Australian Credit Resilience Tests the RBA’s Policy

• Credit growth in Australia gathered pace into year-end, with new lending up 9.5% in Q4 to $108.3bn, leaving activity 23.5% higher year-on-year after a 10.9% rise in Q3.
• The acceleration was concentrated in owner-occupier lending, signalling household credit demand remains firm. For the RBA, this complicates the narrative around restrictive financial conditions and suggests policy may not be biting as much as previously assessed.
• US labour data told a similar story of resilience, with payrolls rising 130k in January versus 65k expected and 48k prior, while unemployment edged down to 4.3% from 4.4%, pointing to a jobs market still expanding.
• While one print does not establish direction, the strength of the release supports the Fed’s narrative of a labour market that is holding firm.
• Markets adjusted quickly, trimming expectations for rate cuts this year, with the US 10-year yield up 3bps to 4.17%.