To the relief of borrowers, the economy appears to be showing signs of softening ahead of the Reserve Bank’s first rate decision of the year as growth in spending and home loan values decelerates.
The Australian Bureau of Statistics’ lending data released on Friday shows the value of new loans has continued to rise, but at a slower rate.
NAB economists say this result “plays to the view of financial conditions not being especially restrictive from the perspective of new lending demand”.
“In terms of flow through to the broader economy, housing momentum if sustained would act to support consumer spending in 2024, adding to notions of a soft landing,” they said.
The value of new loan commitments for all housing rose one per cent in November, after a 7.1 per cent surge in October. This is still 13.1 per cent higher than 12 months ago.
Loans for owner-occupiers have risen 10.6 per cent through the year to November, with a surge of 17.9 per cent in the last recording month.
The number of refinanced owner-occupier loan commitments rose 4.2 per cent, which ABS’s head of finance statistics Mish Tan says puts it at levels similar to March 2022 — before the Reserve Bank embarked on its cash rate rises.
“The growth in owner-occupier and investor lending seen through 2023 was driven by the three States with the largest populations,” Dr Tan said.
“For both owner-occupiers and investors, New South Wales saw the most growth.”
Oxford Economics Australia senior economist Maree Kilroy says 2024 is expected to be a “softer year” after rebounds over 2023.
“While Sydney and Melbourne are expected to record relatively softer growth, Perth is well-equipped to lead the pack as the city develops a more sizeable dwelling stock deficiency,” she said.
The ABS’s monthly household data, also released on Friday found household spending in November was 3.1 per cent higher than the year before.
While household spending has continued to increase, its rate of growth has also generally decelerated, with August recording a 5.3 per cent increase over the previous year and September showing a 4.3 per cent jump compared to 2022.
The ABS’s head of business statistics Robert Ewing said the November rise was driven by spending on essential goods and services.
Non-discretionary spending rose 5.8 per cent compared to November the year before with spending on transport and health growing by 8.3 per cent and 7.8 per cent, respectively.
Black Friday predictably played a big role in boosting spending with households spending 0.3 per cent more on discretionary goods and services than in November 2022.
However, spending on clothing and footwear fell 0.1 per cent while furnishings and household equipment spending jumped 1.7 per cent.
This comes after the ABS on Wednesday revealed the November consumer price index was at 4.3 per cent, its lowest level since January 2022, which has led many economists to tip the central bank will keep the cash rate on hold in February.