Down Under, Aussie Debt Grows But Only to Buy Land
|January 21, 2014||Posted by Staff under Economic Principles, High Cost of Land|
This 2014 excerpt of MacroBusiness, Jan 21, is by Leith van Onselen.
In Australia as of 2013 Q4, personal loans enquiries have stabilised at a much higher level after a period of strong growth. This suggests ongoing challenging conditions for retailers of big ticket items and reflects a slowdown of car sales, which have shown no growth year on year, and a reduced demand for larger purchases among consumers in the mining states.
The December quarter is typically a strong period for credit demand, reflecting the seasonal peak in spending associated with the Christmas period. The relatively weak outcome in loans and credit cards suggests low interest rates are not leading to a significant lift in consumer borrowing as households remain cautious about rising unemployment.
It’s worth also pointing out that the latest credit aggregates data from the Reserve Bank of Australia revealed that the share of credit flowing to mortgages hit the highest level on record (60.2%), with the share of loans flowing to business (33.4%) hitting a record low.
Ed. Notes: Aussie debt is not a thing of beauty, as debt isn’t anywhere. There, personal borrowing has topped out, business borrowing has bottomed out, hopefully, while borrowing to buy housing with, especially, the land beneath it keeps expanding. So, Aussies spend more for something nobody made — land — and less for the goods and services that their neighbors make. That’s a recipe for a recession. So where in the business cycle is the Aussie economy? Perhaps they’re lagging seven or so years behind America’s.