Liquid households limit Australian housing debt growth

The Reserve Bank of Australia spelled out more of its thinking and analysis of offset account balances and their relevance to housing lending policy in its August 2015 Statement on Monetary Policy.

Offset account balances "have been growing much more rapidly than housing credit", putting "annual growth in net housing debt [at] about one percentage point below growth in housing credit," the RBA said in the statement, released on Friday.

Offset accounts allow a customer with a home loan to have payments through a transaction-style account credited against loan balances. This reduces the interest liability.

Balances in offset accounts "have been increasing rapidly," the RBA said, "with growth over recent years around 30 per cent."

The central bank's analysts wrote that "this growth has the potential to continue as older loans that are less likely to have offset accounts are replaced with new loans, where it is more common to have an offset account."

The RBA also produced data on available redraw balances, which "at around A$120 billion, are larger than offset account balances, but have grown at a pace closer to ten per cent over recent years."

The discussion is central to another theme of the SOMP, the correct measurement of household debt.

"Without adjusting the stock of outstanding housing credit for offset account balances, housing debt as a share of household disposable income has been increasing since mid 2012 to be at a historical high of 144 per cent," the RBA said.

"Adjusting for offset account balances suggests that this ratio has been rising at a slower pace, and has only just surpassed its most recent peak in late 2010."