Australians are avoiding personal debt, but are still enthusiastic for borrowing when it comes to housing and business, according to the latest Reserve Bank of Australia credit numbers.
Private sector credit rose by 0.5% in November, with annual credit growing to 5.9% from 5.8%, the strongest growth in almost six years.
Craig James, Chief Economist at CommSec, says the private sector credit figures have implications for finance providers, retailers and companies dependent on business spending.
“Lending growth remains healthy, although it remains skewed to business and housing markets with consumers not keen on taking on debt for purposes other than buying or building homes,” he says.
“While much is made of solid growth in investment housing loans, it’s worthwhile noting that that business credit, or loans outstanding by the business sector, is growing at the fastest pace in six years.”
James says investors have been fixated on residential property in 2014 but with good reason – it has been the best performing asset market.
He says consumers and businesses are borrowing, but in a measured way.
“That means the Reserve Bank has no reason to be either lifting or cutting interest rates at present,” he says. “The weaker Aussie dollar and lower petrol prices are providing solid stimulus to the economy at present.”
The numbers for November:
- Housing credit grew by 0.6%, the fourth straight month of 0.6% gains. Housing credit is up 7.1% on a year ago, the strongest annual growth for four years.
- Owner occupier housing credit rose by 0.5%, the fourth straight month of 0.5% gains. Annual growth stands at 5.7%.
- Investor housing finance lifted 0.8%, down from the 0.9% monthly gains recorded over September and October. Investor home loans are up 10% over the year, the strongest growth for almost seven years.
- Personal credit was flat after a 0.2% increase in October. Personal credit was up just 1.1% over the year.
- Business credit rose by 0.2% in November after a 0.7% increase in October. Business credit is 4.6% higher than a year ago, the strongest growth in almost six years.