Bloomberg News

Australian Construction Contracts at Slower Pace on Rate Cut

December 07, 2011

Dec. 7 (Bloomberg) -- A gauge of Australian construction showed the building industry contracted at a slower pace last month after the central bank cut interest rates for the first time in 2 1/2 years.

The construction performance index rose to 39.6 in November from 34.7 a month earlier, a survey by the Australian Industry Group and the Housing Industry Association released in Sydney today showed. The result was the 18th consecutive month under 50, the dividing line between expansion and contraction.

“The construction sector remains very uneven” and “appears to be pulling back from the the accelerating pace of decline reached in August and September,” Peter Burn, director of public policy at the Australian Industry Group, said in a statement.

Reserve Bank of Australia Governor Glenn Stevens lowered the benchmark borrowing cost a quarter percentage point to 4.5 percent on Nov. 1, the first reduction in 31 months, and followed it yesterday with a cut to 4.25 percent to spur demand. Employment in Australia weakened this year as the currency’s climb hurt non-resource companies and consumers saved cash.

Today’s report showed new orders advanced 6.7 points to 38.6, and a gauge of employment rose 4.6 points to 41.9 last month. Construction of houses gained 5.3 points to 38.6, while apartments slid 2.2 points to 23.4, it showed.

Investors are betting Stevens will lower rates again at the RBA’s next meeting in February to 4 percent, interbank cash-rate futures show.

The Australian dollar, the world’s fifth-most traded currency, was at $1.0246 at 8:56 a.m. in Sydney. It has weakened in recent months as Europe’s debt crisis intensified, having reached $1.1081 on July 27, the strongest since exchange controls were scrapped in 1983.

--Editors: Brendan Murray, Iain Wilson

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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