Australian dollar boosted by business data

The Australian dollar got a lift today from news that business confidence and overall conditions jumped in June.

The Australian dollar got a lift today from news that business confidence and overall conditions jumped in June, signalling that economic stimulus earlier in the year is starting to drive increased economic activity.

Business conditions rose to their highest level since last October providing a strong signal that a long-awaited recovery in investment in non-mining industries is starting to get underway, albeit slowly.

The National Australia Bank’s business conditions index rose five points to show a net balance of plus 11. Business confidence rose two points to plus 10, the strongest reading since September 2013. Trading conditions jumped eight points to plus 20.

At 4:50pm, the Australian dollar was trading at US74.27c, compared with US74.54c around the same time yesterday. Prior to the NAB data, the local unit had traded at lows around US73.90c.

The economy, excluding mining, is starting to look a lot stronger, said Shane Oliver, chief economist at AMP Capital.

“When you look at the data ex-mining, business confidence and conditions are clearly on the up,” he said.

“For those who are doubting that non-mining activity is starting to pick-up, that survey clearly indicates that it is,” he said.

Broad strength in the economy would argue strongly against the need for a further interest rate cut, economists said.

NAB said it expected the next move in rates would be up in late 2016.

The RBA has already lowered interest rates twice this year, while Treasurer Joe Hockey announced a confidence boosting budget on May 12, targeting stimulus at small business through tax concessions.

Mr. Hockey told reporters in Canberra he thought the economy was gaining fresh momentum and that it would emerge mostly unscathed from the recent volatility in global markets.

But earlier, news on consumer sentiment was less upbeat.

Consumer confidence plunged 8 per cent to a one-year low in the two weeks to Sunday due to a torrent of worrying overseas reports.

According to the ANZ-Roy Morgan weekly survey of confidence, the mood of consumers fell 3.6 per cent last week and 4.6 per cent the prior week, a trend that if continued would signal stiffer headwinds to economic growth.