Credit, particularly to businesses, increased relatively quickly for a number of years, and now the downside of that cycle is currently being played out. In the period since the mid 1980s, there have been three broad expansion phases in credit in Australia: two related to business credit and one to household credit.
The first of the cycles in business credit began in the mid 1980s when financial deregulation led to a strong expansion in credit to businesses. The annual growth in business credit exceeded 30 per cent for a time. The subsequent economic downturn saw many business failures, large losses by the banks and a prolonged period of deleveraging by business (Graph 6).