Bank lending to business falls further, homeowners keep reducing debt

Photo / Kenny Rodger

Credit growth slipped into negative territory last month, led by a continuing contraction in bank lending to the business sector.

Businesses owed their banks $72.8 billion, down $400 million or 0.5 per cent on May and down $6 billion or 7.4 per cent on June last year.

Lending to farmers continues to grow but much more slowly than it used to. The $47.3 billion they own their bankers is up just 2.7 per cent on a year ago, a contrast to annual growth rates of 14.6 and 20.7 per cent in the two previous years.

Household debt rose an imperceptible $79 million or 0.04 per cent to $180.9 billion over the month and is 2.5 per cent higher than a year ago.

The increase was all in mortgage lending. Consumer credit is down both from May and from June last year.

The three sectors combined owe their banks 0.1 per cent less than they did a year ago.

Meanwhile, household deposits are rising - at $90.9 billion they are up 0.7 per cent on May and 2.8 per cent or $2.5 billion on a year ago. ANZ economists expect households to continue the process of getting their balance sheets, extended by the previous decade's housing boom, in shape.

At the peak of the housing boom over $6 billion of housing equity was withdrawn to fund consumption or to invest in other areas, they say in their weekly Market Focus.