Growth in business credit demand has softened according to new research from Veda.
The credit bureau’s Quarterly Credit Demand Index increased at an annual rate of 1.5% in the March 2016 quarter, following the December 2015 quarter growth rate of 3%.
The Index measures applications for business loans, trade credit and asset finance, and is a lead indicator of how the overall economy is performing.
New South Wales posted the highest demand for business credit in the quarter (+4.8%) followed by Tasmania (+3.7%), Victoria (+1.7%), the ACT (+0.2%) and SA (+0.1%).
However, applications fell across the mining states, led by the Northern Territory (-14%), with falls also recording in Western Australia (-3.5%) and Queensland (-0.3%).
Veda attributes the Index’s softer growth rate compared to the December quarter to low growth in asset finance applications (+3.3%) and business loans (+3.2%), with further deterioration in trade credit applications (-1.7%).
In terms of trade credit applications, the majority of states recorded a fall over the past 12 months, led by the Northern Territory (-8.0%), followed by Western Australia (-5.2%), the ACT (-4.4%), Victoria (-4.2%), Queensland (-3.7%) and Tasmania (-2.6%). Just two states recorded a rise in trade credit applications: South Australia (+5.8%) and New South Wales (+2.1%).
In the asset finance category, Veda notes the overall slowing of the growth rate to 3.3% follows the strong December quarter growth rate of 8.8%.
New South Wales achieved the strongest growth in asset finance applications ((+6.1%), followed by Victoria (+3.8%), the ACT (+2.8%), SA (+2.5%), and Tasmania (+2.4%). The mining states posted weaker conditions: Queensland (+1.6%), with falls in Northern Territory (-30% and Western Australia (-2.3%).
Looking at state results for business loan applications, Tasmania recorded the strongest rate of growth (+10.8%), followed by New South Wales (+6.2%), Victoria (+5.1%), the ACT (+2.4%). Veda highlights Queensland (+1.6%) was the only mining state to experience positive growth in business loan applications, while the Northern Territory (-11.0%) saw the highest fall, followed by South Australia (-6.2%) and WA (-2.6%).
According to Veda general manager of commercial and property solutions, Moses Samaha, a significant cooling across all indicators in January had dragged down the entire quarter, despite more positive growth being seen in February and March.
“The considerable dip experienced across the board in January may have been impacted by media coverage reporting an anticipated global economic downturn, which led to poor global sentiment,” Samaha says.
“Locally, a major Australian retailer publicly announced that it had entered external administration in early January. The job losses and direct impact on trade creditors may have effected general business and consumer sentiment and contributed to the January downturn in business credit demand.”
Samaha notes the improvement in the annual growth rate in February and March, when it averaged 4.1%.
“Yet this bounce back was not enough to compensate for the poor start to the quarter,” he adds.