Rate rise blamed for Australian building slump

CANBERRA - A sharp fall in building approvals is due solely to the Australian Reserve Bank's decision to lift interest rates in March, Master Builders Australia (MBA) said yesterday.

MBA chief executive Wilhem Harnisch said the latest building approval figures were more evidence for the Reserve Bank to leave rates on hold this month.

Building approvals slumped 6.8 per cent in March, with approvals for units and other dwellings down 25 per cent. However, private home approvals climbed 0.3 per cent.

Mr Harnisch said the Reserve Bank should keep rates on hold.

"Today's data provides the first stark evidence as to how the highly interest-rate-sensitive housing industry reacts to rate rises, particularly at the end of a growth cycle," he said.

"The March building approval figures do not add to the case for a further rate rise. A further rate rise can lead only to a damaging and more pronounced housing downturn."

Housing Industry Association senior economist Harley Dale said the figures pointed to even softer levels of activity in the construction sector in coming months.

He said the full impact of the March rate rise would become evident in the April building approvals.

"An additional chunk of buyer urgency was wiped from the housing market as a result of the interest rate rise and some further moderation in building approvals is likely.

"That won't change the story of a reasonably mild pull-back to housing activity ahead. That story will be in danger of changing, however, unless the sensible option is taken [leaving the interest rate unchanged]."

- AAP