5232.0 - Australian National Accounts: Finance and Wealth, Jun 2019 Quality Declaration 
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 26/09/2019   
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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
Mar Qtr 2019
Jun Qtr 2019
Jun Qtr 2019
Jun Qtr 2019

Non-financial corporations
Investment funds
Other private
3 644.6
3 735.0
General government
State and local
2 291.7
2 322.1
7 264.2
7 422.0

- nil or rounded to zero (including null cells)

Demand for credit in 2018-19 weakest in 6 years

Demand for credit ($48.6b) was subdued for a third consecutive quarter, with credit demand in 2018-19 the weakest it has been since 2012-13. The growth in demand for credit this quarter was driven by loans to households ($22.9b), equity raising by other private non-financial corporations ($10.1b) and bond issuances by national general government ($8.9b).

Household's demand for credit continues to be impacted by the slowing growth in loans for residential property, reflecting the tight lending environment and soft housing market. The majority of the increase in household loans from banks this quarter were for owner occupiers, with flat growth in investor loans. Loans to unincorporated business, which are typically strong in June quarters, also contributed to the increase in loans to the household sector, while $14.5b of residential mortgages were securitised.

Demand for credit by other private non-financial corporations was modest in 2018-19. Loan borrowings by other private non-financial corporations decreased for the first time in 8 years this quarter, with loans from banks and the rest of the world falling. However, bond issuances were strong for a second consecutive quarter.

National general government's demand for credit slowed in 2018-19 as the government's saving position continued to improve. Net bond issuances increased this quarter following March quarter 2019 where maturities of national general government bonds were greater than issuances for the first time since September quarter 2008. Conversely, state and local general government's demand for credit, which rose $7.7b this quarter, continued to grow in 2018-19, partly reflecting increased spending on infrastructure over the year.

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

Valuations increases in bonds and equities drive credit market outstanding

Despite subdued demand for credit in 2018-19, significant valuation increases pushed through the year growth in credit market outstanding of non-financial domestic sectors to 6.1%. Strong price increases in the Australian stock market and falling bond yields, particularly over the last 2 quarters, were the main contributors to the growth.

Credit market outstanding rose 2.2% this quarter, following last quarter’s 2.9% increase. There were significant valuation increases in the equity of other private non-financial corporations and government bonds, reflecting the rise in the Australian stock market and falling bond yields during the quarter.

Graph 2. Credit market outstanding
Graph 2 shows Credit market outstanding