Friday, October 1, 2010
AUSTRALIA'S housing recovery has vanished. Dwelling approvals plunged again in August to their lowest level in a year, throwing serious doubt on the prospects of another rate rise soon.
With the federal government's stimulus programs coming to an end, the banks turning away builders, and six rate rises in the past year deterring buyers, seasonally adjusted housing approvals fell 4.7 per cent in August to 13,049.
In just five months, approvals have crashed by 24 per cent, after hitting a high of 16,835 in March. Half that crash is due to the Rudd government's social housing initiative winding down, and half to a slump in private sector activity.
The crash has come overwhelmingly in New South Wales, Queensland and Western Australia with Victoria, South Australia and Tasmania islands of strength in a drifting continent.
So far this financial year:
More than 40 per cent of Australia's private sector housing approvals have been in Victoria which has just 25 per cent of the population.
More homes were approved in Melbourne alone than in Sydney, Brisbane, Perth and Canberra combined.
The Bureau of Statistics reports that 8728 new homes were approved in Melbourne in July and August, but just 3420 in Sydney, 2652 in Perth, and 1863 in Brisbane.
Non-residential building also remains very weak. The federal government's school building program has wound down, while private sector activity is still bumping along the bottom.
The figures suggest that the Reserve Bank's six interest rate rises in a year have dampened the economy's prospects more than the Reserve has been willing to admit.
Financial markets, which had been pricing in a further rate rise when the Reserve board meets next week, yesterday slashed the odds of a hike to 50/50, amid mounting evidence of economic weakness.
The Reserve itself reported that business credit slumped by another 0.6 per cent in August, while credit to people buying their own homes in the past quarter grew at the lowest rate on record.
The HSBC bank's new chief economist Paul Bloxham until recently one of the Reserve's senior economic analysts predicted that the Reserve would hold off raising rates again until it had more data to justify a rise.
"One of the least good outcomes would be that the Reserve Bank is in a position where it has to reverse a decision quickly," Mr Bloxham said. "This would be disruptive for both the economy and the financial markets."
The IMF also sounded a warning note in a new report on Australia, released yesterday. It forecast only average growth in 2011, with a risk that a deteriorating world economy could slow the economy further.
The government had hoped rising housing activity could help reduce the shortfall of an estimated 200,000 homes.