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  • Federal budget 2015: Business confidence flat in April ahead of budget, says NAB

    2018 - 07.05

    “Until confidence lifts significantly it is difficult to see a sustained economic recovery developing.” NAB chief economist Alan Oster. Photo: Michele MossopBusiness confidence was unchanged in April, according to the latest National Australia Bank survey, as uneven economic growth, uncertainty around Tuesday’s budget and continued weakness in consumer spending and unemployment weighed on sentiment.
    Nanjing Night Net

    NAB’s latest monthly business survey of more than 400 companies, found no change in the mood from March, at 3 index points, after a jump from zero in February. Business conditions, meanwhile, slipped from 6 to 4 points, giving back some of the gains posted between February and March.

    NAB chief economist Alan Oster attributed the movements to resurgent uncertainty about growth patterns, unemployment trends and consumer behaviour.

    He said the impact of the interest rate cut by the Reserve Bank of Australia in February had so far proved limited, although last week’s cut, to 2 per cent, should provide stimulus beyond the investor housing market.

    “Until confidence lifts significantly it is difficult to see a sustained economic recovery developing,” Mr Oster said.

    “To date, rate cuts have not appeared to do much and it will be interesting to see what, if anything, this week’s Federal Budget will do.”

    With the Federal Government committed to spending restraints, the central bank has been under more pressure than usual to stimulate demand and investment through lower interest rates.

    However, some economists have warned that too much monetary easing can be counterproductive, with the potential to sharpen, rather than smoothen out, imbalances in the economy. Queensland Investment Corporation chief economist Matthew Peter said on Monday low interest rates were helping fuel double-digit house price inflation in Sydney, for example.

    “That’s all a function of the interest rate being forced down much lower than it would need to be if there were some other demand-side stimulus to support the economy – and that naturally would come from fiscal policy,” he said.

    NAB’s Alan Oster also noted from the survey that  investment was patchy as the much-need transition away from resource-linked infrastructure remained narrowly-based.

    “Low interest rates are having a notable impact on the most sensitive sectors of the economy, like investor housing, and the recent rate cut in May should further contribute to these trends,” said Mr Oster.

    “Nevertheless, pass-though to the broader economy has been somewhat mixed.”

    He once again highlighted business reluctance to invest in new capacity as a drag on the economy, despite some signs of a pick-up in the consumer mood.

    Trading and profitability both slipped in the April survey, while labour, input and retail costs were largely flat.

    He said the lower Australian dollar should have fed through to higher input costs, which would eventually be passed on to consumers.

    However, the currency impact appeared to have been offset by lower oil prices.​

    This story Administrator ready to work first appeared on Nanjing Night Net.

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