Australian Business Credit Demand Index
Demand for credit hits a low, as business remains cautious
6 May 2009: Veda Advantage’s Business Credit Demand Index, released today, reveals business credit applications for the January – March 2009 quarter fell by 8.3% in comparison to the same period in 2008 – the highest quarterly decrease on Veda Advantage’s records.
Businesses making enquiries for credit dropped off rapidly, falling 8.7% in January, 11.7% in February and 6.9% fall in March when compared to the same months in 2008. Each month has been trading day adjusted.
Main points of the January to March 2009 Business Credit Demand Index:
• In the January to March quarter 2009, Australian Businesses’ applications for credit decreased by 8.3%,
• All months in the quarter were down compared to the same period the year before,
• February had the largest year-on-year decrease of 11.7% - the largest monthly fall in business credit enquiries on record (full monthly break-down on next page),
• Veda Advantage records show business credit enquiries have declined every month since December 2007, year-on-year.
Looking at different types of business credit enquiries, property mortgages applications fell by 37% in the first three months of this year compared to the same period in 2008. Business credit card enquiries fell by 16.2%. Business enquiries for premium finance had the largest increase in credit demand, increasing by 42% year-on-year. While 30 Day accounts made up almost 30% of all applications in the quarter the number of enquiries was the same as the previous year.
Russell Evans, Veda Advantage General Manager, said while the Australian stock exchange had picked up recently, there may be a lag effect before business confidence returns. “The decline in credit demand is not unexpected, as Veda Advantage’s business sentiment survey, released in March, found businesses remain cautious in the economic climate, with 61% of businesses surveyed saying they were unlikely to apply for credit in the next 12 months. Furthermore, 64% of business executives surveyed said they were personally concerned about the future of the business they work for.
“Despite this, 62% of business executives indicated they had not been affected by liquidity or cash flow issues in the past year, while almost 58% of businesses surveyed said they were not exposed to a large amount of bad debt. This is a sign that many Australian businesses may be playing it safe given the global financial climate, and not applying for more debt. Future business growth relies on working capital, and grounded business relationships – with people who have the money and will pay you as debt falls due. This in turn will maximize liquidity. We also hope to see a little more interest in business credit from small-to-medium enterprises given the banks recent efforts to protect them against the financial crisis,” Mr Evans said.
Last year, the business credit demand index for the October to December quarter of 2008 saw business credit enquiries decrease by more than 7% in comparison to the same period in 2007.
Monthly YoY Changes
Trading Day Adjusted
| YoY Delta |
2007 |
2008 |
2009 |
| Jan |
4.3% |
-6.6% |
-8.7% |
| Feb |
6.4% |
-3.1% |
-11.7% |
| Mar |
9.3% |
-5.3% |
-6.9% |
| Apr |
10.5% |
-2.5% |
|
| May |
10.2% |
-5.0% |
|
| Jun |
9.6% |
-1.9% |
|
| Jul |
6.7% |
-3.5% |
|
| Aug |
4.0% |
-5.5% |
|
| Sep |
6.9% |
-7.4% |
|
| Oct |
1.1% |
-3.2% |
|
| Nov |
3.8% |
-8.0% |
|
| Dec |
-1.5% |
-9.8% |
|
Mr Evans said Veda Advantage’s data shows a clear pattern of reduced demand for business credit over the course of 2008 and into 2009. “The business credit demand index is a key indicator in business activity and credit uptake, with our data indicating a drop off in Australian business credit demand since December 2007, coinciding with large scale economic instability and the start of what is now referred to as the global economic crisis,” he said.
Business credit accounts covered by this study include: 30 day loans, hire purchase, lending proposals, commercial rentals, credit cards, bill of sale, utilities, personal commercial loans, real property mortgage, overdraft and more.
- Ends-
For more information contact:
Sally Robertson at Launch Group 02 9270 0289 or 0400 927 003
*The Business Credit Demand Index looked at more than 6.3 million credit enquiries from 2004 to 2009 registered on Veda Advantage’s commercial database. Business CDI measures total Business Credit application activity over each quarter, comparing it with year on year analysis. Business CDI looks at all account types, including 30 day account, hire purchase, lending proposal, real property mortgage, leasing, commercial rental, communication services, credit card premium finance, seven day account, trade finance bill of sale overdraft, personal loan, utilities, cheque wholesale finance, cash on delivery factored account, 60 day account, continuing credit contract, 90 day account, bridging finance, deferred payment debit card.
** About the Veda Advantage Business Sentiment Survey:
Veda Advantage’s Business Sentiment Survey research was administered via an online survey, using the Ticketek Rewards panel. The fieldwork was undertaken between the 10th and 23rd March 2009. A stratified target sample of Owner/ manager, C Level executives and Directors of companies across 5 Australian States was the target for this research. A total of 300 surveys were completed by senior business owners and executives. Of the businesses surveyed, 25% operated businesses with a turnover greater that $10 million, while 32.1% operated smaller businesses with annual turnover of less than $500 000, representing Australia’s SME business sentiment.
DISCLAIMER
Purpose of Veda Advantage media releases:
Veda Advantage media releases are intended as a contemporary contribution to data and commentary in relation to consumer credit activity in the Australian economy. The information in this release is not intended to provide guidance or commentary as to Veda Advantage’s financial position nor does it constitute legal, accounting other professional financial advice. The information may change and Veda Advantage does not guarantee their currency or accuracy.
To the extent permitted by law, Veda Advantage specifically excludes all liability or responsibility for any loss or damage arising out of reliance on information in this release and the data in this report, including any consequential or indirect loss, loss of profit, loss of revenue or loss of business opportunity.