Credit disleveraging continues

The Reserve Bank of Australia (RBA) released the monthly Financial Aggregates data this morning, which incorporate private credit (including housing, personal and business lending) and monetary growth (M3 money supply).

Here’s the release, I’ll have the analysis and charts up shortly, the most important thing to note is that housing credit growth is now at a 35 year historic low. Although it is still a “healthy” 5.3% annualised growth, and it saw an uptick in growth in January over December – this is still quite anaemic.

Total credit provided to the private sector by financial intermediaries rose by 0.2 per cent over January 2012, after rising by 0.3 per cent over December. Over the year to January, total credit rose by 3.5 per cent.

Housing credit increased by 0.5 per cent over January, following an increase of 0.4 per cent over December. Over the year to January, housing credit rose by 5.3 per cent.

Other personal credit declined by 0.2 per cent over January, after falling by 0.1 per cent over December. Over the year to January, other personal credit decreased by 1.3 per cent.

Business credit fell by 0.2 per cent over January, after increasing by 0.3 per cent over December. Over the year to January, business credit increased by 1.4 per cent.

Over the month of January, M3 grew by 0.8 per cent and broad money grew by 0.9 per cent. Over the year to January, broad money grew by 7.8 per cent.

Comments

  1. “…broad money grew by 7.8 per cent.”

    Might that explain why the AU economy still experiences an actual inflation of about 6% ?

    “Over the year to January, housing credit rose by 5.3 per cent”

    Anyone knows whether/how much RBMS the AU Fed Gov is still buying to keep credit flowing ? Just curious …

    • And a CAD to go with the domestic inflation.
      Bewdy! Don’t worry Whale she’ll be right. We’ll just tweak a few numbers and everything is hunkydory!

      • Jumping jack flash

        They just need to make sure imported TVs and other unnecessary trinkets keep dropping in price to offset the rising cost of food, fuel and electricity.

        Can you imagine what would happen to our service based economy if our dollar slipped? I try not to think too much about it.

      • Many a long year ago ( 🙁 hmmmmmm 40 years)my Dad made an observation about civilisations. He reckoned when the entertainers got paid multiple times the producers it was a sign the civilisation was pretty much doomed.
        It seems we in Aus don’t care much as long as we can watch the one-dayers, League AFL or Rugby on a big Flat screen and have a few beers.
        It’s looking to me that this is the main aim of both political parties. Keep everyone opiated with arm-chair sport so nobody asks questions. The cost, in that case, doesn’t matter.

    • “AU economy still experiences an actual inflation of about 6%”

      Shhh! don’t say it so loud, you will not be taken seriously. And wake the sheep.
      The only measure proper economists used is ABS CPI. And that is barely 3%.

      • Yes, unfortunately, the ABS CPI is not representative anymore of actual inflation, but still a convenient policy instrument 🙂

        I’ve turned it into a personal exercise to calculation inflation whenever I see a price change – whether it’s energy, the barber, or anything. And this virtually always runs in the 5-6% bracket.

        Resulting in real interest rate of near zero on savings or term deposits (interest paid – inflation), which in turn discourages saving.

        The RBA isn’t stupid, I presume they’re quite well aware of that – and just let inflation eat away AU’s debt in real terms, and let wages catch up. It’s just more prudent not to publicly make statements about it.

      • whale I’ve been banging away at that inflation number on MB for a while. I too like to pull those ABS figures apart a bit. I’m an importer and I can tell you our USD FOB prices are rising about 15% per year. If the A$ increases at less than that rate we are in deep inflation doodoos even by ABS stats.

        Secondly whale please join me in the advocacy of using RAT rates as the REAL interest rate. i.e. Real After Tax (av marginal rate of tax ) Rates.

        There are many other factors pointing to a huge wave of inflation headed our way. Everyone looks backwards and says “no inflation on the horizon”. I guess everyone is too scared to look forwards on this matter even in MB pages (with the odd exception)
        Ignoring something does not make it go away!

  2. Have a look at the following interesting article:

    http://mobile.businessweek.com/news/2012-02-16/gillard-urged-to-follow-bernanke-with-australia-loans-mortgages.html?section=highlights

    Interesting tidbit:

    “Bank of Queensland Ltd., Bendigo & Adelaide Bank Ltd. and CUA say they’ll seek AOFM support with future mortgage bond sales.

    ‘Challenges are likely to continue in 2012,’ said Brisbane-based Tim Ledingham, treasurer of Bank of Queensland, citing slow lending growth, rising funding costs, increased unemployment and slipping house prices. ‘Until RMBS transactions are achieving wide and diverse distribution I would expect that the market will benefit from the AOFM’s involvement.'”

  3. Over the month of January, M3 grew by 0.8 per cent and broad money grew by 0.9 per cent. Over the year to January, broad money grew by 7.8 per cent.

    as per comment thread yesterday or day before, why do people hand wring about central banks supposed “printing” when credit by private banks dwarfs whatever central banks add to the system.

    • same with hand wringing over government debt – over quarter of a trillion in new private debt was added alongside the “wasteful” “shameful” “wrong” $220 billion in Aussie gov’t debt in the same period….

      • yep. I wonder if it is all geared to the “government is always bad but private sector is good and makes informed decisions which, ipso facto, are correct” ideology.

    • Well, although the credit creation by commercial banks indeed dwarfs central bank money creation, there is a clear relation between the two. Base money (M0) volume usually creates a ceiling for Broad money (M3) volume.

      In Australia the ratio between the amount of RBA (base money) reserves and its deposits (M3) of the average commercial bank is a staggering 200 …

      … meaning for every single base dollar the RBA creates, the bank can create an extra $ 200 of credit.

      • fair enough but the exercises that the Fed has undertaken in the last couple of years haven’t added one zac to M0 (by definition).

        on your last point, in Australia a banks ability to create credit is independent on whatever amounts the RBA is creating. So therefore it seems to me neither staggering nor non-staggering. it is what it is.

    • Hugo…we are a bit too sensitive to the school of thought that now runs “All Govt expenditure is good. It doesn’t matter if it is wasteful. Govt expenditure does not add to debt because the number is just a theoretical one anyway! The Govt can print its own currency to cover the debt”

      I have a bad tendency to jump all over it every time and don’t have the subtlety of Prince!…..

      Please note I agree that Private credit creation is no better. Howevewr this really goes back to Govt policy. With correct policy settings we would certainly have much less excess private credit e.g. as whale and I would both argue…RAISE interest rates.
      Without thinking too deeply (for the moment) irrational exuberance will always be around.

  4. As always the monthly numbers are lot easier to understand with 2 decimal places shown (i.e. monthly housing credit grew 0.47% in Jan 2012, up fromn 0.37%).

    Still the average montly housing credit growth since 2008 is 0.56%, so it’s still “anaemic” as The Price wrote. IMO it’s more of a reflection of how poor the December numbers were. Still no demand surge to meet the growing mountain of vendors.

  5. in a mature market I would have thought that with inflation of 3% and population growth of 2% housing credit growth of 5% sounds sensible.

    It’s the past 7 years that are abnormal!