Australia-Farmers hit by credit squeeze.

AUSTRALIA- NEGATIVE NEWS AS FOREIGN banks have started cutting their loans to Australian businesses.

The Reserve Bank yesterday Friday blamed a fall in foreign currency lending for the second-biggest monthly drop in business borrowing on record in December.

The total level of loans to business fell by 1.1 per cent or $6.7billion in the month, while total lending to households and businesses fell 0.3 per cent, the first monthly fall since the 1992 recession, according to The Australian.

The fall in lending and the rapid weakening of the world economy mean the Reserve Bank may cut interest rates when its board meets in Sydney on Tuesday by even more than the 1 per cent tipped by financial markets.