New lending hits 7½-year highs

Lending finance; Credit & Debit cards

Lending: Total new loans (personal, business, housing & lease) rose by 6.4 per cent in September to a 7½-year high of $75.3 billion. It was the biggest monthly rise in lending in eight months.
Credit cards: The average credit card balance rose by just $5.20 to $3,135.70 in September. Compared with a year ago, the average credit card balance was down 1.5 per cent. On average, each card holder is making a record 20 transactions on credit and debit cards each month.

The past week has been a turning point in the economic cycle. A raft of strong indicators has confirmed that economic momentum is picking up, reducing the need for lower interest rates. Data this week has shown strong employment growth, increased consumer confidence and solid business conditions. And the latest figures out today show that lending has hit 7½ year highs, underpinned by stronger borrowing by businesses.
If businesses are borrowing and employing more staff then they are likely spending and investing. Businesses are clearly more confident and embracing opportunities again.
The Reserve Bank has patiently waited for businesses to get their mojos back. Well, it’s happening. A more stable political and economic environment has laid the groundwork for businesses to get back to business.
It’s taken some time but new loans are almost back to record levels. But while businesses are less fearful about taking on debt, consumers remain cautious. Credit card debt is still lower than a year ago and personal lending is falling in trend terms near the fastest pace in almost four years.
ussie consumers are only really prepared to take on debt to buy cars (more generally, new cars) and homes. New loans to buy cars hit record highs over the year to September while new housing loans were also at historic highs over the same period.

Figures released from the Reserve Bank show that the average credit card balance rose by $5.20 (0.2 per cent) to $3,135.70 in August. Compared with a year ago, the average credit card balance was down 1.5 per cent. In smoothed terms (12 month average) the average balance was down by 0.7 per cent – the biggest fall in 13 months.
Of credit cards attracting interest charges, the average outstanding balance fell by $11.80 in September to a near 10-year low of $1,979.00. The average balance accruing interest is down by 6.8 per cent on a year ago. In smoothed terms (12 month average) the average balance was down by 5.0 per cent on a year ago – an 11-month low.
The average credit card limit rose by $5.80 (or 0.1 per cent) to $9,067.70 in September. The average credit card limit rose by 0.2 per cent in the year to September. Usage of credit card limits lifted from a 14-year low of 34.5 per cent in August (lowest since November 2001) to 34.6 per cent in September.
The average repayment per credit card rose from $1,599.10 to $1,610.10 in September. On average, there were 11.8 transactions made per each credit card account in September, up from 11.6 a year ago. The average value of purchases was $128.01 in September with the rolling annual average up from a 10½ year low of $130.96 to $131.29 in September.
The number of cash advances recorded a 1.3 per cent annual fall in smoothed (12-month average) terms in September.

The number of debit card accounts rose by 3.7 per cent in the year to September to 41.0 million.
The number of purchases and cash-out transactions made with debit cards in August were up by 12.8 per cent on a year ago. The annual growth rate has averaged 12.0 per cent over the past two years.
On average there were 8.9 transactions made per debit card in September, up from 8.2 a year ago. The average value of a transaction was $53.26 with the rolling annual average at $53.91 – a record (12-year) low.

Total new loans (personal, business, housing & lease) rose by 6.4 per cent in September to a 7½-year high of $75.3 billion. It was the biggest monthly rise in lending in eight months.
Housing finance: The seasonally adjusted measure of construction and new purchases rose by 3.0 per cent in September while alterations & additions rose by 0.9 per cent. Home loans are up 22.9 per cent on a year.
Commercial finance: The seasonally adjusted series for the value of total commercial finance commitments rose by 9.5 per cent in September after falling by 4.1 per cent in August and falling by 4.3 per cent in July. Revolving credit commitments rose by 8.7 per cent while fixed lending commitments rose by 9.8 per cent. Business loans are up 14.1 per cent over the year.
Personal finance: The seasonally adjusted series for the value of total personal finance commitments fell by 0.8 per cent in September, the third straight fall. Revolving credit commitments rose by 3.0 per cent and fixed lending commitments fell by 3.2 per cent. Personal loans are down 3.4 per cent over the year. Within personal fixed finance commitments, finance for used cars was down 1.8 per cent on a year earlier while loans for new cars were up by 12.4 per cent. Loans for residential blocks of land were down by 14.8 per cent on a year ago – the 11th consecutive annual decline.
Lease finance: Lending fell by 0.5 per cent in September. Lease finance rose by 8.8 per cent over the year.

The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.
Lending Finance is released monthly by the Bureau of Statistics and contains figures on new housing, personal, commercial and lease finance commitments. The importance of the data lies in what it reveals about the appropriateness of interest rate settings, confidence and spending levels in the economy.

Businesses are borrowing again – but they are taking on debt quietly and with purpose. Consumers are also thoughtful when it comes to debt – there is clearly an inherent degree of conservatism involved.
The latest lending data is encouraging for investors of banks and other finance providers.
The latest data confirms that the Reserve Bank can stay on the interest rate sidelines.