"Both house and apartment approvals look to have peaked at the start of the year, but in our view the top of the cycle could be more protracted than usual reflecting the RBA being in no hurry to raise rates"
-Paul Brennan and Joshua Williamson, Citi economists
Mixed data came out from Australia on Thursday, with building approvals posting the strongest monthly gain in eight months, while sales at Australian retailers slumped. Approvals for the construction of new homes jumped 9.9% in May, which was well ahead of expectations for a 3.2% increase, indicating that the housing sector will be the main driver for the Australian economy when mining investment fades. Over the 12 months, building approvals rose 14.3%. The rise was boosted by a strong increase in apartment approvals that had been struggling in recent months. Separately, the Australian Bureau of Statistics data showed that retail sales fell 0.5% month-on-month in May following a 1% drop a month earlier, compared to the 0.2% rise projected by economists. The bigger losers in May were clothing and footwear retailers, as clothing sales declined 2%, while footwear and accessories went down 2.9%.
Meanwhile, Glenn Stevens, the RBA Governor, warned investors against belief housing prices will always rise and that the Australian Dollar might not weaken. The Reserve Bank of Australia expects that the Aussie is set for decline significantly, as Stevens believes at 94 U.S. cents Australia's current exchange rate is far too high. Following his comment the Australian currency lost 0.5% to 93.92 U.S. cents.
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