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Bernard Hickey details the key news overnight in 90 seconds at 9am in association with ASB, including news that the 2025 Taskforce is due to recommend today a flat tax and cuts in government spending, although Prime Minister John Key has already torpedoed the report, saying he does not want big bang reform.

Figures out from the Reserve Bank show farm lending fell NZ$297 million in October to NZ$46.934 billion, the first monthly fall in farm lending since February 2001 when total lending was NZ$12.58 billion.

Meanwhile consumer lending rose for the first time since December last year.

Bank and non-bank lending to business continued to contract in August while growth in lending to the agriculture sector slowed, figures released by the Reserve Bank show. Meanwhile, housing credit lending growth accelerated over the month.

The Reserve Bank and Treasury are concerned about New Zealand’s economy becoming unbalanced with too much investment in farm land, government and property rather than in private businesses and exporting.

Agricredit lending rose NZ$319 million, or 0.7%, in August from July, the lowest nominal increase in agricultural credit since February. Year-on-year growth in farm lending slowed further to be up 13.1% in August from 14.4% in July and over 20% between May 2008 and April 2009.

Business lending in August 2009 was down 0.3% from August 2008, the first year-on-year contraction in business credit for any month since August 2003. Business lending fell NZ$506 million, or 0.6% from July.

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Banks and non-banks grew lending to farmers by NZ$161 million in February to NZ$44.069 billion, meaning growth from the same month a year ago was a stonking 22.3%, figures from RBNZ show.

Farm lending has grown NZ$8.046 billion in the last year, which is 51% more than the extra NZ$5.325 billion lent to home owners in the last year. This will fuel fears of a bubble developing in farm property, although some of this will be financing for dairy inventory being built up by Fonterra at the peak of the season.

Meanwhile lending to non-farm businesses fell by NZ$67 million in February to NZ$79.931 billion, which dragged the annual growth rate down to 10.9%. These figures suggest bank reassurances that their doors are open and they are lending to small businesses, manufacturers and medium sized businesses may be an exaggeration.

Reserve Bank of New Zealand figures show banks and non-banks lent just NZ$616 million extra to home buyers in April, sharply down on the previous month and well below the NZ$1.5 billion being lent during the peak of the housing boom in 2004, 2005 and 2006.

The slowdown in the annual growth of housing lending to 10.2% in April from 11.1% in March shows the 50% plus collapse in house sales this year is now flowing through to lower lending growth from the banks. This was the lowest annual growth rate in housing lending for almost 5 years.

This fall in lending growth will in turn flow through into slower consumer spending as less equity is withdrawn from houses and spent by cashed up sellers or by existing home owners paying for renovations, holidays, cars and flat screen TVs by drawing down on their mortgages. (more…)