- Tom Kennedy, JP Morgan economist
The number of home-construction permits issued in Australia dropped in September, pushing the local currency to the lowest level in two weeks. According to the Australia Bureau of Statistics, building approvals, which are a leading indicator of construction activity, dived 11% from August after rising 3.4%, and compared with economists forecasts for a 1% decline. On an annual basis, approvals plummeted 13.4%, considerably lower than a 0.9% drop expected by analysts, and a significant turnaround from the 14.5% advance in approvals recorded in August. The dive in consents was largely due to non-house dwellings, which plunged 21.9% from August, while private-sector housing consents dropped 2.3% over the reported period. Housing construction had appeared to be emerging as one of the few areas of strength in the economy as resources boom cools. The latest data will cast a shadow on the strength and reliability of the sector's recovery. The Reserve Bank of Australia has kept interest rates at all-time low 2.5% for more than a year in an attempt to boost activity in areas like retail and housing that have led previous expansions. At the same time, policy makers are concerned about the housing sector overheating, leading to risky investment that could derail a still-fragile recovery. The central bank and the country's banking regulator have said they will soon implement measures to cool surging lending to property investors.
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