Craig James has an interesting piece on building in Australia out today which is either cause for celebration or a dire warning of some dark days ahead for the Australian economy in 2015.
James, citing the release of the June quarter dwelling approvals by the ABS this morning says that, “Dwelling starts lifted to 180,408 new dwellings over the 12-months to June, the highest annual result in over 19-years and well above both 5-year and 10-year averages.”
“Home building has certainly stepped up to the plate to be the key driver of growth,” James says which is exactly as the RBA expected and wants to happen in the economy as it tries to transition away from from the mining investment boom led growth of recent years.
But as we have seen in the NAB Business survey and in the recent run of ANZ and Westpac consumer confidence surveys there is little evidence that the activity in housing construction is spilling out into the broader economy.
Indeed yesterday’s NAB Business survey had such weak internals that were it not for the rapid appreciation in house prices in Sydney and to a lesser extent the rest of Australia it is likely the conversation today would be about when the RBA is going to ease interest rates.
Which is why this is both the best and scariest chart in the economy. Home building is growing as the RBA wants it to but the economy remains fairly weak overall.