Australia’s private sector credit growth rose to its highest annual rate in more than three years in March 2026, according to a new report by Westpac Economics, driven by sustained momentum in housing and business lending.
The Australian Private Credit Bulletin, published Thursday, found total private sector credit grew 0.7% month-on-month in March, up from 0.6% in February and above Westpac’s forecast of 0.5%. Annual growth climbed to 8.1%, the highest since late 2022.
Senior economist Mantas Vanagas, who authored the bulletin, said the result defied expectations.
“Contrary to our expectations of a slowdown to 0.5%mth, total private sector credit growth increased from 0.6%mth to 0.7%mth in March,” he wrote. “Credit growth has so far remained resilient to tighter monetary policy and a more uncertain economic environment amid the ongoing global energy price shock.”
Housing credit, which accounts for 62% of total credit stock, rose 0.6% for the seventh time in eight months. Within that segment, owner-occupier credit also rose 0.6%, among its highest readings in the current cycle, while investor credit climbed 0.8%, maintaining a steeper trajectory consistent with its six-month average.
Business credit, identified in the report as the main driver of overall credit growth in recent months, recorded a 0.8% monthly increase, broadly in line with the pace seen throughout 2025. Other personal credit, which makes up 4% of total private credit, grew 0.6% and was described as elevated by historical standards.
Despite the strong March result, Westpac warned that headwinds were building. The report pointed to Reserve Bank of Australia cash rate increases in February and March as factors likely to begin weighing on credit demand, with three further hikes anticipated. Higher energy prices, rising inflation, and falling consumer sentiment and business confidence were also cited as likely drags on near-term borrowing.
The report noted, however, that evidence from previous tightening cycles was mixed. While the 2022 hiking cycle helped curb post-pandemic credit expansion, that effect proved short-lived. Earlier episodes in 2009 and 2002 showed divergent patterns across credit components.
Vanagas cautioned that any softening in credit demand may not be immediately apparent.
“Given the strong inertia in credit data, any such effect may emerge with a delay,” he wrote.
