RBA doesn’t believe Labor’s housing supply story
The Albanese government is failing dismally to meet its target of building 1.2 million homes over five years, commencing 1 July 2024.
Over the first six quarters of the National Housing Accord, actual dwelling completions were tracking 97,400 (27%) below the required run rate to meet the target.
CBA’s latest forecasts of dwelling construction also forecast that actual housing construction will run 315,000 (26%) short of the target by 2028-29, due in part to the war in the Middle East driving up construction costs.
As reported by The AFR’s Luke Kinsella, the federal budget assumes $315 billion in new housing investment over 2026‑27 and 2027‑28 — $13.7 billion more than the Reserve Bank of Australia (RBA), which forecasts $301 billion.
Economists say this gap is highly unusual and suggests 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”.
Seriously, why would dwelling construction rates increase when:
- Interest rates are rising
- Material input costs are rising
- There is a shortage of construction workers
- Home prices are falling.
These macroeconomic conditions point to lower construction rates, as forecast above by CBA and the RBA.
Meanwhile, Labor continues to run an excessive immigration program that was revised upwards by 55,000 in the latest federal budget.
As a result, Labor has ensured that housing demand via population growth will continue to exceed supply.
The solution is simple: slash immigration. Otherwise, the housing shortage will worsen.
