Business loans down, household loans up

Credit growth turned negative last month as the business sector in particular continued to shed debt.

The loan books of banks and non-bank lending institutions shrank by 0.1 per cent in September as small increases in lending to the household and farm sectors only partially offset a $900 million decline in business loans.

Total lending at $301.6 billion was down $1.7 billion or 0.6 per cent on September last year.

Lending to farmers was just 1.7 per cent up on September 2009, compared with annual growth of 12 per cent a year ago and 22.3 per cent two years ago.

Lending to businesses was down $6.6 billion or 8.4 per cent over the year. This reverses a gradually improving trend in the annual rate of contraction in business credit over the previous six months.

Lending to households, which makes up 60 per cent of the total, was up $300 million on August and 2.3 per cent higher than in September last year.

The increase was all in housing loans, up 2.5 per cent, while consumer credit was down 0.8 per cent on September last year.