Summary: Private sector credit up 0.2% in June, less than expected; annual growth rate slows to 5.5%; Westpac: a “soft” update; ACGB yields down modestly; rate-rise expectations firm slightly; owner-occupier lending segment accounts for 80% 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.
According to the latest RBA figures, private sector credit increased by 0.2% in June. The result was less than the 0.4% which had been generally expected as well as May’s 0.4% rise. On an annual basis, the growth rate slowed from 6.2% to 5.5%.
“The June update for credit was a soft one,” said Westpac senior economist Andrew Hanlan. “The shift was centred on business and investor housing.”
The figures came out on the same day as the latest Westpac-Melbourne Institute Inflation Gauge numbers and Commonwealth Government bond yields fell modestly. By the close of business, the 3-year ACGB yield had lost 2bps to 3.86%, the 10-year yield had slipped 1bp to 4.06% while the 20-year yield finished unchanged at 4.36%.
In the cash futures market, expectations regarding further rate rises firmed a touch. At the end of the day, contracts implied the cash rate would rise from the current rate of 4.07% to average 4.135% in August and then to 4.175% in September. February 2024 contracts implied a 4.315% average cash rate and May 2024 contracts implied 4.31%, both around 24bps more than the current rate.
Owner-occupier lending accounted for about 80% of the net growth over the month, while lending in the business segment accounted for much of the balance. Investor lending declined a little and personal lending increased a touch.
The traditional driver of overall loan growth, the owner-occupier segment, grew by 0.4% over the month, the same rate as in May and April. The sector’s 12-month growth rate slowed again, this time from 5.6% to 5.3%.
Total lending in the non-financial business sector increased by 0.3%, down from 0.5% in the previous month. Growth on an annual basis slowed from 9.7% to 8.3%.
Monthly growth in the investor-lending segment slowed to a near-halt in early 2018 and essentially stayed that way until mid-2021. In June, net lending fell by 0.1%, down from May’s 0.2%, taking the 12-month growth rate from 3.7% after revisions to 3.0%.
Total personal loans rose by 0.1%, in line with May’s revised growth figure, taking the annual growth rate from 0.2% to 0.5%. This category of debt includes fixed-term loans for large personal expenditures, credit cards and other revolving credit facilities.