Lending growth in Australia has remained strong despite adverse economic conditions overseas and interest rate hikes. But this statement alone does not cover the breadth of developments within specific lending sectors, particularly in personal lending and credit cards. In-depth analysis of trends in each of these sectors, correlations between lending sectors and interest rates and forecasting via regression analysis reveal a trend away from credit cards towards personal loans.
Adverse shocks in the form of stock market slumps and interest rate hikes are expected to slow down lending growth in the near future. But to generalise trends in the sector means neglecting the breadth of developments, particularly in the credit card and refinancing sector of household loans. Early indicators pre-empt a likely slowdown in the credit cards sector as customers are scared off by rising rates and consequently higher borrowings risks. Conversely refinancing and debt consolidation has undergone massive growth, suggesting credit card customers are switching their debts to personal loans. The challenge lies in ascertaining whether such a trend is permanent and if so the consequences for the relevant sectors.
