Housing surge makes Aust rate cut unlikely

Photo / Richard Robinson
Photo / Richard Robinson

Rising home loan approvals are another sign that the Australian housing recovery is in full swing, making another cash rate cut unlikely.

The number of home loans approved in November was up 1.1 per cent to 52,912, the Australian Bureau of Statistics said yesterday.

That meant the end of the road for rate cuts during this cycle, Commonwealth Bank of Australia chief economist Michael Blythe said.

"We think [the Reserve Bank of Australia is] done because those interest-rate-sensitive parts like housing, as we've seen today, are moving," he said.

"You don't need any more help from that perspective and the sectors that do still need help would benefit more from a lower currency."

Blythe said that the cash rate was likely to rise in late 2014 as a weakening Australian dollar added to inflationary pressures.

National Australia Bank senior economist Spiros Papadopoulos said home loan approvals had risen almost every month in 2013, except August.

But although the housing market was strengthening, it would not be enough to rebalance the economy as the mining investment boom winds down, Papadopoulos said.

Unemployment would continue to rise, meaning the Reserve Bank would be unlikely to raise the cash rate this year, he said.

"This is another indicator that points to the strength in the housing market."

Housing Industry Association senior economist Shane Garrett said recovery in the housing construction sector would help rebalance the economy by creating more jobs.

"There are few sectors of the economy more labour-intensive than dwelling construction," Garrett said. "The strong expansion of the sector brings the potential for greater jobs market support at this time of economic transition." AAP

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