Australia building approvals show marginal rise

Sydney: Australian home-building approvals advanced in July at a slower-than-expected pace, driven by public dwellings, as the developed world's highest interest rates suppressed demand for housing.

The number of permits granted to build or renovate houses and apartments climbed 1 per cent from June, when they fell a revised 3.6 per cent, the Bureau of Statistics said in Sydney on Tuesday. While that was the first increase in four months, it was less than economists forecast for a 2 per cent gain.

Australia's unemployment rate last month jumped for the first time since October, to 5.1 per cent, as the currency surged to a record high. Reserve Bank Governor Glenn Stevens has kept interest rates unchanged at 4.75 per cent for eight straight meetings to gauge fallout from Europe's sovereign-debt crisis and the US's fiscal problems and as local housing cools.

"The underlying trend in building approvals remains one of decline, even though total approvals etched out a modest rise," said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney.

"While the prospect of continued housing market malaise undoubtedly is a reflection of ongoing consumer caution, today's data contain little information that will have any bearing on near-term RBA policy."

Currency reaction

The Australian dollar fell immediately after the report before recovering to $1.0674 in Sydney from $1.0664 just before the release.

Building approvals fell 15 per cent from a year earlier, the report showed, compared with economists' forecast for a 12.4 per cent drop.

Approvals to build private houses fell 0.2 per cent to 7,600 in July from the previous month, the report showed. Permits for apartments and renovations declined 1.4 per cent to 4,173.

Australia's higher borrowing costs relative to other developed-world economies and a mining-investment boom helped drive the Australian dollar to $1.1081 on July 27, the highest since exchange controls were scrapped in 1983.

"Approvals remain weak in Australia despite positive fundamentals, which I think you can only put down to sentiment," said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world's biggest interdealer broker. "It was not a good report overall, it was all public" housing, he said.