James McIntyre, who is a very good economist, puts it well in this summary:
"Apparently it was the weather in February. Certainly, the Australian summer (particularly in the Eastern states) has been wetter than usual. But whether the weather has had a significant impact on house purchase activity, and subsequent applications for housing finance, remains to be seen. Certainly, the Queensland impact in January was significant. Following the 15.7% fall in January, Queensland housing finance approvals performed “best overall” out of all regions, falling only 0.5%. If it is the case that wet conditions held back housing markets over the summer selling season then there may be some normalisation over coming months. This could see housing finance approval volumes bounce.
Given the uncertainties, it is too early to suggest that a downtrend is underway in the housing market. A recovery in housing finance approvals was evident running into the end of 2010. Two months of disaster, or weather, affected data have wiped out that momentum. The key for policy will be to ascertain whether the momentum returns.
Natural disaster impacts mean that there is a significant amount of volatility, or “noise” in the high frequency data releases at present. The difficulty of divining the underlying signal for the economy from the data is a key factor behind our decision to push back our call for the RBA to lift rates from May to August. The dynamics at play in the economy remain unchanged – temporary natural disaster impacts are affecting activity domestically; a mammoth investment boom is currently underway; wages growth is already back up to pre-GFC levels; and there is limited spare capacity in the labour market. But evidence that some of the recovery from the recent spate of natural disasters domestically is slower than anticipated, the Japanese earthquake and the rise in the Australian dollar have removed some of the urgency for the RBA. The challenges remain, so the direction for rates remains the same. The issue is timing."
