Australia’s private sector credit growth slows in March, sustained upswing in business credit unlikely

Australia’s private sector credit grew 0.4% m/m last month, slightly lower than market projections of a growth of 0.5%.  Housing credit growth decelerated to the weakest monthly data in more than two years, whereas business credit weakened in March after posting strong results in past few months. Housing credit growth rate came in at 0.5% m/m and is largely consistent with the past few years. But the growth rate of 1.6% 3m/3m is the slowest since January 2014. This shows that housing demand still exists; however, the slowdown from 2015’s peak is still there, according to ANZ.

Looking at housing details, investor demand continues to decelerate. Housing investor credit grew 7% y/y, as compared to the double-digit growth seen in 2015. The 7% growth is quite lower than APRA’s 10% target and is much slower than owner-occupier credit. Moreover, business credit also slowed last month. The weaker data is slightly unexpected as business conditions and profitability surveys were positive in the same period.

“Going forward, we continue to believe a sustained upswing in business credit is unlikely given businesses’ soft CAPEX outlook”, said ANZ.