Planing the cause of house build shortage

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By Robert Carry

The failure of the central government and state capital authorities to properly harmonise urban development is the reason for the ongoing housing shortage, CommSec has claimed.

"Poor co-ordination of state and federal government urban planning is the key reason why not enough houses are being built, not Reserve Bank control over interest rates," said Craig James, CommSec chief economist.

In the firm's latest Investor Signpost report, James added that the Reserve Bank's ability to control inflation was hindered by its inability to tackle a number of related factors.

"The Reserve Bank cannot do anything about rising electricity and water bills. And lifting interest rates won't cause more houses to be built - a key reason why house prices are growing, together with rents," said James.

James also predicted that the Reserve Bank would still increase interest rates at its next meeting, but added that inflationary pressures would not be its main reason for doing so.

"We do expect a rate hike of a quarter of a percent. But rates are rising because interest rates need to gradually lift to more normal levels, not because the inflation figures are a concern."

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