Business finance market to maintain modest growth trend

New commercial finance commitments rose 0.4 per cent in December, compared with the previous month (in seasonally adjusted terms), according to Australian Bureau of Statistics lending data released on Friday.

However, the positive result was a recovery from very weak lending in November; the A$37.9 billion of new business lending during December was the second lowest amount recorded in over 12 months.

Reserve Bank figures show that lenders' total business credit balances grew by 4.8 per cent over the 12 months to December.

While the rate of growth is still weak relative to the growth in housing finance, the sector has at least got out of the doldrums; in the 12 months to December 2013 business loan aggregates grew by only 1.6 per cent.

That growth rate may not pick up much this year. In a recent Deloitte survey of chief financial officers, only 29 per cent said they expected their bank borrowings to "increase significantly" or "increase somewhat" over the next 12 months.

Forty-six per cent said their borrowing levels would not change, 21 per cent said borrowings would "decrease somewhat" and four per cent said they would "decrease significantly."

Deloitte said these responses were in line with an overall mood of caution. "With just over a quarter of CFOs thinking now is a good time to take greater risk onto their balance sheets, they appear to be preparing for an uncertain future," the survey said.

Dun & Bradstreet's latest Business Expectations Survey, published earlier this month, found that only 18 per cent of business planned to increase capital investment during the June quarter, while seven per cent planned to cut spending and 75 per cent would keep it at current levels.