An eight-month low in lending finance approvals recorded in the month of October will have no more bearing on the interest rate outlook than the 18-month high recorded a month earlier.

The total value of finance commitments fell by 9.7 per cent in October to $50.766 billion, seasonally adjusted, from $56.208 billion in September, data from the Australian Bureau of Statistics (ABS) on Monday showed.

Within the total, commitments for housing finance, including alterations and additions, fell by 1.7 per cent while, other personal finance was down by 1.5 per cent, however the overall fall was dominated by commercial finance, which recorded a 16.3 per cent drop.

It is tempting to try to attribute these movements to some underlying economic cause, but the volatility of this series warns against that.

The fall in October was, in absolute terms, only a little bigger than the average month-to-month change in recent years.

The October level was the lowest since February, but September’s was the highest since March 2008.

The ABS estimates the trend level of commitments in October was $52.956 billion, meaning the seasonally adjusted series was above trend in September to about the same degree it was below it in October.

And the average for September and October was above the average for the preceding two months, although only marginally, essentially continuing a flat trend.

The rise in September most likely had little impact on the decision of the Reserve Bank of Australia (RBA) to raise interest rates for the third time in three months in December.

Nor will the October figures affect the central bank’s decision on rates when its board next meets - and not just because there is a another set of lending finance data due on January 13, ahead of that meeting on February 2.

The RBA is well aware that commercial lending, which hit a four year low in October according to the data on Monday, may be flat or even heading lower.

Business have been making the rational decision to use accumulated earnings and equity raisings to finance their businesses, rather than access loans which as still harder to get and more expensive since the financial crisis erupted.

This was a point made in the RBA’s latest quarterly monetary policy statement published last month.

In other words, the failure of business borrowing to grow does not mean businesses are not intending to invest in new capacity or expand their activity and employment levels.

In fact there is plenty of evidence to the contrary.

The NAB’s survey last week, for example, showed business confidence was at a seven-year high in November while the index of expected employment growth was back around pre-crisis levels.

And the ABS labour force figures not only showed a sustained turnaround in employment growth, but revealed an upward trend that is increasingly supported by the full-time employment category, a bellwether for the health of labour demand.

AAP