Personal credit demand in freefall

Banking Day staff Consumer lending

The housing finance slump reverted to trend during March 2019, down 3 per cent over one month and down 11 per cent over a year, the monthly ABS lending data yesterday shows.

Plain vanilla consumer credit – already a challenging segment for banks – is turning anorexic.

Personal finance supply (but really demand) fell a stark 11 per cent just over March from February. Over the full year personal finance tanked by 24 per cent.

Complementary data from the Reserve Bank of Australia on use of credit cards shows similar trends.

Total credit card balances declined by $430 million from February to $51.5 billion in March 2019, to be 2.2 per cent below the level of a year ago, Mike Ebstein of MWE Consulting wrote in an analysis of the RBA data.

Balances accruing interest dropped by around one per cent to $31.6 billion.

“The decline in account numbers shows no sign of halting with a further drop of forty one thousand accounts from February to March,” Ebstein said.

“Accounts have now dropped by almost one million over the last two years.”

The MWE report for March 2019 provided some long range colour on a secular shift in the mix of consumer credit demand.

“Personal debt continues to constitute a diminishing share of total consumer debt having fallen from 20.84 per cent in the December 1996 quarter to 7.7 per cent in the March 2019 quarter.

“Banks account for the great majority of home mortgage lending in Australia but the gap between their share of that market and the personal lending market has been growing.

“The last three years has seen their share of personal lending slip from 73.4 per cent to 67.9 per cent.