Credit crunch hitting hard in Australian finance markets
In a recent interview industry officials have confirmed that the global credit crunch is now hitting hard on Australian financial markets, giving them cause for concern.
In a recent interview industry officials have confirmed that the global credit crunch is now kicking in and having an adverse effect on Australia’s financial markets. Officials have said that lending has actually contracted in Australia for the first time since the dark days of recession in the 1990s.
With banks and lenders now rationing credit and being more stringent over lending money, figures showed that last month there was a collapse in both personal and business lending. Whilst some officials have said that this comes as no surprise given the level of debt that people were getting themselves into over the credit boom period, others have said that the sharp drop in lending could cause real problems.
Officials said that businesses and consumers had been borrowing more and more money each month for the past sixteen years, but that the credit bubble burst in the run up to Christmas, as the effects of the global credit crunch took effect and wreaked havoc in the financial sector.
One official said: “We’re expecting growth to come down, but in fact the aggregate level of credit came down, now that was quite extraordinary, and the last time that happened was during the recession in the early 1990s. So really, we’re getting a pretty compelling signal here that the economy is in some trouble, when the level of credit outstanding in your economy contracts, really we’re in for a pretty sharp downturn in the economy, that’s the message we take out of that.”
He added that Australia was “seeing quite a bit of constriction of supply of credit, so the big banks in particular being much more discerning with the amount of lending they want to do, particularly to the business community where they see quite a bit of risk of actually not getting their money back when the loans become due.”