Banks lending more to households, not businesses

Bill English.

Finance Minister Bill English is concerned that it appears banks have been increasing their mortgage lending, while reducing their lending to businesses.

The Treasury's monthly economic indicators report for August said there were signs of a fragile recovery in the global economy and this made a stronger recovery in New Zealand more likely than it had earlier forecast.

But not all the news was good with signs the housing market and consumer spending was once again being fuelled by household debt.

Mr English said it was important that any recovery was sustainable and driven by increases in exports not households borrowing more money.

"It's a concern that lending to businesses has been contracting and lending to housing is picking up again. In the long run that's not going to lead to a sustainable recovery," Mr English said.

Treasury yesterday said there were signs the housing market and the wider economy were beginning to grow again and that unemployment would not reach the 8 per cent it earlier predicted.

Mr English told reporters any uplift was good, particularly if it helped preserve jobs.

"The big issue is whether we can get the economy growing enough to allow people to pay off their debt, to have the unemployed get their jobs back."

- NZPA