Fear eases but business conditions worsen: NAB survey

Operating conditions worsened in April beyond the depths of the GFC, even as confidence regained some ground, a survey shows.

An empty street in a nation where confidence has taken a battering from the pandemic. Picture: Flavio Brancaleone)

Operating conditions worsened beyond the depths of the GFC during the first full month of coronavirus lockdown, although the intense fear among businesses leading into April eased somewhat, according to NAB’s latest survey.

Business confidence bounced from March’s record lows during April, but remained well below the depths of the early 1990s recession. The survey revealed conditions continued to fall, however, as firms adjusted to the reality of operating under social distancing restrictions.

“The improvement in confidence was broadbased but, like conditions, it remains deeply negative across all industries and states,” NAB chief economist Alan Oster said.

In index terms, confidence rose 19 points to -46, from three times as bad as during the last recession to two times. The conditions index fell 12pts to -34pts, to sit below the levels seen in the GFC.

The question measuring forward orders fell again in the month, suggesting firms expected further weakness ahead, the report said. Capital expenditure intentions also dropped as firms reined in spending.

“While it is now likely that coronavirus containment measures could well ease earlier than expected, we expect this to be a gradual process,” Mr Oster said.

“We also worry the hit to confidence will have some ongoing impacts to hiring and capex which could see a drag on growth for some time.”

On Tuesday The Australian revealed KPMG analysis which showed the nation’s industrial output will not recover to pre-COVID levels until September 2021.

But Mr Oster said that despite what could be a “solid bounce” late this year”, businesses will not have recovered the damage from the pandemic until early 2022.

“This all points to required ongoing policy support for some time,” he said.