Guess, what, housing finance continues to improve, and after last week’s rate cut, consumer confidence jumped sharply.
In other words, the Australian economy continues to surprise on the upside, and the chances of a second rate cut are starting to recede.
But they will return if Europe can’t get its act together, which still seems likely after events overnight where Italy’s debt costs jumped sharply to levels that would cripple the economy if sustained.
And good economic news from China yesterday, especially on inflation, is also bullish for Australian sentiment and confidence in the economy from offshore investors.
The Australian Bureau of Statistics reported that the number of home loans rose for the sixth straight month in September.
The number of home loans rose 2.2% in September, seasonally adjusted, following a 1.2% rise in August, better than the market estimates of a 1.5% rise in the month.
The ABS also reported that total housing finance by value rose 1.0% in September, seasonally adjusted, to $21.104 billion.
The number of home loans approved in was 51,821 from a downwardly revised 50,706 in August (50,944 originally reported).
Construction of new dwellings fell 0.2% in the September, while the purchase of new homes eased by 0.7% in the month.
There was a 2.6% rise in the number of loans to buy established homes, a healthy sign for the real estate industry.
The RBA cut the cash rate to 4.5% a week ago Tuesday, from 4.75 per cent where it had been since November 2010.
Analysts reckon that will trigger a further rise in demand for housing loans in the next six months or so, unless the European crisis worsens into a full blown recession and financial freeze.
West economists weren’t enthused by the report, saying in a note released yesterday: "New lending – i.e. ex-refinancing – increased by a modest 1.0% in the month."
"For the year to date, new lending is down by 3.8%.
"Moreover, the level of new lending remains relatively low, only a little above that prevailing over the second half of the 1990s."
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And it probably came as little surprise to learn that the rate cut last week improved consumer confidence in the monthly survey from Westpac and the Melbourne Institute.
The survey, released yesterday showed a rise of 6.3 percent to 103.4, the third straight monthly gain and the highest level since May.
It was taken from October 31 to November 6 and included the Melbourne Cup day rate cut from the RBA.
Westpac’s Chief Economist, Bill Evans said in yesterday’s statement:
"This result is around our expectations and is clearly driven by the decision by the Reserve Bank to cut the official cash rate by 0.25% with, in most cases, the major lending institutions passing the cut on in full to mortgage borrowers.
"The cut represented the first interest rate reduction since April 2009 and comes only a few months after the Bank desisted from threatening higher rates.
"The significance of the rates decision is apparent from the breakdown in responses by home ownership.
"Confidence amongst those folks which have a mortgage soared by 13.9%; people who own their house mortgage free boosted their confidence by 6%; while tenants’ confidence actually fell by 6.8%.
"The Index is now indicating that optimists slightly outnumber pessimists for the first time since June 2011 and this is the highest reading for the Index since May 2011.
"However it is still 6.7% below its level last year.
"That is even after the Index had fallen by 5.3% in response to the rate hike in November last year," Mr Evans said.
There will be a further test of sentiment and the health of the economy with today’s release of the jobs data for October.
