Home truths on rent
RBA advises living with parents or getting housemate
The Reserve Bank governor says Australians will have to get a housemate or stay at home with mum and dad a little bit longer as rents continue to soar across the country.
Appearing before a Senate estimates hearing on Wednesday, Philip Lowe said not enough homes were being built to keep pace with population growth, driving up rents and exacerbating the cost-ofliving crisis.
The reopening of the international border and the return of international students and skilled migrants is forecast to increase Australia’s population by 2 per cent.
“Are there 2 per cent more houses? No,” he said. “We need more people on average to live in each dwelling.”
Dr Lowe told the hearing that Australians’ preference for more space as they continue to work from home and the population increase were the main contributors to the dramatic increase in rents.
“We do need people to economise on housing,” he said. “Kids don’t move out of home because the rent is too expensive … you decide to get a flatmate or a housemate because that’s the price mechanism at work.”
Pressed by Greens senator Nick McKim on the viability of a freeze on rents, which the minor party has been pushing the federal government to work with the states to achieve, Dr Lowe said the solution to “all these problems in the housing market is supply”.
He suggested the Greens’ rent-freeze policy was “the wrong way to go” and raised concern it would distort supply.
“We might get inflation down for a bit, but we’ll all end up in the poor,” he said.
The Reserve Bank governor also said he wasn’t declaring victory in the war on inflation just yet, and denied that he’s engaged in a scare campaign on interest rates.
Dr Lowe said he was acutely aware of the unpopularity of the central bank’s aggressive tightening of the cash rate in a bid to curb “persistent” inflation.
But he warned the bank may still need to increase rates further depending on what happens in the global economy, consumer spending, inflation expectations and productivity growth.
“I know the higher interest rates at the moment are very unpopular and are hurting people,” he said.
“I know it’s really tough. But, you know, the board discussions think of the alternative.
“If we had not increased interest rates … inflation will be higher for longer.”