Business confidence rocked by political leadership turmoil

Liberal Party leadership turmoil has dragged business confidence to its lowest level in two years.

Malcolm Turnbull in Canberra after vacating the Liberal Party leadership. Picture: Sean Davey.

Liberal Party leadership turmoil has dragged business confidence to its lowest level in two years, ­despite improved profitability and employers saying they are increasingly keen to hire more staff.

A closely watched survey of business confidence, conducted in the days immediately after Malcolm Turnbull lost the prime ministership late last month, has revealed confidence fell noticeably last month compared with a month earlier.

“This is something to watch — will sentiment snap back in September or will uncertainty around policy remain a concern?” said Westpac economist Andrew Hanlan, adding that the leadership turmoil had probably “dented business investment”.

Business conditions, however, improved in August, contributing to an increasingly pronounced contrast between trading conditions and outlook evident since early last year.

ANZ economist David Plank also blamed “recent political turmoil” for the decline in con­fidence, but remained optimistic about the impact on the economy. “If we think about the performance of the economy over this period, this divergence hasn’t translated into weak economic performance,” he said. “We doubt it will be a major impediment to business activity.”

The improvement in reported conditions reversed two months of decline, according to the ­National Australia Bank survey of 400 firms, which left the index near a historic peak reached earlier in the year.

Alan Oster, NAB chief economist, said ­answers to survey questions on the outlook for ­employment foreshadowed relatively strong jobs growth of 23,000 a month over the next six months

“With a stabilisation in the ­labour-force participation rate, this should be enough to see the unemployment rate decline further over the rest of 2018,” he said.

The news came as the Aus­tralian dollar continued its slide, falling below US71c briefly this week, the lowest level in more than two years. The next set of jobless figures, tomorrow, are expected to show the unemployment rate ­remained flat at 5.3 per cent last month.

The survey followed news that economic growth had increased to an above-trend 3.4 per cent over the year to June, faster than analysts had expected. Business conditions were elevated across the four economically biggest states, this being the first time that has happened since 2007.