The busy beavers at the Bureau of Statistics are putting the value of new housing loan commitments for March up 1.6% to $33.3 billion following the February slide in the wake of January’s record high peak of $33.9bn.

For owner-occupier, housing loans were lower compared to a year ago, but investor loans jumped 2.9% to a record high of $11.7bn.

Here’s a chart:

New loan commitments, total housing (seasonally adjusted), values, Australia (ABS)

Investor lending has gone psycho, up by 48.4% as investors flooded back into the surging market after a weak spot of lending over 2017-2020 when APRA changed some of its rules around “high risk” investor lending.

Diana Mousina, senior economist at AMP Investments, says Tuesday’s rate rise will nip that bud.

“Lending will come under pressure over coming months as the RBA increases interest rates and as momentum in the housing market is already slowing.”

Meanwhile, Australian retail sales beat expectations in March, up 1.6 % also to a new record high. Economist expectations pointed to a 0.5% rise.

The ABS says rising prices and easing of restrictions led to increases in turnover in all three months of the March quarter.

Mousina says this follows months of solid spending data.

“Retail sales are 9.4% higher than a year ago and much stronger compared to the pre-Covid trend (also see the cracking chart below), because the pandemic caused a massive shift to goods spending to replace services spending.”

Via AMP Investments, ABS


But put away your Solomon Lew party hat because retail sales growth is expected to ease in coming months, according to Mousina.

“Inflation is lifting across goods and services and especially for essential items like petrol, electricity, gas and food which will dampen consumer spending power, RBA interest rate rises will increase interest costs on housing debt and very elevated goods demand is likely to be replaced with higher services spending as consumers get back to ‘normal’ (pre-Covid) activities like travel and recreation.

“The large savings pool built by households over the past two years from income windfalls – worth $240bn or more than 10% of GDP – will provide some offset to these headwinds,” Mousina says.

More shopping was the theme around all the grounds, except for South Australia in March, when former Stockhead deputy editor Sam Jacobs visited. He is a market-moving penny-pincher, that’s a certain.

Queensland (+3.3%) and NSW (+1.6%) did well because there was a lot less water flowing through main streets and in WA sales rose almost 2% following supply chain woes.

Matthew Hassan at Westpac reckons there’s actually been little or no impact from the recent weather and fuel price surges – although the effects on retail volumes may be being more than offset by rising prices.

“Indeed, the momentum has been well sustained in early 2022 despite multiple headwinds that have included the Omicron outbreak early in the year; lousy weather including severe flooding in parts of Queensland and NSW; and a spike in fuel prices following Russia’s invasion of Ukraine.” (nb: fuel is outside the scope of the retail survey but higher fuel costs can often indirectly siphon demand away from retail.)

One ought to note here that the beavers’ monthly sales are measured in nominal, dollar value terms and thus include the effects of higher prices.

“The very strong Q1 CPI rise suggests much of the 2.9%qtr rise in nominal retail sales in the quarter has been price driven. The final retail report for March, due May 10, will include more details including the ‘price-volume’ split for the quarter,” Hassan warns.

Discretionary segments continue to outperform – basic food retail up 0.5%mth but cafes & restaurants up 2%mth and non-food retail up 2.5%mth on a combined basis. Normalising expenditure patterns post-COVID are likely to continue favouring segments other than basic food although this is also likely to see more spending flow to ‘non-retail’ segments, tourism and travel-related services in particular.

The detailed categories show more big gains for department stores (+4.1%) and household goods (+3.4%) with ‘other retail’ up 2% and clothing up 0.5%, albeit off a big 11.2% surge in February.