By online business reporter Michael Janda | ABC – 9 hours ago
Australians are continuing to shun debt, despite official interest rates being at their lowest level in half a century.
Total credit provided by lenders to private borrowers grew just 0.3 per cent in April, and only 3.1 per cent over the past year.
Housing credit continues to be the strongest sector, with a 0.4 per cent rise last month, but the annual growth rate of 4.5 per cent remains very close to the lowest levels seen in at least three-and-a-half decades.
Lending to housing investors (up 5.5 per cent for the year to April) continues to outpace growth in loans to owner-occupiers (up 4 per cent).
Personal lending is faring even worse, falling 0.3 per cent last month and down 0.2 per cent over the past year.
Business borrowing - a key to investment in new buildings and equipment - is also struggling, up just 0.2 per cent in April and 1.4 per cent over the past year, indicating that the drop-off in investment seen in figures released yesterday is likely to continue.
CommSec economist Savanth Sebastian says consumers and businesses have not responded to record low official interest rates with a rise in borrowing, and that would concern the Reserve Bank.
"The lack of borrowing reinforces the sluggish activity levels across the economy," he explained.
"Less borrowings effectively means less spending in coming months." Mr Sebastian says the Reserve Bank may need to cut rates again to help the economy gain traction, but such a move would also not be without its risks.
"Weak growth in outstanding debt together with low inflation means that the Reserve Bank can cut rates further if it believes it will be beneficial," he observed.
"But, with less indebtedness and fewer people wanting to borrow, a rate cut could prove more negative – reducing the income of savers.
It is a difficult environment for lenders." CommSec is expecting the RBA will remain on hold for the next two meetings before cutting rates again in August - a view share by many analysts.
