Confidence began to rise even before Tony Abbott won the election.
Photo: Alex Ellinghausen
Business confidence has hit its highest level since May 2011, with lower interest rates and the prospect of the Coalition winning government boosting most sectors of the economy.
The latest NAB monthly business survey was taken in the week prior to the federal election, but the bank’s chief economist Alan Oster still believes the confidence lift can be attributed to political factors.
However, Oster has raised questions about whether the lift in confidence will be lasting or simply an election-linked sugar hit.
“Confidence lifted in all industries and states in August. That said, confidence is now only back to average levels and much will depend on whether the current bounce is maintained or erodes away in the face of poor business conditions.”
Business conditions lifted slightly in August but NAB describes them as being “unchanged at soggy levels”.
While confidence surged in mining, construction and property and business services, actual business conditions remain weak in mining, manufacturing, construction and the wholesale sales sector.
Forward indicators also contain some worrying signs, with forward orders and capacity utilisation remaining well below long-term averages.
“Particularly concerning was a slump in employment conditions (weakest since May 2009), painting a worrying outlook for the labour market,” Oster reported Tuesday morning.
“The persistent weakness in business conditions experienced throughout 2013 highlights the inherent weakness in the domestic economic environment.”
One positive from the report is an uptick in profitability, which could be a sign that the lower Australian dollar is starting to give some sectors a boost.