Summary: Private sector credit up 0.5% in September, above expectations; annual growth rate slows to 4.9%; ACGB yields up moderately; rate-rise expectations over next 3 months ease slightly; business lending segment accounts for around 50% of net growth.
The pace of lending growth in the non-bank private sector by financial institutions in Australia followed a steady-but-gradual downtrend from late 2015 through to early 2020 before hitting what appears to be a nadir in March 2021. That downtrend ended later in that same year and annual growth rates shot up through 2022, peaking in September/October before easing in 2023.
According to the latest RBA figures, private sector credit increased by 0.5% in September. The result was greater than the 0.3% rise which had been generally expected as well as August’s 0.4% increase. On an annual basis, the growth rate slowed from August’s revised figure of 5.2% to 4.9%.
Commonwealth Government bond yields rose moderately across the curve, broadly in line with overnight movements of US Treasury yields. By the close of business, the 3-year ACGB yield had gained 4bps to 4.43% while 10-year and 20-year yields both finished 6bps higher at 4.95% and 5.29% respectively.
In the cash futures market, expectations regarding further rate rises over the next three months eased slightly. At the end of the day, contracts implied the cash rate would increase from the current rate of 4.07% to average 4.195% through November, 4.275% in December and 4.37% in February. May 2024 contracts implied a 4.505% average cash rate while August 2024 contracts implied 4.515%, 45bps more than the current rate.
Business lending accounted for just under half of the net growth over the month, while lending in the owner-occupier segment accounted for around 40%. Investor lending and personal lending both increased in net terms and accounted for the balance.
The traditional driver of overall loan growth, the owner-occupier segment, grew by 0.4% over the month, up from the 0.3% growth rates registered in the previous two months. The sector’s 12-month growth rate slowed again, this time from 5.0% to 4.9%.
Total lending in the non-financial business sector increased by 0.8%, up from 0.7% in the previous month after revisions. Growth on an annual basis slowed from 7.4% to 6.8%.
Monthly growth in the investor-lending segment slowed to a near-halt in early 2018 and essentially stayed that way until mid-2021. In September, net lending rose by 0.2%, down from 0.3% in August and July, maintaining the 12-month growth rate at 2.9%.
Total personal loans rose by 0.6%, down from 0.8% in August, taking the annual growth rate from 1.6% to 2.3%. This category of debt includes fixed-term loans for large personal expenditures, credit cards and other revolving credit facilities.