Budget gloom hits credit demand

The federal budget has not only hit consumer confidence and retail spending it also appears to have dampened our appetite for credit.

New figures show a sharp drop in personal loan applications during the June quarter, while demand for credit cards moderated, resulting in annual credit growth turning negative.

Credit data provider Veda's consumer credit demand index dropped to minus three per cent compared to a year earlier.

Veda's general manager of consumer risk Angus Luffman said not only did the government's budget take its toll on consumer confidence but unusually warm weather sapped autumn and winter sales for clothing retailers.

"Most fundamentally, income growth has been subdued against the backdrop of weakness in the labour market," Mr Luffman said releasing the data on Thursday.

Official labour force figures for June are released later on Thursday. Economists expect they will show the jobless rate rising to 5.9 per cent after holding at 5.8 per cent for three months in a row.

Gauges of consumer confidence have made only modest recoveries after sharp losses at the time of the budget, while retail sales data have shown no growth since February.

Mr Luffman said a reduced appetite for consumer credit suggests retail sales in the June quarter are likely to have been soft.

Monthly data for June has yet to be released.

Personal loan applications tumbled 7.1 per cent in the year to June, while demand for new credit cards grew at just 1.6 per cent after growing at a 6.1 per cent pace as of three months earlier.

Mortgage demand almost halved to 6.1 per cent as of the June quarter compared to 11 per cent as of March.

Mortgage applications have proved to be a good leading indicator of future moves in house prices by around six to nine months, Mr Luffman said.