Sydney - Wednesday - August 6: (RWE Aust Business News) - The applications for housing finance continued to weaken in June with the 3.7 per cent seasonally adjusted fall marking the fifth consecutive monthly decline. Approval numbers are now 25pc below the level of one year ago, the weakest yearly growth rate in thirteen years, TD Securities senior strategist Joshua Williamson said. "Despite the prognostications of a number of analysts, finance approvals have refused to respond to the gaping imbalance between the demand and supply for new dwellings," he said. "The fact that nominal demand can so robustly outstrip supply, yet the market fail to respond shows just how restrictive interest rates are right now in curbing effective demand. "The situation will only be remedied by cuts to official interest rates. However, we are likely to need to see numerous cuts to get the banks to materially reduce lending rates in the current credit constrained environment. "In the meantime, households will continue to crowd into the rental market. While this will add to dwelling based inflation, it will suck money from other goods and services and contribute to the demand erosion that will ultimately result in domestic inflation falling. "With the RBA loading the gun yesterday, TD Securities looks for them to fire off the first rate cut in September and to back this up with two further rate cuts in the December quarter. All the cuts are likely to be in the order of 25 basis points, as the RBA remains wary of the terms of trade boost to income and upside inflation risks."
