Source : Business Times - 3 Feb 2009
Biggest annual drop so far points to further rate cuts
Australian house prices fell 3.3 percent in 2008, official figures showed yesterday, reflecting their biggest annual drop and cementing expectations of more interest rate cuts, analysts said.
Property prices fell 0.8 per cent in the December quarter, according to the Australian Bureau of Statistics, the largest 12-month fall since the data service began 23 years ago.
But economists said the price drop is unlikely to spiral out of control and match the crippling 10 to 20 per cent falls in the US and Britain, Dow Jones Newswires reported.
‘We maintain this is not the beginning of the end (for house prices),’ said Katie Dean, senior economist at ANZ Bank.
‘Ongoing commentary that suggests that softer prices in Australia will end up as a US-style collapse remains unfounded.’
A growing population boosted by immigration, and a shortage of housing, are expected to stave off a major loss in value in a country where property is regularly cited as among the least affordable in the world.
But the latest figures support the case for the central bank to cut interest rates again.
The Reserve Bank of Australia is widely expected to slash rates by up to 100 basis points after its monthly board meeting on Tuesday, taking rates to a 45-year low.
The figures came as Prime Minister Kevin Rudd said the global economic crisis and China’s slowdown will punch a A$115 billion (S$109.6 billion) hole in Australia’s budget over the next four years.
Mr Rudd flagged more government spending in a new stimulus package to be revealed soon, pledging ‘to move heaven and earth’ to support growth in the economy.
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