As of April 12th, the National Australia Bank (NAB)’s Monthly Business Survey supports the idea that the Australian business environment has strengthened. In particular, while the current overall business outlook stays relatively the same, recovery within non-mining sectors appears to have become more broad-based. Furthermore, there are no additional cash rate cuts on the forecast.
The highlights of the NAB survey include:
Business conditions have reached levels as high as those last seen in 2008. In March, overall business conditions jumped up to +12 index points, substantially above the average of +5 points. Overall business conditions include profit, trade opportunities and increased employment.
When we review the changes by industry, service industries are the best performers, although positive changes have been seen in other industries as well. Construction has closed the gap, manufacturing is on an upward trend, and transport is doing well in response to lower fuel prices. Mr. Alan Orster, NAB Chief Economist, stated, “It is particularly encouraging to see the employment index point towards ongoing strength in the labour market, supported by signs the recovery is broadening into previous trouble spots such as manufacturing.” Areas still falling short include mining and retail.
Business confidence has seen a boost of 3 points. The index is currently at +6. Orster noted, “the lift in business confidence suggests a lower risk of contagion from global uncertainty, but also provides some assurance that gains in conditions will be sustainable.”
As of March, there have been reports of a “fall in spare capacity.” This gives indication that there haves been additional improvements to Australia’s economic health. Tighter capacity, improving confidence levels, and good profitability are encouraging, though forward orders left more to be desired.
While the Australian economy outlook stays fundamentally the same, the improvements in non-mining are moving the recovery forward. The RBA is still set to extend the hold on interest rates. Faltering in the non-mining sector recovery may trigger cut rates.