Australian business conditions hit the highest level yet recorded in the National Australia Bank’s monthly survey which has been going since 1997.
The bank said yesterday its index of business conditions climbed 3 points to +21 in February, far above the long-run average of +5.
Standouts were the survey’s measure of profitability rose another 2 points to +21 in February, while its sales index climbed 3 points to +27.
The volatile measure of business confidence dipped 2 points to +9, a possible reaction to the turbulence in international financial markets seen in early February and the instability around former National Party leader Barnaby Joyce.
Firms’ demand for labour leapt in February with the employment index jumping 10 points to +16, another all-time high.
"If the recent surge is sustained, the employment index points to a robust level of jobs growth of approximately 27,000 per month," said NAB group chief economist Alan Oster.
The strength in business conditions was broad-based with all major industry groups reporting above-average conditions, and Mr Oster noted that employment conditions were at a record high.
“The bottom line is that strong jobs growth will not be ending any time soon," Mr Oster said.
While the underperforming retail sector hit its highest reading in eight months, Mr Oster warned that the downtrend in personal and recreational services needs to be watched closely .
“It could indicate that softness in consumer spending is broadening beyond retail," Mr Oster said.
“In that context retail price measures remain very subdued and the rise in labour costs (a wages bill concept in the Survey) appears more related to the surge in employment than wages per se,” he said.
“The Survey results for February reinforce our views on the outlook for the Australian economy,” Mr Oster said.
“After last week’s release of below expectation GDP growth data, the strength in business conditions and leading indicators makes us more confident that Australia will see stronger economic growth in coming quarters on the back of LNG exports, and business and government investment.
"This will sustain strong jobs growth, reduce unemployment, and put gradual upwards pressure on private sector wages. We expect by late 2018 the RBA will feel relaxed enough about the domestic fundamentals to cautiously start withdrawing the stimulatory policy stance it is currently running.
"However, it will depend heavily on the data flow and the risk is that the RBA will delay rate rises until early 2019” said Mr Oster.
