Credit growth stronger again
The Reserve Bank released its Financial Aggregates today which showed credit growth of 5.1 percent for the past year, the highest rate of credit growth half a decade which is lovely to see.
When I spoke to two members of Commonwealth Bank's small business lending team last month they were adamant that business lending was on the up and up, and it appears that they may be right.
Business lending jumped by 1 percent in June to be 3.5 percent higher over the past year.
As you can see above housing credit growth is now tracking at a very robust 6.4 percent per annum with strong increases over the last quarter in both owner occupier and investor credit, spurred on by low interest rates (click below chart):
In terms of percentage credit growth, there was a good deal of excitement back in 2012 about the lowest growth rates on record which could stymie any housing market recovery.
What this commentary overlooked, apart from the fact that as we're coming from a higher base lower credit growth than times past is inevitable, was the role of cash buyers, overseas buyers and most importantly of all the lag effect of interest rate cuts.
When the effects of rate cuts gradually started to flow through, house prices started rising and now too are transaction levels, building approvals, dwelling commencements, construction activity and building work done.
Housing credit growth is now rising strongly for owner occupiers and even more strongly for investors (click chart):
We always expected this to be an investor-led recovery and thus it has proved as the red line on the above chart shows.
In fact, if we re-run the chart smoothed out on a rolling annual basis, it becomes increasingly obvious what has driven the housing market rebound - investors.
Indeed, as more Aussies choose to invest in property, home ownership rates will continue to slide towards 60 percent over the coming decade and the percentage share of credit for investors will rise.
This has been playing out over the last quarter century and the percentage share of credit for investment housing is steadily continuing to creep higher.
Low interest rates are steadily taking effect, but in a somewhat unbalanced fashion.