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Consumer confidence still slow
Consumer confidence still slow

Consumer confidence has edged up this month and work was started on a higher number of houses last quarter, but the gains were minor.

The figures released today will give heart to economists saying another interest rate cut or two this year is both likely and necessary.

They include Westpac’s chief economist Bill Evans, who said the latest reading of the Westpac/Melbourne Institute index showed consumers were “clearly stuck in an extended ’cautiously pessimistic’ phase”.

The index rose to 98.3 in the survey done in the week ending September 8, from 96.6 a month earlier, but has been below the 100 level where optimists and pessimists are evenly balanced for seven months now.

Mr Evans said Westpac’s view was that the case for a further rate cut by the Reserve Bank of Australia has been made, although it was more likely to come in November than October.

The news from the housing sector was along similar lines - an improvement, but only a minor one, with the state of play supporting arguments for lower interest rates.

The number of now homes started in the June quarter was up by almost five per cent.
On its own, that sounds positive.

But the rise followed seven consecutive quarterly falls.

And to wind back the rest of that seven-quarter slide would take a further recovery of 34 per cent.

Even after the June quarter blip, the the total number of commencements was still seven per cent below the average for the past 40 years.

What’s more, the June quarter rise was entirely in multi-unit developments, where the number of homes started was up by 38 per cent.

Monthly building approvals numbers show that blip originated in a spike in approvals in May and June, which was followed by a slump in July that took number of approvals in the multi-unit category back to their lowest point since October last year.

On the other hand, commencements for free-standing houses, a more stable indicator of demand for new housing, posted their tenth quarterly fall in a row, hitting an 11-year low.

So housing, is clearly not booming.

Nowhere near it.

In that context, the comment from Master Builders Australia chief economist Peter Jones, while predictable, was also understandable.

“Further rate cuts from the Reserve Bank are needed to turn consumer pessimism around and ensure that demand recovers,” he said in a commentary issued after the housing data.

For its part, though, the RBA will look at the latest national accounts and see that domestic final demand - demand for all goods and services, not just housing - rose by 5.8 per cent in real terms over the past year, its fastest pace since 2007.

Concern about a weak housing sector and uninspired consumers might not be enough.

House prices across capital cities rose in the three months to June, but it is still cheaper for most Australians to buy a home today than it was a year ago.

A national survey of home prices, released today, shows the median capital city house price lifted 1.4 per cent in the June quarter, though it remains 3.1 per cent below its level a year ago.

Meanwhile, the median price of apartments and other residential dwelling rose 0.4 per cent over the quarter, the Bendigo Bank/Real Estate Institute of Australia Real Estate Market Facts report showed.

But those prices were still 0.4 per cent lower for the year.

Bendigo and Adelaide Bank executive Dennis Bice said the report suggested the housing market may be gaining momentum.

"People have been putting the big decisions, such as up-sizing or downsizing their housing preferences on hold for some time now but there is evidence to suggest that activity in the property market is beginning to build again,” he said.

Hobart recorded the biggest increase over the quarter, with prices up 4.8 per cent, while Canberra was the worst with a 5.0 per cent slump in prices.

The report also found loans to first home buyers rose by 5.9 per cent in the quarter.