Uncertainty makes companies suspicious of debt: RBA | The Border Mail


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The Reserve Bank pays particular attention to the availability of credit for small businesses, given their importance to the economy and having been hit hard by the COVID-19 pandemic. According to Christopher Kent, RBA deputy governor for financial markets, while business confidence has improved markedly in recent times, small businesses in particular remain reluctant to take new loans. “Some of these elements reflect an economic outlook which, although improved, is still very uncertain,” Dr Kent told the Australian Finance Industry Association at an online conference Wednesday. “In addition, access to finance for small businesses is a long-standing challenge.” He said small businesses had suffered greatly from the economic hardships caused by the pandemic, but a wide range of monetary, fiscal and private sector measures had been provided. “Given the importance of small businesses to the economy, we will continue to pay close attention to their access to finance and their prospects more broadly,” said Dr Kent. At the same time, the RBA and other members of the Board of Financial Regulators are monitoring the maintenance of lending standards as the prices of assets, such as housing, rise. Dr Kent said if asset prices were to rise due to deteriorating lending standards this would be of concern to board members and a number of different responses would be considered. “We’re not at that point now,” he said in response to a question. “But those answers would not be monetary policy first and foremost. In fact, there are many other avenues they would pursue.” Meanwhile, the number of small businesses and outstanding households that have postponed their loan repayments during the pandemic continues to decline. New figures from the Australian Banking Association show that nearly 97 percent of deferred loans had resumed payments by the end of February. Anna Bligh, chief executive of ABA, said the numbers confirm that more and more customers are getting back on their feet. “Over the past year, banks have cushioned the blow for their customers,” she told AAP. “Until 2021, their priority is to help customers rebuild and progress.” Only 2,803 small business loans remain deferred out of the 234,270 that were requested in the depths of the recession. For households, there are still 22,480 deferrals out of the 448,864 requested. Two weeks away from the end of the JobKeeper wage subsidy, Premier Scott Morrison insists the economy is getting back on its feet. “He is recovering and the comeback is here and it allows Australia to move away from the emergency aid that was so needed in times of crisis,” he told Parliament. The latest Australian Bureau of Statistics survey on the impact of COVID-19 on households found that nearly one in five expects their finances to improve in the next 12 months and only one in eight expects them to get worse. During the same period, almost half expect their household to be on top to save money. Despite this, Westpac chief economist Bill Evans expects the household sector to be the main engine of growth in 2021, as high savings levels ease and support strong spending by consumption. The Westpac-Melbourne Institute leading index for February – which shows the likely pace of economic activity three to nine months into the future – continues to show above-trend annual growth, which is typically around $ 2. 8%. Mr Evans said the result was in line with Westpac’s opinion, having recently raised its growth forecast for 2021 to 4.5% from 4.0%. Australian Associated Press


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