JAPANESE banks are stepping into the funding gap left by crippled European lenders pulling their capital from Australia, as Asian financiers play a growing role in bankrolling the expansion of mining.
European banks continued to withdraw from Australia during the turbulent June quarter, pulling another $US17.7 billion ($17.1 billion) in loans, preliminary figures from the Bank for International Settlements show.
In the past six months, the value of European bank lending to Australia has fallen $US27.8 billion. But while overall foreign lending to Australia is sliding, there are signs Asian banks are continuing to fund the economy's expansion, especially in mining.
During the June quarter, when fears of collapse in the eurozone reached new heights, Japanese lenders increased their lending activity to Australia by $US13.7 billion. Loans from Taiwan fell by $US200 million, but are up over the last six months. The figures do not cover China.
The chief economist at the Export Finance and Insurance Corporation, Roger Donnelly, said Asian banks, including some that were state-owned, were playing a critical role funding big resources projects.
''The European banks are not as willing or able to arrange and provide the finance for the big resources infrastructure projects as they were previously,'' Mr Donnelly said.
''Had it not been for the Asian banks stepping into the breach, and Australian banks including the national export credit agencies … there could have been some financing restrictions on the resources investment boom.''
For instance, the state-owned Japan Bank for International Cooperation and Nippon Export and Investment Insurance are both reported to have lent up to $US3 billion for the $32 billion Ichthys liquefied natural gas project in Darwin.
The trend stands in contrast to the continuing fall in funding from western Europe. German banks cut their exposure to Australia by more than $US8 billion and British lenders by $US2.1 billion.
All up, foreign lenders' total exposure to Australia fell $US12 billion
during the quarter, in which global funding flows between BIS member nations' banks contracted by almost $US600 billion.
Despite the slowdown in bank lending to Australia, the government remains optimistic that foreigners will continue to finance the wave of mining investment, expected to peak next year.
Treasury's midyear budget review, published on Monday, said the current account deficit would widen in the coming years, from 5 per cent in 2012-13 to 5.75 per cent in 2013-14. The long-run average for the deficit is about 4 per cent. ''The key driver of the rising current account deficit is the inflow needed to finance the resources investment boom, with the household sector and the Australian government expected to be net lenders over the forecast period,'' the Treasury said.