Business conditions at post-GFC high

Business conditions have reached their best point since 2008, National Australia Bank’s survey shows.

14/03/2008 BUSINESS: 14/03/2008 BUSINESS: NAB bank logo.

The domestic business environment not only remains favourable but appears to be strengthening despite global uncertainties, and the recovery in non-mining sectors is becoming a little more broadbased, suggesting the Reserve Bank of Australia may not need to cut interest rates again.

Business confidence rose from +3 to +6 points in March, while business conditions jumped from +8 to +12 points, the highest since early 2008, reflecting above-average business conditions in most industries, according to National Australia Bank’s Monthly Business Survey.

The Australian dollar rose from $75.96c to $76.24c after the survey was released.

It was last trading around $76.17c.

Meanwhile, ahead of official Labour Force data from the Bureau of Statistics this week, the employment index in NAB’s Business Survey rose from +1 to +5 points — a five-year high — last month.

“The lift in business conditions to these levels not only suggests that Australia is withstanding the uncertainty offshore, but that the recovery in the non-mining sectors of the economy have in fact stepped up a gear this month,” said Mr Alan Oster, NAB Chief Economist.

“It is particularly encouraging to see the employment index point towards ongoing strength in the labour market, supported by signs the recovery is broadening into previous trouble spots such as manufacturing.”

Mr Oster said the Business Survey reinforced his view that monetary policy is likely to remain on hold for an extended period, although recent statements from the RBA suggest that if the nonmining sector were to show any signs of weakening, lower inflation and Australian dollar strength has increased the RBA’s willingness to cut rates.

“This is an especially good result in the context of a downbeat global economic outlook,” Mr Oster added. “Low interest rates and a more competitive currency are expected to remain key drivers domestically. Consequently, our outlook for the economy remains unchanged — and with the non-mining recovery expected to progress further.”

By industry, service industries remain the best performers, although construction also closed the gap in March, manufacturing is looking more upbeat, and transport appears to be responding positively to lower fuel prices, the survey showed. In contrast, mining conditions remain extremely weak and retail was disappointing.