Summary: Private sector credit grows by 0.9% in June, above expected figure; annual growth rate rises from 1.9% to 3.1%; owner-occupier loans, business loans account for much of net growth; increased business lending in June may have similar drivers as in March 2020; housing credit growth continues, business loans up, personal loans down.
The pace of lending to the non-bank private sector by financial institutions in Australia has been trending down since late-2015. Private sector credit growth appeared to have stabilised in the September quarter of 2018 but the annual growth rate then continued to deteriorate through to the end of 2019. The early months of 2020 provided some positive signs but they disappeared in April 2020.
According to the latest RBA figures, private sector credit growth accelerated again In June, rising by 0.9%. The result was above the generally expected figure of 0.4% and nearly double May’s 0.5% increase after revisions. On an annual basis, the growth rate increased from 1.9% in May to 3.1%.
Commonwealth Government bond yields moved higher on the day following modest increases in US Treasury yield overnight. By the close of business, the 3-year ACGB yield had ticked up 1bp to 0.28% while 10-year and 20-year yields each finished 3bps higher at 1.18% and 1.81% respectively.
Owner-occupier loans and business loans equally accounted for much of the net growth over the month. Investor loans again grew quite modestly while total personal debt contracted.
Westpac senior economist Andrew Hanlan drew a parallel between the business sector’s reactions to lockdowns in June with those in March 2021. “The 2020 experience for business credit was that the jump in March was followed by a consolidation in April and then a reversal over the seven months to November, down by a cumulative 3.4%. There is the potential near-term for a partial reversal of the sizeable June 2021 increase.” However, he also sounded a cautiously hopeful note, saying “businesses may well have the confidence to resume borrowing to expand investment” once vaccination rates increase and the economy reopens.