Small business owners rushed to take advantage of the government’s boosted instant asset tax write-off incentives ahead of the end of financial year, with lending to these firms surging by nearly one third, to $3.6bn, in June.
The increase in new lending was mostly for the purposes for plant and equipment finance, the Australian Bureau of Statistics figures showed.
The rush to take advantage of the expanded $150,000 write-off scheme — which Treasurer Josh Frydenberg in June extended to the end of the year – also triggered a surge in a 20 per cent surge in the value of new loan commitments for cars, which drove a 5.2 per cent jump in fixed term personal finance, the ABS figures showed.
New lending to medium-sized businesses returned to levels not seen since August last year, but the increase was driven by lending for “general business purposes”, rather than plant and equipment, suggesting tax was not a driving factor.
The ABS data also showed new home loan approvals managed a partial recovery in June, lifting 6.2 per cent after a much sharper plunge in May when COVID-19 restrictions dragged on housing market activity.
House lending commitments, excluding refinancing, for the month reached $17.4bn, the seasonally adjusted figures from the ABS showed. Of that, new lending for homes in which to live climbed 5.5 per cent to $13bn, while new housing loan commitments for investment purposes lifted by 8.1 per cent to $4.4bn.
ABS chief economist Bruce Hockman said the June rise in home loan approvals “reflects the easing of COVID-19 restrictions in May on auctions, open houses and mobility in general”.
Nevertheless, new lending remains well below pre-COVID levels, Mr Hockman said.
“Despite the rebound in lending activity, the value of housing loan commitments in June was down over 10 per cent compared to March after large falls in April and May.”
Mortgage rates have reached record lows through the health crisis as the Reserve Bank dropped its cash rate target to 0.25 per cent in March and implemented a bond-buying program, which has pinned three-year bond yields at the same level, leading to fixed home lending rates plummeting close to 2 per cent.