New lending going to houses, cars, not business
Posted on 29 January 2010
By the look of the RBA’s December monetary aggregate release – the government sponsored housing and car splurge continues apace but the rest of the economy is busy paying down its debts.
First up the housing finance numbers (all seasonally adjusted):
Compare and contrast to the personal finance and business finance charts:
The contraction in lending volumes in everything but the housing sector is hardly a vote of confidence in an expanding economy. The net effect is an acceleration in the tightening of the money supply with M3 falling for the seventh consecutive month (and well below the long-term average of +0.85%).
Conclusion – the numbers suggest that the continuing strength in house prices is being driven by debt. The government should have a good long hard look at its ‘first home buyers grant’…not sure that it’s been good for anyone but the sellers. Still maybe that was the intent?
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