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Personal borrowing posts 1st consecutive rise in 13mths(Update)

By Ed Logue
16 Mar 2009 3:23 PM

SYDNEY, March 16 AAP - Consumers and businesses increased their borrowings for the second straight month as low interest rates made debt more appealing, an economist says.

Total personal finance commitments rose by a seasonally adjusted 1.4 per cent in January to $6.492 billion, Australian Bureau of Statistics (ABS) data showed on Monday.

It was the first time the value of new personal loans posted consecutive monthly rises since December 2007.

Housing finance increased 2.3 per cent in January, while total loans for commercial purposes rose 6.5 per cent in January, the first back-to-back increase in business lending since March 2007.

CommSec chief equities economist, Craig James, said the consecutive monthly increases in lending to businesses and consumers was quite encouraging.

"It was the best back-to-back monthly gain in 18 months," Mr James said.

"It confirms what we are hearing in anecdotal evidence across the corporate sectors that a lot of businesses have gone into the downturn with relatively low debt levels.

"Business are seeing the opportunities in the current economic environment that they can take advantage of in taking on a bit more debt."

Lease financing slumped 17.4 per cent to $443 million in January, its lowest level since July 2000.

Mr James said lease financing was a major component of the car market, which was the feeling the downturn in the the global economy.

Sales of new motor vehicles fell an adjusted 1.1 per cent in January and was 16.9 per cent lower from a year earlier, ABS data showed.

"The car market has slowed down not just here, but right across the globe," he said.

"In the current environment people are not just buying cars, they are making do," he said.

Mr James said businesses were taking advantage of interest rates so low many firms had not experienced during their existence.

The ABS lending data was collated before the Reserve Bank of Australia (RBA) lowered the cash rate by one percentage point to a 45-year low of 3.25 per cent.