Conspiracy of silence?
The latest available banking and credit statistics included a material reclassification of loans.
A media piece surfaced reporting an unprecedented loss of mortgage market share for ANZ Bank, but one suspects the composition of its mortgage book may have had at least some role to play here (a greater market share of international investor and expat loans, perhaps?).
It's also probably not wise to read too much into growth rates when the monetary aggregates haven't been adjusted for series breaks, with the Reserve Bank's latest credit statistics aiming to resolve some previous ambiguities between resident and non-resident borrowers.
To underscore this point, all of the major banks effectively reported a jump in the total value of their investment housing loan exposures in July, but since the prior period figures aren't adjusted any in-depth analysis of shifting trends becomes rather meaningless:
In saying that, it is interesting to note in passing how Westpac has remained the undisputed king of investor (and interest-only) lending, with its total investment loan exposures being upwardly revised to an impressive $185.6 billion.
Following the reclassification, the Reserve Bank figures implied that investor credit made up 37 per cent of total housing credit, which is roughly what you'd expect to see given the overall composition of the housing market.
Of course, this won't halt the torrents of faux outrage, but having read every meaningful BIS paper on systemic risks arising from housing debt it's apparent that the total value of credit has little direct bearing on whether banking crises arise.
Instead, the ability of borrowers to service their debt is far more important than its total value according to the research of the BIS.
Highly urbanised countries with larger cities have generally been able to sustain higher levels of debt than decentralised economies with lower home ownership rates, while Australian households are somewhat unique in their penchant for using offset accounts to build buffers.
Housing credit revised down
For the record, the total value of both housing credit and total credit was actually revised down, which the conspiracy theorists may neglect to highlight in their haste to lampoon the figures:
Moreover, anyone with real-world experience will know that the classification of housing loans between homeowners and investors is far less clear-cut than implied by hard data (and that's even before considering how to tackle the increasingly fluid nature of residency versus non-residency these days).
The Reserve Bank explained the technical reasons for the reclass arising from its methodological improvements in its midweek financial aggregates release.
Incidentally, household debt-to-income ratios will only be modestly improved by the adjustments, due to an offsetting increase in the value of personal credit.
