Australia: Business credit stalls - Westpac

Australian credit to the private sector has begun the 2018 year on much the same note that it finished 2017, recording relatively subdued growth, explains Andrew Hanlan, Research Analyst at Westpac.

Key Quotes

“Credit grew by 0.4% in February, following an insipid 0.2% increase in January (revised lower from 0.3%). The monthly average pace in Q4 was 0.4%.”

“Annual credit growth is 4.9% currently, unchanged from the outcome for 2017, but representing a slowing from a 5.6% increase in 2016.”

“The key themes are: a trend slowing in housing credit, led by investors, in response to tighter lending conditions; and business credit volatility around a modest uptrend.”

“That said, the detail for February provided some surprises - which we expect to be temporary. Housing was more resilient than anticipated and the stalling of business extended to a third month.”

“In 2017, the business mood improved, mirroring the global trend. This has translated into an increase in business investment in the real economy by the non-mining sectors, particularly in construction with new projects required to meet the needs of a rising population and against a positive global backdrop.”

“Currently, business credit growth is undershooting growth in non-mining business investment, the reverse of the experience in recent years, suggesting a greater reliance by businesses on internal funds.”