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AUSTRALIA 
Falling house prices adds to economic woes
Monday, 4 August, 2008
Peter Costello remained tightlipped about his political future today as his publisher admitted wanting to keep him under wraps until his memoirs are released in six weeks time. (AAP)
As if to add insult to injury, households struggling to cope with 12-year high mortgage rates could now find the price of their house is falling.
New government data shows houses prices on average fell in half of the nation's states during the three months to June, including a drop in Perth prices, despite enjoying the first-hand benefit of the resources boom.
A private survey also shows job prospects are deteriorating as businesses wind back their hiring intentions, which could see the unemployment rate spike towards five per cent in coming months.
These two gloomy reports add to a myriad of data pointing to a rapidly lowing economy, which economists say could see the Reserve Bank of Australia (RBA) cutting interest rates before the end of the year.
The RBA is widely tipped to leave its key cash rate at 7.25 per cent for a fifth straight month at tomorrow's monthly board meeting, but may lay the groundwork for a change in interest rate policy in its accompanying statement.
"Their statement is likely to further highlight the downside risks to growth following the very poor run of data over the past week," National Australia Bank senior economist Spiros Papadopoulos
said.
NAB expects the first rate cut will be in the first three months of next year, but financial markets are putting a 75 per cent risk of a cut as early as the central bank's September meeting.
The RBA raised rates four times between August last year and March to try to bring inflation pressures back under control after spiking above an annual rate of four per cent.
This is well outside the central bank's two to three per cent inflation target.
"We do have to remember inflation is at a 16-year high, so the RBA is not going to be rushed into cutting interest rates," ANZ senior economist Katie Dean told Sky News.
"We think they are more likely to stay on hold at least one more month."
The Australian Bureau of Statistics house price index released today - which calculates the average for the country's eight capitals - fell by sharpest pace in three years at 0.3 per cent in the June quarter.
This left the annual rate at its slowest pace in two years at 8.2 per cent, compared with 13.2 per cent growth in year to March.
Economists had expected a fall of 1.0 per cent for the June quarter.
Perth suffered the biggest drop in house prices, falling 2.4 per cent in the June quarter, and prices are now dropping at an annual rate of 0.9 per cent, the weakest growth amongst all states.
But the country's largest housing market - Sydney - rose 0.3 per cent in the quarter, albeit at a slim annual rate of 4.4 per cent growth.
Other data also showed job advertising fell for a third successive month.
The ANZ newspaper and internet job ads series fell by a seasonally-adjusted 0.3 per cent in July.
As such, ANZ expects jobs growth is likely to slow in coming months, and predicted the jobless rate would climb to 4.9 per cent by June 2009, up from 4.2 per cent in June 2008.
Source: AAP
New government data shows houses prices on average fell in half of the nation's states during the three months to June, including a drop in Perth prices, despite enjoying the first-hand benefit of the resources boom.
A private survey also shows job prospects are deteriorating as businesses wind back their hiring intentions, which could see the unemployment rate spike towards five per cent in coming months.
These two gloomy reports add to a myriad of data pointing to a rapidly lowing economy, which economists say could see the Reserve Bank of Australia (RBA) cutting interest rates before the end of the year.
The RBA is widely tipped to leave its key cash rate at 7.25 per cent for a fifth straight month at tomorrow's monthly board meeting, but may lay the groundwork for a change in interest rate policy in its accompanying statement.
"Their statement is likely to further highlight the downside risks to growth following the very poor run of data over the past week," National Australia Bank senior economist Spiros Papadopoulos
said.
NAB expects the first rate cut will be in the first three months of next year, but financial markets are putting a 75 per cent risk of a cut as early as the central bank's September meeting.
The RBA raised rates four times between August last year and March to try to bring inflation pressures back under control after spiking above an annual rate of four per cent.
This is well outside the central bank's two to three per cent inflation target.
"We do have to remember inflation is at a 16-year high, so the RBA is not going to be rushed into cutting interest rates," ANZ senior economist Katie Dean told Sky News.
"We think they are more likely to stay on hold at least one more month."
The Australian Bureau of Statistics house price index released today - which calculates the average for the country's eight capitals - fell by sharpest pace in three years at 0.3 per cent in the June quarter.
This left the annual rate at its slowest pace in two years at 8.2 per cent, compared with 13.2 per cent growth in year to March.
Economists had expected a fall of 1.0 per cent for the June quarter.
Perth suffered the biggest drop in house prices, falling 2.4 per cent in the June quarter, and prices are now dropping at an annual rate of 0.9 per cent, the weakest growth amongst all states.
But the country's largest housing market - Sydney - rose 0.3 per cent in the quarter, albeit at a slim annual rate of 4.4 per cent growth.
Other data also showed job advertising fell for a third successive month.
The ANZ newspaper and internet job ads series fell by a seasonally-adjusted 0.3 per cent in July.
As such, ANZ expects jobs growth is likely to slow in coming months, and predicted the jobless rate would climb to 4.9 per cent by June 2009, up from 4.2 per cent in June 2008.
Source: AAP
