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 show the pace of lending has continued to slow.
According to the latest RBA figures, private sector credit grew by 0.1% in June, the same rate as in May after revisions but noticeably below the +0.3% consensus estimate. The annual growth rate slipped from May’s figure of 3.6% to 3.3% as lending to business went back into reverse and lending to owner-occupiers slowed.
Andrew Hanlan, a Westpac senior economist, described the growth rate as “anaemic”, a result of a then-weak housing market, a flat business sector and prior to any rate cuts or tax breaks..
Financial markets reacted by sending local bond yields a little lower, although the June quarter CPI report was released at the same time and it would have had some effect. By the end of the day, 3-year ACGB yields had slipped 1bp lower to 0.78% while 10-year and 20-year yields had each lost 2bps to 1.19% and 1.65% respectively. The local currency increased and finished the afternoon session at around 68.90 US cents, having traded at around 68.75 US cents for most of the morning.