The pace of lending to the private sector by financial institutions in Australia remained at a subdued level in August. The rate of growth in lending to the business sector remained well below its long-term average while lending to home owners continued to be the main driver of loan growth.
According to the latest RBA figures, private sector credit grew by 0.5% for the second month in a row and in line with the market consensus figure. The year-to-August growth rate of 5.4% was slightly higher than July’s comparable figure of 5.4% (after revisions). Since 1990, the average annual growth rate of private sector loans in Australia has been a bit over 8%.
The overall increase was driven by owner-occupier loans, which increased by 0.5% over the month or 6.3% for the 12 months to August. Business credit also rose by 0.5% but its annual growth rate picked up from July’s 4.2% to 4.5% in August. These two types of lending account for most loans by value and thus any change in them has a greater effect in overall credit growth. However, investor loans have grown at an annual rate of nearly 16% since 1990 and this segment has become a larger part of overall lending (see chart below) since then.
Growth in investor loans was unchanged at 0.4%. On an annual basis, this segment of private credit grew by 7.3%, down from the 7.4% annual rate at which loan balances of this type grew in May, June and July.
