Pete Wargent blogspot


'Must-read, must-follow, one of the best 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, Markets & Economics Editor, Sydney Morning Herald.

'I've been investing 40 years & still learn new concepts from Pete; one of the best commentators...and not just a theorist!' - Michael Yardney, Amazon #1 bestseller.

Tuesday, 31 July 2018

Credit strangle continues for investors

Credit growth slows

Annual credit growth slowed to 4.5 per cent as at June 2018, well down from 5.4 per cent a year earlier, according to the Reserve Bank's latest Financial Aggregates. 

Broad money growth fell to an anemic 1.9 per cent year-on-year in June - the lowest level since Bobby Brown was #1 in the Australian charts with Humpin' Around in September 1992 - a disagreeable image I'm sure you'll agree (and the credit aggregates weren't too flash either).

Personal credit shrank 1.3 per cent year-on-year, and the annual growth in business credit slowed to just 3.2 per cent.

Housing credit held up reasonably well at 5.6 per cent.

The monthly growth in mortgages was all driven by owner-occupiers, with total investment credit actually declining for only the third time since these records began (just before Bobby Brown). 

With more investors also now switching to paying down principal, investor credit as a share of total housing market outstanding loans fell to 33.5 per cent, which puts investor market share broadly back in line with the average level seen over the past 18 years since June 2000 of 33.2 per cent. 

Although housing credit as measured here is slowing, the APRA ADI figures also released today grew at a faster clip, implying in turn that non-bank lenders are picking up some of the slack. 

Of of the larger players Westpac recorded solid growth in its home loan book, while Macquarie, Commonwealth Bank, and NAB notched higher totals for investment loans for the month of June.

In saying that, NAB's investor loan book has recorded only 2 per cent growth over the past year and CBA and ANZ are in negative territory, so there is potentially ample headroom for more investor lending to return forthwith (the 10 per cent growth cap has been shelved as redundant). 

Overall, housing credit still seems to be flowing freely enough, but the economy really needs to start generating household income growth to get things moving again.