Deposit growth is falling fast

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%:

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.

MBS January 2013

David Llewellyn-Smith

Comments

  1. At the risk of labouring a point – who’d be nuts enough to be a saver in this manipulated market?! Borrow as much as you can….. Saving? That’s for losers….

    • Yeah, I closed down a term deposit. What’s the point is saving when you’re losing money after accounting for tax and inflation.

    • as i’ve said i agree, but there is something about this that brings out the contrarian in me.

      On the bright side, it’s unlikely anyone will do anything about the battler so you do kinda make money standing still being in the aussie.

    • I would agree and go one step further, how about borrow, put all of that money into a property trust of some sort, or offshore savings account, then simply say you can’t pay it back. I have found when it comes to paying back money most companies have very little in the way of power to do so. If the amount is at a rate that does not make it worth lawyers all you get is debt collection letters, look at that as someone writing and saying, hi how are you going, as they don’t have much affect. If you earn ok money then chances are if you allow for a mortgage later you will be fine, if you earn very little then it does not mean as chances of getting any real loan are poor. 🙂

    • At the risk of labouring a point – who’d be nuts enough to be a saver in this manipulated market?!

      People not confident of their ability to time an exit ?

    • yeah for losers 🙁
      I loved to be saver but I saw the writing last year, sold my all my gold, got by TD back, bought properties.

      happy like a Larry

    • Iron HorseMEMBER

      At the risk of labouring a point – who’d be nuts enough to be a saver in this manipulated market?!

      That’s part of the problem though isn’t it – it’s almost a measure forcing you to invest outside of cash. (property, shares etc) It could be time to be patient grasshopper…

  2. Race to “get deposits” appears to have begun…

    Ubank has upped thier savings interest to 4.91% from 4.51%

    • ME Bank is offering 5.1% for Online Savings Account if linked to ME Bank Everyday Transaction A/c.

      I’ve been looking into ME Bank offer over past couple of days.

      You can have as many (fee-free) Everyday Transaction Accounts as you want.
      My CU is about to impose $6/month fee on each of my two Visa Debit card accounts (one account is for Internet purchases). CU dresses it up as a great deal because they scrap fees on individual transactions – EFTPOS etc. – but since I wasn’t paying any individual fees (because I stayed within the monthly fee-free limit) it’s just one big price hike for me. So I’m gunna take a hike across to ME Bank’s fee-free Debit MasterCard issued with its Everyday Transaction Accounts.
      But I don’t want the funds I put into ME’s Online Savings A/c to be linked in any way with an active MasterCard (call me cautious), so I plan to open three Everyday Transaction Accounts (two will replace the two I close at CU), the third will be linked to the Online Savings Account (I’ll put the MasterCard that is issued for that account away somewhere secure). The Online Savings Account can be linked to only one (nominated) account, and to get the 5.1% that link has to be to an ME Everyday Transaction Account. However, the Everyday Transaction Account can be linked to more than one account,. so I can set up DD/DC facility to my CMA.
      You don’t need to be a member of union or industrial super fund, anyone can take out an account (with a few restrictions e.g. age, citizenship).

      http://www.mebank.com.au/promotions/HigherForLongerDec2012/index.html

  3. The total’s about 110% of GDP. Doesn’t sound too shabby, until you compare it with our external debt.

    BTW, in googling to refresh my memory about the latest GDP figure, I discovered that, in $US terms, our 2012 GDP was almost three times the 2004 figure. Amazing.

  4. What about money been drained because of the increase in living costs, power, payment of Christmas spending etc… and people who have lost jobs and are having to use savings first before they can get gov assistance. Maybe some of this deposit money is just going to vanish into thin air because things are getting tight for many out there.

  5. 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.

    Credit growth 4.4% YoY (see Leith’s post on credit growth).

  6. Seems to be a mirror image of the growth in housing finance. Non-housing finance seems to have largely stopped falling.

  7. Cannot expect different result, can we ?

    Pushed by financial repression from global central banks, the bank deposits will be purged even more if RBA lowered the interest rate in near future.

    The problem is whether the “wealth effect” from share and property markets will be sustainable to spur economic growth. If we’re rational, they should not but with bogan population on the rise, who knows ?

  8. unless you believe that such transactions are associated with a reduction in loans – which seems very unlikely in a rising market.

    I reduced my margin loan balance by liquidating some holdings few months ago. I guess it depends on how you perceive this “rising market” will go in the end.