Approvals to build new homes in Australia surged to 15-month highs in November as more apartment towers got the go-ahead, an unexpected return to strength that should drive activity and hiring across the economy. The upbeat news came as the latest survey of Australian consumers found a marked improvement in mood for the new year.
The ANZ-Roy Morgan confidence index climbed 4.7 percent from mid-December to the highest since November 2013, a hopeful sign for a much-needed pick up in spending. Tuesday's figures from the Australian Bureau of Statistics showed building approvals jumped 11.7 percent in November from October, confounding forecasts of a 1.0 percent decline.
Approvals of 21,055 were the highest since August 2016 and the third strongest on record. The gains came in multi-unit properties which soared almost 31 percent in November, leaving total approvals up a resounding 17 percent on a year before. The value of all those homes approved also jumped to a record peak of A$7.7 billion ($6.05 billion), a windfall for economic growth.
The revival in approvals has come as a major surprise to analysts who had assumed the sector was on its last legs. The current building bonanza has already been under way for almost five years, far longer than past cycles. Typically, past booms were snuffed out by rising interest rates, but this time subdued inflation has allowed the Reserve Bank of Australia (RBA) to keep rates at record lows for the past 17 months.
The central bank still seems in no hurry to tighten with inflation below its target band of 2 to 3 percent and wages growth only just above all-time lows. Policy makers have also managed to curb speculation in housing by tightening lending rules rather than jacking up rates, thus extending the lifetime of the building cycle.
Home construction has major spill over effects in the economy given the many suppliers involved and the need for buyers to furnish new premises. Over 100,000 new construction jobs were created in the year to November, positions that tend to pay higher than the average.
A separate survey from ANZ out on Tuesday showed job advertisements across Australia had fallen back by 2.3 percent in December, but that followed a run of strong months. "Our assessment of economic conditions suggests a continued improvement in labour market conditions over 2018," said ANZ's head of Australian economics, David Plank. "A slow but steady reduction in spare capacity should also eventually feed into wage growth, providing some support for consumers."