Business interest rates higher overall

More business borrowers, whether large or small, report that they've had to pay higher interest rates on loans in recent months than when asked the corresponding question six to 12 months ago.

Data from three surveys conducted by East and Partners, which consistently questions businesses on this point in its research, supports this view.

Whether or not business borrowers are paying more during a period of looser monetary policy is a talking point in the industry, given the repeat assertions by the Reserve Bank of Australia and its officials that interest rates are below average for business borrowers as well as households.

The RBA made this point in the brief explanation published on Tuesday to explain the decision to leave the cash rate steady at three per cent.

Of the three surveys by East and Partners two, covering institutional banking customers (with turnover of more than $340 million) and small and medium business customers (with turnover of between $1 million and $20 million), were published in April 2009. The third, covering the corporate market (with turnover between $20 million and $40 million), was published in January 2009.

On East's findings, 63 per cent of institutional businesses surveyed said they experienced a rate increase in the April 2009 survey, up from 51 per cent in a survey in October 2008.
 
In the corporate market, 30 per cent of businesses said they experienced a rate increase in the January 2009 survey, up from 19 per cent in a survey in July 2008.

In the SME segment, 64 per cent of businesses said they experienced a rate increase in the April 2009 survey, up from 59 per cent in the survey in October 2008.

The RBA began to ease monetary policy in a tentative manner in March 2008 and switched to an aggressive cycle of easing (with cash rate cuts of around one percentage point four months in a row) in October 2008.