Rate Cuts Fail To Fuel Credit Growth

By Glenn Dyer | More Articles by Glenn Dyer

Private credit growth hit an 8-year plus low in August, according to the Reserve Bank’s latest financial aggregates data, released yesterday.

August lending was the lowest since August 2011 when the annual rate was 2.8% in the wake of floods and storms at the start of the year in parts of Queensland, NSW and Victoria and the impact of the strength of the Aussie dollar which helped crush demand as the great mining investment boom started.

The August annual growth rate was down sharply from the 4.5% recorded in the same month of 2018 and the 4.3% annual rate for calendar 2018. On a month on month basis, total credit growth was 0.2%, unchanged from July.

There was no surge in housing credit, business and personal credit were again weak – it was, in fact, a month that matched the slide in the momentum in the economy that has emerged from weak retail sales, falling car sales and other lacklustre consumption data.

The rebound in house prices in Sydney and Melbourne that emerged in August didn’t boost housing credit, and investor demand was again weak

Lending for mortgages increased 0.2% in August compared to a 0.3% rise in the previous month while credit to business was up 0.2% and personal credit fell 0.2%.

Total housing credit grew 3.1%, the slowest growth rate since records started in 1976. Housing credit was running at an annual rate of more than 5% in August 2018 and grew 4.7% through 2018.

Business credit rose an annual 3.4% in August, down sharply from the 5.1% annual rate in February. Growth through 2018 was 3.8%.
Personal credit fell 3.4% in the 12 months to August.

Loans to property investors contracted 0.1% in August – the sixth consecutive month of falls and its largest monthly contraction since August 1991 – and edged up just 0.06% on an annual basis, another record low.

Owner-occupier credit expanded by 0.3% in August compared with an 0.5% gain in July, with the 4.7% annual increase the weakest since March 2014.

Loans to owner-occupiers were running at an annual rate of more than 7% in August 2018 and 6.5% for the year to last December.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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