The pace of lending to the non-bank private sector by financial institutions in Australia has been trending down since it peaked in October 2015. It appeared to have stabilised in the September quarter of 2018 but credit figures in the December quarter put paid to that idea.
According to the latest RBA figures, private sector credit grew by 0.2% in December, lower than November’s 0.3% and less than the 0.3% consensus estimate. The year-to-December growth rate slipped from 4.4% to 4.3% as investor lending continued to stagnate and personal lending contracted further.
Economists expect the figures to continue to deteriorate on the back of lower house prices. Typical of the response to the figures was the one from ANZ economist Jack Chambers. “The focus remains on the continued slowdown in housing credit, with investor credit growth low and owner-occupier credit slowing. Critically, the housing credit impulse declined further in December.”
Reactions of financial markets was subdued. Australian Government bond yields finished the day ever-so-slightly higher, holding up despite sizable falls in US yields. 3-year and 10-year Treasury bond yields both finished unchanged at 1.74% and 2.24% respectively, while the 20-year yield crept up 1bp to 2.62%. The local currency was largely unchanged by the report and finished the afternoon session at 72.60 US cents.