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Category: Business, Economics and Finance / Economic Trends

Business confidence remains upbeat, RBA cut bolsters optimism

Tuesday, 13 Sep 2016 10:16:30 | Thuy Ong

The RBA's rate cut in August helped bolster business sentiment. (ABC News: Margaret Burin)

Australian business sentiment has remained reasonably strong as the Reserve Bank's interest rate cut in August bolstered optimism, helping to buffer against negative retail conditions.

National Australia Bank's business confidence index rose to +6 index points in August from +4 the previous month, with the results showing a patchy but sustained improvement in the non-mining economy.

However, NAB flagged negative retail conditions would be a cause for concern if sustained.

"The recent downward trend in business conditions suggests the non-mining recovery may have lost some vigour, but headline results from the survey still suggest these segments are performing well," said Alan Oster, chief economist at NAB.

"It is particularly encouraging to see that firms demand for labour remains quite solid, which will hopefully have some positive flow on effects to households."

NAB flagged the economy will likely need more policy support from the Reserve Bank in 2018 to firm up growth and stabilise the employment rate, as the effects of the previous Australian dollar depreciation, higher commodity exports and the housing construction cycle begin to wane.

In contrast to confidence, business conditions fell slightly, from +9 in July to +7 in August.

NAB said strength in business conditions remained confined to construction and the major services industries, with conditions solid across most states.

Western Australian remains the exception as the winding down of the mining boom continues to hit.

New South Wales conditions have eased, but it still has had the highest index of mainland states on average in the past three months.

"The survey still gives us confidence in the near-term outlook for the economy even though things may have cooled a bit," Mr Oster said.

AustraliaPlus


 

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