Signs of life in Australia's housing market could provide fresh stimulus to the economy: Gottliebsen

When we look abroad we see all sorts of warning signs but we should not forget that the Australian domestic economy is getting a substantial stimulus.

Julia Gillard and Wayne Swan are once again spraying money at lower-income earners, and they will spend it. 

Australians are highly leveraged into the housing market so they are very responsive to falls in interest rates. This is a big help to middle-class Australia who are being hit by Canberra. 

Not only have official rates come down but also there are clear Reserve Bank signals of further falls.

Moreover the dollar has slipped, which will give some light to struggling service and manufacturing industries.

From this week’s comment by Australia’s largest apartment developer Harry Triguboff it is clear that local buyers have returned to the apartment market. Harry Triguboff is clearly talking his book when he says the market has risen, but in the past when the market has fallen Triguboff has been just as frank so his track record shows when he calls a move you can believe it.

The simple fact is that banks may be tardy lending to developers but they will lend to consumers for dwellings. And the apartment market is being boosted by mainland Chinese buying which is a sure sign that while the current indications in China suggest a downturn there is still great momentum and Chinese investors have money spend in Australia.

Harry Triguboff believes the way to kick start non-mining Australia is to step up migration. I think that’s a great idea but I know there are many with a different point of view. 

There is no doubt that building dwellings is an important part of non-mining Australia. The Reserve Bank was nervous about having strong dwelling activity at the same time as a mining boom but the limitations on bank finance mean that we are not going to see a boom.

The greatest threat to the dwelling market is the large number of potential layoffs in the system and the fact that 47% of Australians are frightened about their job. 

We will not escape if the Greek crisis blows up but the signs of life in the Australian dwelling market give hope that if Europe can hold it together and China minimises its growth rate decline we will come through in reasonable shape. A dollar fall will help.

This article originally appeared on Business Spectator.