Lending still in all the wrong places

Interest.co.nz’s David Hargreaves has posted the below chart showing that Kiwis continue to leverage big time into non-productive housing lending, whereas consumer lending has also rebounded hard. By contrast, lending to productive areas of the economy – businesses and agriculture – remains stuck in negative:

NZ lending

Non-productive lending booms.

The latest increase [in housing lending] means that the annual rate of increase has lifted to 11.4% from 11% a month earlier and that’s now the fastest pace of growth since February 2008…

The rise and rise in mortgage debt has been making the country look a little one-dimensional in respect of its economy…

It’s a telling chart, which I have attempted to replicate for Australia below using the RBA’s latest private sector credit aggregates, which were released yesterday:

Australian lending

Mortgages are the only form of credit that has grown.

Like New Zealand, mortgages (+4.8% year-on-year) are the only form of private sector credit that is growing, whereas business credit (-2.0% year-on-year) and personal credit (-6.4% year-on-year) have both declined in annual terms. Personal credit is also rebounding hard, whereas business credit has improved a little.

While, the divergence between ‘productive’ and ‘non-productive’ lending is not as extreme in Australia, just like their Kiwi counterparts, Aussies continue to bet it on the house.

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