House approvals at 21-year high
Building approvals; International trade
Dwelling approvals: Council approvals to build new homes rose by 2.6 per cent in November to 28-month highs. Private sector house approvals hit 21-year highs.
Foreign trade: The trade surplus fell by $1.6 billion to $5.02 billion in November. Australia has posted 35 successive monthly trade surpluses.
The trade data is instructive on income flows in the economy and consumer and business activity and has implications for the currency. The building approvals and lending finance data has implications for banks, retailers, developers, building and building material companies.
What does it all mean?
• The run of encouraging economic reports continues. Council approvals to build new houses stand at 21-year highs, boosting activity for tradespeople and building material suppliers. For homes more generally – houses and apartments – building approvals are the highest in more than two years.
• Australia continues to pay its way in the world. The good news is that exports and imports both posted healthy gains in November. Exports boost business incomes. And higher imports are a sign of firmer consumer and business demand for goods. A lift in aircraft purchases was one special factor driving the lift in imports. But imports of telco equipment such as mobile phones were up by 26 per cent in the month.
What do the figures show?
Building Approvals – November
• Council approvals to build new homes rose by 2.6 per cent to 28-month highs in November.
• House approvals rose by 5.9 per cent but apartment approvals fell by 3.9 per cent.
• Private-sector house approvals rose for the fifth straight month to 21-year highs (highest since December 1999).
• Over the past year 180,990 new homes were approved, a 16-month high.
• Dwelling approvals across states in November: NSW (+1.5 per cent); Victoria (-4.6 per cent); Queensland (+6.5 per cent); South Australia (+18.8 per cent); Western Australia (-5.4 per cent); Tasmania (-0.4 per cent).
• The value of all commercial and residential building approvals fell by 8.4 per cent after rising by 26.2 per cent in October. Residential approvals rose by 5.7 per cent with new building up 5.7 per cent and alterations & additions up by 5.6 per cent. But commercial building fell 27.4 per cent after rising by 59.3 per cent in October.
International trade – November
• The trade surplus fell by $1.6 billion to $5.02 billion in November. Australia has posted 35 successive monthly trade surpluses
• The rolling annual surplus eased from $74.183 billion in the year to October to $71.102 billion in the year to November.
• Exports of goods and services rose by 3.5 per cent (exports of goods rose by 3.7 per cent).
• Imports of goods and services rose by 9.7 per cent (goods imports rose by 10.6 per cent).
• Rural exports rose by 6.3 per cent after rising 7.5 per cent in October. Exports of non-rural goods rose by 0.1 per cent after rising by 6.9 per cent in October. Gold exports rose by 44.7 per cent after falling 16.1 per cent in October.
• Within imports, consumer imports rose by 3.8 per cent; capital goods imports rose by 31.4 per cent and intermediate goods imports rose by 3.5 per cent.
• A net services surplus of $1.295 billion was posted in November after a $1.346 billion surplus in October.
• Australia’s annual exports to China fell from $146.57 billion in October to $145.79 billion in November. Exports to China are down 0.4 per cent on a year ago.
• Australia’s annual imports from China lifted from $82.07 billion in October to $82.92 billion in November. Annual imports were up 5.6 per cent on a year ago.
• Australia’s rolling annual trade surplus with China fell from $64.51 billion in October to a 16-month low of $62.86 billion in November.
What is the importance of the economic data?
• The Bureau of Statistics’ monthly Building Approvals release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. An increase in approvals would point to stronger future activity for construction-related companies.
• The monthly International Trade in Goods and Services release from the Bureau of Statistics provides estimates on exports and imports of physical goods (such as coal, beef and computers) and services (such as travel receipts). The balance of goods and services (BOGS) is a narrower description of Australia’s external position than the current account estimates. The import data is a useful gauge of consumer and business spending while exports reflect global demand as well as domestic influences such as drought.
What are the implications for investors?
• The ongoing trade surpluses support recent gains in the value of the Aussie dollar. High and rising commodity prices, Australia’s relative success in suppressing Covid-19 and signs of a firmer Australian economy also fundamentally support our currency.
• Super-low interest rates and government housing packages will support home builders at a time when overseas migration is absent.
Published by Craig James, Chief Economist, CommSec