Australia’s Building Approvals Increase 2012.03.01

March 01, 2012 17:07

The Australian Bureau of Statistics reported Thursday the country’s number of provisioned building approvals to build or renovate houses and apartments rose by a seasonally adjusted 0.9% from December 2011 to January 2012. This resulted worse than economists’ expectations of a 2.0% increase. Yet, this still amounted more than the previous November to December 2011 supplied building permits that dropped by a revised 0.8%. The Reserve Bank of Australia had lowered the overnight cash rate by 0.25% on November 1st as well as December 6th 2011 but surprisingly left the 4.25% rate unchanged in January. In 2011 home prices in the country dropped the most on record by 4.8% as financial instability abroad wavered with the ongoing fiscal issues in the European region. Additionally, hiring by companies weakened as appreciations in the country’s currency hurt business.

In other country news, the Australian Bureau of Statistics also reported Thursday the country’s volume in new capital expenditures (CAPEX) increased 5.9% in the September to December 2011 quarter, although in real terms (seasonally adjusted) the estimate fell 0.3%. This was lower than the 4.0% rise analysts projected. Furthermore, the trend volume estimate for equipment, plant, and machinery increased 2.1% for the September to December quarter (2011) and the trend (seasonally adjusted) estimate dropping 2.1%, the main reason for the CAPEX decline.

The AUDUSD declined over 100 pips in the previous day as U.S. Dollar strengthened on Fed Chairman Ben Bernanke’s comments. Chairman Bernanke sounded more dovish which reduced the likelihood of further QE. The Reserve Bank of Australia is meeting next week and there is not much likelihood of rate cuts from the RBA. We will be watching the RBA comments to see if policy makers specify a timeline for current monetary policy. The Fed has pledged to hold rates near zero until late 2014. We expect the AUDUSD to trade back in its range of 1.0650 – 1.0800 until the RBA meeting on Tuesday March 6th.

Eugene Ross, Analyst

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