Building approval figures for January released today suggest rising interest rates are starting to bite on the housing sector.
The number of new buildings approved for construction increased by 1.9% seasonally adjusted in January 2008, but that follows a whopping 16% decline in approvals in December last year.
And a 15.7% rise in the value of new homes in January follows a 14.1% decline in the previous month.
In short, despite the rise in building approval numbers and value, they remain low following two interest rate rises in the second half of last year and expectations – now come to fruition – of more to come this year.
Another consequence of rising interest rates, the stronger dollar, can be seen in the falling number of short-term visitors to Australia in January.
The number of short-term visitors, who are mainly tourists, dropped 1% to 463,700 from December to January. This follows a monthly increase of 2.3% for November 2007 and a monthly decrease of 0.8% for December 2007.
The strong dollar partly explains a $786 million increase in the trade deficit in January to $2.7 billion. Although negative, the result was marginally better than expected thanks to a 1.7% rise in exports offsetting to some extent a 5.4% surge in imports.
And evidence emerged in yesterday’s national accounts of a key underlying cause for Australia’s current inflation problems – slowing productivity growth. Buried in yesterday’s 0.6% rise in GDP for the fourth quarter of 2007 was evidence that productivity per hour worked went backwards in the December quarter and was flat over 2007.
On the markets today, at 12.40pm the S&P/ASX200 is up 0.4% on yesterday’s close to 5397.4 and the Australian dollar is trading at US93.42c, down on last night’s US92.55c close.