SYDNEY: A measure of Australian business confidence fell to its lowest since late 2013 in February as a cut in interest rates seemingly failed to dispel uncertainty over the economy and government policy.
National Australia Bank’s monthly survey of more than 400 firms showed its index of business confidence dropped three points to zero in February, even as its measure of business conditions held steady at +2.
The drop would be a disappointment to the Reserve Bank of Australia (RBA) which cut rates to record lows of 2.25 per cent early in February in part to help revive “animal spirits” in the business community.
“Confidence also fell across all industries except manufacturing and wholesale, suggesting common factors such as political and broader economic uncertainty may be at play – perhaps the rate cut acted as a stark reminder of the significant headwinds facing the economy,” said NAB’s chief economist Alan Oster.
The survey found sharp declines in mining and retail confidence, which outweighed improvements in manufacturing and construction. “We still see another rate cut in coming months – most likely May but the April meeting is live and data-dependent,” added Oster.
Futures markets imply around a 30 per cent chance of an easing in April, rising to 80 per cent for May.
The survey’s measures of business conditions were relatively steady in February. Its index of sales held at +5, with profitability at +2 and employment up a tick at 0. Forward orders added a point to +2 thanks as an improvement in transport and utilities, and construction offset a setback for mining amid falling resource prices.
Inflationary pressures were restrained with firms reporting sluggish wages growth and only a small increase in prices at the retail level.