Small businesses borrowed big in June, ABS data shows

Small business owners rushed to take advantage of the boosted instant asset write-off scheme, while car lending also jumped.

Sydney plumber Andre Fayad is one of the business owners who took advantage of tax incentives. Picture: Jonathan Ng

Small business owners rushed to take advantage of the government’s boosted instant asset tax write-off incentives ahead of the end of the financial year, with lending to these firms surging by nearly one-third to $3.6bn in June.

The increase in new lending, excluding refinancing, was mostly for plant and equipment fin­ance, Australian Bureau of Statistics original figures showed.

The rush to take advantage of the expanded $150,000 write-off scheme — which Josh Frydenberg in June extended to the end of the year — coincided with a 20 per cent jump in the value of new loan commitments for cars, which drove a seasonally adjusted 5.2 per cent jump in fixed-term personal finance.

New lending to medium-sized businesses returned to levels not seen since August last year, but the increase was driven by lending for “general business purposes”, as well as borrowing against plant and equipment investment.

The ABS data also showed new home loan approvals managed a partial recovery in June, lifting 6.2 per cent after a much sharper plunge in May when COVID-19 restrictions dragged on housing market activity.

House lending commitments, excluding refinancing, for the month reached $17.4bn, seasonally adjusted figures from the ABS showed. Of that, new lending for homes in which to live climbed 5.5 per cent to $13bn, while new housing loan commitments for investment purposes lifted by 8.1 per cent to $4.4bn.

ABS chief economist Bruce Hockman said the June rise in home loan approvals “reflects the easing of COVID-19 restrictions in May on auctions, open houses and mobility in general”.

Nevertheless, new lending remains well below pre-COVID levels, Mr Hockman said.

“Despite the rebound in lending activity, the value of housing loan commitments in June was down over 10 per cent compared to March after large falls in April and May.”

Investor lending grew 6.1 per cent on the month, but new loan commitments remain 16 per cent below February levels.

“Falling rents and economic uncertainty arising from recent events in Melbourne may further weaken investor demand,” ANZ economist Adelaide Timbrell said

Mortgage rates have reached record lows through the health crisis as the Reserve Bank dropped its cash rate target to 0.25 per cent in March and implemented a bond-buying program, which has pinned three-year bond yields at the same level, leading to fixed home lending rates falling close to 2 per cent.