An emerging upward trend in lending commitments augurs well for the Australian economy.

Figures released on Monday show the value of finance commitments, including housing, personal and business loans, along with business finance leases, rose by 3.9 per cent in seasonally adjusted terms in May.

The monthly figures are quite choppy, with the April figures showing a 6.9 per cent fall after a 14.2 per cent surge in March.

The trend figures worked out by the Australian Bureau of Statistics (ABS) cut through this volatility.

They show the value of finance commitments has been rising for six months now.

The latest estimates indicating a 2.4 per cent rise in May bringing the trend measure up by five per cent or $2.6 billion per month up from its November low.

The rise has been concentrated in lending for home-buying, where lending has been trending up strongly since September.

Housing also dominates the commercial lending category, where the trend only just turned positive in May after 16 consecutive months of falls.

Still a rising trend, no matter how it is composed, is better than the alternative.

The earlier slump in total finance commitments got under way in early 2008, as the global credit crisis paralysed the world’s banking system.

The downward trend was at its steepest around the middle of the year.

The latest national accounts show total spending, measured by domestic final demand, rose only 0.5 per cent in trend terms in the March quarter, as small a rise as any since the recession year of 1991.

After adjusting for inflation, final demand slumped one per cent in the quarter in seasonally adjusted terms.

Aside from the volatility associated with the GST in 2000, that was the biggest one-quarter fall since the 1991 recession.

The figures showing lending has now stopped falling and even begun to edge higher points to brighter outlook for spending.

Employment and business investment are slow ships to turn around and seem destined to head lower for quite a few months yet, but the increased flow of finance will ultimately flow through into better outcomes for both.

AAP