CONFIDENCE in the commercial construction and home building sectors is driving borrowings growth in Western Australia, despite the gloomy economic outlook contained in the state budget.
Commercial finance for the 12 months to March 2015 in WA was up $9 billion compared with the same period to March 2014, the Australian Bureau of Statistics said in its recent lending statistics release.
Total commercial finance for the state was $48.1 billion during the period, compared with more than $508 billion nationally.
The national numbers were up about 16 per cent on last year.
Commercial finance is provided to individuals and corporations for business or investment purposes, including for the construction or purchase of dwellings for rental or resale.
Fixed loans, revolving credit and commercial hire purchase are included.
The WA numbers were powered in part by a massive increase in construction finance for the 12-month period to March of almost 150 per cent on the previous year, to $2.8 billion.
Property purchases, which make a large portion of the commercial finance statistics, were 6.9 per cent higher at $15 billion.
The figures reflect a record low cash rates by the Reserve Bank of Australia, which have since fallen further to 2 per cent.
However, dramatically falling new car sales have led to slowing lending for commercial motor vehicle purchases.
Commercial lending for WA motor vehicles was down 6.2 per cent for the period to $1 billion. There was also a change in the type of commercial loans offered.
Fixed loans in WA were overall up 19 per cent to $38.1 billion, while revolving credit use was down 7.6 per cent to $18.3 billion, with roughly half that number in cancellations and reductions.
CommSec economist Savanth Sebastian said that nationally, the lift in total lending finance commitments was encouraging, particularly given that lending lifted across the commercial and residential fields.
“The only area of weakness was personal borrowings,” he said.
“Keep in mind the result was for March and policymakers would certainly be hoping that the May rate cut would shift consumer sentiment and result in a lift in household activity.
“Overall there are signs that businesses and consumers are tentatively embracing cheap financing.
“It is very likely that consumers are tapping into the cheaper equity in their homes and low mortgage rates for additional needs.
“Business conditions are ok and likely to be supported by the incentives for small business, announced in the federal budget.
“Hopefully in the case of business, some of the extra dollars will be put to work in new investment, in turn leading to the hiring of more staff.”
Personal borrowings were weak in WA, almost unchanged for the 12 months to March 2015 at $12.8 billion.
Other, less substantial categories of borrowing were also soft too.
Lease finance, which includes finance and leverage leases was down in WA by nearly 10 per cent, to $381 million.
Operating lease finance collapsed 34 per cent to $289.5 million.
Both falls suggest that WA businesses are moving away from borrowing for leasing of equipment.
