I think you're going to be surprised. The Australian Reserve Bank will raise interest rates again maybe as soon as their next meeting due to excessive strength in the Australian economy (high job vacancy rate and rising prices). Not every economy in the world is a basket case like Japan and America.
sg.biz.yahoo.com
Friday July 2, 10:21 AM
Australian "May Building Report" Ups Talk Of Rate Hike
By Malcolm Scott, DOW JONES NEWSWIRES
SYDNEY (Dow Jones) -- Australia's housing sector is proving far more resilient than expected, increasing speculation that the Reserve Bank may need to hike interest rates later in the year.
The total number of Australian houses and apartments approved for construction rose a seasonally adjusted 1.5% in May from April, the Australian Bureau of Statistics said Friday.
Economists had expected on average that total residential building approvals fell 2.0% from the month before.
The building sector is "surprisingly resilient," reinforcing a view of strong economic growth, said Andrew Hanlan, economist at Westpac.
"Housing will take a nibble out of growth rather than a big chunk, very much keeping the Reserve Bank in the game."
The central bank late last year hiked interest rates 50 basis points to 5.25% in an effort to cool Australia's housing boom, and has since been trying to jawbone the sector lower.
While home prices have come off the boil according to a variety of reports, construction is showing few signs of easing.
"It is certainly becoming clearer now that those pessimistic anecdotes coming out of the market just seem to be wide of the mark; things just aren't falling into a hole as some people would have you believe," Hanlan said.
Westpac expects the Reserve Bank to raise interest rates 25 basis points at the end of the year.
Private-sector house approvals fell a seasonally adjusted 3.5% in May from a month earlier and fell 3.0% from a year earlier.
The bureau also reported that the value of total building approved in May, including residential and nonresidential building, rose 1.1% to a seasonally adjusted A$4.37 billion from A$4.33 billion a month earlier.
The bureau said its trend estimate for the total number of dwelling units approved rose 0.5% in May from April and fell 0.1% from a year earlier. The trend estimate further smoothes the seasonally adjusted data.
Commonwealth Bank of Australia senior economist Michael Blythe said the building approvals data feed the recent theme that the sector has stabilized and is tracking sideways, rather than continuing to slow.
"That stabilization is coming through at what are historically still quite high levels and suggests the ongoing housing slowdown that underlines most people's forecasts is not necessarily set in concrete," said Blythe.
He noted the figures also add to a recent shift in sentiment, namely that the Reserve Bank might need to raise rates again if it wants to engineer the sort of slowdown it wants for the housing sector.
"The problem the Reserve Bank is facing at the moment is the uncertainty about what is happening with house prices. Some measures are flat and some are falling," said Blythe.
And while that uncertainty continues, the central bank won't be in any great hurry to act on rates.
"No immediate action is likely to result," Blythe said. Commonwealth Bank expects a rate hike in September.
"Anticipated detractions from growth (from dwelling investment) keep getting pushed further and further into the future," added Anthony Thompson, senior economist at HSBC.
For now, the housing sector is going to continue to add to domestic demand and inflationary pressures, he said.
"It reinforces the view that the Reserve Bank needs to do more," Thompson said.
But a rise in interest rates is likely to remain on the backburner until after the next federal election, which is expected in September or October, he said.
The data cap off a weak of strong economic reports, with May retail trade and private-sector credit also pointing to an economy that's growing strongly. |
