Menu
Menu
Business conditions slump to four-year low

Business conditions slump to four-year low

Business conditions have slumped to their lowest level in four years showing that the Australian economy is stuck in a rut.

The Australian economy is stuck in a rut, with business conditions tumbling to their lowest level in four years despite low interest rates and a falling Australian dollar.

Business conditions in June were at their weakest level since May 2009, thanks to softer trading conditions and profitability, according to the National Australia Bank monthly business survey.

The mining, retail and manufacturing sectors were the hardest hit while the finance, business and property sectors saw solid improvement.

ANZ economist Dylan Eades said the weak survey result suggested that domestic economic conditions were soft.

He said it was concerning that lower interest rates, which have been cut by two per cent since 2010, along with the falling Australian dollar had little impact in boosting non-mining sectors in preparation for the wind-down of the mining boom.

"The continued decline in the mining sector is consistent with the data we are seeing that suggests that investment has already peaked or is at its peak and certainly some of the anecdotal evidence in relation to job cuts and firms scaling back their investment plans," Mr Eades said.

"But we haven't really seen a pick-up in those non-mining sectors.

"It's fair to say that given the amount of stimulus that's been put into the economy, both through lower interest rates and the lower Australian dollar, it's not really gaining the traction that a lot of people may have been expecting.

"The upturn has been a lot less significant than probably what the RBA was expecting."

CommSec economist Savanth Sebastian said lack of consumer spending, tough trading conditions and margin pressures were pushing businesses to focus on cost management rather than investment.

He said businesses were also constrained by uncertainty ahead of the federal election.

"The lack of consumer activity is ensuring that the business sector remains on the sidelines," Mr Sebastian said.

"Given the pullback in mining investment, another rate cut may be the only option the Reserve Bank has to try inspire a pick-up in confidence."

Shadow Treasurer Joe Hockey said the federal government should stop procrastinating and call the election to give more certainty to business.

"The uncertainty about the election timing is clearly having an impact on an already fragile Australian economy," he said.

According to the NAB survey, business conditions in June were down to -8 from -4 in May.

The survey saw the Australian dollar drop from 91.16 US cents at 1130 AEST when it was released to 90.85 cents within eight minutes.

It also encouraged NAB economists to bring forward their forecast for another cash rate cut to August instead of November.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

Join the newsletter!

Error: Please check your email address.

Tags ANZAustralian dollarAustralian economy

More about ANZ Banking GroupCommSecNABNational Australia BankRBA

Show Comments

Market Place

Computerworld
ARN
Techworld
CMO