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AAP

2013-02-04

A fall in building approvals in December suggests the Reserve Bank Australia may need to cut the cash rate again in the next few months.

Residential building approvals fell 4.4 per cent to 12,767 units in December, figures released by the Australian Bureau of Statistics on Monday showed.

JP Morgan economist Tom Kennedy said the ABS figures also showed approvals for houses fell for the first time since April 2012.

"That is quite worrying because detached dwellings really give you the underlying sense of what's happening in the housing market," he said.

Mr Kennedy said the building approvals data suggested the RBA may need to cut the cash rate (currently at three per cent) again in the next few months in order to support the housing construction sector.

"When you look at the number of building approvals in level terms, they are significantly lower than they were in 2010 and 2009 and if you want to see those levels return I think the RBA is going to have to provide a bit more of an accommodative stance over the coming months," he said.

However, Mr Kennedy said an improving outlook for the global economy, including stronger growth in China, meant the RBA would keep the cash rate on hold at its February board meeting on Tuesday.