House lending hits skids - Courier Mail 1-7-08
THE brakes have been slammed on the Australian economy with home loan approvals posting their weakest annual growth since the recession of 1991.
Housing credit grew by 10.6 per cent in the year to May, which was the slowest annual rate since August 1991 when home loan take-up grew by just 10.3 per cent.
The Reserve Bank figures released yesterday also reveal total borrowing levels delivered their most lacklustre growth in almost three years, while personal loans rose at their weakest pace in six years, following a string of recent interest rate rises.
Macquarie interest rate strategist Rory Robertson said the credit figures confirmed "a significant deceleration in the Australian economy is well under way".
However, soaring petrol prices and higher rents continue to drive inflation.
The TD Securities-Melbourne Institute inflation gauge rose 4.8 per cent in the 12 months to June, which is the largest annual increase in the 5 1/2-year history of the series.
Year-end inflation, according to the series, has now been at or above 4 per cent for the past five months.
This is outside the Reserve Bank's target band of between 2 and 3 per cent.
TD Securities senior strategist Joshua Williamson said it was little surprise inflation remained high, given the "extreme jump" in petrol prices.
"The surge in petrol prices is overwhelming most other price changes," Mr Williamson said.
World oil prices closed in on $US142 a barrel in Asian trade yesterday, pushed up by continued worries over supply and the weak US currency.
While some economists believe the rising price of petrol will make the RBA nervous about the inflation outlook, the central bank is widely tipped to leave the cash rate unchanged at 7.25 per cent today.
"The bank should be starting to feel a bit more confident that the demand slowdown they're looking for is on track," AMP Capital Investors chief economist Shane Oliver said.
 "That will head off the need for another rate hike, regardless of the short-term threat to inflation coming from gasoline."
The RBA board will announce its decision at 2.30pm.
Also, the Australian dollar has traded at its highest level in 25 years on the back of record commodity prices. It rose to US96.35c, the highest since February 1983, late yesterday.
