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Strong demand for asset finance and a significant increase in commercial mortgage applications have driven growth in total business credit over the June quarter, new research has shown.
The Quarterly Business Credit Demand Index by Equifax, which measures the level of business loan, trade credit and asset finance applications, rose at an annual rate of 2.7 per cent in the June quarter, compared to the same period last year.
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The index reflected an increase of 6.5 per cent in asset finance applications, and 0.4 per cent in trade credit applications, compared to the same period in 2016.
The positive outcomes in trade credit and asset finance offset the more moderate rate of growth in business loan applications (+1.9 per cent), which nonetheless remained positive in the June quarter.
Within business loans, commercial mortgage applications grew by 23.1 per cent, despite also easing slightly in the June quarter (from 25.7 per cent the previous quarter).
Equifax noted that commercial mortgages are a broad category encompassing business investment in new buildings and commercial property for both development and investment purposes.
Equifax general manager for commercial and property products Neil Shilbury said that while overall growth in business loan applications was moderate this quarter, “we are still seeing considerable activity” in commercial mortgage applications.
“With two interest rate cuts in 2016, lower interest rates may be a key factor in the growth in commercial mortgage applications, as business investment in property remains an attractive prospect,” Mr Shilbury said.
Mr Shilbury explained that the growth in the overall index signified a positive outlook for businesses, consistent with a number of external indicators.
He added: “The uptick in business credit demand seen in the June Index suggests much of the pain from falling mining investment is passing, helped along by improved conditions in China, which have boosted the Australian economy.”
“Over the past several months, we have seen stronger company profits, low interest rates and solid levels of business confidence nationally," Mr Shilbury said. "In this context, the pick-up in business credit growth seen in the most recent Index is consistent with the better business conditions that have emerged in the first half of 2017.”
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