Australian private sector credit growth missed expectations in November, rising 0.4% against expectations for an increase of 0.6%. The miss left the annual pace of credit growth at 6.6%, down fractionally on 6.7% level of October.
According to the RBA’s financial aggregates report released earlier this morning, credit for housing rose modestly, offsetting a decline in personal credit and flat growth in business lending.
Over the month credit extended for housing rose by 0.6%, in line with the increase registered in October, leaving the annual pace of growth at 7.5%.
Lending to owner-occupiers jumped by 0.8%, the largest percentage increase seen since August 2009, leaving the annual pace of growth at 6.5% – a level not seen since February 2011.
Fitting with recent measures introduced by APRA to slow lending to housing investors, credit extended to this category rose by just 0.4%, the-equal lowest level since June 2012.
While at 9.1% annual growth in investor lending remains well above that to owner-occupiers, it is now growing at the slowest pace seen since June last year. It is also significantly below the 11% year-on-year rate registered in June 2015, along with the 10% level APRA was looking to cap annual growth at when its measures were first introduced late last year.
Aside from housing, the news elsewhere was disappointing.
Following a 1.1% surge in October, business credit came in flat, leaving the annual growth rate 0.4% lower at 6.2%.
Lending for personal use slid 0.2%, leaving the year-on-year growth rate flat.
The chart below reveals the annual growth rates in all three categories, going back to 2010.
In a nutshell, lending for housing continues to accelerate – largely as a consequence of credit growth to owner-occupiers offsetting weaker demand from investors – while credit growth to business continues to trend higher, albeit it remains at modest levels compared to the period prior to the global financial crisis.
Personal credit remains the weak spot, falling back to flat in the 12 months to November. Record-low wages growth, still elevated unemployment and low inflation, among others, suggests caution continues to prevail when it comes to personal borrowing.
Given solid growth in consumption will be required to assist Australia’s economic rebalancing, developments in this area will be worth watching, particularly given signs house price growth is continuing to cool.