Rise in home lending, household spend not a concern: economists

Australians spent big on home loans and discretionary goods in the lead-up to Christmas despite cost-of-living constraints, but economists don’t expect the buy-up to spur another rate rise.

Black Friday sales are overtaking Boxing Day, ANZ senior economist Adelaide Timbrell says. Picture: Justin Lloyd

Australians spent big on home loans and discretionary goods in the lead-up to Christmas despite cost-of-living constraints, but economists don’t expect the buy-up to spur another rate rise.

Black Friday sales caused household spending to rise 3.1 per cent over the year to November, according to the latest Australian Bureau of Statistics figures.

Meanwhile, the value of home loan lending continued to climb, surpassing a 13 per cent rise in the first 11 months of 2023.

But the Australian chief economist of HSBC Bank, Paul Bloxham, said the economy was moving largely in line with RBA expectations, with the “positive momentum” unlikely to spur a rate reaction when the central bank meets next month for the first time this year.

“The inflation numbers were in line with what the RBA had been forecasting back in November,” Mr Bloxham said.

“The fact that we have still got positive momentum in the economy is roughly what they were forecasting as well. So there isn’t really too much information to get them to think that they need to lift interest rates again in February, but there really isn’t anything to tell us that we should be talking about cuts yet.”

Home loan spend is up. Picture: NCA NewsWire/Max Mason-Hubers

Increasingly popular Black Friday Sales boosted discretionary spending 0.3 per cent higher than in November 2022. Spending on furnishings and household equipment proved the most popular (up 1.7 per cent), while cash splashed on clothing and footwear fell 0.1 per cent.

Non-discretionary spending was up 5.8 per in the same period, led by increased outlay on transport and health, which rose 8.3 per cent and 7.8 per cent respectively.

ANZ senior economist Adelaide Timbrell said consumers were becoming more savvy with their money, with the popularity of November offers set to overtake Boxing Day sales.

“What we’ve seen over 2023, in general, is people are buying less and the retail sales result is just showing us that people are being more organised in their spending, not necessarily spending more,” she said.

“Every year, Boxing Day becomes a less important sales event because of the Black Friday sales.”

New home loan commitments rose 1 per cent to a total value of $27.6bn in November. Lending to owner-occupiers was up 10.6 per cent over the year to November, with a 25.8 per cent jump in first home buyers entering the market.

AMP chief economist Shane Oliver said the fact lending remains a fifth below its record high in early 2022 highlights that last year’s home price rebound of 8.1 per cent, according to CoreLogic, came off the low number of homes being offered for sale. The sentiment was echoed by Ms Timbrell, who said demand for housing was significantly outpacing the availability of housing.

“There is really strong population growth in Australia and there is also really weak growth in the number of homes available,” she said. “That imbalance is what pushed those prices up.”

ANZ senior economist Adelaide Timbrell. Picture: Arsineh Houspian/ANZ

Real Estate Institute of Australia president Leanne Pilkington said the figures were indicative of strong housing growth over the past year. She added that “it’s a relief to see the return of investments in this sector”, with the value of investor loans up 18 per cent in the year to November.

Refinancing between lenders rose 4.2 per cent month-on-month.

Both ANZ and HSBC agree the RBA is likely to keep rates on hold next month, and will continue to do so for some time. Inflation in Australia fell last month, and Mr Bloxham expects Australia to follow overseas central banks, which are hinting at future cuts.