The aggregate sum of private sector credit rose by 0.5% July, in line with expectations although annual growth in business lending slowed from the previous month.
The Reserve Bank of Australia’s monthly summary of credit growth showed that housing credit remains steady, off-setting continued weakness in personal loans such as credit cards.
In fact, housing credit chalked up its fifth straight month of 0.5% growth. Within that figure, credit growth to owner-occupiers rose by 0.5% for the month, which left annual growth at 6.1%.
Credit to housing investors increased at a slightly slower rate in July, climbing by 0.4% which was consistent with the prior month.
Following the latest round of lending restriction by APRA earlier this year, the RBA figures show that growth in investor loans has remained capped at 7.4%.
That’s after steadily climbing from a recent low of 4.6% growth in August 2016. Prior to that, investor loans slowed sharply from annual growth of above 10% in 2015, after APRA enforced its initial restrictions on investor lending.
The RBA again noted the extent of changes in investor behaviour, “following the introduction of an interest rate differential between housing loans to investors and owner-occupiers in mid-2015”.
“The net value of switching of loan purpose from investor to owner-occupier is estimated to have been $56 billion over the period of July 2015 to July 2017, of which $1.4 billion occurred in July 2017,” the RBA said.
The 0.1% fall in personal loan growth was consistent with the prior month, leaving annual growth at -1.4%. Seasonally-adjusted annual falls in personal lending have now exceeded 1% in every month for the past year.
But of the three sub-categories, it was business lending slowed the most from the previous month.
Growth of 0.5% in July business lending was lower than the 0.8% in June, which left annual growth at just 4.2% — down from 6.3% in the previous month.
That’s despite this morning’s Q2 capital expenditure report, in which businesses gave a relatively upbeat assessment on the near-term outlook for investment.
Monthly growth in broad money – a measure of the total amount of money in the Australian financial system – was negative at 0.1%, down from a 0.8% rise in June. It marks the first time that broad money growth has turned negative since June 2011.
Below is the RBA’s monthly table of results:
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