RBA expects dwelling investment to fall from late 2027 due to construction constraints. By contrast, the Treasury expects strong growth to continue.
Economists say the RBA appears more aligned with current market conditions, such as labour shortages, rising input costs and builder insolvencies.
“The differences between Treasury’s economic forecasts and those of the RBA are significant and hard to reconcile”, Deloitte Access Economics partner Stephen Smith said.
“The RBA appears to be taking account of current market conditions and constraints in the construction sector to a greater extent than Treasury”.
My view aligns with the RBA given the strong headwinds facing the sector, including:
- Rising interest rates
- Rising material input costs
- Shortage of construction workers
- Falling home prices.
The SMH reported that an internal briefing from the RBA gave a harsh assessment of Labor’s first term housing agenda, noting that it did little to boost supply and likely contributed to rising prices, including via excessive levels of immigration:
The bank documents show its policy experts were critical of policies such as Labor’s Help to Buy share equity initiative and an expansion of a scheme allowing people to buy a house with a 5% deposit.
“In recent years, many policies that subsidise [first home buyers] – are just demand side measures, pull fwd purchases; many of the view this just translates into higher prices,” they wrote. “Being characterised as a demand side measures to bridge the gap until supply is online”…
Bank officials note that key levers at the government’s disposal, the “main way the [government] influences” housing, had “not changed” as a result of Labor’s first-term housing agenda.
Those areas include “migration policy”, according to the internal talking points…
Indeed, Labor has run the most extreme immigration program in the nation’s history at nearly double the daily rate of the prior two governments:
The 2026 federal budget upwardly revised net overseas migration by 55,000, which will ensure that housing demand via population growth will continue to exceed supply.
The number one solution to Australia’s housing market is obvious: slash immigration. Otherwise, the housing shortage and rental crisis will persist.
