Australian house prices expected down

Official house price figures due out across the Tasman today could give another clue to the prospects of an early interest rate cut there.

The house price index for capital cities, to be released by the Australian Bureau of Statistics this morning, could show whether the economic slowdown is biting the real estate sector.

A string of economic reports over the past week has provided further evidence that the economy is slowing on the back of high interest rates and rising petrol prices.

Figures released last week show growth in retail spending in June was at its weakest in six years, slumping to recession levels, while housing approvals have also fallen.

The weight of evidence supporting a major economic slowdown has some economists forecasting the Reserve Bank could soon embark on a course of rate cuts in an effort to stave off a potential recession.

Financial markets now believe there is a 75 per cent chance that the Reserve Bank, which meets on Tuesday, will cut interest rates by October.

Finance Minister Lindsay Tanner concedes that the economy is slowing, but says speculation that Australia is headed for a recession is premature.

Prime Minister Kevin Rudd says it is clear growth has slowed, but maintains the government is well placed to deal with the challenges confronting the economy.

“We believe that we have a strong economic course of action to take Australia through these difficult global economic times,” Mr Rudd told the Nine Network yesterday.

Speculation about whether interest rates, at their highest level in 12 years, have slowed the economy too much comes amid a new report suggesting the major banks are making gains on the back of the credit crisis.

Source: AAP, NZ Herald