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AAP

2013-01-31

Credit growth picked up in December, but is still a long way short of standing in the way of an official cut in interest rates.

The value of credit provided to the private sector posted a solid rise in December after business borrowing bounced back after two monthly falls.

The rise of 0.4 per cent, seasonally adjusted, was reported by the Reserve Bank of Australia on Thursday.

The last time a bigger rise in total credit was recorded was in September 2011, but the latest gain followed two months of stagnation in lending.

But credit had risen only 0.1 per cent in October before stalling completely in November.

As a result, growth through the December quarter of 2012 was 2.2 per cent on an annualised basis, decelerating from 3.1 per cent in the previous three months and a 4.9 per cent pace in the three months before that.

The monthly bounce in December was mainly the result of a recovery in business credit, up by 0.7 per cent in December after falls of 0.3 per cent in October and 0.7 per cent in November.

Business credit growth was 2.8 per cent through 2012, marginally faster than consumer price inflation, but all that growth was recorded in the first half.

Business credit in December was at the same level as in June.

Housing credit rose 0.3 per cent in December, following three monthly rises of 0.4 per cent.

Annual growth in housing credit slowed from a modest 4.6 per cent over the year to November to a slightly more modest 4.5 per cent over the year to December.

Other personal credit neatly reversed November's 0.2 per cent fall in December, but was still down by 0.3 per cent through the year after falling by 1.3 per cent in 2011.

Aside from fluctuations around a weak trend in the more volatile business credit category, the figures show no sign that credit growth is being revved up by the interest rate cuts over the past couple of years.

Although it seems unlikely that the RBA will cut the cash rate after it's board meets next Tuesday, fear of runaway credit growth - at least in the short near term - will not be what stays its hand.

Garry Shilson-Josling, AAP Economist