Slowing down Down Under

By Jacob Greber  |   2008-11-4  |     NEWSPAPER EDITION

AUSTRALIAN house prices fell, retail sales dropped by the most in three years and job advertisements slid for a sixth month, according to reports yesterday that add to signs the nation's economy is slowing.

Separate reports also showed manufacturing contracted at a record pace last month and an index of monthly consumer prices fell for the first time since February 2006, supporting the central bank's view that the fastest inflation since 2001 will slow next year as economic growth cools.

Consumers, businesses and home buyers are scrapping spending plans as turmoil on financial markets threatens to push economies in the United States, Europe and Japan into recession. The spreading contagion might prompt central bank governor Glenn Stevens today to add to last month's 1 percentage point cut in the benchmark lending rate, the biggest reduction since a recession in 1992, according to a Bloomberg News survey of economists.

"The global financial crisis has had a significant impact on the domestic economy," said Katie Dean, a senior economist at Australia and New Zealand Banking Group Ltd in Melbourne. The Australian dollar traded at 66.02 US cents at 1:12pm in Sydney from 66.45 cents at the close of Asian trading on Friday. The two-year government bond yield gained 4 basis points, or 0.04 percentage point, to 4.33 percent.

An index measuring the weighted average price for established houses in the nation's eight capital cities dropped 1.8 percent from the June quarter, when it fell a revised 0.2 percent, the Bureau of Statistics said in Sydney yesterday. That was the biggest quarterly decline since 1978, ANZ Bank's Dean said.

Job ads fall

"Ongoing uncertainty, a weaker-than-expected economy and any significant rise in the unemployment rate pose further downside risks to house prices," Dean added.