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Australian Home-Building Approvals Plunge Most Since 2002

Australian home-building approvals declined in September by the most since November 2002 as permits granted for apartments and renovations slumped.

The number of permits to construct or renovate houses and apartments fell 13.6 percent from August, when they rose a revised 10.7 percent, the Bureau of Statistics said in Sydney today. That compares with the median forecast for a 4.9 percent decline in a Bloomberg News survey of 22 economists.

Reserve Bank Governor Glenn Stevens lowered the nation’s benchmark interest rate yesterday for the first time in 31 months as inflation and housing slow, and as Europe’s debt crisis dims prospects for the world economy. A government report this week showed Australian house prices declined in the three months through September, the third straight quarterly drop.

Today’s data “backs the RBA’s decision to cut,” said Joshua Williamson, a senior economist in Sydney at Citigroup Inc. “There should be a little bit of improvement in sentiment from what the central bank has delivered.”

The nation’s four biggest banks -- Commonwealth Bank of Australia, Australia & New Zealand Banking Group Ltd., Westpac Banking Corp. and National Australia Bank Ltd. -- today and yesterday reduced home-loan rates for customers. Westpac said its lower borrowing costs would save customers A$41 ($42) monthly on a A$250,000 mortgage.

Apartments, Renovations

Approvals to build private houses rose 1.1 percent to 7,689 in September from the previous month, the report showed. Permits for apartments and renovations declined 30.7 percent to 3,970, the biggest drop since May 2009.

Weighing on consumer and business sentiment in September was a decline in financial assets as Europe’s fiscal woes threatened to slow the world economy. The Australian dollar, the world’s fifth most traded currency, slumped 9.8 percent against its U.S. counterpart in September and the S&P/ASX 200 Index of stocks dropped 6.7 percent that month.

Permits in September fell 12 percent from a year earlier, the report showed. That compares with economists’ forecast for a 0.1 percent gain year-over-year.

The Australian dollar weakened after the report before recovering to $1.0338 at 1:08 p.m. in Sydney, little changed from yesterday in New York.

Rate Bets

Stevens cut the key rate to 4.5 percent from 4.75 percent yesterday, the first reduction since April 2009. Interbank cash rate futures show a 100 percent chance he will reduce the overnight cash rate target by another quarter percentage point at each of the next two meetings.

An index measuring the weighted average of prices for established houses in Australia’s eight major cities dropped 1.2 percent last quarter from the previous three months, when it fell a revised 0.5 percent, a government report showed yesterday. Prices fell in each of the cities surveyed.

Australia’s higher borrowing costs relative to other developed-world economies and a mining-investment boom helped drive the Australian dollar to $1.1081 on July 27, the highest since exchange controls were scrapped in 1983.

Europe’s fiscal troubles have weighed on the so-called Aussie in recent months. The world’s fifth most-traded currency fell 10 percent last quarter on concern Greece would default and trigger a repeat of the 2008 credit freeze that followed the collapse of Lehman Brothers Holdings Inc.

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