- The December NAB business survey showed business confidence remaining reasonable at +6 and business conditions improving significantly to a strong reading of +11.
- The bounce in conditions reflected strength in trading, profits and new orders.
- Meanwhile, private credit rose a stronger than expected +0.7% in December or 5.6% year on year.
- The bounce in credit growth from +0.5% mom in November was driven by stronger lending to businesses, which is potentially a good sign.
Business continues to remain more confident than are consumers, but the rebound in business conditions adds to confidence that the September quarter downturn in GDP reversed in the December quarter.
While housing credit growth was unchanged at 0.5%mom or 6.3% yoy in December, what is concerning is a continued deceleration in owner occupier housing credit (to +0.4%mom) relative to investor credit (which rose +0.8%mom). Over the last three months investor housing credit rose at an annual rate of 9% and is now rapidly approaching APRA’s 10% threshold. It is increasingly clear that the dampening impact of APRA’s 2015 macro prudential tightening has worn off to a significant degree. With household income growth in the economy running well below 10% yoy and the Sydney and Melbourne property markets continuing to run too hot in the face of ultra-low interest rates there remains a case for APRA to further lower the 10% growth threshold for property investor credit.
