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Building approvals in surprise decline

Fall in job ads for 11th month seen as further sign buyers are wary of Australia's economy

PUBLISHED : Wednesday, 06 February, 2013, 12:00am
UPDATED : Wednesday, 06 February, 2013, 4:59am

Home-building approvals unexpectedly declined for the second time in three months in December and help-wanted notices dropped, underscoring a weaker domestic economy.

The number of permits granted to build or renovate houses and apartments fell 4.4 per cent from November, when they rose a revised 3.4 per cent, the Bureau of Statistics said in Sydney on Monday. Job advertisements dropped for an 11th month in January, capping the worst skid since the 2009 global recession.

The local currency declined initially as investors edged up wagers that the Reserve Bank of Australia will lower interest rates. Governor Glenn Stevens and his board reduced the overnight cash-rate target to 3 per cent in December, matching a half-century low, as they try to revive industries to rebalance economic growth and extend 21 recession-free years.

"Interest rates cuts aren't getting traction with potential home owners," said Joshua Williamson, a senior economist at Citigroup Inc. in Sydney who is among a minority forecasting the RBA will have lowered borrowing costs yesterday. "Households have become less sensitive to interest rates so we're calling for further reductions in borrowing costs. The trend now suggests that employment growth will start to slow."

The local dollar traded at US$1.0427 at 12:51pm in Sydney from US$1.0428 before the release. Traders are pricing in a 21 per cent chance the RBA would cut rates to a record-low 2.75 per cent yesterday according to data compiled by Bloomberg, up from 18 per cent before the release.

Job advertisements fell 0.9 per cent in January, after declining a revised 2.8 per cent in December, an Australia & New Zealand Banking Group Ltd. report showed.

Australia's jobless rate rose in December as the nation posted its worst back-to-back years of job growth since the 1997 Asian financial crisis. Unemployment climbed to 5.4 per cent as the number of workers fell by 5,500 in the month.

The level probably rose to 5.5 per cent in January, matching the highest since April 2010, according to the median estimate in a Bloomberg News survey.