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2007
Business Credit Cards Impacted by Economic Uncertainty
Thursday January 22, 2009
Credit card use by businesses may be waning which may result in cuts to planned capital spending according to some economists, resulting in further pressure being placed on the labour market and limit jobs growth.
Business borrowings have declined to a three year low resulting in concerns of slipping in private investment and the impact it may have on credit cards for business.
The current economic outlook is expected to negatively impact businesses exposed to waning worldwide demand. The Australian Bureau of Statistics has shown that companies are becoming far more reliant on the business equivalent of a credit card with pre-approved lines of credit reaching a 12 year high of 62.7 per cent.
Business borrowings have declined as a result of banks restricting lending standards with commercial finance commitments declining 10.4 per cent for November, from $31.7 billion to $28.4 billion. Within these commitments are loans for business and property investment.
Furthermore, the gauge of lending has recorded a one third loss from $50.4 billion in January 2008 while total lending across the economy is down 30.7 per cent.
These declines have been attributed to less demand for credit and the stricter lending standards being enforced by banks.
Economists have stated that the reduction in credit was impacted by the 12.8 per cent decline in building approvals and trade surplus.
Some have suggested that the weak lending figures indicate that credit growth will remain unsteady in the future months.
