Business conditions highest in two years | Ralph-Lauren

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Business conditions have risen to their highest levels in two years, suggesting strong momentum in Australia’s economic recovery.

However, the National Australia Bank’s monthly business survey also found confidence declined in December, which likely reflected the COVID-19 outbreak in Sydney.

But NAB chief economist Alan Oster said it was a positive result for the survey overall.

In December, business conditions rose seven points to 14 index points, a level last seen in September 2018, while confidence fell nine points to four index points.

“The improvement in conditions is broad-based and, importantly, driven by a big move back into positive territory for employment conditions,” Mr Oster said, releasing the survey on Wednesday.

The survey’s employment index showed a sharp 13-point turnaround in the month to nine index points. The trading sub-index was also up five points, but profitability edged down two points.

All three sub-indices are above average for the first time since early 2019.

“The rise in the employment index is very encouraging and is consistent with the big gains we’ve seen in the official jobs data,” Mr Oster said.

Consumers have also been buoyed by the decline in the unemployment rate.

The ANZ-Roy Morgan consumer confidence index rose 2.3 per cent in the past week, recouping its losses seen either side of the Christmas and New Year holidays when parts of NSW and Brisbane were in COVID-19 lockdown.

ANZ head of Australian economics David Plank said the improvement in consumer confidence – a pointer to future household spending – comes on the back of the drop in the unemployment rate to 6.6 per cent in December.

“The absence of community transmitted COVID-19 cases for a number of days and the relaxation in border rules has likely also supported confidence,” Mr Plank said.

Separately, the Westpac-Melbourne Institute leading index – which indicates the likely pace of economic activity three to nine months in the future – eased slightly in December after its recent strong recovery.

“While we may have seen the peak in the growth rate of the index, it is still signalling healthy above trend growth for the Australian economy in the first half of 2021,” Westpac chief economist Bill Evans said.

“This is consistent with Westpac’s view that the economy will grow by four per cent in 2021.”


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