Wed, Jun 12, 2019 - Page 10 News List

Business confidence up in Australia on election win

Bloomberg

Australian business confidence surged after Australian Prime Minister Scott Morrison’s shock election win, while conditions again deteriorated, providing further grist to the central bank’s decision to cut interest rates.

Sentiment last month jumped 7 points from zero the previous month, the biggest gain since the center-right government came to power almost six years ago, National Australia Bank (NAB) Ltd’s survey showed yesterday. The conditions index — measuring hiring, sales and profits — slumped to 1 from 3.

“Trading conditions and profits are particularly weak,” NAB chief economist Alan Oster said. “The employment index which we are watching closely, partially reversed some of its decline last month, but is only around average.”

Reserve Bank of Australia (RBA) Governor Philip Lowe last week cut rates for the first time since he took the helm in 2016 to encourage firms to hire and invest in an economy that is sharply decelerated in the past nine months.

Confidence was bolstered by Morrison’s come-from-behind win on May 18, which was bracketed by the NAB survey that ran from the May 14 to 24.

Conditions “are now well below average — the key message remains that the private sector continues to lose momentum,” Oster said.

“The goods distribution industries, especially retail — which is clearly in recession — remain particularly weak, and manufacturing” is not far behind, he said.

“Worryingly, forward orders declined further, and capacity utilization is now a touch below average,” Oster said.

“With activity continuing to lose momentum, and capacity utilization declining, the survey continues to show weak price pressure across inputs and final products,” he added.

Australia’s economy expanded in the first three months of this year at the slowest annual pace in a decade and inflation barely registered in the period.

Growth is almost entirely supported by government spending and the RBA is urging Morrison and his ministers to address policies that would boost productivity and living standards.

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