Bank Failures Unlikely to Disrupt Business Credit Growth - ANZ
(14 April 2023 – Australia) ANZ forecasts business credit growth of 5.5 percent in 2023 and 5.1 percent in 2024, noting minimal disruption anticipated from international bank failures in Europe and the United States.
Dragged down by housing credit decelerating from 6.4 percent year-on-year (YOY) in 2022 to a mere 2.8 percent YOY in 2023, total private sector credit growth of just 3.7 percent is forecast in 2023 and 4.8 percent in 2024. The forecast is considerably lower than the average YOY growth rates of 5.9 percent from 2020 to 2022 and 4.8 percent from 2015 to 2019.
ANZ projects quarterly business credit growth, which has been trending above average, to outpace housing credit growth between now and Q3 2024. Labour shortages and strong capital expenditure (capex) plans outweigh the negative impacts of higher rates and global financial volatility on lending demand.
“We have softened our business credit growth forecasts a touch since February but
have retained our view of growth through 2024. Companies’ resilient capital expenditure expectations are likely to drive business credit growth. Instability in the construction sector and other supply constraints seem to have delayed, not discouraged, capex appetite” ANZ Senior Economist Adelaide Timbrell stated in ANZ Research’s latest Australian Economic Insight.
“While business confidence is lower than its long-term average, most business conditions are still trending above average. We expect significant labour constraints and pent-up demand for capex will outweigh the negative impacts of higher rates on appetite for credit.”
“Very high capacity utilisation suggests firms are already “behind” on their capital compared to usual, which means they may not require as much demand growth as usual to necessitate investment. This reduces the impacts of the slowing economy on capex.” Timbrell added.