SYDNEY—Australian home loan approvals have posted their slowest annual growth since the 1991 recession, the Reserve Bank of Australia said.
Meanwhile, total borrowing levels posted their most lacklustre growth in almost three years, while personal loans rose at their weakest pace in six years, following a string of recent interest rate rises.
Economists say this means home owners are more likely to be spared further interest rate pain in 2008.
Housing credit grew by 10.6 per cent in the year to May, which was the slowest annual pace since August 1991 when home loan take-up grew by 10.3 per cent.
Home borrowing levels, which rose by 0.6 per cent in May, moderated for the third month in a row.
Lehman Brothers chief economist Stephen Roberts said home borrowers were likely to escape the pain of another interest rate rise.
"They can take some comfort," he said.
"This is exactly the sort of data to keep the Reserve Bank on hold.
"It makes it difficult for them to raise rates any further."
Total private sector credit rose by 13.4 per cent in the year to May.
This was the slowest annual growth pace since October 2005 when borrowing levels increased by 13.2 per cent.
JPMorgan economist Helen Kevans said the marked slowdown in credit growth in 2008 made it more likely the RBA would leave interest rates on hold this year.
"There is building evidence of a loss of momentum in the domestic economy and a significant easing in domestic demand, if sustained, should help curb inflation pressures," she said.
May's 0.6 per cent increase in total credit matched market expectations, so currency markets had a muted reaction to the data.
It was marginally better than April's 0.4 per cent increase, which was the weakest growth rate since October 2002.
The "other" category, which refers to personal loans, grew by 8.8 per cent in the year to May.
This was the slowest annual pace since July 2002, when personal loans approvals grew by 8.2 per cent.
Business credit rose by 18.2 per cent in the year to May, its slowest annual pace since May 2007.
ICAP senior economist Matthew Johnson said there was "no questioning" that personal and housing credit was trending downwards.
"So, when the RBA meets tomorrow, they will face an economy where consumption growth is flat, and credit and money growth is slowing, but inflation is still accelerating," he said.
None of the 19 economists surveyed by AAP expected the RBA to raise interest rates tomorrow, after its July board meeting.
The cash rate was raised to a 12-year high 7.25 per cent in March on the back of rises in February, November and August.
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