The Reserve Bank will of course take an interest in the Fed’s decision and its reasoning, but the US economic slide and interest rate outlook is light years away from what we face in Australia.
Even though things are slowing here, they are slowing from a very high level of activity to hopefully a more moderate level, with a lessening of inflationary pressures.
That’s why the continuing easing of credit growth, especially for housing and personal investing, will be seen as ‘good’ developments by the bank.
The impact of the margin calls during the market slump from January to March, plus slowing investment interest in housing saw credit growth continue to slow in March.
As well, the impact of two interest rate rises and sluggish or easing retail activity, plus a slide in consumer confidence, has played a part in the slowdown.
Economists say there’s nothing in the credit figures to worry the Reserve Bank at its meeting next Tuesday.
According to figures from the Reserve Bank yesterday total private sector credit rose by 0.8% in March, compared to a revised downwards 0.6% rise in February (it was 0.7%) over March 2008.
The overall figure was in line with market forecasts.
For the year to March credit rose at an annual rate of 14.9%, down from the 15.4% annual rate in February and the 18 year high of 16.5% in the year to December.
That high was driven more by so-called reintermediation as scared investors put cash into the banks and companies deposited funds with their banks and sought loans from them because the credit crunch had shut market fundings.
The important housing sector saw a 0.8% rise in the month for an annual rise of 11.2%, the lowest increase for a decade, and continuing the slowing growth trend evident from midway through last year.
Once again it was investors who drove the slower growth rate: growth in the value of loans for investor property fell to an annual rate of 9.5% after it rose 0.5% in the month (0.6% in February). That was well down from the 10.1% annual rate in February.
Owner-occupied credit rose at an annual rate of 12% in the year to March (12.1% the month before) after rising 1.0% in the month (unchanged).
Non-housing personal credit fell 0.2% in the month after rising 0.1% in February and falling 0.4% in January. That means negative growth in the quarter and reflects the widespread margin calls on investors during the market slump, led by the failures of groups like Opes Prime and Lift Capital and the near death experience of Tricom.
Analysts said there was also a slow down in credit card transactions as retail sales slowed and the annual rate in the year to March fell to a rise of 9.8%, the lowest annual rate since August 2006.
Business credit rose 0.9% in the month after a 0.3% rise in February, for an annual growth of 21.4%, compared to 21.9% the month before.
Building approvals for March are due to be issued later today and retail trade figures for the same month tomorrow.
