Demand for business credit winds down

The federal budget appears to have stifled business confidence and that is weighing on demand for credit.

Data provider Veda's quarterly business credit demand index was virtually flat in the June quarter compared with a year earlier, rising just 0.5 per cent.

The modest rise contrasts sharply to a year earlier when small and medium sized businesses were actively seeking loans, posting growth of close to 10 per cent.

This index has historically proved to be a lead indicator of how the overall economy is performing, says Veda's general manager for commercial credit, Moses Samaha.

He said while overall conditions are flat, it is important to put these results in the context of a boom in business credit last year.

"In light of last year's peak ... the overall business outlook is still positive," he said, releasing the data on Wednesday.

The modest rise in overall credit reflected a 4.9 per cent drop in asset finance compared with a year earlier, offset by a small increase in trade credit applications (0.3 per cent) and a rise in business loans (4.9 per cent).