Australia must ease zoning to fix housing crisis: | Australian Markets

An influential international financial physique has weighed in on Australia’s housing debate, urging governments to loosen up zoning restrictions to ease home costs.

The Organisation for Economic Cooperation and Development warned Australia to enhance housing provide and tackle falling affordability because it revealed a downgrade to its financial growth forecast for 2025.

The Paris-based coverage discussion board mentioned Australia’s gross home product would grow at 1.8 per cent this yr, down 10 foundation factors from its prediction in March, as Donald Trump’s tariffs hit demand for Australian exports, particularly if China experiences a marked slowdown.

The organisation downgraded its international growth forecasts from 3.1 per cent to 2.9 per cent this yr.

“Australia’s exposure to US tariff increases is limited given that exports to the United States represent only about five per cent of total exports,” the OECD mentioned in its Economic Outlook, launched on Tuesday.

“The impact of global trade tensions on the Australian economy is more likely to come via the depressing effect of higher tariffs and policy uncertainty on investment worldwide, manifested in part by lower prices for iron ore, coal and natural gas.”

But financial growth is predicted to speed up to 2.2 per cent subsequent yr – an increase from its prediction earlier this yr and in step with the OECD’s estimate of Australia’s financial potential.

As rates of interest decline and staff expertise continued growth in actual wages, swelling disposable income ought to enhance personal consumption, offsetting a slowdown in public spending.

The OECD’s forecast for 2025 is decrease than the Reserve Bank’s estimate of 2.1 per cent however in step with its 2026 prediction.

Treasurer Jim Chalmers mentioned it was a “stark reminder of the risks posed by tariffs and trade tensions, conflict and fragmentation”.

But with GDP set to increase over the subsequent two years, Australia was turning a nook as the remaining of the world took a flip for the more severe, Dr Chalmers mentioned.

Inflation will stay close to goal, averaging 2.3 per cent over 2025 and 2026, the OECD projected.

That’s under RBA estimates, which predict headline inflation accelerating to 3.1 per cent by the top of the yr as authorities power subsidies roll off.

The OECD mentioned the central bank can be warranted to proceed easing rates of interest however must be nimble to change path in case of sudden exterior shocks.

Longer time period, Australia wants to fix stagnating productiveness growth and make housing more inexpensive.

Recently applied competitors reforms needs to be complemented with different insurance policies strengthening investment, “including improved incentives for house-building, especially for social housing, and public investment to improve electricity grid connections”.

The OECD mentioned easing zoning restrictions would strengthen competitors and productiveness, in addition to raise housing investment to “reverse the long-standing decline in housing affordability”.

The physique mentioned it was important that state and native governments in charge of housing provide are given financial incentives to scale back regulatory complexity and streamline approvals.

The feedback chime with feedback by federal assistant minister for productiveness Andrew Leigh, who singled out native councils and stultified planning systems for “structural failure” in assembly provide targets in a speech to the Chifley Research Centre earlier on Tuesday.

“Too often, the planning process is built for avoidance, not delivery. Zoning schemes reward conformity over quality,” he mentioned.

“The consequences are visible everywhere – from rising rents and overcrowding, to the growing number of people priced out of the communities they grew up in.”