Jan. 8 (Bloomberg) -- Australian home-building approvals fell by the most since 2002 and exports dropped for the first time in nine months, stoking speculation the central bank will extend the biggest round of interest-rate cuts in 17 years.

The number of permits granted to build or renovate houses and apartments slumped 12.8 percent in November, the fifth month of declines, the Bureau of Statistics said in Sydney today. A separate report showed exports fell 4 percent, halving the trade surplus to A$1.45 billion ($1 billion).

Today’s reports add to signs the economy is close to a recession after expanding in the third quarter at the weakest pace in eight years. Central bank Governor Glenn Stevens will cut the benchmark interest rate again after slashing it by three percentage points since September to a six-year low of 4.25 percent, economists forecast.

“Australia is in a technical recession and growth in 2009 will be very weak,” said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney. “We’re seeing a lot of weakness in the building sector and this is going to continue,” while slowing global demand for commodities will erode exports.

The Australian dollar fell to 70.92 U.S. cents at 12:56 p.m. in Sydney from 71.03 cents before the figures were released. The two-year government bond yield slipped 4 basis points, or 0.04 percentage point, to 2.94 percent.

The slump in building approvals suggests the central bank’s interest-rate cuts since September, the most aggressive since the economy was last in a recession in 1991, have so far failed to boost demand for homes.

Construction Shrinks

Approvals for building plunged 34.7 percent in November from a year earlier, today’s report showed. The median estimate of 10 economists surveyed by Bloomberg was for a 27 percent drop.

A separate report published today by the Australian Industry Group and Housing Industry Association showed the construction industry shrank for a 10th month in December.

“Pressure clearly remains on the building industry as economic uncertainty rises and the lingering effects of the credit crisis continue to impinge” on lending, said Alex Joiner, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne.

There is a “clear risk that the economy will contract in 2009,” Joiner added.

Gross domestic product rose 0.1 percent in the third quarter from the previous three months, as consumer spending stalled, a report showed last month.

Job Losses

Domestic growth may be hampered in coming months as reduced global demand for Australian exports forces companies to scrap investment plans and fire workers.

Shipments of minerals and metal ores such as iron dropped 13 percent in November and coal exports declined 2 percent, today’s trade report showed.

Business confidence fell to a record low in November and the jobless rate climbed to a one-year high of 4.4 percent as mining companies including Rio Tinto Group announced plans to shed staff. The rate reached a three-decade low of 3.9 percent in February last year.

“The Reserve Bank is likely to take special notice of today’s reports,” said Joshua Williamson, a senior strategist at TD Securities Ltd. in Sydney. “They clearly show the Australian economy remains weak” and that enthusiasm about recent gains in stock markets “was misplaced.”

The benchmark S&P/ASX 200 stock index, which has gained almost 12 percent since hitting a five-year low on Nov. 20, was down 2.3 percent at 12:24 p.m. in Sydney.

“The Reserve Bank needs to cut interest rates,” said Williamson, adding that he expects policy makers to lower the benchmark rate by three-quarters of a point to 3.5 percent on Feb. 3.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

Last Updated: January 7, 2009 21:00 EST