The 5.4% rise in total credit over the year is low by historic standards. But Australia’s stock of private debt is still growing faster than nominal GDP which means overall leverage in the economy is rising. The increase in leverage is being driven mainly by the household sector. And the debt is going into bricks and mortar.

Housing credit has been expanding by around 0.5% a month over the past six months. But the annual growth rate has been falling over that period. The stock of housing credit was growing at 6.4%pa in September. It looks like it will stabilise around this level over the near term.

Despite the annual growth rate of housing credit cooling, the pace of growth is still well above national income growth. This means that the household debt‑to‑income ratio is rising. It is currently at a record high and puts Australia in the top tier of household indebtedness globally. As the RBA noted in its October Financial Stability Review, “household indebtedness continues to drift up and, with incomes growing more slowly than in the previous decade, households may not be able to rely on income growth to make their debt easier to service.”

Credit to owner‑occupiers grew by 0.5% in September and is up 7.3% through the year. The stock of debt to investors rose by a slightly higher 0.6% over the month and annual growth lifted a little to 4.8%. Investor credit growth has been accelerating month on month for the past six months which is consistent with other indicators of activity in the housing market. The lift in investor‑related credit shows that the May and August rate cuts had a stimulatory impact on the housing market.

Business credit growth has been limp over the past five months after accelerating earlier in the year. The trend in business credit is a little concerning because it suggests that non‑mining private capex is likely to be soft over the near term. Fortunately public capex is starting to lift after falling as a share of GDP for most of the past six years. This will need to continue to support aggregate demand if private investment is going to remain soft.

The “deleveraging” in other personal credit continues. Personal credit is down 1.3% over the year and reflects the lack of appetite for consumer debt outside of housing.

Broad money was flat over September and stands 5.8% higher through the year.

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