Building industry recovery looking more likely – more evidence last RBA rate cut unnecessary

Today’s new ABS building approvals data have generated much excitement at the prospect of a building industry recovery, although Queensland’s increase in September was much lower than NSW’s. The Housing Industry Association notes in a media release today that:

“Today’s building approvals data shows September 2012 provided a second consecutive monthly increase – up by 7.8 per cent in seasonally adjusted terms,” said HIA Economist, Geordan Murray…

…In September 2012 total seasonally adjusted building approvals increased by 22.8 per cent in New South Wales, 5.2 per cent in Victoria, and 2.6 per cent in Queensland. Building approvals fell by 1.4 per cent in South Australia, 2.4 per cent in Western Australia, and 9.6 per cent in Tasmania.

While Queensland’s recovery doesn’t appear spectacular, there is a marked improvement over the situation one year ago, as shown in the chart below.

I agree with Pete Faulkner’s conclusion in his post Good news on building approvals that:

Although one month of positive data is not enough to be drawing conclusions from, it would appear at least possible that we turned the corner on construction earlier this year.

In other encouraging news today, reported in the Tourism on Q newsletter:

Cairns has welcomed the first China Eastern Airlines passengers flying direct from Shanghai on a new route which could potentially inject millions annually into the local economy. Tourism Minister Jann Stuckey and Deputy Premier Jeff Seeney were at Cairns Airport today to greet the inaugural service and China Eastern Airlines VIPs. The China Eastern Airlines deal was the first announced under the Queensland Government’s $8 million Attracting Aviation Investment Fund.

I worry about the long-term sustainability of the direct flights from China to Cairns if the Government has provided a subsidy through the Attracting Aviation Investment Fund. That said, let’s hope the direct flights provide a stimulus to the Cairns economy.

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