Australian private sector credit rose modestly in March, continuing the moderation in lending seen in recent months.
According to the Reserve Bank of Australia, credit grew by 0.4%, the weakest monthly increase recorded in over two years. It left the annual expansion at 6.4%, the slowest seen since August last year.
By category, housing credit increased by 0.5% — unchanged from February — leaving the year-on-year increase at 7.2%.
Lending to owner-occupiers increased by 0.5%, near double the 0.3% lift in investor credit.
On an annualised basis, owner-occupier credit grew by 7.2%, the steepest increase recorded since September 2010. In stark contrast, investor credit growth slowed to 7.0%, the weakest expansion in over two years. It now sits well below the 10% soft target set by APRA for annual growth to this category.
It was also the first time since April 2012 that annual percentage growth in owner-occupier lending was greater than that to investors.
Outside of housing, the news elsewhere was mixed.
Adding to confidence towards the outlook for Australian business outlook, credit extended to firms rose by a further 0.3%, leaving the increase from a year earlier at 6.5%.
The annual figure, unchanged from February, continues the gradual acceleration seen since mid-2013.
The one weak link came from personal credit demand, continuing the pattern seen over recent years. It fell by a further 0.3% during the month, leaving the annual decline at 1.0%, the largest recorded in nearly four years.
The figures reported by the RBA are a near carbon copy of those reported in February, and will be largely be welcomed by the bank.
Housing credit growth continues to moderate, particularly for investors, while business credit continues to grow at levels not seen since before the global financial crisis. The one area of weakness remains personal credit, with consumers continuing to express caution despite improved labour market conditions.
While the report usually has few implications for monetary policy, the continued moderation in credit growth — particularly for housing — provides no barrier for the RBA should it decide to cut interest rates further, perhaps as early as next week.
Here’s a chart looking at annual credit growth by individual category over the past five years.