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Australian economic snapshot: Finance lending figures provide a boost, but concerns as business confidence flops

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Category: The Australian Economy

Published on Tuesday, 12 June 2012 09:03

Written by Rob Samson

Two key events out of the Australian economy today: Falling business conditions and confidence, but there was good news on the finance lending front.

Looking at the deterioration in business conditions first.

Despite the 50bps rate cut by the RBA in May, business conditions declined to -4 from 0, reaching their lowest level since May 2009.



"The fall in conditions appears to have largely been driven by ongoing concerns in relation to the European debt crisis and slowing global economic activity.  Business confidence also recorded a sharp decline, falling by 6pts to -2," says a note from ANZ Bank that followed in the wake of the news.

It was noted that the fall in business conditions was broad based, with conditions falling across the majority of industries and states, although the sharpest fall was recorded in the mining industry as a result of lower commodity prices.

This could have an impact on the Australian dollar going forward as, "price pressures remain benign suggesting the RBA has scope to provide further stimulus to the economy to boost activity," say ANZ.

On the lending front we see the value of all lending finance commitments increased 6.3% m/m in April (following a 6.1% m/m increase in March) to be 12.6% higher over the year.

The value of commercial finance commitments was 9.8% higher month-on-month in April (following a 10.1% m/m increase in March), and 19.1% higher year-on-year.

Within this, both fixed and revolving commitments were higher in the month (+4.3% m/m and +25.1% m/m respectively).

In original terms, monthly commercial lending growth was positive for wholesale finance (+2.6% m/m) and the purchase of plant and equipment (+0.3% m/m).

ANZ Bank say:

"While global economic and financial market uncertainty continues to weigh on some parts of commercial lending, annual commercial lending growth has been positive in trend terms since August 2012. This reflects the positive impact of the mining and energy funding requirement in the face of global and financial market headwinds facing the Australian corporate sector."