Deposit growth is falling fast

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This morning APRA released its January banking statistics and it is no surprise to see the downtrend in deposit growth being entrenched. In January deposits grew just 0.23%:

Year on year growth is falling fast, down now to 7.3%:

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Total deposits are leveling off:

This will be the combination of the income blow from the falling terms of trade and the stock market rally sucking out savings. Deposits represent roughly 60% of liabilities so using the back of the envelope, if credit growth passes 4.3% then money will need to come from wholesale markets, which it already is.

But if it accelerates at all from here, offshore borrowing is going to need to grow to fund new loans. We are swiftly approaching a cross-roads in Australia’s post-GFC financial stability. APRA’s great test looms.

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MBS January 2013

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.