Credit growth stunted by dive in business lending

The weakness was triggered by a sharp decline in business credit growth, from a record high of 3.1 per cent in March to 0.1 per cent in April.  

ANZ Research attributed the slide in business credit growth to a hangover from the previous months, which saw businesses capitalise on low-cost funding initiatives offered in response to the COVID-19 crisis.  

“This sharp reversion in business credit growth likely means the precautionary shoring up of balance sheets seen in February and March is over,” the research group.

“We anticipate new business loan growth to be subdued going forward as businesses try to protect revenues rather than expand operations.”

The research group added that it expects business credit growth to “go negative” over the next six months.

The RBA data revealed that housing credit growth was also subdued in April at 0.2 per cent, down from 0.3 per cent in March.

The slowdown was driven by negative investor credit growth, which fell 0.2 per cent, with owner-occupied credit growing 0.5 per cent over the same period.

However, ANZ Research stated it expects owner-occupied credit growth to slow over the coming months in response to a “deterioration” in the housing market.

Meanwhile, personal credit growth continued to contract, down 3 per cent in April following a 1.4 per cent decline in March.

In annual terms, total credit grew 3.6 per cent in the 12 months to April 2020 – in line with the previous corresponding period.

[Related: Property investors remain confident despite COVID-19: PIPA]