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RBA predicts rent and house costs spiral

Reserve Bank of Australia assistant governor Philip Lowe has warned of a return to pre-GFC levels house cost spirals as the resources sector grows.

RBA assistant governor Philip Lowe warned a conference in Sydney that over “the next couple of years” capacity constraints were looming, especially as the resource sector returns to pre-GFC levels of activity.

The predicted resource sector expansion comes about as China announced higher export numbers for February, with the expected shortage of skilled workers to service the demand coming from related industries such as new housing construction. This flight of workers from other areas of the economy will bid up the price of housing and rents as costs to build increase.RBA house prices

Philip Lowe said it was necessary for Government to manage the micro economic problems created by the expanding resources sector to ensure that there was sufficient supply of housing for a growing population.

“If housing construction is very strong at the same time that the resources sector is expanding, there will be competing demands for a range of skilled workers and specialised services,” he said.

“Managing these competing demands and ensuring the adequate supply of workers with appropriate skills will be a challenge.”