Borrowing levels have posted their slowest monthly increase in almost six years, fuelling concerns economic growth may have been flat at the start of calendar 2008.

Flat economic growth means home buyers are more likely to be spared an interest rate rise next week when the Reserve Bank of Australia (RBA) board next meets.

Total credit given to the private sector rose by 0.4 per cent in April, the RBA said today, which was half the market forecast.

Credit growth in April was the slowest since October 2002, with the increase well down from March’s 0.8 per cent rise.

Over the year to April total credit rose by 14.1 per cent, its weakest annual pace since early 2006.

Interest rate rises by the RBA in February and March, which took the cash rate to a near 12-year high of 7.25 per cent, appear to have particularly affected personal and business borrowing, the credit data shows.

Citigroup managing director of economics Paul Brennan said the economy was likely to have grown by 0.1 per cent in the first three months of 2008.

If realised, that would be the weakest gross domestic product (GDP) growth since the December quarter of 2000, when the economy contracted in the aftermath of the introduction of good and services tax.

“We continue to expect an unfavourable combination of slowing economic growth and inflation above four per cent this year,” Mr Brennan said.

“We see no room for the RBA to ease monetary policy.”

Personal loan growth was flat in April, while business borrowing was up by just 0.1 per cent.

The only bright spot was a 0.7 per cent monthly rise in home borrowing even though the major banks all lifted their variable lending rates in April independently of the RBA.

A senior economist with money broker ICAP, Matthew Johnson, said the business sector was harder hit by higher interest rates and the credit crunch.

Lehman Brothers chief economist Stephen Roberts said the financial aggregates data showed that high interest rates were slowing domestic spending growth.

“Deceleration in credit growth of this order will, in our opinion, weigh heavily on growth in domestic spending in the economy, just what the Reserve Bank ordered,” he said.

All 19 economists surveyed by AAP this week expected the RBA to leave interest rates alone when it held its monthly board meeting on June 3.

Gross domestic product data for the March quarter is due out a day later on June 4.

AAP