The housing sector is still going strong, with home building approvals in October suffering only a small fall from the three-and-a-half year high recorded the month before.
Home building approvals fell 1.8 per cent across Australia in October, the Australian Bureau of Statistics data said on Monday.
Local councils approved the construction of 16,491 new homes in October, down from the 16,791 approvals in September, which was the highest since March 2010.
JP Morgan economist Tom Kennedy said a fall in building approvals was inevitable after strong rises in recent months.
"We are viewing the building approvals data in a positive light," he said.
"If you look at a two or three month rolling average, clearly the trend is higher."
Mr Kennedy believes the housing sector is capable of being a significant driver for economic growth in the future.
"This does add a bit of credence to the theory that the Reserve Bank of Australia's interest rate cuts are getting traction, the construction sector is lifting and the housing market in general is turning higher.
"It's still is early days though, building approvals are still tracking at levels that are probably pretty low, compared to where they should be with the cash rate at 2.5 per cent.
Macquarie Group senior economist Brian Redican said the disappointing data for October would be unlikely to encourage the RBA to cut rates this month or early next year.
"This data won't change the RBA's perspective here," he said.
"We think they're marginally on the weaker side but you need several more months of substantially weaker data to change the RBA's mind."
Housing Industry Association chief economist Harley Dale was encouraged by the result.
"The upward momentum to building approvals is impressive and augers well for new home building activity heading into a new year," he said.
"Evidence of faster growth across a wider number of geographical jurisdictions and building approval types will be an important additional element to observe in coming months."
Over the year to October, total building approvals were up 23.1 per cent.
Approvals for private sector houses fell 0.3 per cent in the month, and the 'other dwellings' category, which includes apartment blocks and townhouses, was down 2.7 per cent.
