Aussie economy coasting despite housing

Housing approvals which seemed to be climbing out of a slump rising 9% in February fell 11.4% in March and are down 9.6% in the year to March 2007. Whilst a small rise of 0.1% in private sector housing approvals was recorded other private sector dwellings fell 29.2% reversing the 25.6% gain in February. In dollar terms total building approved fell 3.7%, to $5,471.5m, in March 2007. Declines in dollar value occurred across all categories - residential, non-residential and additions and alterations. Homebuilders AV Jennings and Australand both singled out New South Wales as the laggard. So the much anticipated recovery in housing has been put on hold, at least for another month.

However despite the weakness in housing the rest of the economy remains strong as it enters it's 16th straight year of expansion. Whilst Inflation has dropped back into the middle of the RBA range, new jobs continue to be created without causing a blowout in wages and consumers are spending like crazy. Just take a look at the latest retail sales numbers for March released by the Australian Bureau of Statistics last Tuesday. Sales were up 1.1% from February, twice the consensus forecast. From 1 year ago sales were up 8.2% in dollar terms. Department stores were the main beneficiary as confirmed by David Jones which reported a third-quarter sales increase of 8.4% the day after the ABS release.

On employment the Australian unemployment rate fell to a 33 year low of 4.4% as 50,000 new jobs were created in the month of April as against a consensus estimate of 20,000. Regardless of the easter effect in March the employment and retail statistics combined with a lower inflation reading paint a picture of health for the Australian economy. It is worth bearing in mind that housing and inflation are usually considered leading indicators whilst unemployment a lagging one. Both the housing and inflation data seem to support one another pointing to a slowing in the economy and whilst its a little early to say employment has peaked it's difficult to see the unemployment rate falling further.