Business confidence has slipped to the lowest level since before the September 2013 Federal election.
The National Australia Bank’s business confidence and conditions survey for February, released yesterday, also showed no change in conditions, indicating the economy continues to stagnate.
In fact the confidence index for February fell 3 points to -0.2, the first negative reading since July 2013.
The business conditions index, which looks at current conditions rather than the outlook, stayed at 2.1, the lowest reading since last September.
The Reserve Bank of Australia’s surprise interest rate cut didn’t change confidence (its impact on conditions will take longer to appear).
The survey period also coincided with intense speculation about the governing Coalition’s leadership, but also a strong 6.1% rise in the Australian stockmarket, the second successive month the market had risen.
“The RBA’s 25 basis point rate cut appears to have done little to improve business confidence in the month,” Alan Oster NAB’s chief economist said in yesterday’s statement accompanying the survey results.
“Confidence… fell across all industries, except manufacturing and wholesale, suggesting common factors such as political and broader economic uncertainty may be at play – perhaps the rate cut acted as a stark reminder of the significant headwinds facing the economy,” he said in yesterday’s statement.
For the steady business conditions, both profitability and trading were unchanged, while forward orders and employment conditions improved slightly.
According to the monthly job ads survey from the ANZ, employers are still looking for more staff.
So far as the wider economy is concerned, the NAB said the results of the February survey had not changed the bank’s forecasts for the Australian economy.
“Locally, we have not changed our near term forecasts – 2014/15 at 2.3% – and have marginally lowered 2015/16 forecasts to 3% (was 3.2%),” the NAB said.
"That largely reflects weaker business investment and a touch higher unemployment rate (6.7%) at end 2015 and hence a touch weaker consumption.
“On going weak global trade has lowered our expectations of much better non-commodity exports. The domestic economy, in early 2015, has not gained momentum and indeed business confidence is lower. Inflation will continue to slow.
“We still see another rate cut in coming months – most likely May but the April meeting is live and data dependent.
"We are not forecasting a second cut to below 2% but the chances of that happening are rising (35-40% chance). We see rate rises starting again in H2 2016," the bank said.
