More signs that the Reserve Bank of Australia’s campaign against inflation is working has emerged today with news that mortgage lending fell significantly in March.
The value of home borrowing in March fell 5.3% seasonally adjusted to $20 billion in March, with investment housing commitments down 7.2% and owner occupier mortgages down 4.4%. The number of new loans for housing also fell 6%.
Although markets expected a negative figure, today’s result is worse than was generally expected and lends support to the RBA’s wait-and-see position on interest rates.
Today’s NAB Business Survey for April also paints a grim picture of the economy, witj business confidence, which was already at a seven-year low, tumbling even further.
The prospect of tough times ahead is reinforced by a sharp drop in forward orders to levels not seen since late 2001 and sharp drops in both profits and trading conditions.
The recreational and personal services industry was the worst performing in April and was the only sector with more firms reporting poor, rather than good, conditions. Property and business services and retail business also struggled in April, with the prospect of more tough times to come.
With all this bad news it should come as no surprise that Treasurer Wayne Swan is talking up the notion of a collapse in revenue flowing to Government coffers in the lead up to tomorrow’s budget.
Swan told The Australian the slowing conditions and the effect of the credit squeeze mean that revenue forecasts for 2008-09 are likely to be upgraded by just 1.25%, a very low figure by recent standards.
Even if tomorrow’s budget does surprise with some unexpected good news, we are not likely to see the buckets of money scenario of recent years replicated – and no doubt business will be in for its share of the pain.
On the markets today, by just before 12.30pm, the S&P/ASX200 is up 0.7% on Friday’s close to 5812, with bank stocks likely to perform well on the back of merger discussions between St George and Westpac Banks announced this morning.