31 Oct 2013
Flash: Australian building approvals surge discourages RBA rate cuts - RBS
FXstreet.com (Barcelona) - Australian building approvals rose by 14.4% m/m in Sep (+1.5%m/m core private sector houses, +31.8%m/m apartments), a result which strengthens the case for no more RBA rate cuts, notes Greg Gibbs, Strategist at RBS.
Key Quotes
"The strongest section of demand in Australia for housing is coming from domestic investors; many using their government approved self managed retirement funds in which they are apparently allowed to borrow to invest in housing, and foreign buyers increasingly from China, the type of buyers that might be more interested in apartments."
"This is further indication that the RBA has cut rate sufficiently to engender a strong housing market, and thus any further cuts may be of little value and in fact threaten longer term financial stability by over-stimulating the housing market."
"Any further cuts therefore might only serve the purpose of encouraging lower AUD. However, attempting to use rates to target the exchange rate can backfire."
Key Quotes
"The strongest section of demand in Australia for housing is coming from domestic investors; many using their government approved self managed retirement funds in which they are apparently allowed to borrow to invest in housing, and foreign buyers increasingly from China, the type of buyers that might be more interested in apartments."
"This is further indication that the RBA has cut rate sufficiently to engender a strong housing market, and thus any further cuts may be of little value and in fact threaten longer term financial stability by over-stimulating the housing market."
"Any further cuts therefore might only serve the purpose of encouraging lower AUD. However, attempting to use rates to target the exchange rate can backfire."