Credit slowdown
Two of the stronger leading indicators of economic activity are money growth and building approvals.
Building approvals are now down 29 per cent year-in-year, and looking at the latest credit growth figures isn't going to inspire too much confidence either!
Housing credit growth was just 0.2 per cent in August as low transaction volumes and the interest-only reset continued to drag, and this followed on from 0.2 per cent in July, according to the Reserve Bank's Financial Aggregates.
This took annual housing credit growth down to 3.1 per cent, which is the lowest annual pace since records began in 1977.
This is partly due to the interest-only mortgages reset, as well as more borrowers taking advantage of low mortgage rates to pay down debt.
Credit growth to investors again declined in August, while annual credit growth pertaining to investors was zero.
Personal credit growth fell to a potentially alarming negative -3.4 per cent for the year to August, although one wonders whether the data series has fully captured the shift away from credit cards towards e.g Afterpay.
The small business credit crunch is also biting, with business credit growth of just 0.2 per cent in both July and August respectively, taking annual business credit growth down to 3.4 per cent.
Total credit growth over the year to August was just 2.9 per cent - down from 4.5 per cent a year earlier - which for an Aussie population growing at about 400,000 per annum is anaemic to say the least.
Housing prices remain a mixed picture since the election, with prices now rising in Sydney and Melbourne, but not so much elsewhere (in fact prices in Perth, Darwin, and Adelaide are all a bit lower).
The credit impulse suggests that the market may be stabilising somewhat at the national level.
In other news, the TD-MI monthly inflation gauge came in at just 0.1 per cent for the month and 1.5 per cent for the year, and inflation expectations are at risk of becoming anchored lower.
Financial markets are pricing a rate cut tomorrow as an 80 per cent likelihood, with credit growth approaching recessionary levels, inflation having drifted further below target in 2019, and unemployment rising.
Governor Lowe noted in a speech last week that there's been no growth in household consumption per person over the past year, and the household cashflow channel of monetary policy is believed to remain effective.
