"We held onto the gains from the previous month and the detached house numbers are rising solidly"
- Paul Bloxham, HSBC Australia and New Zealand chief economist
The number of building approvals in Australia fell from a month earlier in May, the latest sign that deep rate cuts have yet to spur a sustained recovery in the property market. The Australian Bureau of Statistics said that total number of dwelling units approved dropped 1.1% from the previous month on a seasonally adjusted basis, following a 9.5% gain recorded in April. Analysts, however, predicted a 1% contraction. On a yearly basis, approvals fell 3.2% in the last month of spring. Despite a worse-than-expected reading, approvals for fully-detached houses jumped 2.5% in May, suggesting a recovery in the home building sector is likely to be taking hold soon.
The RBA is likely to make one more cut to the cash rate by the end of the year, HSBC Australia and New Zealand chief economist Paul Bloxham projects. Earlier this week the nation's central bank held its official interest rate at 2.75%, however, Governor Glenn Stevens pointed out that the bank may cut rates further in order to help cushion the economy as a long mining boom starts to wane. Still structural reforms are needed and housing alone will not make up the difference for the economy in general, and will not be able to offset the drags coming from fading mining investment.
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