It could have been the end of financial year loan boom for personal investors and business, or it could have been a real increase in demand for loans from more and more businesses and consumers, but whatever the reason the growth in private lending in the country hit a six year high in June.
Figures from the Reserve Bank yesterday showed bank lending, especially to consumers and business, jumped sharply in June, while housing credit was steady at existing high levels, especially to investors.
In fact the annual rate of credit growth of 5.1% in the year to June (and for the 2013-14 year) was the strongest growth in lending for a financial year seen since 2007-08 when lending grew at an annual 11.8%.
The sharp rise in bank lending is the most important statistics issued this week because it suggests that demand for credit away from the hot housing sector could be picking up.
But there is one caveat – we will have to wait to see if that growth continued into July and then August in case the solid rise in lending to business and consumers wasn’t end of financial year tax-based.
Lending jumps sharply in June
The Reserve Bank data showed credit growth jumped 0.7% in June from May, the fastest monthly rate since September 2008, just as the GFC was starting to break across the economy.
The annual rate of 5.1% was the fastest growth rate since February 2009.
Lending for housing rose 0.6%, the same rate as in the two preceding months to be up an annual 6.4%, faster than the 4.6% rate in 2012-13 and the 5.4% rate for calendar 2013. It was the fastest annual rate since the year to March 2009.
Lending for private housing rose 0.4% in June to be up 5.3% for the 2013-14 financial year. That was the best growth since the year to May 2012.
Loans to investors in June jumped 0.9%, equalling the biggest gain since June 2007, when they rose 1.6%.
Annual investment loan growth has hit 8.7% in the year to June, the fastest year-on-year growth since May 2008.
Personal credit rose 0.6% in June from a fall of 0.2% in May, a significant rebound.
The annual rate in the year to June was 0.7%, the same as in the year to February of this year.
It was the strongest annual growth in personal credit since the 2010-11 financial year.
Business credit jumped 1% in June, the strongest rise for that key indicator since October 2008, when the GFC was at its most intense and credit was shutting down across the banking system here and around the world.
The annual rate of 3.5% was the fastest since September 2012.
In a similar rise in personal credit in June, business lending leapt from 0.2% to 1% that month.
Now both could be down to investors and businesses fixing up tax or lending arrangements before the end of the financial year.
We will see in a month when the July figures are issued for the RBA, if personal credit and business lending remain around their June levels, it would be a sign demand for loans is spreading out of the housing sector to other parts of the economy.
June’s building approvals, also issued yesterday, showed the strong level of approvals continued. But once again the volatile non-private dwelling area produced another fall (because they depend on local councils to process the approvals and notify the Australian Bureau of Statistics, which is not always the case).
Thanks to the big fall in non-private dwelling approvals of 10.5% for the month, total approvals fell 5% in June. Approvals of private houses were down 2.2%, seasonally adjusted, according to the Bureau of Statistics data.
But for the year to June total approvals rose a solid 16%. Private sector house approvals are up 13% and non-private dwellings were up 23%.
