The pace of lending to the non-bank private sector by financial institutions in Australia has fallen back to its lowest rate since May 2014. According to the latest RBA figures, private sector credit grew by 0.2% in May, down from the 0.4% growth rate recorded in April and half the consensus estimate of 0.4%. The year-to-May growth rate fell back from 5.1% to 4.8% as personal loans and lending to house investors stagnated while business lending contracted.
The small overall increase was driven entirely by “owner-occupier” loans. Typically, business lending is another major contributor to overall changes but on this occasion, the segment actually contracted. By value, these two segments account for nearly 75% of outstanding loans while loans to house investors account for just over 20%.
Business credit growth dropped from a growth rate of +0.5% in April to a 0.2% contraction in May and its annual growth rate slowed from 4.3% to 3.8% after having accelerated for several months. The owner-occupier segment repeated March’s and April’s 0.6% growth rate with the same-sized increase in May but its annual growth rate slipped back from 8.0% to 7.9%.
Lending to investors continued to slow. Credit growth in this segment eased from a growth rate of +0.1% in April to +0.0% in May. Its annual growth rate also fell back, for the eleventh month in a row, from 2.3% to 2.0%.