NZ lending growth surges in March

Reserve Bank of New Zealand measures of credit growth found business lending grew at an annual rate of 7.3 per cent in March, which was up from a 4.7 per cent rate in February and the fastest growth in six years.

Business confidence has remained buoyant in recent months, albeit off its mid-2014 highs, as the New Zealand economy is growing at an annual rate of more than three per cent. Strong business investment and building booms in Auckland and Christchurch are cited by economists as factors in a pick-up in business lending.

Farm lending grew at an annual rate of six per cent in March, its fastest rate in four years and up from five per cent in February. However, the reasons for the lending growth may not be so positive.

Dairy farm lending makes up the bulk of farm lending and a 50 per cent slump in dairy prices in the last year has left many farmers in negative cashflow situations and reliant on bank funding.

Household lending also picked up in March as Auckland's housing market activity and prices surged, driven by record high net migration, falling fixed mortgage rates and a growing supply shortage in New Zealand's largest city.

Household lending growth rose to an annual rate of 5.0 per cent in March, which was the strongest annual growth since August last year and up from 4.9 per cent in February.