Consumers shy away from new homes, cars

Consumers may need a further gee-up from the Reserve Bank of Australia to get them
spending, despite recent rate cuts.
Demand for cars and new homes has slumped, and even the lure of foreign goods
appears to have dried up.
A rush of new economic data released on Thursday - while not taking a full account
of the central bank's 300 basis points worth of interest rate reductions - suggests
households may need another prod next year.
Still, coal exporters are enjoying their moment in the sun, recording a 20 per cent
increase in demand during October, resulting in a record trade surplus of nearly $3
billion in the month, while imports were flat.
"This surplus was achieved despite the escalating global financial crisis at that
time," Trade Minister Simon Crean said in a statement.
"It indicates that Australia's export performance will play an important role in
sustaining our economy during this period of international economic instability."
Other data was far less positive.
October building approvals fell for a fourth straight month, dropping by a
seasonally adjusted 5.4 per cent to 10,730 units, to be 26 per cent lower than a
year earlier.
Private sector house approvals fell 2.7 per cent to 7,507 units, a 20.4 per cent
drop over the year, while other dwellings - such as apartments and townhouses -
tumbled 11.4 per cent to just 2,916 units, a slump of 38.8 per cent from a year
earlier.
"The housing slide now poses a major risk to the economy and points to the need for
more rate cuts to ensure a recovery in housing helps prevent the Australian economy
from falling into recession," Master Builders Australia chief economist Peter Jones
said.
"Stimulatory effects of the dramatic loosening of fiscal and monetary policy will
take time to come through and soft conditions in the housing market can be expected
over much of calendar 2009."
The data takes into account the 125 basis points worth of reductions by the RBA in
the cash rate in September and October. It has since cut by a further 175 basis
points, taking the rate to 4.25 per cent.
Financial markets are all but pricing in a cash rate below three per cent by mid-2009.
Macquarie Bank senior economist Brian Redican said the government's initiative to
treble the First Home Owners Grant for new homes should breathe some life into new
home building activity.
"But this initiative should be seen as a stop-gap measure ... we believe that
policymakers will continue to lower rates until they see evidence of a more
sustainable turnaround in housing market activity," Mr Redican said.
As part of its $10.4 billion economic stimulus package, the government has increased
the grant to $21,000 for the purchase of new homes until June next year.
The grant was doubled to $14,000 for first-time buyers purchasing an existing property.
Industry data released on Thursday also showed that despite lower rates and falling
petrol prices, motor vehicle retailers suffered their worst November performance in
six years.
The Federal Chamber of Automotive Industries said 71,647 new cars and trucks were
sold last month, down 22.2 per cent when compared to sales in November last year.