Two Credit Markets Under One Cash Rate

Australia has one cash rate. Right now it is telling two different credit stories.

On 29 September 2026 the Reserve Bank's Monetary Policy Board raised the cash rate target by 25 basis points to 4.60 per cent. The decision was unanimous. That is the highest cash rate since late 2011, and the fourth increase in 2026. The October Financial Stability Review notes that the Board has lifted the cash rate by 100 basis points this year. The context is familiar: inflation still too high, energy costs elevated by the Middle East conflict, and a Board focused on bringing inflation back to target.

What matters for anyone who works with property, credit or lending is not only the headline rate. It is what credit is doing underneath it.

The split in the aggregates

The RBA's Financial Aggregates for August 2026 (released 30 September) show a clear divergence, seasonally adjusted.

Housing credit grew 0.4 per cent month on month and 7.3 per cent year on year. Business credit to non-financial borrowers grew 0.9 per cent month on month and 10.9 per cent year on year. Total credit sat in between: 0.6 per cent month on month and 8.4 per cent year on year.

Those are not dramatic numbers on their own. The point is the gap. Housing credit has slowed. Business credit has not. Treating "credit conditions" as a single national story misses that split.

What the Financial Stability Review adds

The October Financial Stability Review puts the aggregates in a broader frame.

Overall, the Review finds the Australian financial system resilient. Most households and businesses are well positioned. Loan arrears remain low. Banks have maintained prudent lending standards and hold large capital buffers. That is the baseline: this is not a system in distress.

On housing, the picture is softer. Housing prices are declining. Demand for housing credit has eased, particularly for investors. The Review points to higher rates and recent tax changes affecting housing investors as factors weighing on demand. Competition in housing lending remains strong, but credit growth has moderated and higher-risk lending remains contained.

On business credit, the tone is different. Credit growth and lending competition remain strong across banks and non-banks. That has supported businesses' access to credit through a challenging period of cost pressure. The Review sees little evidence that this strength has been accompanied by a material overall easing in lending standards, though it notes data gaps in some non-bank segments and continues to watch the area closely.

Commercial real estate sits in a similar middle ground. Fundamentals have improved across most CRE sectors. There is little evidence of financial stress among CRE owners. Competition in CRE lending remains strong from banks and non-banks. Standards appear largely unchanged more recently, after some earlier easing in terms. That combination (improving fundamentals, strong competition, standards that need watching) is worth reading carefully if you work in property funding.

Private credit and property exposure

One section of the Review deserves particular attention for a property and credit audience: non-bank and private credit.

Non-bank lenders account for around 10 per cent of total business debt outstanding. Private credit has grown, but from a small base, and banks' exposures to private credit funds remain limited. The RBA's assessment is that systemic financial stability risks from this sector are currently limited by size and limited interconnection with banks.

The composition matters more than the size headline. Relative to typical US private credit, Australian private credit is more exposed to real estate, including construction and development, and less exposed to companies disrupted by AI. Investor-protection issues also feature: opaque valuation practices and uneven governance and risk management standards, which ASIC is addressing.

That is not a verdict on private credit as an asset class. It is a reminder that Australian private credit is not a carbon copy of the US market. Real estate and development exposure sit closer to the centre of the domestic story. For operators and lenders who work around development and CRE funding, that composition is relevant context when reading headlines about private credit stress overseas.

Pockets of pressure, not a system-wide break

The Review is also clear about where stress is concentrated. Insolvencies remain elevated in hospitality, construction and transport. Energy cost pressures linked to the Middle East conflict are weighing on more energy-intensive and cyclical firms, especially smaller ones. Broader spillovers to the financial system from insolvencies have been contained so far, partly because many of the affected firms are small and carry limited bank debt.

That distinction between pockets and system is useful. Elevated insolvencies in a few sectors do not automatically mean credit conditions are broken everywhere. Equally, resilience at the system level does not mean every borrower or every project sits in the same place.

Reading the split, not the average

If I had to take one practical message from the cash rate decision, the August aggregates and the October Review together, it would be this: stop treating Australian credit conditions as one number.

Housing credit is slowing under higher rates, softer prices and tax changes that have cooled investor demand. Business credit remains strong, with competition across banks and non-banks still supporting access. Private credit is growing from a small base, with a real-estate tilt that differs from the US market, and with investor-protection questions that regulators are already focused on. CRE fundamentals look better in most sectors, while competition in CRE lending remains intense enough that standards need ongoing attention.

None of that is a call to borrow, lend, buy or sell anything. It is a way of reading the environment. When someone says "credit is tight" or "credit is open," ask which credit. Housing or business. Bank or non-bank. Prime CRE or higher-risk development. The cash rate is one instrument. The credit market underneath it is not one market.

That is the split worth watching as 2026 heads toward year end.