Is the era of debt-based consumption over?

Friday’s credit aggregates data from the RBA revealed that both personal and mortgage credit growth has collapsed, with personal loan growth declining by 5.1% in the 2019 calendar year and mortgage growth falling to just 3.0% – the equal lowest level in recorded history:

The decline in mortgage credit growth comes at the same time as Australian dwelling values are rocketing, which appears contradictory:

This disconnect has arisen because mortgage credit growth measures two distinct things: 1) the addition to the mortgage stock from new mortgages taken out by borrowers (increases the stock of debt outstanding); and 2) the repayment of mortgage debt by existing borrowers (reduces mortgage debt).

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About the author

Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.