By Craig James

Dwelling approvals: Dwelling approvals fell by 12.7% in November, dragged down by a 24% fall in apartment approvals. Approvals fell 35.5% in Victoria.

Peak in boom? Over the past year, 231,489 new homes were approved, down from the record high of 233,186 approvals in the year to October.

Trade deficit: Australia’s trade narrowed from $3.2 billion in October to $2.9 billion in November. It was the 20th consecutive monthly deficit.

Imports from India: In the year to November, Australia imported almost $4.7 billion of goods from India, a near doubling in two years.

The trade data has the potential to affect the Aussie dollar so may be important for exporters. The approvals data has implications for banks, building and building material companies

What does it all mean?

All good things come to an end eventually. And Australia’s long building boom may finally be showing signs of peaking. In the year to June 2009, 135,558 new dwellings were approved. Fast forward to the year to October 2015 with 233,186 homes approved – up 72% from the cyclical lows. The building boom showed signs of peaking a year ago before rallying to new highs. But the situation bears watching again.

The increase in the supply of new homes on the market will act to dampen home prices over the coming year.

The trade figures are interesting for the detail rather than the bottom line deficit. Some of the interesting trends at present are the lift in Australia’s services exports to record highs and the explosion in imports from India. In the past year $4.66 billion of goods were imported from India, a near doubling in the space of two years. The top imports from India are listed as refined petroleum, cars, pearls/gems and medicaments.

In the year to November almost 30% (29.6%) of all dwelling approvals were for apartments higher than 4 storeys. Five years ago only 10% of approvals were high-rise apartments. Australian society is changing at a fast clip.

What do the figures show?

International trade

Australia’s trade deficit narrowed from $3.2 billion in October to $2.9 billion in November. It was the 20th consecutive monthly deficit.

In November, exports of goods and services rose by 0.6% (goods rose by 0.6%) while imports of goods and services fell by 0.6% (goods down by 0.8%). Exports are down 1.1% on a year ago, while imports are up 5.4%.

Rural exports rose by 15.3% with non-rural exports down by 1.3% and gold down 15.5%.

Within imports, consumer imports rose by 0.8% with capital goods imports up by 4.6% while intermediate goods imports fell by 1.7%.

Consumption goods imports are up 15.1% on a year ago while capital goods imports are up by 3 % and intermediate goods imports are down by 1.6%.

Services exports rose 0.6% to a record high of $5,676 million. Services exports are up 8.5 % over the year. Services imports rose by 0.1% to stand 5.3% higher over the year. The net services deficit is at a 5-year low of $491 million.

Australia's annual exports to China stood at $81.87 billion in the year to November. Annual exports were down 10.8% on a year ago. Exports to China accounted for 32.3 % of Australia's total exports.

Australia's annual imports from China rose from $60.4 billion to a record high of $61.5 billion in the year to November, up 20.4% on a year ago. Imports from China accounted for a record 23.1% of Australia's total imports.

Australia's rolling annual trade surplus with China hit a 4-year low of $20.35 billion in November, well down from the record high of $51.16 billion set in April 2014.

Australia annual exports to the US eased from a record high of $13.69 billion to $13.56 billion in the year to November. The share of annual exports going to the US eased from a 6-year high of 5.39% to 5.36% in November.

Australia’s annual exports to India hit a two-year high of $10.4 billion in November.

Australia's annual imports from India rose from $4.50 billion to a record high of $4.66 billion in the year to November.

Building Approvals

Dwelling approvals fell by 12.7 % in November after rising by 3.3% in October and rising 2.7% in September. Over the past year 231,489 new homes were approved, down from the record high of 233,186 approvals in the year to October.

House approvals fell for the third month, down by 0.6% in November (private sector fell by 0.5%). Meanwhile ‘lumpy’ apartment approvals fell by 24.0% in November after rising 17.2% in the previous two months. Private sector apartment approvals fell by 23% in November.

Dwelling approvals are down by 8.4 % on a year ago with house approvals down by 2.2% while apartments are down by 15.0%.

Across states and territories approvals in November: NSW (+1.0%); Victoria (-35.5%); Queensland (+9.4%); South Australia (-10.3%); Western Australia (-16.3 %); Tasmania (+47.5%). In trend terms, approvals fell by 0.6% in the Northern Territory and fell by 9.3% in the ACT.

The value of all commercial and residential building approvals fell by 5.0 % in November after rising by 6.4% in October. Residential approvals fell by 10.2 % (+9.8 % in October). New building fell by 10.9% while alterations & additions fell by 4.3%. Commercial building rose by 7.3% in November to be up 4.4% over the year.

What is the importance of the economic data?

The monthly International Trade in Goods and Services release from the Bureau of Statistics provides estimates on exports and imports of physical goods (such as coal, beef and computers) and services (such as travel receipts). The balance of goods and services (BOGS) is a narrower description of Australia’s external position than the current account estimates. The import data is a useful gauge of consumer and business spending while exports reflect global demand as well as domestic influences such as drought.

The Bureau of Statistics' monthly Building Approvals release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. An increase in approvals would point to stronger future activity for construction-related companies.

What are the implications for interest rates and investors?

Dwelling approvals may be peaking, but activity in the home building segment will remain strong over 2016.

China dominates Australia’s trade relationships but India is the country to watch.

CommSec expects the Reserve Bank to remain on the interest rate sidelines over 2016. But if the turmoil on Chinese financial markets serves to dampen global economic activity, infiltrating Australia, then the Reserve Bank is well placed to cut rates.