Australians are borrowing to buy houses but not much else

Photo by Nick Laham/Getty Images

Australians continue to borrow to buy houses but not much else.

According to data released by the Australian Bureau of Statistics earlier today, the value of credit extended to Australia’s private sector grew by a paltry 0.3% in January in seasonally adjusted terms, unchanged from the level reported in December.

Over the year, total credit grew by 4.9%, the equal-lowest increase since May 2014.

Private sector credit measures the change in the value of outstanding loan balances issued to the private sector.

Looking at the underlying trends in the January report, it was yet again housing credit that drove the increase.

It rose by 0.5% in seasonally adjusted terms, up from 0.4% in December, leaving the increase on a year earlier at 6.2%. Despite the small acceleration, the annual rate was also the weakest since May 2014.

By group, credit growth to owner-occupiers rose by 0.6% — the fifth consecutive month that has occurred — seeing the annual rate of growth accelerate to 8%, the fastest since November 2016.

In contrast, credit extended to housing investors grew by just 0.2% after seasonal adjustments, the same outcome seen in each of the past eight months.

At 3%, annual growth to investors is now the slowest since October 2016, reflective of tighter restrictions on interest-only lending introduced by APRA in March last year.

It is also well below the 10% annual cap introduced by APRA in late 2014.

Outside of housing, credit demand remained tepid from both businesses and for personal use.

The RBA said credit extended to business fell by 0.1% in seasonally adjusted terms, the first decline since February last year.

That left total growth over the year at 3.4%. That was above the 3.2% level of December and reflects an even larger decline in credit in January 2017.

Indicating that stronger labour market conditions and improved consumer confidence may be encouraging households to loosen the purse strings a little, growth in personal credit rose to 0.1% after seasonal adjustments, the largest increase since June 2015.

Over the year, credit for personal uses still fell by 0.9%. It has fallen in year-on-year terms since January 2016.

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