A survey done in recent time indicates business confidence of the Australian companies has deteriorated. In the month of September, both business condition and confidence dropped to the lowest since election of the current Abbott government.
The survey was done by National Australian Bank. It shows business confidence was +7 in August. In September it fell to +5. The average of business conditions seems to be tending to +5. Although unpromising, the average is better than the last year’s average.
A representative of National Australian Bank described the situation “At this level, business conditions are still well up on 2013 averages, but below the long run average of the series.”
The question that’s bound to occur is why business confidence matters so much. Experts believe readings like the NAB business survey could provide an overview of how top and mid tier businesses are performing in both short and medium term. The survey also helps pointing out the pattern of investment in Australian business sector.
The survey data reveal mining and wholesale are two sectors that posted negative confidence in September. The volume of trade has been satisfactory but profitability index has dropped. Currently, the status of forward orders is not too bright and that in turn implies holistic improvements are not on the horizon.
Annette Beacher, head of Asia-Pacific research at TD Securities said the recent decline in Australian dollar sparked confidence amongst businesses. In early July, Aussie dollar was 95 US cents. Last week it slid to 86.50 US cents. Currently the currency is being traded 88 US cents. But there seems to be no bright future with lower Australian dollar.
The employment growth has been weak. Coupled with weak growth in wages, it contributed to the decline of business confidence and conditions. Utilities and transport is the only sector to report improvement in business conditions. NAB’s assessment is declining oil prices and the dismissal of the carbon tax have increased profitability.
Alan Oster of NAB summarized the whole situation saying “the effects of soft national income growth – a function of lower commodity prices, excess capacity and cautious spending behaviour – are being felt across the economy.”