Australian business borrowing is back

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Australian private sector credit growth topped expectations in April, expanding by 0.5% compared to predictions of a 0.4% increase. It left annual pace of growth at 6.7%, up from 6.4% in March.

Continuing the pattern of recent months, growth in housing and business credit did all of the heavy lifting, helping to mitigate a further contraction in personal lending.

Housing credit grew by 0.4% following a 0.5% lift in March, seeing the annual pace of growth slow to 7.0% from 7.3%.

By category, credit to owner-occupiers expended by 0.5% — unchanged from March — leaving annual growth at 7.3%, the fastest acceleration since August 2010.

Despite a pick up in the value of new lending to housing investors, overall credit growth to that category slowed to 0.3%, dropping the annual increase to a 32-month low of 6.5%.

Fitting with the view of the Reserve Bank of Australia that “supervisory measures are strengthening lending standards”, credit growth to investors is now running well below the 10% annual level targeted by Australia’s banking regulator, APRA.

In dollar terms, the outstanding balance of housing loans now stands at $1.556 trillion. Owner-occupier debt stands at $1.005 trillion, the highest level on record, while housing investment loans are around half that at $551.3 billion.

Outside of housing, there was further promising news on Australia’s economic transition with credit growth to businesses jumping by 0.8% in April.

The increase left the annual growth rate at 7.4%, a level not seen since January 2009.

Coincidentally, it was also the first time since February 2009 — the height of the global financial crisis — that annual credit growth to businesses exceeded the housing figure in percentage terms.

Andrew Hanlan, senior economist at Westpac, put the acceleration in credit growth to businesses down to increased investment in existing assets.

“While real investment by the non-mining sectors has been relatively sluggish of late, low interest rates have encouraged investors into existing assets, such as commercial property, in search of yield,’ he said following the release of the April report.

However, keeping with the recent tradition, consumer credit growth remained elusive, contracting yet again in April. It declined by a further 0.1%, leaving it down 0.9% from a year earlier.

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