"There had been further signs of the stimulatory effects of low interest rates, most notably in the housing market, and additional effects were still likely to be coming through"
- The Reserve Bank of Australia
The resource-rich economy is stuck in the transition phase, as investment in the key mining sector begin to wane and during the period of prosperity the government was not able to seize the opportunity of economic expansion, and the economy is struggling to grow. Currently, analysts believe that housing market can become a new locomotive for the Australian economy, but is it that strong enough or the RBA will be forced to make another intervention?
According to a report from the Australian Bureau of Statistics, the number of approvals for the construction of new homes plunged 2.9% in December, following a 0.3% dip a month earlier and posting third straight monthly decline. Moreover, the data surprised markets to the downside, as economists predicted a 0.3% decline. Nevertheless, on a yearly basis the indicator were 21.8% higher, bolstering the case the property market will gain momentum in 2014. Record-low interest rates have definitely helped to boost demand for construction and new housing in the Oz economy over the last year, and taking into account the latest economic data from Australia, the RBA is likely to maintain its loose monetary policy in the foreseeable future. Even despite the latest slump in building approvals, the six months trend is reflecting a pickup in households willingness to build a new home in the back half of 2013.
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