Many fear that more pain lies ahead for the struggling property market as growth in home lending has fallen to the lowest level seen in 34 years.
The amount Australian property buyers borrowed went up only 6 per cent in the year to June, sending out more confusing signals on the real state of the Australian economy.
Together with a decline in business borrowing, the total private sector credit contracted 0.1 per cent in the previous month, which was the first drop in lending in almost two years.
The low figures released by the Reserve Bank removed some pressure on the Australian dollar, which fell below $US1.10 on July 29th amid warnings of an increase in rates that could accelerate the economic slowdown.
Many fear that the economy would find it hard to cope with a rate rise – the domestic market is near an 11 month low whilst global markets remain unstable.
The slide in private sector credit over June was the weakest reading since the height of the global financial crisis, and property values in capital cities fell 2 per cent in the year to June.
Experts fear that the economy may be losing momentum with the outlook for housing credit lackluster: housing affordability is a constraint, households are looking to pay down debt and interest rates are a headwind.
