Loans to small businesses declined as real estate prices fell, according to the Council of Financial Regulators (CFR).
The CFR, composed of the Reserve Bank of Australia (RBA), the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC), and the Australian Treasury, found loans to small businesses dropped during the past year.
“Lenders are, themselves, applying stricter verification of expenses and income to small businesses, and lending may be affected by declining collateral values as housing prices decline,” the CFR said.
Housing credit growth remained steady at a low level, with weakened lending investors including major banks, the council said.
The council also noted that there were signs of stabilisation in Sydney and Melbourne, but the adjustment over the past two years was sizeable, with conditions in capital cities remaining soft.
“Risks to lenders from housing price falls have, to date, been limited by the strength of the labour market, low interest rates, and the improvement in lending standards in recent years. Housing loan arrears have continued to edge higher, but with significant variation between regions,” the council said.