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QTPA Member Alert |Ai Group Economics and Research 2 May 2014

Ai Group Economics and Research 2 May 2014

Australian Economic Developments:

Recent Australian economic data suggests the Australian economy continues to grow at a subdued, below trend pace as we move through Q2 2014. The positives include an upturn in the housing sector and a pick-up in retail sales, but the transition in business investment growth from the mining to non-mining sectors remains tepid. Forward indicators suggest that the overall tough trading environment is likely to persist in coming months, although the low interest rate environment should help to support continued growth in dwelling investment and to strengthen household demand.

Private sector credit – slowly picking up:

Total credit outstanding to the private sector (owed to banks and other financial intermediaries) increased by 0.4% m/m resulting in growth of 4.4% p.a. in March 2014, the highest annual rate in five years. Despite this pick-up, total credit growth is still soft and well below its long run average. Credit conditions continue to show the effects of the ongoing momentum in the housing market. Credit for housing grew by 0.5% m/m in March for annual growth of 5.9% p.a. This was the strongest annual pace since July 2011. Credit for investor housing increased by 0.7% m/m and 7.9% p.a., but credit growth for owner-occupiers was steady at 0.4% m/m and 4.9% p.a. Outside the housing segment however, demand for credit remains subdued. Business credit grew by 0.2% m/m to be up by just 2.6% p.a. Personal credit (unsecured credit such as credit cards plus auto and other personal credit) fell by 0.1% m/m in March to be up just 0.4% p.a. (the lowest annual rate of growth since mid 2013), reflecting ongoing risk aversion to credit.

Solid home buyer activity was reflected in the RP Data – Rismark home value index (see table below) which revealed that national capital-city home prices rose by a seasonally adjusted 11.5% p.a. in the year to April 2014, its fastest pace since July 2010. Dwelling prices are now 16.1% above their low point on May 2012 and exceed the previous peak in October 2010 by 7.5%. Sydney and Melbourne continue to drive the lift in national house prices.

RP Data- Rismark Dwelling Prices April 2014




Median House Prices


























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