Australian economy looks towards housing sector to maintain growth
Australia could be shifting its focus towards new housing investment to fill the void left in the economy as the resource sector begins to slow, which will be good news for those with home loans.
Australian Chamber of Commerce and Industry (ACCI) chief economist Greg Evans believes the Australian economy has been too reliant on the resources boom and the investment that comes with it, and as it begins to cool off Australia will have to look at other ways to maintain the trend in the country's economic growth.
The Australian economy is growing at an average pace of 3.1 percent, just below the trend of 3.2 percent and down considerably from the 4.0 percent seen in early 2012. The Reserve Bank of Australia has indicated that investment has reached its peak, sooner than thought, and at a lower level than was expected, according to the Herald Sun.
As a result of this decline, other sectors of the Australian economy are expected to pick up their game and the residential housing sector is set to carry the bulk of the load. It's hoped that the residential housing construction sector will be the key driver of economic growth in 2013 but thus far it has only shown a glimmer of hope. The Central Bank is doing everything it can can to help kick start housing construction, cutting the cash rate by 175 basis points in just under a year, but according to JP Morgan economist Tom Kennedy, simply cutting interest rates is not enough "Given the current preferences of consumers to accumulate savings and shy away from new debt, it is likely that the construction sector's contribution to GDP will dwindle over the next few years unless residential construction activity significantly improves."
Housing Industry Association chief economist Harley Dale believes not only will further cuts be necessary but there will also have to be sensible policy reforms to reduce barriers to new housing being brought to market.
The good news for current homeowners and those planning to enter the market is that interest rates are not likely to make a large increase any time soon, making now one of the cheapest home loan periods in a long time for Australians.
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