GDP disappointment proves RBA got it wrong: HIA

by Adam Smith08 Mar 2012

The housing industry believes sluggish GDP growth is proof the RBA got it wrong by keeping rates on hold this week.

GDP growth for the December quarter came in at 0.4%, below market expectations of a 0.7% rise. Dwelling investment proved to be a drag on economic growth, detracting 0.2% from the GDP result.

In the wake of the result, HIA senior economist Andrew Harvey took aim at the Reserve Bank's decision to leave the cash rate untouched.

"Today's result confirms that interest rates remain too high and should place serious doubt over the Federal Government's strategy to rush back to budget surplus. While the Government should balance the budget over the economic cycle, the current fragile and uncertain economic environment is not one in which either fiscal or monetary policy should be restraining economic activity," he said.

Annual growth came in at 2.3%, which Harvey called "markedly below trend". He said the low growth proved the focus on the resources sector was "fraught with risk".

"It's time to broaden the focus of policy to put in place the strategies and reforms to ensure Australia's new housing is not over-taxed or constrained by the myriad of supply-side barriers that currently exist," Harvey said.

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