12 October 2012
Sydney, Australia, 15 October 2012 - Veda, Asia Pacific's leading provider of consumer and commercial data intelligence and insights has today released the results of its business credit demand index for the third calendar quarter of 2012. The results show that the rate of growth in business credit applications picked up by 6.8% in the September quarter compared to this time last year, with indications that the two-speed economy is still evident.
The growth in overall business credit applications reflects quarterly growth over the past year in business loans (+9.5%), asset finance (+9.2%), and trade credit (+3.0%).
The RBA has cut the cash rate by 150 basis points since November last year, and Veda's business credit data for the third calendar quarter of 2012 indicates that the rate cuts are having a significant effect on business credit enquiries.
"Veda's Business Credit Demand Index has historically been an excellent predictor for how the economy for each state and our country is moving. Traditionally GDP correlates with movements shown in the index and the latest data suggests the pace of real GDP growth will remain quite solid in the September quarter," states Moses Samaha, General Manager of commercial risk for Veda.
With overall business credit applications rising in all states over the same quarter last year, the mining states continue to show strong growth with NT (+14.6%) and WA (+10.8%) leading, although Queensland (+6.1%) is further behind. Among the non-mining states, which are expected to benefit most from the RBA's rate cuts, NSW (+6.1%) and Victoria (+6.4%) are seeing solid growth, followed closely by SA (+5.6%).
"Lower interest rates have no doubt already helped to support an improved rate of growth in business credit enquiries in the non-mining states of late," continued Samaha.
Growth in business loan applications also picked up in September from the prior quarter. Among the major states, WA (+12.6%) was again the leader, while business loan growth picked up notably in Victoria (+7.8%), but remains weaker than in NSW (+10.0%), and SA (+9.8%). Queensland (+6.5%) is seeing moderate growth in business loan applications at present. The NT (+48.7%) saw a surge in business loan application activity in September, coinciding with the go-ahead earlier this year of the major Ichthys LNG Project - an indication that business investment is now lifting significantly in the NT.
Asset finance enquiries are continuing to pick-up. The growth in asset finance enquiries over the year to September (+9.2%) was the highest for almost three years. Asset finance has been in a slump since the GFC and despite the latest rise, the level of asset finance enquiries remains well below its pre-GFC peak. Within asset finance, personal loans have gained a larger share of all enquires over the past year, while commercial rental and hire purchase have shrunk as a share of all enquiries. By state, the mining states of WA (+11.7%), Queensland (+14.8%), and the NT (+16.1%) show relatively strong growth, and are followed by NSW (+9.0%), Victoria (+5.4%), SA (+3.9%), and Tasmania (-0.6%).
Trade credit enquiries have been less cyclical than business loans and asset finance over the past few years, growing 3% in the September quarter. This line of credit is less dependent on interest rate changes, as it is used by businesses seeking supplier terms for day to day operations. Within trade credit, 30 day accounts have comprised a larger share of enquiries in recent months. By state, WA (+8.4%) and Victoria (+5.8%) showed relatively strong growth, but SA (+3.1%), NSW (+1.1%) and Queensland (+0.5%) were relatively weak.
Veda's Commercial Enquiry Indices provide an indication of commercial enquiry levels by industry. The mining industry continued to lead all other industries in terms of the highest share of commercial enquiries relative to industry size in the Veda database, followed by electricity, gas, water, and waste services, and wholesale trade. The weakest on this measure were health care and social assistance and administrative and support services.
The Veda Commercial Default Indices showed that transport, postal and warehousing had the highest share of defaults relative to industry size in the Veda database, followed by rental, hiring and real estate services, and manufacturing. All three industries have deteriorated on this measure of commercial defaults over the past year. The construction industry is also experiencing a higher rate of defaults on this measure over the past year - not surprising given the weakness in residential construction and commercial building construction activity at present.
Consistent with an above average rate of commercial defaults, the Veda Commercial External Administration Indices showed that the wholesale trade, transport, and electricity, gas, water and waste services industries had the highest share of businesses going into external administration in the September quarter relative to industry size in the Veda database. They were closely followed by manufacturing and construction. By state, Queensland had the highest relative share of businesses going into external administration, followed by South Australia, and both states have deteriorated on this measure over the past year.