Housing finance falls, Construction industry finally grows, Brookes defends Myer IPO: Economy Roundup

Housing finance has dropped by 0.6% during August, while the value of owner-occupied housing finance fell 1.7% to $16.54 billion, according to new figures from the Australian Bureau of Statistics.

The value of dwelling finance commitments increased during August by a seasonally adjusted 0.7%, or $22.8 million, with investment housing commitments up 7.6% or $6.2 million.

The total number of owner occupied dwelling commitments fell by a seasonally adjusted 0.6%. The number of new construction projects jumped by 4.6% during August, while purchases of new dwellings also gained 4.9%. Purchases of established dwellings decreased by 1.5%.

Meanwhile, the construction industry has returned to growth during September following 18 months of contraction, according to figures from the Australian Industry Group.

The latest Housing Industry Association Australian Performance of Construction Index (PCI) rose by 8.4 points to 50.8, putting the index above the 50-point level separating expansion from contraction.

“It is very encouraging to see the Australian PCI back in positive territory after such a long period of sustained sub 50 readings, and detached home building is responsible for much of the improvement,” Housing Industry Association senior economist Ben Phillips said in a statement.

“The unwinding of low interest rates and the first home buyers boost threatens to reverse this welcome trend and ensure any recovery in new home trade-up buyer activity and new investment activity remains in a holding pattern.”

Phillips said activity in the housing sector was the main driver for growth, with the last days of the increased first home owner’s grant increasing demand.

Shares rise after RBA lifts rates

The Australian sharemarket has opened higher today after good results in the US, with optimism high after the Reserve Bank of Australia lifted rates by 25 basis points yesterday.

The benchmark S&P/ASX200 index was up 68.2 points or 1.49% to 4659.8 at 12.00 AEST. The Australian dollar also gained ground, moving up to US88c.

ANZ shares gained 1.9% to $23.75, while Commonwealth Bank gained 2.2% to $50.58. Westpac lifted 0.2% to $25.22, as NAB gained 1.5% to $29.52.

Department store giant Myer has defended itself against claims from fund managers that its upcoming float is too expensive, with chief executive Berne Brookes telling AAP that some are talking down the IPO in order to make a profit.

“It is their job to try and posture to ensure that the price that they offer is as low as possible, because they are the buyer, and we are the seller,” he said. “Obviously they are going to continue to attempt to talk down the value of the company to ensure that it puts other prospective candidates to purchase part of the company off.”

“So it is not unexpected, it is not unparalleled in what happens in any IPO and at the end of the day we respect what they have got to say but water will find its own level,” he said.

ACCC delays decision on Caltex, Mobil deal

The Australian Competition and Consumer Commission has delayed its final decision on whether Caltex can go ahead with the $300 million takeover of Mobil service stations.

The ACCC indicated last month in a draft report that the deal could lead to higher petrol prices, but has said it would welcome any move from Caltex to scale down the bid. The final report will be released on 11 November.

Overseas, Wall Street stocks rose after news broke the Reserve Bank of Australia became the first G20 member to raise interest rates in more than 12 months, indicating a looming recovery.

The Dow Jones Industrial Average gained 1.37% to 9,731.25, while the Standard & Poor’s 500 Index gained 1.37% to 1,054.72.