Stronger-than-expected growth in the number of residential building approvals has added to the Reserve Bank’s headaches over rising property prices.

The Australian Bureau of Statistics data shows the number of home building approvals rose 3 per cent in August, in seasonally adjusted terms, to 16,810.

It was a significantly better result than the 1 per cent growth analysts had been expecting.

Apartment projects entirely drove the growth, surging 9.6 per cent.

Approvals for detached houses actually went backwards, falling 1.8 per cent.

It was not all good news though, with the ABS revising down approvals growth in July from 2.5 per cent to 2.1 per cent.

JP Morgan senior economist Ben Jarman says the RBA will want the momentum in new home construction to be maintained, even as it ramps up its plans to reign in rising prices.

“Part of the reason why the RBA were initially fairly comfortable with rising house prices was because they viewed that as the mechanism that creates incentive to bring on new home supply,” he said.

“The fact that we have had one of the more impressive home building cycles for probably a decade is partly to do with the fact that home prices have been rising.

“Now for the RBA the issue is how the financial stability risks of rising house prices trade off against the positives that you get from new building.”

Trade deficit shrinks as expected

The Bureau of Statistics also released  its trade balance figures for August, showing Australia’s trade deficit continued to shrink in the month.

The deficit in goods and services traded fell by more than 25 per cent to just below $800 million.

The fall would have been even greater but the prior month’s result was revised down from $1.4 billion to $1.1 billion.

The result was broadly in line with analyst expectations, but the Australian dollar began rising steadily once the data had been released.

Having traded as low as 86.9 US cents yesterday, by early afternoon today the Aussie had risen to 88.1 US cents.

While exports fell in August, by 1.5 per cent, imports declined 2.5 per cent in the month.