Summary: Private sector credit up 0.4% in May, in line with expectations; annual growth rate steady at 5.2%; ANZ: credit growth relatively steady over last year, slows from post-COVID above-average growth rates; ACGB yields fall; rate-rise expectations soften; owner-occupier segment accounts for ~50% 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 before easing through 2023.
According to the latest RBA figures, private sector credit increased by 0.4% in May. The result was in line with expectations but down slightly from May’s 0.5% rise. On an annual basis, the growth rate remained unchanged at 5.2%.
“Both housing and business credit growth slowed in May,” said ANZ senior economist Blair Chapman. “Overall credit growth has been relatively steady over the last year, after slowing from above average growth rates post-COVID.”
Commonwealth Government bond yields reversed Thursday’s rises, moving noticeably lower on the day and outpacing the falls of US yields on Thursday night. By the close of business, the 3-year ACGB yield had lost 9bps to 4.05%, the 10-year yield had shed 10bps to 4.32% while the 20-year yield finished 9bps lower at 4.61%.
Expectations regarding rate rises in the next twelve months softened by the end of the day. In the cash futures market, contracts implied the cash rate would average 4.32% through July, 4.40% in August and 4.47% in November. February 2025 contracts implied 4.425% while May 2025 contracts implied 4.315%, just below the current cash rate.
Owner-occupiers accounted for just under 50% of the net growth over the month while business lending accounted slightly under 30%. Investor lending accounted for the balance.
The traditional driver of overall loan growth, the owner-occupier segment, grew by 0.4% over the month, slightly slower than April’s 0.5%. The sector’s 12-month growth rate ticked up from 5.1% to 5.2%.
Total lending in the non-financial business sector increased by 0.4%, down from April’s growth rate of 0.6%. Growth on an annual basis slowed from 6.8% to 6.6%.
Monthly growth in the investor-lending segment slowed to a near-halt in early 2018 and essentially stayed that way until mid-2021. In May, net lending rose by 0.4%, in line with April’s upwardly-revised rate. The 12-month growth rate increased from 3.2% to 3.5%.
Total personal loans decreased by 0.1%, in contrast with April’s 0.2% increase, while the annual growth rate decreased from 3.2% to 2.7%. This category of debt includes fixed-term loans for large personal expenditures, credit cards and other revolving credit facilities.