Credit demand improving

Ian Rogers
Refinancing, restructuring and repositioning by business is generating reasonable demand for new loans by business, and supporting the flow of fee income for banks.

The quarterly flow of fund data in the national financial accounts, and published by the Australian Bureau of Statistics, shows a resurgence in demand for loans by business in the September quarter and no more than modest softening in the supply of loans by financiers.

Businesses in Australia, in aggregate, raised a net $36.4 billion in loans and placements during the September 2008 quarter, up from $3.2 billion in the June 2008 quarter, and the second highest level of demand for finance over one quarter in any period covered by the national financial accounts (the highest previous period being the September 2007 quarter).

The supply of loans by financiers, and primarily banks, eased to $54.7 billion during the September 2008 quarter, down from $61.8 billion in the June quarter.

This level of demand is below the median of $61 billion a quarter in the two years to September 2007 (and the onset of the credit crunch) but might represent more demand than anticipated.