Summary: Private sector credit up 0.5% in April, slightly above expectations; annual growth rate steady at 5.2%; Westpac: credit growth less than post-2000 average, more than post-GFC average; ACGB yields fall; rate-cut expectations firm; owner-occupier segment accounts for 45% 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 0.5% in April. The result was slightly above the 0.4% rise which had been generally expected as well as March’s 0.4% rise. On an annual basis, the growth rate remained unchanged at 5.2%.
“Annual credit growth at 5.2% compares with a post-2000 average of 7.5% but is more in line with the subdued post-GFC average of 4.6%,” said Westpac senior economist Matthew Hassan. “Note that this is in the context of relatively high inflation; the CPI [is] up 3.6% over the year to April.”
Commonwealth Government bond yields moved moderately lower across the curve on the day, slightly lagging the falls of US Treasury yields on Thursday night. By the close of business, 3-year and 10-year ACGB yields had both lost 4bps to 4.05% and 4.42% respectively while the 20-year yield finished 4bps lower at 4.71%.
Expectations regarding rate cuts in the next twelve months firmed by the end of the day. In the cash futures market, contracts implied the cash rate would remain close to the current rate for the next few months and average 4.315% through June and 4.345% in August. November contracts implied 4.36%, February 2025 contracts implied 4.31% while May 2025 contracts implied 4.215%, 10bps less than the current cash rate.
Owner-occupier accounted for around 45% of the net growth over the month while business lending accounted for a bit over 35%. Investor lending accounted for a little under 20% while personal lending accounted for the balance.
The traditional driver of overall loan growth, the owner-occupier segment, grew by 0.5% over the month, in line with the previous month. The sector’s 12-month growth rate ticked up from 5.0% to 5.1%.
Total lending in the non-financial business sector increased by 0.6%, unchanged from March’s growth rate after revisions. Growth on an annual basis slowed from 7.3% to 6.8%.
Monthly growth in the investor-lending segment slowed to a near-halt in early 2018 and essentially stayed that way until mid-2021. In April, net lending rose by 0.3%, the same growth as in March. The 12-month growth rate increased from 3.0% to 3.1%.
Total personal loans increased by 0.2%, down from 0.4% in March, while the annual growth rate increased from 3.1% to 3.2%. This category of debt includes fixed-term loans for large personal expenditures, credit cards and other revolving credit facilities.