The total number of dwelling approvals across Australia jumped by a solid 2.2% in December buoyed by the improving economy and low interest rates according to the Australian Bureau of Statistics.

Tasmania outperformed all other states, notching up a massive 21.7% increase while Victoria recorded a rise of 11.1%.

The number of approvals for private sector housing recovered in December, adding a healthy 3.1% and reversing a drop in the previous month.

Victoria racked up the highest increase in detached housing approval with a 4.6% growth. Queensland rose 2.2% while Western Australia gained 3.3%.

The Housing Industry Association noted that during the December quarter, the total number of approvals climbed by a stunning 34.9% compared to a year ago.

HIA senior economist Ben Phillips said the latest data is a positive sign that the new home building recovery is well underway.

"The recovery in building approvals now appears broad-based with all states and territories recording solid gains over the last quarter of 2009. The strong growth over the last quarter in New South Wales and Queensland, the two recent laggards, is most pleasing," said Phillips. 

"The strong result in approvals is no doubt driven by the combined impacts of the federal government?s social housing stimulus, low interest rates through 2009, and the last wave of the first home buyer boost approvals filtering through." 

Despite these upbeat data, HIA pointed out that the housing industry remains weak. Over the entire 2009, only 144,992 dwellings were approved, down 2.1% over 2008 and well below the 190,000 dwellings required to satisfy Australia's growing population.

"The sustainability of a broad-based housing recovery will be challenged through 2010 as the positive impact of federal stimulus and very low interest rates wanes. The removal of the first home buyers boost and the potential for higher interest rates could prevent further sustained growth in approvals through the year," said Phillips.

"The fundamentals of strong population and employment growth can be expected to push high housing demand. Without an adequate supply response, price pressures and further erosion of housing affordability will be inevitable."