Private sector credit
- Private sector credit (loans outstanding) rose by 0.4 per cent in July. Credit stands 3.2 per cent higher than a year ago.
Low interest rates drawing borrowers back.
What do the figures show?
- Private sector credit (lending) rose by 0.4 per cent in July after a 0.4 per cent rise in June. Annual credit growth rose from 3.1 per cent to 3.2 per cent.
- Housing credit grew by 0.4 per cent in July. Housing credit is up 4.7 per cent on a year ago, lifting further away from the 4.4 per cent annual growth rate recorded in May – weakest annual growth in records going back to 1976.
- Owner occupier housing credit rose by 0.3 per cent in July to stand 4.1 per cent higher than a year ago. And investor housing credit lifted 0.5 per cent in July to be up 5.8 per cent over the year.
- Personal credit was flat in July after rising by 0.3 per cent in June. Personal credit was up 0.5 per cent over the year, after being flat or falling in annual terms for the past two years.
- Business credit rose by 0.4 per cent in July after a 0.5 per cent rise in June. Business credit is 1.3 per cent higher than a year ago.
- Monetary aggregates, M3 and broad money, improved modestly but remained near the lowest annual growth rate in three years.
- There have been some glimmers of hope in the last few months of credit data, but it was still very early days. The modest lift in overall credit is a positive development, but there was more excitement within the details of the data. Investor housing finance recorded its best annual growth rate in two years, while business credit posted its best monthly gain in 13 months. There have been early indications in other statistics that people are starting to borrow again. And while it is important to highlight that the improvement are taking place of a low base, it may just be that the low interest rate environment are beginning to entice Aussie consumer and businesses.
- In recent times the Reserve Bank has made mention of the lack of confidence amongst the business community and high savings rate amongst households. And while the Central Bank doesn’t expect a full blown turnaround in demand for credit, they have highlighted that super low rates are starting to result in a shift to more risky assets classes – interest rate sensitive areas of the economy are responding to the low interest rates on offer albeit it modestly.
- Overall weak growth in outstanding debt together with low inflation means that the Reserve Bank can cut rates further if it believes it will be beneficial. However it comes down to how the economy reacts to a post-election environment.
What does it mean?
- Private sector credit (lending) rose by 0.4 per cent in July after a 0.4 per cent rise in June. Annual credit growth rose from 3.1 per cent to 3.2 per cent.
- Housing credit grew by 0.4 per cent in July. Housing credit is up 4.7 per cent on a year ago, lifting further away from the 4.4 per cent annual growth rate recorded in May – weakest annual growth in records going back to 1976.
- Owner occupier housing credit rose by 0.3 per cent in July to stand 4.1 per cent higher than a year ago. And investor housing credit lifted 0.5 per cent in July to be up 5.8 per cent over the year.
- Personal credit was flat in July after rising by 0.3 per cent in June. Personal credit was up 0.5 per cent over the year, after being flat or falling in annual terms for the past two years.
- Business credit rose by 0.4 per cent in July after a 0.5 per cent rise in June. Business credit is 1.3 per cent higher than a year ago.
- Monetary aggregates, M3 and broad money, improved modestly but remained near the lowest annual growth rate in three years.
What does it mean?
- There have been some glimmers of hope in the last few months of credit data, but it was still very early days. The modest lift in overall credit is a positive development, but there was more excitement within the details of the data. Investor housing finance recorded its best annual growth rate in two years, while business credit posted its best monthly gain in 13 months. There have been early indications in other statistics that people are starting to borrow again. And while it is important to highlight that the improvement are taking place of a low base, it may just be that the low interest rate environment are beginning to entice Aussie consumer and businesses.
- In recent times the Reserve Bank has made mention of the lack of confidence amongst the business community and high savings rate amongst households. And while the Central Bank doesn’t expect a full blown turnaround in demand for credit, they have highlighted that super low rates are starting to result in a shift to more risky assets classes – interest rate sensitive areas of the economy are responding to the low interest rates on offer albeit it modestly.
- Overall weak growth in outstanding debt together with low inflation means that the Reserve Bank can cut rates further if it believes it will be beneficial. However it comes down to how the economy reacts to a post-election environment.
