Originally published by AMP Capital
December building approvals fell 1.2% which was pretty much in line with expectations.
Building approvals are well down from their highs as multi-unit approvals fall back to more normal levels.
There is still a big pipeline of work yet to do, but expect dwelling investment to be flat (albeit at high levels) through the course of this year before falling in 2018.
Australia’s trade surplus rose to a record $3.5bn in December from a revised $2bn surplus in November (previously reported to be $1.2bn). This was well above market expectations and explains the bounce above $US0.76 in the Australian dollar today.
The move to a large surplus reflects the flow through of the surge in iron ore and coal prices with a further rise likely in January. As a result exports rose by 5% in December, swamping a 1% rise in imports.
While higher commodity prices explain most of move into a trade surplus, export volumes also look to have increased by around 3% or so. But import volumes also look to have risen such that net exports are likely to have been flat to only slightly positive in the December quarter. Still a big improvement after the September quarter detraction.
The turnaround in commodity prices signals a large boost to national income which will help Australian economic growth this year (partly offsetting the slowing in housing construction growth). That said, further large gains in bulk commodity prices are unlikely – if anything they may fall back a bit.