Construction Credit Demand Blooms

Wednesday, October 22nd, 2014
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The economy may be growing at a faster clip than many are predicting.

Retailers and home builders are finally showing the confidence to expand, helping to push business credit growth to its strongest level in over a year.

Business credit applications rose by 3.6 per cent in the September quarter compared to a year earlier, the strongest since mid-2013, according to credit data provider Veda.

Its general manager for commercial credit, Moses Samaha, believes the economy is adjusting to life after the mining boom with the lift in business credit coming from outside of the resources sector.

He says interest rate sensitive industries such as retail and housing construction are starting to pick up.

“Investment prospects in these non-mining sectors are being further stimulated by solid economic growth, business profitability and the recent fall in the Australian dollar,” he said, releasing the Veda business credit demand index on Tuesday.

The index has historically proven to be a lead indicator of how the overall economy is performing.

The latest data suggests the economy is growing at around 3.25 to 3.5 per cent and above the long-term trend needed to encourage employment.

The economy grew at an annual rate of 3.1 per cent in the June quarter, but the Reserve Bank is forecasting growth to subside to 2.5 per cent by the end of this year.

Business credit applications picked up in all states and territories, led by NSW and Tasmania in the year to September.

Loan applications jumped by 6.7 per cent annually and trade credit applications increased by 4.9 per cent.

The only soft spot was for asset finance applications, which declined 2.7 per cent, which Mr Samaha said reflected a contraction in autofinance activity.

By Colin Brinsden
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