Friday, February 29, 2008

Australian money & credit growth facts

The year-to-year growth rates in broad monetary aggregates and in credit from November 2007 through January 2008 were the highest they have been for three years according to the RBA. Broad money over this three-month period grew at from 18.5-18.8% while credit grew from 16-16.4% again on an annual basis. Annual growth rates in borrowing for housing have dropped off by a few points over the last few years from, around 15 to around 11.5%, while growth rates in business borrowing have surged strongly over the past three years from around 12% to 24% annually.

Loans to house buyers were valued at $924 billion at end 2007 while loans to business were valued at $715 billion. The first derivative of business borrowings is the variable of interest. Of course offsetting concerns about the scale of business borrowings is the realisation that a major broad-based investment boom is occurring in Australia that will increase the productive capacity of the Australian economy. It is the biggest boom in 20 years - the Australian economy is 'growing at speed'.

Credit growth in 2007 in Australia was the highest it had been for 18 years despite two interest rate increases and a shortage of credit internationally. Interest rates will almost certainly be adjusted upwards next week. Stephen Kirchner believes the adjustment should have been made a month ago.

Comments sought on these, what to me, are troubling facts.

1 comment:

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