UNCERTAINTY surrounding the previous Labor government's planned changes to fringe benefit tax (FBT) on cars had a dampening impact on overall business credit in the run-up to the September election.
However, credit data provider Veda says low interest rates and a new government appears to be giving businesses greater confidence with credit demand in October looking strong.
Veda said its business credit demand index for the September quarter, released on Wednesday, fell 0.7 per cent over the year, a sharp fall from 5.5 per cent annual growth in the June quarter.
"The September quarter was the first contraction in business credit demand since the end of the GFC, so it is clear that weak economic conditions and political uncertainty were affecting business confidence," Veda's general manager of commercial credit risk Moses Samaha said in a statement.
While inquiries for business loans rose 3.1 per cent in the September quarter, trade credit fell 0.6 per cent and asset finance tumbled 5.9 per cent, reversing two quarters of growth.
"We saw a large drop in the number of businesses seeking to hire or lease equipment in the September quarter, which may have been a result of changes to fringe benefit tax implemented by the Labor government at the beginning of the quarter," Mr Samaha said.
The coalition government has scrapped the FBT changes.
He said the Veda index was highly correlated with growth in gross domestic product (GDP), investment in machinery and building construction.
The September quarter reading would be consistent with annual GDP growth of 2.5 per cent compared with 2.6 per cent as of the June quarter.
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