Demand for credit remains subdued in an uncertain economic climate with only the housing sector showing any signs of strength, new data shows.

The Reserve Bank of Australia’s monthly credit report released on Tuesday shows total credit demand eased 0.1 per cent in May compared with April, to stand at a paltry 3.9 per cent higher than a year earlier.

Annual growth was over 13 per cent in May last year.

Demand for credit by businesses continued to tank against a backdrop of weak trading conditions and a cut in investment plans.

Business credit fell 0.7 per cent in May, growing by just 2.1 per cent over the year and a far cry from the 18.2 per cent annual pace recorded in May 2008.

Personal credit - other than housing loans - fell for a 12th straight month, declining 0.6 per cent in May and tumbling 7.8 per cent over the year.

Low interest rates and a more generous first-home owners grant continued to prop up demand for housing credit.

Total housing credit rose 0.5 per cent in May for an annual rate of 7.0 per cent.

Owner-occupier credit rose 0.7 per cent to 8.5 per cent over the year.

Federal Treasurer Wayne said in his weekly economic note on Sunday that more than 97,000 first-time home buyers had taken up the more generous grant by the end of May.

“The month of May saw the biggest take-up so far, with 19,607 first-home buyers using the `boost’ to enter the housing market,” he said.

The increased grant was extended until December 31 from its initial June 30 expiry date in the May budget.

The grant was doubled to 14,000 for the purchase of established homes and trebled to $21,000 for new properties last October as part of the government’s first stimulus package.

Those amounts will be reduced to $10,500 and $14,000, respectively, in the final three months of this year, before returning to the original offer of $7,000 next year.

The data showed investor housing credit was more subdued, rising 0.1 per cent in May for an annual rate of 3.8 per cent.

AAP