Published date: 02/09/2019
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2 minutes

Source: The Australian, 30/8/2019 

A sharp, unexpected fall in building approvals dragged the currency lower yesterday, as economists braced for the slowest quarterly economic growth figures in almost 20 years.

Home approvals fell more than 9 per cent in July from a month earlier — bringing the annual decline to 28.5 per cent — prompting calls for government action from builders and fuelling concerns the Reserve Bank will need to downgrade its growth forecasts.

Apartment approvals slumped 18 per cent over the month — leaving them down 44 per cent over the year — to 4420, the lowest level since 2012.

“A sharp reduction in unit approvals, led by Sydney and Melbourne, may be a sign that quality concerns are having an impact on apartment supply,” said Adelaide Timbrell, an economist at ANZ.

House approvals, the other component, dipped 3 per cent to 8274, the lowest level since 2013.

“We want to see government policies such as incentives for businesses to invest as well as fast-tracking infrastructure construct¬ion to help kickstart activity,” said Denita Wawn, chief executive of Master Builders Australia.

“The July update is clearly much weaker than expected and raises the risk that building activity may take another leg lower,” said Westpac’s Matthew Hassan.

The last piece of major data ahead of the Reserve Bank of Australia’s September board meeting next Tuesday, the ABS’s monthly home approvals add to a series of disappointments, including a decline in business investment by 0.5 per cent in the June quarter.

“The RBA board will meet ahead of what is shaping up as a very soft GDP report,” said ANZ economists. “Annual growth will slow to just above 1 per cent, the softest annual print since the early 1990s if we put aside the GST-¬related slowdown in late 2000.”

RBA governor Philip Lowe earlier this month optimistically looked forward to a “gentle turning point” in the economy. “Consistent with this, we are expecting the quarterly GDP growth outcomes to strengthen gradually after a run of disappointing numbers,” he said.
“Yearly GDP growth would be the slowest since 2000 and undershoot the RBA’s yearly forecast of 1.7 per cent by 0.4 percentage points,” said Citi chief economists, who expect quarterly growth for June of 0.4 per cent.

Separately, the RBA yesterday said private sector credit grew 0.2 per cent, including an increase of 0.3 per cent for mortgages compared with a 0.2 per cent rise in the previous month.

Home lending grew 3.3 per cent — the slowest growth rate since records started in 1976 — over the year to $1.79 trillion.

Business credit increased 3.9 per cent to $951bn in the year.

“The 0.5 percentage points of easing delivered by the RBA already this year, tweaks to lending requirements by APRA and the positive pricing and sentiment shift following the federal election all argue for a stabilisation in coming months,” said Tom Kennedy, economist at JPMorgan.

The dollar slipped from US67.20c just before the data’s release to US67.05c moments later.

Source: The Australian, 30/8/2019