Delta Covid-19 variant dashing consumer and business hopes

The mood among businesses and consumers has turned negative for the first time since 2020, new surveys reveal.

Restrictions have hit business operating conditions and confidence hard. Picture: Brendan Radke

Business and consumer confidence has collapsed under the weight of Delta lockdowns, as sentiment turned negative for the first time since 2020.

NAB’s monthly business survey showed operating conditions and confidence “deteriorated sharply” in July.

The bank’s corporate sentiment index plunged by 19 points to -8 points and was “now well below average”, NAB said, where a reading below zero signals more pessimists than optimists.

Operating conditions for Australian firms deteriorated across the mainland, according to the survey, falling 14 points to 11 points – still above the historical average of six points. There was a particularly savage drop of 31 points to two points in NSW, while South Australia also experienced a large fall.

NAB chief economist Alan Oster said “the survey shows that the strength in the business sector seen in early to mid-2021 has faded on the back of fresh disruptions in the economy, but it has not yet deteriorated to the lows seen in early 2020”.

There was a “very large” 27-point drop in confidence among NSW firms, where the corporate mood is now the worst in the country at -21 points, and 46 points below the April peak when optimism around the post-Covid recovery was running high.

Sentiment also dropped eight points in July to just below zero in Queensland, and South Australian corporate confidence retreated a hefty 16 points to one point.

The survey included the period when NSW and SA were in lockdown, but when Victoria was opening up after its fifth round of stay-at-home orders.

The subindex measuring ­employment conditions fell eight points to 10, and back to December 2020 levels. Citi chief economist Josh Williamson said the result “points to a near-term slowdown in employment”, although “the labour market will be somewhat buttressed by the wage subsidy available for employers”.

 

The business read comes as consumers have also grown pessimistic for the first time this year, after ANZ’s weekly gauge of confidence dropped a further 3 per cent over the weekend to be 10 per cent down on a month earlier.

“Sentiment is still above the level reached during Victoria’s long second lockdown, but it is now in pessimistic territory for the first time since early November last year,” said ANZ head of Australian economics David Plank.

 

The sentiment index dropped to 98.6 points – below the 100 threshold at which point pessimistic responses outnumbered the positive. “Our research suggests we can’t be sure the low in confidence in the current cycle has been reached until Covid case numbers start to trend lower,” Mr Plank said.

News of further Covid restrictions in Queensland and Victoria saw consumer sentiment decline 7.5 per cent in Brisbane, and by 1.6 per cent in Melbourne, the ANZ survey showed.

Confidence in Sydney and ­regional NSW, however, rallied by 3.7 per cent and 2.1 per cent, ­respectively “as the vaccination rate picked up and some restrictions on construction work were eased”, Mr Plank said.

 

Mr Oster, like Reserve Bank governor Philip Lowe, remained hopeful the eventual easing of ­restrictions would trigger a rapid recovery. “With … a very strong momentum in the lead-up to the recent lockdowns, the hope is that once restrictions are eased, the economy will rebound relatively quickly, consistent with the experience through the pandemic to date, and resume a strong growth trajectory – and a return to strong capex and employment plans.”