Credit demand slack all round

Growth in credit continues to be anaemic in Australia, and a drag on the profit outlook for much of the banking sector.

The RBA put growth in credit at 0.3 per cent in May, and at 3.1 per cent over 12 months.

Growth in housing credit lifted a fraction, to 0.5 per cent for the month, from 0.4 per cent, and growth in business credit showed the smallest growth, 0.1 per cent, in the month, following a decline in April.

One chief executive, Peter Evers from Adelaide-based Australian Central Savings & Loans, said in an interview before the release of the credit data that "business the last few months has been very slow.

"There's been very little demand from customers to take on extra commitments for the home or lifestyle."

Evers said the fall-away in credit demand could be tied to the November 2010 rise in the RBA cash rate (to 4.75 per cent), the most recent step in a gradual tightening of monetary policy over the last year and a half.

"The lending amount is down on what we would have expected. And we expect that to continue to at least the first quarter of 2011/12."

Evers said ACSL's experience was not a factor in the positioning of its business.

"I sit on a number of national boards, such as the Treasury's Financial Sector Advisory Council, and the common theme is a dramatic change in consumer attitudes and confidence, and appetite, and that's now flowing into businesses over the last three to four months.

"We see that in each of our key markets, in the Northern Territory, South Australia and Victoria; west and east we see the same."