The pace of lending to the non-bank private sector by financial institutions in Australia stabilised in July and it has now picked up a little in August. However, some economists expect the downward trend to continue as lending institutions tighten their standards and potential borrowers respond to perceptions of lower returns in asset markets.
According to the latest RBA figures, private sector credit grew by 0.5% in August, up from the 0.4% growth rate in July and above the 0.4% consensus estimate. The year-to-August growth rate inched up from 4.4% to 4.5% on the back of home loans to owner-occupiers and, to a lesser extent, loans to the business sector. Westpac senior economist Andre Hanlon does not expect the rebound to continue. “This is likely to be only a temporary reprieve from the underlying slowdown.”
Historically, the “owner-occupier” and business loans segments have been the largest influences on total credit growth as they account for nearly 75% of outstanding loans.