Australian private sector credit expanded by 0.6% in June, a solid result against a consensus forecast rise of 0.2%.
The June increase was slightly above the 0.4% rise seen in the previous two months, and was driven by a rebound in business sector credit.
The annual increase of 5.4% was lower than the 6.2% rise in the previous 12 months. Across the year, that fall was driven by slower growth in business credit and a fall in personal lending (e.g. credit cards).
Housing finance eased slightly but stayed more consistent year-on-year. Here’s the summary:
Looking more closely at housing finance, the evidence suggests that growth in investor loans continues to slow, following macro-prudential measures introduced in April which restricted interest-only mortgages to 30% of all new loans.
ANZ senior economist Daniel Gradwell said that quarterly growth of investor loans now sits at 6%.
“This reflects a significant cooling from the recent peak of 9% growth reached in December 2016, suggesting that APRA’s macro-prudential regulation continues to bite housing investors,” said Gradwell.
Almost right on cue, loan finance to owner-occupiers has increased, leaving overall housing finance growth stable at 6.6%.
The chart below from ANZ shows the clear divergence in growth between investor and owner-occupier loans since the latest measures were introduced.
It also displays the noticeable downturn in investor loans when the previous APRA measures were introduced in 2015:
Commonwealth Bank economist Kristina Clifton noted that the 0.9% increase in business lending for June was a strong result, after it had averaged monthly growth of just 0.1% since the start of the year.
“There have been some positive signs for business investment of late including, record levels of business conditions and confidence, and a lift in non residential building approvals,” Clifton said.
“Policy makers will be keen to see these positive signals continue and translate into a up-cycle in non mining business investment.”
ANZ’s Gradwell is sceptical that June’s strong result for business sector credit growth will last.
“Business finance approvals have remained weak in recent months, and suggest that growth in the stock of business credit is likely to ease from here,” Gradwell said.
The 0.1% decline in personal credit growth in June led to a fall on 1.4% across the year.
According to Clifton, that trend has been apparent since the fallout from the global financial crisis in 2009, due to both financial circumstances and a change in credit behaviour.
“Weak wages growth, job security fears and high housing debt is weighing on personal credit growth,” Clifton said.
She added that “households are using mortgage offset accounts to smooth their cash flows rather than credit cards”.