Is it any wonder that bank lending is plunging in Australia, though not at the rate it is in the US, UK and New Zealand?
On a day when the Commonwealth and ANZ Banks lifted their rates for another time, and were joined by the National Australia Bank and Suncorp, figures were released from the Australian Bureau of Statistics showing the sharpest fall in ending in 16 years.
That matches the 17 year low for the Westpac/Melbourne Institute consumer sentiment survey last week.
National Australia Bank Ltd has lifted its standard variable mortgage rates by 0.15% to 9.61 per cent from today.
The NAB said the rate hike reflected "the sustained increases to long-term wholesale funding costs all bank had been experiencing". That comment has appeared in all the bank statements.
NAB's announcement follows similar rate rises on Friday by Commonwealth Bank of Australia, which increased its standard mortgage by 0.14%, and ANZ, which lifted its rate by 0.15%.
The Commonwealth's standard variable home loan rate rose from 9.44% to 9.58% and the ANZ's standard variable rate lending rate rose from 9.47% to 9.62%.
St George Bank and BankWest also lifted their rates within the past week.
Suncorp lifted its rate by 0.20%, the same as St George. From July 16, Suncorp's variable rate on home loans will increase by 0.20% pa to 9.67% pa for new and existing customers.
But housing finance is falling, and you have to wonder if the penny might have dropped at one of the banks that a bit of profit margin shedding might be in order to try and write new business and gain some market share.
The Reserve Bank will appreciate the importance of the lending finance figures for May: they support the private credit figures it issued just over two weeks ago showing a sharp contraction in credit growth.
The ABS said that total lending finance, including personal, housing, commercial and lease borrowing, slumped by a seasonally adjusted 13.3% in the year to May. That was the largest annual decline since January 1992 when Australia was emerging from a recession.
Loans for personal finance fell 7.8% to $6.3 billion in May, down from $6.8 billion in May. Finance to businesses rose 3.2%, reversing a fall of nearly 15% in the previous month. Lease finance dropped 7.1% to $544 million in May, as well.
The breakdown of the figures from the ABS shows the extent of the slowdown: the rise in business lending is a one off, it would seem.
"The seasonally adjusted series for the value of total personal finance commitments fell 7.8%, due to a fall in both fixed lending commitments (down 11.9%) and revolving credit commitments (down 4.5%)," the ABS said.
"The seasonally adjusted series for the value of total commercial finance commitments rose 3.2%. This increase was due to a rise in both revolving credit commitments (up 7.2%) and fixed lending commitments (up 1.1%). The lease finance seasonally adjusted series fell by 7.1%."
After a string of weak economic readings the ANZ Bank is reviewing its forecast for an August interest rate increase.
The RBA's July meeting minutes will be released later today.
Bank shares were again under pressure yesterday. National Australia Bank shed 3.6% to $26.47, ANZ lost 0.8% to $17.80 and Commonwealth Bank eased 0.4% to $40.16. Westpac (up 33c to $19.34) and St George (up 4 cents to $25.48) went against the weaker trend that saw the overall market close at a two year low.
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