SYDNEY Nov 30 Australia is watching a
much-needed boom in home building turn to rubble after approvals
for new projects collapsed in October, a violent turnaround that
could undermine policymakers' hopes for solid economic growth
Shock figures from the Australian Bureau of Statistics on
Wednesday showed approvals to build new homes sank 12.6 percent
in October from a month earlier, confounding forecasts of a 1.5
percent rise and the biggest drop since mid-2012.
It was the third month of declines and brought the pullback
since July to 22.5 percent.
"Overall the update is unambiguously weak and puts a clear
marker in the ground showing the construction cycle is now
turning down," said Matthew Hassan, an economist at Westpac.
Most of the damage came in the once high-flying apartment
sector where approvals dived by a quarter in October alone, and
were down more than 42 percent on the same month last year.
That will be alarming news for the Reserve Bank of Australia
(RBA), which has been counting on continued strength in home
building to offset a lingering drag from a mining slump.
Indeed, figures due next week had already been expected to
show the economy all but stalled in the third quarter, and may
even have shrunk - only the fourth negative quarter in 25 years.
"Total approvals are still relatively high but the speed at
which they are rolling over is a real surprise," said Shane
Oliver, chief economist at AMP.
"It already looks like the economy lost momentum in the
third quarter and now residential investment could turn into a
drag on growth next year," he added.
"That only underscores our call for another rate cut next
While the economy had been running at a brisk 3.3 percent in
the year to June, that likely slowed closer to 2.0 percent for
the year to September.
The RBA has been playing down the need for further easing
following cuts in August and May that took the cash rate to an
all-time low of 1.5 percent.
Policymakers argued that the massive drag from a slowdown in
mining investment had almost passed, while a revival in prices
for key commodity exports in recent months was set to boost
As a result, financial markets had all but given up on the
chance of a further rate cut <0#YIB:> and were even toying with
the idea of a hike late in 2017.
"All talk of a hike is out the window after these building
numbers," said Oliver.
(Reporting by Wayne Cole; Editing by Kim Coghill)