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Will new home building save Australia’s economy?

17 April 2014 Staff Reporter

Historical data indicates Australia’s housing sector might stimulate the economy’s next round of growth.

The Housing Institute of Australia (HIA) published a research note this week that highlighted the “strong historical linkages” between new home building and general economic conditions.

Home building not only creates direct employment, it also triggers expenditure on household appliances, which in turn generates economic activity and dwelling price growth.

The institute said that new home building “bottomed out” in 2012 but then made its largest contribution to GDP growth in almost a decade in 2013, a trend it said was set to continue.

However, the institute warned that a housing-led recovery couldn’t be taken for granted because it had observed a recent break in the link between home building and employment growth.

“Understandably, the hope is the labour market will eventually catch up with the developments in new home building,” it said.

“With [housing] starts forecast to grow over the coming two to three years, household consumption, at the behest of new home building, appears on track to improve and play a greater role in an emerging non-mining economic recovery.”

The institute also said the federal budget would benefit if governments reduced “excessive” taxes on new housing.

That would trigger the construction of more housing, which in turn would make housing more affordable and reduce demand for Commonwealth housing assistance, according to the institute.

Will new home building save Australia’s economy?
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