Slipping property values may have contributed to the recent fall in loans to small businesses, the country's four main financial regulatory agencies say.
"Demand for housing credit has been subdued, though there has also been some tightening in credit supply," the Council of Financial Regulators said in a statement summarising their meeting on July 5.
The CFR - comprising the Reserve Bank of Australia, the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Australian Treasury - said loans to small businesses had declined during the past year.
"Lenders are themselves applying stricter verification of expenses and income to small businesses and lending may be affected by declining collateral values as housing prices decline," the CFR said on Wednesday.
"Housing credit growth has stabilised at a relatively low level, with lending to investors remaining weak, particularly from the major banks."
The council noted "signs of stabilisation in the Sydney and Melbourne housing markets, evident in both housing prices and auction clearance rates" but added "the adjustment over the past two years has been sizeable and conditions in most other capital cities continue to be soft".
The agencies said banks had so far been mostly shielded from risks stemming from sliding property prices by various measures, including the RBA cutting the cash rate.
"Risks to lenders from housing price falls have to date been limited by the strength of the labour market, low interest rates and the improvement in lending standards in recent years. Housing loan arrears have continued to edge higher but with significant variation between regions."
