Bullish Asset Finance Volume Growth “Despite Everything”
(17 December 2021 – Australia) Despite supply chain disruptions, diesel fuel concerns, rising COVID gloom and ongoing border restrictions negatively impacting overall business confidence and short term revenue growth projections, asset finance demand is booming at record highs according to East & Partners latest Asset Finance research.
Direct interviews conducted with 1,300 Australian CFOs and corporate treasurers forecast asset financing volumes to accelerate by 9.5 percent in 2022. This figure remains below the pre-GFC record high forecast of 17.3 percent notched in 2006 however momentum continues to build strongly on the back of the federal government’s instant asset write-off provision following the extension and broadened scope of the initiative.
Projected asset finance volumes have been trending steadily higher after dipping from 8.1 percent in 2015 to 6.6 percent in 2016. Over the last year, asset finance volumes expanded by 8.9 percent, marking a significant 11.3 percent or nine percentage point increase on the 2021 prior year volume increase of eight percent with segment break downs indicating growth is firmly driven “bottom up” by Microbusinesses and SMEs.
Volkswagen and General Motors are bracing for the global semiconductor shortage to last beyond 2022 and are being forced to redesign vehicles so they require less high-tech components. Severe bottlenecks will persist through 2022 according to analysts at Munich-based consultancy Roland Berger. Supply chain disruptions across multiple sectors are “going nowhere” according to Toll Group.
Separately, NAB’s agribusiness bank reports that asset and equipment finance loans to small business customers have advanced by 341 percent in value since 2019 while asset finance for agricultural enterprises across all segments has accelerated by 33 percent to the end of Q3 2021 year-on-year (YOY).
“These trends reflect strong seasonal conditions which have created positive economic conditions across Australia, and the ongoing uptake of government incentives, including the instant asset write-off scheme. The generally positive outlook of the agricultural sector which has been buoyed by strong commodity prices and the prospect of record crops has also contributed to the rise in equipment finance lending” stated NAB Executive Regional and Agribusiness, Julie Rynski.
“The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) is forecasting Australian winter crop production will reach a new national record of 58.4 million tonnes, even with flooding causing some losses and downgrades across several production regions. The area planted to summer crops in 2021/22 is forecast to increase by 36 percent to reach 1.4 million hectares” Ms Rynski stated.
“Farmers are also being incentivised by the instant asset write-off scheme, which was expanded substantially in the 2020-2021 federal budget to $150,000, largely as a COVID-19 stimulus measure. In the 2021-2022 federal budget, the scheme was extended for one year to 30 June 2023, providing a longer window of opportunity for agribusinesses to make on-farm investments.”