The Australian economy may be growing at a solid clip with confidence at multi-year highs, but there are few signs people are willing to take on a loan outside of housing.
Australia's booming housing market has seen the amount of home loans in the economy increase to the highest level in more than two years, but business credit remains at its weakest in over a decade.
"Apart from housing, there is still a reluctance by Aussies to borrow," Commonwealth Securities chief economist Craig James said.
Reserve Bank of Australia credit figures show total housing loans rose by a further 0.5 per cent in April for an annual pace of 4.4 per cent, the highest since January 2019.
Mortgages to owner-occupiers rose by 0.6 per cent to 6.2 per cent annually, while investors finally appear to be getting on board after a noticeable absence.
Investor loans rose 0.4 per cent to 1.1 per cent annually, the highest rate since December 2018.
The RBA and other financial regulators are keeping a close eye on developments in the housing market to make sure lending standards are not deteriorating at a time of sharply rising prices.
Overall, total credit in the economy rose 0.2 per cent in April to 1.3 per cent.
Demand for personal loans outside of housing was flat in April, falling 7.8 per cent over the year.
Business credit eased a further 0.3 per cent to be down three per cent annually, its weakest since September 2010.
RBA governor Philp Lowe will likely make reference to the housing market in his post-board meeting on Tuesday.
Otherwise, there seems little doubt the RBA will leave its suite of policies unchanged at its monthly gathering with the cash rate remaining at a record low 0.1 per cent.
Australian National University's Timo Henckel expects the cash rate could remain unchanged for at least a year.
"The lockdown in Victoria serves as a potent reminder that COVID-19 can affect the domestic economy unexpectedly at any time, at least until a large proportion of the Australian population is vaccinated," Dr Henckel said.
"Further fiscal and monetary stimulus is needed for the foreseeable future and so large budget deficits and low interest rates are likely to persist for years."
Dr Henckel chairs the ANU's so-called RBA shadow board, made up of academics and economists from the Crawford School of Public Policy.
It gives a 95 per cent chance of the cash rate remaining unchanged at Tuesday's board meeting and a 62 per cent prediction of it staying unchanged in 12 months' time.
The RBA does not expect to lift rates until 2024.
Dr Henckel notes that while the economic recovery has been gathering pace, which has seen the unemployment rate fall to 5.5 per cent, annual inflation was a mere 1.1 per cent and well below the RBA's two-three per cent target.
