Private sector credit up 0.4% in January, in line with expectations; annual growth rate ticks up to 4.9%; ACGB yields fall; rate-cut expectations firm; business segment accounts for over 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 0.4% in January. The result was in line with consensus expectations as well as the previous three months’ growth figures. On an annual basis, the growth rate ticked up from December’s figure of 4.8% to 4.9%.
Commonwealth Government bond yields moved lower on the day, largely in line with movements of US Treasury yields overnight. By the close of business, 3-year and 10-year ACGB yields had both lost 3bps to 3.70% and 4.15% respectively while the 20-year yield finished 4bps lower at 4.45%.
In the cash futures market, expectations regarding rate cuts later this year firmed. At the end of the day, contracts implied the cash rate would remain close to the current rate for the next few months and average 4.31% through March, 4.30% in April and 4.275% in May. However, August contracts implied a 4.16% average cash rate while November contracts implied 3.995%, 33bps less than the current rate.
Business lending each accounted for a bit more than 45% of the net growth over the month while owner-occupier lending accounted for around 40%. Investor lending accounted for the balance.
The traditional driver of overall loan growth, the owner-occupier segment, grew by 0.4% over the month, in line with the previous six months. The sector’s 12-month growth rate remained steady at 4.8%.
Total lending in the non-financial business sector increased by 0.7%, up from 0.6% in December after revisions. Growth on an annual basis picked up from 6.6% 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 January, net lending rose by 0.2%, in line with December’s growth rate, accelerating the 12-month growth rate from 3.0% to 3.1%.
Total personal loans increased by 0.2%, in contrast with December’s 0.1% contraction, while the annual growth rate remained unchanged at 1.2%. This category of debt includes fixed-term loans for large personal expenditures, credit cards and other revolving credit facilities.