Equipment a Big Win for Asset Finance Brokers as Business Investment Increases

RBA Governor Philip Lowe recently cautioned that the Australian economy is on a “narrow path… likely to be a bumpy one” as the central bank attempts to control inflation without curtailing growth.

While uncertainty is a given in this environment, that doesn’t signify a shortage of opportunities.

For brokers willing to adapt, upskill, diversify and proactively service clients, there are plenty of potential revenue streams to uncover. Take a look.

Equipment and Machinery Investments Going Strong

First, the silver lining: Purchases of equipment and machinery grew 6.0% in the March 2023 quarter, driven by demand from the manufacturing, transport and mining industries. This accounted for part of the increase in business investment (3.4%) and private investment (1.4%) during this period, according to ABS data.

Asset finance brokers are well placed to support these clients with future purchases of light and heavy vehicles, agricultural equipment and automation equipment.

Promising Signs in Business Construction and Lending

New housing construction declined in the March quarter, but non-dwelling construction rose 2.4%. There was also an uptick in new loan commitments for business construction (up 44%) and business purchase of property (9.8%), a promising sign for asset finance brokers considering diversifying into commercial lending.

Infrastructure spending also increased 3.1%, driven by electricity and transport projects, according to the ABS.

The renewable energy sector, with significant wind, solar and battery projects underway, is one emerging industry to watch.

New Car Market Booming

The Australian automotive industry achieved a record May sales result of 105,694 new vehicles delivered– a 12% increase on the same month last year. This suggests that the shipping and logistics challenges may be easing.

Tony Weber, CEO of the Federal Chamber of Automotive Industries, said the result was encouraging, but the industry remained cautious about broader economic conditions and their potential impact on demand.

Asset finance brokers could leverage this boom by expanding their knowledge of electric vehicles, which accounted for 15.6% of the market in May.

Consumer, Business Confidence Remain Low

Inflation and elevated interest rates continue to put a damper on consumer and business confidence.

Consumer confidence has remained at “near recession lows” for the past year, according to the June Westpac-Melbourne Institute Consumer Sentiment Index. This will likely be further compounded with more than 880,000 borrowers facing the expiry of their low fixed-rate loans this year.

Likewise, the NAB Monthly Business Survey for May 2023 reported a four-point decline in business confidence and a seven-point fall in business conditions.

All of these factors may lead households to reduce spending, potentially leading to an economic slowdown, as predicted by the OECD.

The Main Takeaway

While there are obvious challenges in this rapidly evolving market, there are also opportunities for asset finance brokers– from equipment and machinery purchases to commercial lending and electric vehicles.

As always, we’ll support you in staying informed on market developments as they happen, and help you upskill and identify emerging trends so you’re ready to uncover new growth opportunities.