HOUSEHOLDS and businesses stashed an extra $16 billion in bank deposits last month, as Europe’s debt saga continued to drive savings into safe havens. And in a sign that consumers remain wary towards the property market, the annual rate of credit growth by owner-occupiers has slumped to a record low.
The total amount of money on deposit with the nation’s banks hit $1.5 trillion in May – the month sharemarkets melted down on fears of a eurozone implosion.
The 1 per cent increase in deposits, outlined in figures published by the Australian Prudential Regulation Authority, was almost twice as fast as the 0.6 per cent rise in outstanding loans during the month. The rush to deposit accounts – which are paying consumers relatively high interest rates – comes as households continue to shy away from new debt.
The annual growth in borrowing for owner-occupied housing slowed to 5.1 per cent, the slowest pace since the series began in 1991, figures from the Reserve Bank showed.
Commonwealth Securities economist Savanth Sebastian said people’s reluctance to borrow suggested retail spending would remain weak, despite the cuts in interest rates. ”At present, it looks like the sluggish consumer spending environment will dominate the economic landscape over the next six months.”
Reflecting the rush to safer assets, figures from the Bureau of Statistics last week showed households held 25.9 per cent of their assets in cash during the March quarter, well above the long-term average of 19.5 per cent.
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