Reviewing inflation and economic activity data may provide guidance as to the potential business outlook to assist in making decisions on commercial loans.
Deciding when is the best time to proceed with major acquisitions with finance – trucks, equipment, machinery, can be guided by an understanding of the outlook for the specific industry sector or the wider economy.
What’s happening with inflation in the current economic climate is of particular significance. The RBA
is continuing with raising the cash rate to bring inflation down to its target of 2-3%. Changes in inflation may provide indications of what the next RBA decision may be. The timing of securing commercial loans may mean the difference in a higher or lower interest rate. A difference which may be significant in the effect of cash flow over the term of the finance.
While it may sound like quite an involved and complex process to study statistics on economic activity, it doesn’t have to be to acquire an overall general understanding. The Australian Bureau of Statistics (ABS)
is a valuable source of reports on numerous economic indicators. They cover the overall, general economy as well as providing trends, outlooks and figures relating to specific industry sectors such as construction and retail.
At the start of March the ABS released the January inflation data sets as well as GDP figures and building approvals for the latest reporting periods. We provide a summary of the latest ABS reports as a quick update and recap.
Inflation – January Data
Ms Michelle Marquardt of the ABS released the January Consumer Price Index on 1 March and revealed a fall in the annual rate of inflation of 1% from December to January. The figure for January was 7.4% compared with the 8.4% recorded in December. Ms Marquardt does however note this as a very high annual increase – the second largest going back to September of 2018, and it does indicate ongoing inflation at high rates.
Housing (rents mainly), food and recreational and culture (holiday travel and accommodation predominantly) being the biggest contributors to the monthly figures. When the more volatile items are removed from the calculations to reveal underlying inflation, the rate is 6.7%, down 7.4% in December.
In response to the January inflation figures, the Federal Treasurer said that the peak for inflation appears to have been in December, but caution should be taken in interpreting monthly figures. Mr Chalmers said there was optimism in Government that the worst situation of pressure on prices had passed.
With the peak seemingly passed, this may provide a better outlook for businesses which have been under cash flow pressures from rising costs of supplies and materials.
The GDP figures for the end of 2022 and the National Accounts were also released in early March. The GDP figures show that the economy grew by 2.7% in 2022 with a fall of 0.5% in the December quarter. The economy was driven by a strong export market and strong consumer spending.
The slowing of 0.5% was expected, as noted by the Treasurer, due especially to ongoing global issues. While growth is slowing, the December 2022 quarter result makes five in a row for positive growth since the end of the Delta lockdowns. iccdcgro5iet
Over the quarter, the ABS notes that it was the international trade sector that was the major contributor to growth. It also noted an easing off in consumers buying discretionary items and retail sales fell in the month of December.
During the last quarter of 2022, there was continued growth in mining production while new dwellings showed a modest 1.4% increase. Additions and alterations fell by 4.2%.
Commenting on the national accounts for the period, the Treasurer said that the moderation in growth was expected due to the global challenges. He said that the figures for the December quarter relate to 2022 and that this year would be a different story. Mr Chalmers said the Government expected 2023 to be a challenging year.
Residential Building Sector
The Building Approvals data released recently shows approvals for private sector houses has dropped to 10 year low. When all sectors are combined – the total approvals for all dwellings, the increase in December was 15.3% and for January 27.6%.
The only state to record a positive result was Queensland, on the back of a significant increase in apartment development approvals. Additions and alterations work is easing due to the HomeBuilder effects easing.
Commercial Loans and Interest Rates
Despite inflation falling in January, the major banks still expect the RBA to continue with more rate rises. This will have an effect on business finance and commercial loans, but cheaper rates
are still available across our portfolio.
In the commercial loans sector, lenders make individual decisions around their rates for different industries, loan types and at varying times. This results in variations and the potential for cheaper rates to be sourced. Many non-bank lenders however, only operate through brokers such as Business Finance Australia
. We provide access to this highly competitive commercial loans sector for our customers and may assist your business secure cheaper business finance.
For cheaper commercial loans, contact Business Finance on 1300 000 033
DISCLAIMER: THE SPECIFIC PURPOSE IN PROVIDING THIS ARTICLE IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED AS THE SOLE SOURCE OF FINANCIAL INFORMATION ON WHICH TO MAKE BUSINESS FINANCE DECISIONS. BUSINESS OWNERS WHO REQUIRE ADVICE OR GUIDANCE AROUND THEIR SPECIFIC FINANCIAL CIRCUMSTANCES ARE RECOMMENDED TO CONSULT WITH AN ADVISOR OR ACCOUNTANT. NO LIABILITY IS ACCEPTED IN REGARD TO ANY MISREPRESENTATIONS OR ANY ERRORS RE ANY DATA, SPECIFICS, POLICIES AND OTHER INFORMATION AS SOURCED FROM OTHERS.