Credit growth remains subdued as businesses and investors sit on sidelines
June 30, 2009
New data released today by the Reserve Bank of Australia has shown the resilience of the housing market as credit growth remains weak.
Total credit provided to the private sector by financial intermediaries fell by 0.1 per cent in seasonally adjusted terms over May 2009, following a rise of 0.1 per cent over April. Over the year to May, total credit rose by 3.9 per cent, the central bank advised.
Housing credit increased by 0.5 per cent over May, following an increase of 0.6 per cent over April. Over the year to May, housing credit rose by 7.0 per cent. The expansion seen in housing credit over May was attributed to growth in lending to owner-occupiers, with only weak growth in lending to investors.
Other personal credit fell by 0.6 per cent over May, following a similar decline over April. Over the year to May, other personal credit fell by 7.8 per cent, reflecting a large decline in margin lending.
Business credit fell by 0.7 per cent over May 2009, following a decline of 0.5 per cent over April as many companies shun new investments in case of a further deterioration in economic conditions. New car sales have, however, proven a positive sign that business investment may pick up in the months ahead with the assistance of the tax allowance.
Since business credit peaked in November 2008, the decline has been due to falls in foreign currency denominated lending, the RBA said. These falls reflect both the appreciation of the Australian dollar over this period and some reduction in the stock of foreign currency denominated lending. Over the year to May, business credit rose by 2.1 per cent.