The Reserve Bank’s decision to substantially increase the official interest rate is a wake-up call for the economy in which inflation is running well ahead of expectations.

“Inflation hurts everyone in the economy and so we understand the rationale behind today’s substantial interest rate rise,” Denita Wawn, CEO of Master Builders Australia said.

“However, while there is a need to temper the economy to tackle inflation there is also a need to maintain economic growth so that building and construction activity is not depressed,” she said.

“Building and construction have been the canary down the inflationary coal mine for the past six months. We have been dealing with cost increases for products and labour that have been well ahead of headline inflation figures and building approvals have been declining over the same period,” Denita Wawn said.

“There are more than 420,000 building and construction businesses that have been weathering the storm of inflation in advance of the rest of the economy while also shouldering much of responsibility for completing economic recovery,” she said.

“With the inflation challenge now facing the country it is important that the Federal Government makes use of both fiscal and monetary policy levers,” Denita Wawn said.

“Microeconomic reform must also be a focus, for example, the Federal Government can work to reduce the cost of creating new homes by tackling issues like land supply, regulation and the tax burden on new home building,” Denita Wawn said.