Building approvals resumed their slump in March, reversing the uptick seen in February. Approvals have collapsed 27.3% from March of last year and slid 15.5% since last month. Building approvals are a particularly volatile data set, and highly influenced month-to-month by large apartment approvals, so examining the trend data provides a clearer picture. On this basis the outlook is still poor, however, as in trend terms approvals nationally slumped 0.6% since last month and 22.4% since this time last year.
The trend is worrying and points to weakness ahead in the construction sector. This is concerning as the sector is one of the largest employers in Australia, making up nearly 10% of jobs in Victoria and New South Wales. As residential construction activity deteriorates over the coming months, this will hit employment. Given that strength in the labour market is crucial in determining the Reserve Bank of Australia’s next policy move, it is vital to watch these leading indicators
for clues on the path for monetary policy.