The Veda Quarterly Business Credit Demand Index, measuring applications for business loans, trade credit and asset finance, grew moderately by 1.6% in the September 2015 quarter.
Asset finance applications grew (+6.7%), business loans grew (+1.8%), and trade credit declined (-2.2%) in the September quarter 2015 compared to the September quarter 2014. The Veda Business Credit Demand Index has historically proven to be a lead indicator of how the overall economy is performing. Veda's data continues to indicate moderate growth in credit demand for business, but showed a slight decline from the annual growth rate of +3.7% in the June quarter. Veda's General Manager, Commercial Risk and New Markets, Paul McFadden said: "With growth in the Australian economy remaining below trend, moderate business credit growth should be seen as a positive." Overall business credit applications eased in the September 2015 quarter (+1.6%). The softer conditions reflected across both mining and non-mining jurisdictions, however, non-mining states showed stronger demand for business credit. NSW (+5.9%) and Victoria (+2.5%) were the strongest states, followed by SA (+1.7%), ACT (+1.4%). Tasmania (-12.3%) was the only non-mining state to experience contraction. All mining jurisdictions experienced declining business credit applications for the September quarter 2015; Queensland fell by (-1.7%), WA (-4.5%) and NT (-10.7%).
Business loan applications eased in the September quarter to +1.8%. Of the non-mining jurisdictions NSW (+9.6%), Victoria (+2.3%), and the ACT (+2.1%) enjoyed strong growth in applications, while SA (-1.4%) and Tasmania (-15.4%) recorded a fall.
Business loan applications across the mining jurisdictions experienced drops across all states, with Queensland (-0.9%), having a modest drop, while WA (-11.1%) and the NT (-19.0%) dropped sharply in the September quarter.
Trade credit applications fell overall in the September quarter (-2.2%). Trade credit applications over the past year fell in NSW (-1.5%), Victoria (-2.8%), Queensland (-5.1%), Tasmania (-16.1%), the ACT (-4.8%) and the NT (-8.3%). SA (+5.5%), and WA (+1.4%) were the only two states to see growth in trade credit applications.
The easing of trade credit applications was largely driven by weakness in the main category of 30-day accounts (-4.2%), with applications for seven-day accounts (+3.3%) seeing a lift.
Asset finance applications picked up in the September quarter (+6.7%). This represented an improvement in the annual rate of growth for asset finance applications from 4.0% in the June quarter.
NSW (+10.7%), Victoria (+9.8%) and the ACT (+10.0%) saw strong growth in asset finance applications, followed by the NT (+2.8%), Queensland (+2.5%), SA (+1.3%) and Tasmania (+0.9%). WA (-3.4%) continues to see falls mirroring the downturn in mining-related construction work.
"Changes to accelerated depreciation rules for small businesses in May's Federal Budget caused a spike in demand for asset finance for items under $20,000 in the June quarter.
Changes in Overall Business Credit Demand – Quarterly Year on Year % *Veda recomputes the entire index over its lifetime every quarter so there will be a slight adjustment to the above historical figures. Veda normalises the date for a like-for-like comparison. Demand for asset finance strengthened in the September quarter (+6.7%).
"While growth in national credit demand was moderate, NSW's position as a strong economic performer stood out in this quarter's credit demand numbers. NSW led all states in overall business credit applications (+5.9%), business loan applications (+9.6%) and asset finance applications (+10.7%). NSW's economy has been underpinned by growth in the construction and housing sectors, which have been performing strongly," Mr McFadden said.
Paul McFadden is General Manager Commercial Risk at Veda.