Business confidence rebounds in wake of Coalition election victory, RBA rate cut

Business confidence has rebounded in response to the election result and an RBA rate cut.

National Australia Bank’s business conditions index rose to a net balance of +7 in May from a reading of zero in April.

Australian business confidence rebounded strongly in May as firms responded to the surprise re-election of the centre-right coalition government on May 18, and strongly worded suggestions from the Reserve Bank of Australia that interest rates would be cut.

National Australia Bank’s business confidence index rose to a net balance of +7 in May from a reading of zero in April.

“Business confidence saw a sharp increase in the month following the federal election and a confirmation from the RBA that rates would be cut in June,” said Alan Oster, NAB’s chief economist.

Still, the spike in confidence might prove temporary, Mr Oster added, pointing to a further fall in business conditions in May.

NAB’s business conditions index fell to a net balance of +1 in May from +3 in April.

Forward orders declined further and in addition to being well below average are negative. Capacity utilisation has also pulled back in 2019 to date and is now a touch below average, the survey showed.

The surprise re-election of the Liberal-National coalition on May 18 and the prospect of multiple interest rate cuts by the RBA before the end of the year raised some hope of a rebound in the economy.

Still, the job of reigniting the economy appears significant with the economy growing in the first quarter of 2019 at its slowest pace since the financial crisis a decade ago.

Dow Jones Newswires