The Australian Bureau of Statistics said house approvals fell 1.8 per cent in December and have now dropped 31.5 per cent since April.

"While approvals for private houses have fallen from all-time highs, the series remains at historically elevated levels, with the December result 20.5 per cent higher than the pre-pandemic level in December 2019," ABS director of construction statistics Daniel Rossi said.

However, JP Morgan economist Jack Stinson expects approvals to fall further as mortgage rates rise.

Reserve Bank of Australia governor Philip Lowe warned on Wednesday that a rise in the cash rate later this year, which influences the direction of home loan rates, was "plausible".

Banks have already started lifting their fixed rate mortgages and some have also increased their variable rates in recent weeks.

"There are some uncertainties in the near term as construction plans may be brought forward with the prospect of higher mortgage rates in the future, although it is likely many have already front-loaded construction to take advantage of the HomeBuilder scheme," Mr Stinson said.

Overall approvals rose 8.2 per cent in December, driven by a 27.5 per cent increase in dwellings excluding houses.

Separate data on Thursday showed the construction industry suffered a slump over December and January due to the impact of the Omicron variant, continuing the sector's volatile run during the past six months.

The Australian Industry Group-Housing Industry Association performance of construction index dropped 11.1 points to 45.9 over December and January, cutting short a recovery in November.

It was the weakest index result since August last year, with a reading below 50 indicating the sector is in contraction.

"This latest downturn was driven by disruptions to labour supply, material supplies and business and household confidence associated with the rapid spread of the Omicron strain," Ai Group chief policy advisor Peter Burn said.

"Builders and constructors are hoping the reductions in COVID-19 infections evident over the past couple of weeks will ease some of the extra constraints evident over the past couple of months but they, like everyone else, are geared for further uncertainty and volatility."

Releasing the National Australia Bank business survey for the December quarter, its chief economist Alan Oster said the economy was showing considerable strength before the spread of the Omicron variant and that translated into a positive outlook for the coming months.

"We now know that Omicron has dampened that recovery somewhat but, fundamentally, we expect that positive trajectory to continue when the current virus outbreak recedes," he said.

Over the quarter, the NAB business conditions index held steady at 12 points, but confidence rebounded sharply, up 20 index points to 18 points, as lockdowns were lifted in major states and vaccination rates hit key milestones.

Other ABS figures showed Australia's monthly international trade surplus narrowed further in December to $8.4 billion.

That compares with a revised $9.8 billion in November and having struck a record surplus of $13.3 billion in July last year.

"Since then, the iron ore price is well off its peak and imports jumped late in the year as the economy reopened from Delta lockdowns," Westpac senior economist Andrew Hanlan said.

Exports rose one per cent in December, but were outpaced by a five per cent increase in imports.

Australian Associated Press