Australian consumer confidence jumped after the Reserve Bank cut interest rates for the first time in 31 months, and home-loan approvals rose in September, buttressing the case for quicker economic growth next year.
A Westpac Banking Corp. and Melbourne Institute index of consumer sentiment climbed 6.3 percent to 103.4, the highest level since May, according to an Oct. 31-Nov. 6 poll released today of 1,200 consumers. The number of loans granted to build or buy houses and apartments jumped 2.2 percent from August, the sixth straight monthly gain, a government report showed.
Home-loan growth may accelerate after RBA Governor Glenn Stevens lowered the developed world’s highest benchmark rate on Nov. 1 to 4.5 percent from 4.75 percent amid reduced inflation pressure and a “subdued” housing market. A government report last week showed house prices dropped 1.2 percent in the three months through September, the third straight quarterly decline.
“The lending market was undergoing a marked recovery” before the rate cut, said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s biggest interdealer broker. “The fact that lending was recovering at a rapid pace through all of this global turmoil is a testament to how resilient the market actually is.”
Consumer sentiment climbed for a third straight month, the survey released earlier today showed. In August, it plunged to the lowest level in two years as turmoil engulfed global financial markets and threatened economic growth.
The Australian dollar was little changed after the home-loans report, trading at $1.0377 at 1:03 p.m. in Sydney from $1.0380 before the release of the data.
After Stevens’s first rate cut since April 2009, the nation’s four biggest banks -- Commonwealth Bank of Australia, Australia & New Zealand Banking Group Ltd., Westpac and National Australia Bank Ltd. -- reduced home-loan rates for customers.
Interbank cash rate futures show at least an 84 percent chance Stevens will cut the overnight cash rate target by another quarter percentage point at the next meeting in December.
Today’s home-loans report showed approvals exceeded the median estimate of economists for a 1.5 percent gain. First-home buyers accounted for 16.4 percent of dwellings financed in September, up from 15.4 percent in August and the largest proportion since May 2010.
The total value of loans rose 1 percent to A$21.1 billion ($21.9 billion) in September. The value of lending to owner-occupiers gained 0.7 percent, the report showed. The value of loans to investors who plan to rent or resell homes advanced 1.9 percent.
Australia’s housing market “remains weak,” the RBA said in a quarterly statement on Nov. 4 that set out its economic growth and inflation forecasts. The central bank predicted the nation’s economy will expand 4 percent next year, after 1.75 percent growth this year.
“The stock of unsold homes has not declined significantly and housing construction activity continues to be at very low levels,” the central bank said in the statement on monetary policy. “Population growth is, however, gradually reducing the underlying surplus of houses and there are some signs that house prices have stabilized, particularly in those areas that were less affected by overbuilding in the mid-2000s.”