Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

'Huge fan of your work. Very impressive!' - Scott Pape, The Barefoot Investor, Australia's #1 bestseller.

'Must-read, must-follow, one of the finest analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Business Insider.

'I've been investing 40 years yet still learn new concepts from Pete; one of the finest young commentators' - Michael Yardney, Amazon #1 bestseller.

'The most knowledgeable person on Aussie real estate - loads of good data & charts...most comprehensive analyst I follow in Oz' - Jonathan Tepper, Variant Perception, 2 x NYT bestseller.

Sunday, 31 July 2016

Brace for record low rates

Credit growth slows

The Reserve Bank (RBA) has an inflation target of 2 to 3 per cent, and the latest figures this week showed that inflation is running well below that level, and the softest inflation result in 17 years.

On Friday the RBA released its Financial Aggregates figures for the month of June which showed total credit growth slowing.

Investor credit growth - denoted by the red line below - has more than halved to an annual pace of just 5 per cent now, while personal credit growth remains weak, and business credit went backwards in the month. 


All up annual credit growth slowed to 6.2 per cent, with broad money growth a little slower at 6 per cent.


Business...as usual

Unfortunately business credit growth printed negative in June, taking the annual result back to 6.6 per cent, a disappointing reading which might point towards a cut in interest rates. 


Banks and housing

While growth in term deposits remains understandably weak, other deposits with banks continue to surge at a very strong double digit pace. 



In the housing market investor credit growth slowed to 5 per cent, now tracking at just half the arbitrary "speed limit" imposed by APRA. 

Naturally banks and lenders have been pushing owner-occupier loans, but even here growth slow by a tiny fraction from 7.73 to 7.72 per cent, having notched a 70-month high in May. 


Total housing credit growth of 6.7 per cent is now well below the 7.5 per cent rate hit in November last year, which will provide some comfort that macro-prudential measures are doing what they were designed to do.

The wrap

Overall, while nobody seems quite so sure any more what the split of credit relates to, total credit of $2.57 trillion is now growing at a slower pace of 6.2 per cent, down from 6.7 per cent in October last year. 


Another factor in this week's interest rate decision was that US real GDP printed at an annual pace of just 1.2 per cent in Q2 2016, meaning that the US Federal Reserve won't be hiking rates soon.

The Aussie dollar jumped to 76 US cents, and will probably jump higher again if interest rates are not cut on Tuesday.

Bookies and financial markets are leaning towards an interest rate cut in Tuesday to a record low of 1.50 per cent. 

---

CoreLogic will report on Monday that Sydney dwelling prices rose by a stunning 5.6 per cent in the three months to July, to be up by 10 per cent over the year to date.