Australia: Weak credit growth - Westpac

Andrew Hanlan, analyst at Westpac, notes that the Australian credit growth was weak ahead of the RBA lowering interest rates on June 4, the first move in official rates since 2016.

Key Quotes

“Credit growth has slowed to a sluggish pace as the housing sector weakened in response to tighter lending conditions and a softening of demand. In April and May, another factor was broadly flat results for business credit.”

“Total credit grew by only 0.15% in April and then by 0.16% in May, the softest results since the start of 2013. In May, the mix was: housing, +0.23%; personal, -0.6%; and business, +0.1%.”

“Annual credit growth is 3.6% currently, the slowest pace since October 2013. Credit growth has progressively eased since expanding by 6.6% in 2015, with growth moderating to 5.6% in 2016, +4.8% in 2017 and +4.3% in 2018.”

“Key to this trend has been the housing sector. Housing credit growth has moved lower over recent years: from 7.4% in 2015; 6.3% in both 2016 and 2017; to 4.7% in 2018. The latest annual reading is 3.7%, the weakest reading in the history of the series (dating back to the late 1970s.)”