5232.0 - Australian National Accounts: Finance and Wealth, Dec 2019 Quality Declaration 
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 26/03/2020   
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Credit market summary

Non-financial domestic sectors

Credit market outstandings at end
Demand for credit during
Other changes during
Credit market outstandings at end
Sep Qtr 2019
Dec Qtr 2019
Dec Qtr 2019
Dec Qtr 2019

Non-financial corporations
Investment funds
Other private
3 655.0
3 701.6
General government
State and local
2 362.6
2 383.5
7 462.0
7 526.6

- nil or rounded to zero (including null cells)

Demand for credit

Demand for credit ($54.0b) was the weakest for a December quarter since 2012, and follows the softest September quarter ($39.6b) since 2004. In annualised terms, demand for credit in 2019 was the lowest in 7 years.

Demand for credit this quarter was driven by households ($19.6b) and other private non-financial corporations ($16.8b). Households borrowed $21.0b this quarter, as their demand for credit rebounded from last quarter, which was negative for the first time since March quarter 1993. Equity raising of $18.9b by other private non-financial corporations, $7.5b of issuance of one name paper by national general government and $5.9b of loan borrowings by state and local general government were the other drivers of demand for credit.

Graph 1. Demand for credit
Graph 1 shows Demand for credit

Household's weak demand for credit over most of 2019 reflected the impact of a soft housing market over the first half of 2019 and tight lending environment for residential property loans. However, the year ended with strengthening of the housing market that resulted in an increase in household long term loans with ADIs during the quarter ($18.1b), the strongest rise since September quarter 2018. This growth was driven entirely by owner occupiers as investor loan balances continued to fall.

Demand for credit by other private non-financial corporations over 2019 was the softest since 2012, and coincides with the lowest annual equity raising by the sector since 2012. Loan borrowings by the sector have also been subdued through the year.

General government's demand for credit in 2019 was the highest since 2017. The demand was driven by relative strength in both state and local general government borrowings from central borrowing authorities, and national general government issuance of one name paper over the year. Net bond issuance by national general government in 2019 was the lowest annual amount since 2008.

Graph 2. Annualised demand for credit by sector
Graph 2 shows Annualised demand for credit by sector

Valuations increases in bonds and equities drive credit market outstanding in 2019

Credit market outstanding rose 0.9% this quarter, following last quarter’s 1.3% increase. The growth was driven mainly by demand for credit with the exception of other private non-financial corporations, which exhibited revaluation gains on its shares and other equity. The revaluation losses on government bonds during the quarter was a result of increasing yields following several quarters of falls.

Despite subdued demand for credit over 2019, significant valuation increases over the year pushed through the year growth in credit market outstanding of non-financial domestic sectors to 7.5%. Strong price increases in the Australian stock market and falling bond yields, particularly over the first 3 quarters of the year, were the main contributors to the growth.

Graph 3. Credit market outstanding
Graph 3 shows Credit market outstanding