An increase in new dwelling construction is expected, as the latest interest rate cut fuels a greater recovery in the housing market.
Head of investment strategy and chief economist at AMP Capital, Shane Oliver, said after a lacklustre response to initial rate cuts in this easing cycle, there are now encouraging signs for a housing construction pick up.
“There are signs of an acceleration in dwelling construction activity, which should help rebalance Australian economic growth over the year ahead,” he said.
Mr Oliver cites a house price increase as one driver of new dwelling construction.
“The past year has seen a huge swing in sentiment towards house prices. A year ago fears were rising that Australian house prices might be on the brink of a sharp fall”.
“House prices have picked up over the last year. This is necessary to encourage developers to boost the supply of dwellings,” said Mr Oliver.
The housing sector will be vital in rebalancing Australia’s economy after the peak of the mining boom.
Housing “boosts economic activity via increased construction but also as new house completions boost demand for household retail items and rising prices boost wealth”.