Housing sector in recession, industry says

31 May 2012, 7:05 pm   -   Source: AAP
(File Getty)

(File Getty)

Australia's housing sector says a sharp fall in building approvals indicate the sector has fallen into a recession.

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Australia's housing industry says it has fallen into a recession after building approvals plunged to their lowest level since the global financial crisis.

Figures released by the Australian Bureau of Statistics on Thursday showed building approvals fell 8.74 per cent in April, from the month before, to their lowest level since January 2009.

Housing Industry Association chief economist Harley Dale said the figures suggested new residential construction had fallen into a recession and was a approaching a "looming crisis".

"That's not a positive, upbeat outcome to report, but it is a fact which cant be ignored or denied," he said.

He called on the federal government to stimulate growth in the sector through new funding and tax relief.

"The situation can be turned around, but it requires action and that action needs to occur now."

According to the ABS, data 10,330 building approvals were granted in April, a 24.1 per cent drop from the same month a year ago.

JP Morgan economist Tom Kennedy said most of the fall from March to April this year could be attributed to a change in the approvals administrative process in Western Australia.

"As a result, the number of approvals in Western Australia effectively halved in April, as numerous local councils received building application forms written under the old code, which were subsequently rejected."

In sharp contrast to the moribund housing industry, is the booming resources sector.

According to ABS data, new business investment is expected to soar past $170 billion next financial year, most of it linked to mining and related sectors.

Commonwealth Bank economist James McIntyre said capital expenditure was now expected to grow by 34 per cent in the next financial year, down from the 36 per cent rise forecast three months ago.

"There is still a major surge in business investment under way in the economy, but not as strong as was forecast three months ago," he said.

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