Fed: Building sector confidence falters ahead of RBA

AAP General News (Australia)
12-01-2003
Fed: Building sector confidence falters ahead of RBA

CANBERRA, Dec 1 AAP - Home owners are facing the prospect of another interest rate
rise this week as a new survey showed household consumption was quickening the pace of
economic growth.

The AAP economic indicator for December, based on a survey of economists, showed gross
domestic product (GDP) was likely to have grown by 1.3 per cent in the September quarter
for an annual rate of 2.3 per cent.

This was up from subdued economic growth of 0.1 per cent in the June quarter, for an
annual rate of 2.0 per cent.

Economists say rising household consumption would be the main driver of the expected
jump in GDP growth when the September quarter national accounts figures are announced
on Wednesday.

The Reserve Bank board meets on Tuesday and is expected to raise interest rates for
a second consecutive month to keep a lid on inflation and economic growth.

Most major banks are tipping a rise, with Macquarie Bank's Tim Rocks saying today an
increase was on the cards.

"I think they will and I think they'll probably have to increase interest rates quite
a lot to finally put the nail in the property coffin if that is what they want to do,"

he told the Nine Network.

Confidence in the building sector is already starting to slide with a survey by the
Master Builders' Association finding many in the industry expect the rate rise, which
in turn will dampen demand in the sector.

The survey found 92.3 per cent of respondents rated their own business conditions in
the December quarter as satisfactory or better.

But there was a difference between the residential and commercial sector, with the
home-building sector enjoying a much better December quarter.

When it came to the next six months, the number of members expecting conditions to
improve dropped more than 10 percentage points.

Association chief executive Wilhelm Harnisch said the survey should be heeded by the
Reserve Bank.

The bank, which lifted rates last month by a quarter of a percentage point to 5.0 per
cent, is tipped to do the same again this week.

"The latest survey results are consistent with recent ABS and other anecdotal data
that show the housing sector slowing," Mr Harnisch said in a statement.

"The November rate rise has had an immediate impact on the housing market with builders
reporting that home buyers are now taking a more cautionary approach."

The government, apart from watching the Reserve's decision with interest, will also
be focused on the latest balance of payments figures due out today.

AAP sw/sjb/jlw/mo

KEYWORD: ECONOMY NIGHTLEAD

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