Australian businesses have again gone cold on borrowing

Australian businesses just don’t seem to have the confidence to invest.

Borrowing by businesses shrank for the first time in seven months, according to Reserve Bank of Australia. That comes after data showed business investment continued to slide in the last three months of 2016 and wasn’t expected to pick up.

Outstanding loans to businesses fell 0.3% in January compared with a 1.1% surge in the previous month. On an annual basis, the measure climbed 4.7%, the lowest since October 2016.

Borrowing numbers is another indication of the nation’s struggles to come to terms with the end of the mining boom. Interest rates at record low have only spurred a home building spree and rising house prices, with businesses holding back from expanding capacity.

The data indicates “the debt averse attitude of the corporate sector”, according to Michael Workman, a senior economist with Commonwealth Bank of Australia. “Stronger growth is unlikely until corporates believe their high hurdle rates for investment returns can be met.”

Private new capital expenditure (CAPEX) fell by 2.1% to $27.4 billion in the December quarter in seasonally adjusted terms, well below the 0.5% contraction that had been expected by economists, the ABS said last week. That decline followed a drop of 3.3% in the September quarter that was initially reported as a contraction of 4%.

Adding to the disappointing report, the first estimate for expected expenditure in the 2017/18 financial year was also weak, coming in at $81 billion.

That was 3.9% below the first estimate offered in the 2016/17 financial year and fell short of market expectations for a spend of $84.4 billion.

In seasonally adjusted terms, outstanding credit to businesses now stands at $878 billion, down from about $880 billion a month earlier, according to the data.

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