Demand for credit continues to drop from record highs

The latest data for Australian National Accounts: Finance and Wealth published by the Australian Bureau of Statistics (ABS) revealed that the demand for credit was $63.8 billion during the December 2022 quarter, revealing a decline of $52.4 billion from the previous quarter.

This continued the decline from record-high levels in the March 2022 quarter and was primarily driven by borrowing from households ($31.5 billion), private non-financial corporations ($16 billion), and government ($11.2 billion).

ABS found that housing credit growth rose moderately from the last quarter, with the majority ($30.6 billion) being for loan-term loans, reflecting a lift in buyer activity during the spring housing market.

Short-term loan borrowing sat at $1.1 billion, which was in line with seasonally higher consumer spending during the December quarter.

Furthermore, credit market outstanding increased 2.1 per cent ($181.3 billion), $117.5 billion of which were revaluation gains.

Head of wealth and finance statistics Dr Mish Tan said: “Total credit growth slowed during the quarter amid an environment where households and businesses are facing higher borrowing costs.

“Meanwhile government borrowing has stabilised following unprecedented debt issuance to support the economy through the COVID-19 pandemic and natural disasters.”

Further data revealed that household wealth fell for the third consecutive quarter driven by weakness in the housing market, which dropped by 0.4 per cent or $57 billion in the December 2022 quarter.

Household wealth now sits at $14.4 trillion, 3 per cent lower than the same period a year ago with wealth per capita dropping 0.9 per cent ($4,737) to $546,962 per person.

Dr Tan further stated: “This is largely due to falling residential property prices, as rising interest rates lower demand and household borrowing capacity.”

Additionally, the value of residential land and dwellings declined 2.7 per cent or $260 billion in the December quarter, which contributed to 1.8 percentage points to the overall decline in household wealth.

Residential land and dwellings are 3.9 per cent lower than the previous corresponding period, sitting at $9.2 trillion (a decline of $374 billion).

Household spending on the rise

The ABS household spending indicator data for January 2023 revealed that household spending rose 17.8 in January when compared to the same period last year.

According to ABS head of business indicators Robert Ewing the increases were led by spending on transport, which rose 41.5 per cent; hotels, cafes, and restaurants (up 38.5 per cent); and clothing and footwear (20.9 per cent).

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