Building approvals fell in December as higher mortgage interest rates hurt demand for housing while retail spending sagged, taking pressure off interest rates.
Housing approvals fell 1.9 per cent to a seasonally adjusted 12,395 units, from a downwardly revised 12,630 units in November, the Australian Bureau of Statistics said today.
RBC Capital Markets senior economist Su-Lin Ong said the result shows three interest rate rises last year were hurting the building market.
This should prompt the Reserve Bank of Australia (RBA) to keep rates on hold when it meets this week, she said.
"Households had been showing resilience but its looking like the higher interest rates are starting to take their toll," Ms Ong said.
"It points to the RBA keeping rates on hold this week and for the foreseeable future."
In the year to December, building approvals fell 1.5 per cent. Economists had forecast a fall of 2 per cent in the month.
Meanwhile, the value of retail sales rose at a slightly weaker than expected pace in December, suggesting that inflationary pressures would not be strong enough to prompt the central bank to hike rates in the near-term.
Australian retail trade at current prices rose 0.3 per cent in December to a seasonally adjusted $18.445 billion from a downwardly revised $18.397 billion in November, the Australian Bureau of Statistics (ABS) said.
Economists had forecast an increase of 0.4 per cent in the month.
Meanwhile, retail trade in chain volume measures rose 1.3 per cent to $53.188 billion in the December quarter.
Macquarie Bank senior economist Brian Redican said the retail sales figures were mixed, but spending was holding up.
"In the month, the results was weaker than the market had anticipated, and it does suggest that there is a bit of a weakening trend there in the retail sales series," he said.
"But offsetting that was a very healthy quarterly retail sales number."
Mr Redican said the results suggested that while spending was healthy, it was not adding to inflationary pressures.
"It doesn't suggest that the Reserve Bank will need to do anything further, but nor does it suggest that the economy is falling in a hole either," he said.
Source: AAP
