Bloomberg News

Australia Home-Building Approvals, House Prices Drop on Rates

August 01, 2011

Aug. 2 (Bloomberg) -- Australian home-building approvals unexpectedly declined in June for a third straight month and house prices fell, prompting the local currency to pare gains as traders reduced bets on an interest-rate increase this year.

The number of permits granted to build or renovate houses and apartments slid 3.5 percent from May, when they dropped a revised 6.3 percent, the Bureau of Statistics said in Sydney today. A separate index measuring the weighted average of prices for established houses in eight major cities declined 0.1 percent last quarter to the lowest level since 2009.

Reserve Bank of Australia Governor Glenn Stevens today will keep the developed world’s highest interest rates unchanged at 4.75 percent, according to most economists surveyed by Bloomberg News, after the labor market lost 5,400 jobs in the April-June period, the weakest quarter since 2001. The RBA increased rates seven times from October 2009 to November, helping drive the currency to a record.

“Interest-rate sensitive sectors in the economy are soft and responding to the central bank’s mildly restrictive policy,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at RBC Capital Markets in Sydney. “For the RBA, it probably confirms the trends in place for a while that its policy stance is still working its way through the economy.”

Currency Falls

The local currency declined to $1.0981 at 12:20 p.m. in Sydney from $1.0993 before the data. Traders see a 14 percent chance the RBA will boost borrowing costs by a quarter percentage point today, interbank cash rate futures show.

Today’s report showed house prices fell 1 percent in Perth and dropped 1.6 percent in Darwin from the previous quarter, while they advanced 0.4 percent in Sydney and gained 1.1 percent in Canberra. In Melbourne, prices slipped 0.1 percent.

A jump in home prices was among reasons Stevens increased the benchmark rate by 175 basis points from October 2009.

Building approvals fell 15.5 percent from a year earlier, the report showed. That compares with economists’ forecast for a 10.3 percent drop year-over-year.

Approvals to build private houses dropped 3.2 percent to 7,604 in June from the previous month, the report showed. Approvals for apartments and renovations declined 4.2 percent to 4,274.

--With assistance from Daniel Petrie in Sydney. Editors: Brendan Murray, Garfield Reynolds

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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