Credit growth flat for August

Credit growth continued to flat-line in August. Lending to households, businesses and farms rose $500 million or just 0.16 per cent from July levels and was lower, by a similar margin, from where it was in August last year.

But while the increase in debt may be barely perceptible by historical standards, economists see the legacy of debt from the boom years as a strong headwind to economic recovery.

Lending to households, at $181.2 billion, was 0.1 per cent higher than in July on a seasonally adjusted basis.

Compared with August 2009 mortgage debt was 2.4 per cent higher but consumer credit 1.4 per cent lower. Lending to the business sector at $72.3 billion was 6.6 per cent down on August last year.

And while household debt has eased from a peak of 159 per cent of disposable income in late 2008 to 154 per cent now, households still have a negative savings rate. They spend 11 per cent more than their income, according to the Reserve Bank's September monetary policy statement.

Deleveraging from such high levels by both households and a key export sector is restraining the potential for pent-up demand to be unleashed, boosting the recovery, ANZ says.