Reserve figures show loan demand low

Figures from the Reserve Bank show demand for loans remains low, with business credit especially weak.

Overall, the amount of new lending to the private sector was flat in November, after a 0.1 per cent rise in October.

A 0.6 per cent fall in loans to businesses was the main driver of the decline, following a 0.3 per cent decline in October.

Over the year to November, lending to businesses increased an anaemic 2.4 per cent.

Personal credit, such as credit card debt, continued its medium-term decline, falling 0.2 per cent in November, and down 0.7 per cent over the past year.

The only expanding category of lending to the private sector was housing, which rose 0.4 per cent over the month, following a similar increase in October.

Home lending has grown 4.6 per cent over the past year.

RBC Capital Markets economist Michael Turner says the fall shows households and businesses are still reluctant to take on more debt.

"This was the weakest result since June 2011 and underscores the lack of appetite for credit despite the price of it [interest rates] falling over the course of 2012," he observed.

"We expect more of the same though Q1 [the first quarter], which should form part of a case for further [interest rate] easing in Q2."

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