The pace of lending to the non-bank private sector by financial institutions in Australia has been trending down since 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. The latest figures showed no sign of a change.
According to the latest RBA figures, private sector credit grew by 0.2% in May, the same as April’s growth rate and in line with the consensus estimate. The annual growth rate slipped from April’s figure of 3.7% to 3.6% as home lending slowed while business lending and personal lending contracted again.
Andrew Hanlon, a Westpac senior economist, said recent figures were not just a symptom of tighter bank lending in the property market. “Credit growth has slowed to a sluggish pace as the housing sector weakened in response to tighter lending conditions and a softening of demand. In April and May, another factor was broadly flat results for business credit.
The figures were largely as expected but the local market took its lead from the US markets and finished with lower yields across the curve. By the end of the day, the yield on 3-year Treasury bonds had slipped 1bp lower to 0.92%, 10-year yields had shed 2bps to 1.33% and the 20-year yield had dropped by 4bps to 1.74%.