Steady interest rates lift housing construction

The cash rate has been kept steady at 2.5 per cent for what's now the 11th month in a row, resulting in what is the longest period of interest rate stability in close to decade, according to the Housing Industry Association (HIA).

While the significance of the Reserve Bank of Australia's move to the building industry may not be immediately obvious, it will actually have a great deal of positive influence on the sector. Low interest rate environments make buying a home much more affordable for buyers, which will help stimulate demand for housing. And once demand starts growing, so will the building of new houses to meet it. Under these conditions, it wouldn't be surprising to see diggers and other heavy machinery increasingly hired. 

"Moderate growth has been occurring in consumer demand," confirmed RBA Governor Glenn Stevens in a July 1 statement. "A strong expansion in housing construction is now under way."

The HIA welcomed the decision with open arms, arguing the low interest rates which have come out of the stable cash rate have been fuelling housing construction. 

"We estimate that new dwelling starts grew by 10 per cent during 2013/14, hitting one of the highest annual totals on record," HIA Senior Economist Shane Garrett said in a July 1 release. 

"Low interest rates have also been instrumental in helping the ailing renovations market finally take a turn for the better," added Shane Garrett.

Whether home owners need painting work or are interested in renovating the bathroom, they'll have increased incentive to do so under current conditions.