The construction industry’s peak body is urging the Reserve Bank to rethink future rate hikes as another rise could cripple the sector.

Mortgage holders aren’t the only ones feeling the financial sting of consecutive interest rate hikes, with the construction industry also bearing the brunt as Australians reconsider building their new home.

The building sector’s peak body is calling on the Reserve Bank of Australia (RBA) to give more time between rises to assess its economic impact on the wider economy.

The RBA lifted the cash rate to 1.35 per cent this week, the third rate rise in as many months and the first time since 2019 that the rate has been above 1 per cent.

Master Builders Australia chief executive officer Denita Wawn has called on the RBA to delay further rate rises to soften the impact on the industry.

“We are concerned that a continuing regime of steep rate rises risks turning the economic dial too far in the opposite direction and stalling the economic growth needed for the continuing recovery from Covid-19,” Ms Wawn said.

“Time should be given to observe the impact of the monetary policy changes in the economy.”

Rising interest rates threaten to put further pressure on an industry already grappling with rising costs of building materials, transportation and supply shortages.

The impact of rising expenses has been so detrimental that some building groups have collapsed as a result, with family-owned Langford Jones Homes one of the most recent construction companies to go into liquidation.

Despite the builder’s shareholders investing extra funds in a desperate attempt to keep the company above water, rising labour and material costs as well as a recent cyberattack proved too much for the company to withstand.

It joins a number of other building firms across the country forced to down the tools including Wulfrun Construction, Affordable Modular Homes and Statement Builders.

Ms Wawn said another interest rate hike would add to those pre-existing pressures, which may simply be too much for some businesses to handle.

“Our industry is disproportionately affected by interest rises and a hard economic landing would put at risk the viability of many building and construction businesses who have managed to come through the pandemic but whose resilience has been eroded by severe supply chain pressures,” she said.

“Many now lack the resilience to withstand more sharp economic shocks.”

Interest rate rises weren’t expected to occur until 2024 based on last October’s RBA predictions.

However, a number of international and domestic factors contributed to an early rise in inflation so interest rate rises were imposed to counter the effects.

Economists predict interest rates will keep rising until the end of the year, with the cash rate expected to surpass 2 per cent.

“Inflation in Australia is also high, but not as high as it is in many other countries,” RBA governor Philip Lowe said after Tuesday’s meeting.

“Higher interest rates will also help establish a more sustainable balance between the demand for and the supply of goods and services.”

While another rate rise may be unavoidable, Ms Wawn has urges the RBA to evaluate the effects of the most recent rate rise before proceeding with another one.

“(Tuesday’s) decision reinforces the need for the Federal Government to ensure that its fiscal policies, indeed all economic levers, must be tested against their ability to drive down inflation and increase productivity,” she said.

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