Australian house prices grow 3% in 4Q, trade gap narrows in December
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Australian national house prices rose 3.2%q/q in 4Q (JPMorgan and consensus 3.0%) after growing 3.5% in the previous
three months. From a year ago, house prices rose 12.3%, the fastest rate since early 2004, compared to 10.6% in 3Q.
Prices in all capital cities rose. Until recently, Perth had posted the largest house prices gains, although posted the
smallest price rise (+0.9%) in 4Q, while Adelaide logged the largest (+6.0%). The rate of house price growth in other
capital cities remained solid: Sydney (+2.4%), Melbourne (+3.4%), Brisbane (+5.4%), Hobart (+3.7%), Darwin (+2.3%) and
Canberra (+4.4%).
Rising residential rents (due mainly to an acute shortage of new homes) and accelerating population growth (on the back
of higher skilled migration), will keep upside pressure on house prices going forward. Differing rates of population
growth and affordability, though, mean that house price gains will not be uniform across the nation. Regardless,
prospective home buyers face considerable headwinds. Not only are house prices still heading north, but the RBA will
likely raise the cash rate tomorrow, meaning that nationwide housing affordability is certain to deteriorate from
already record lows.
In other data, the trade deficit narrowed to -A$1.9 billion in December (JPMorgan -A$2.1 billion, consensus -A$2.0
billion) from a revised deficit of -A$2.2 billion in November (previously -A$2.3 billion). Total goods and services
exports increased 1.3% from the previous month, while imports rose just 0.1%.
The trade deficit has improved markedly of late, owing mainly to stronger exports. In December, total goods exports
increased a healthy 1.5%m/m after spiking 6.9% in November. While non-rural exports rose just 0.3%, rural exports surged
9.1%. Total goods imports, meanwhile, fell 0.3%, due to a 2.7% decline in intermediate goods, while imports of
consumption and capital goods both eased, growing 1.2% and 2.9%, respectively. The imports data is, to some extent,
reflective of the near 3% depreciation in the AUD over the December month, which made it more expensive to import goods.
Looking ahead, the trade deficit will likely narrow further throughout 2008. Business investment, particularly in the
resource sector, will continue to help alleviate the capacity constraints and infrastructure bottlenecks that have
hampered the nation’s export performance in recent years. The near-term completion of a number of large mining
projects will help boost non-rural exports which, alongside the anticipated increase in rural exports thanks to recent
rainfalls, should help net exports finally contribute to economic growth in 2008.
ENDS