Lending figures decline first time in 17 years

Friday January 30, 2009

As a result of these events, it is now expected that the Reserve Bank of Australia will cut interest rates further next week to 3.25 per cent in a bid to hold off on the Australian economy moving into a recession.

Figures recorded declines of 0.3 per cent in December on the total credit provided by financial companies with the largest decline reported in the business sector which lost 1.1 per cent. The loss within the business sector has been attributed to a lack of supply and demand for debt. The long term affects of this waning attitude is said to be felt in later months through output and employment, what with the business sector having minimal stimulus for growth.

Some economists have predicted that this most recent report will see the Reserve bank continue its strong monetary policy after predictions of a 0.5 per cent monthly increase have now been proven false, especially when compared to last year's report where total credit was 6.7 per cent higher.

The report today is said to have confirmed recent months tightening in lending standards and credit rationing.

Personal credit was down 1.1% in December, marking a decline of 5.2% over the year while consumer prices were recently announced by the Australian Bureau of Statistics as having the first quarter-on-quarter slide in prices since 1997.

In response to these reports the Federal Government has flagged funding to the value of $4 billion to offer support for lending to the commercial property industry. The government has also suggested that banks should pick up any slack by accepting loans to corporations.

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