Australian business confidence unwinds most of the Turnbull bounce: ANZ Research

 Australian business confidence unwinds most of the Turnbull bounce: ANZ Research
Australian business confidence unwinds most of the Turnbull bounce: ANZ Research

GUEST OBSERVER

Business confidence slipped in October, offsetting most of the gains made in the previous month in response to the new Prime Minister. Although it is still early days for the new government, this is a disappointing result. On the other hand, current business conditions remained at their high level, reflecting the general improvement in the non-mining economy.

After business confidence rose sharply in September, we noted the importance for both the government and the broader economy of sustaining this increase. Today’s data suggest that this is not going to be a straightforward task. However, the fall is somewhat surprising given solid increases in consumer confidence and in the government’s poll results over the same period.
 
 Australian business confidence unwinds most of the Turnbull bounce: ANZ Research

That said, the fall in the NAB measure of business confidence brings it broadly back into line with the Roy Morgan business confidence series, which had been weaker previously.

It appears that Australian businesses are still sensitive to overseas conditions. Australian business confidence has tracked the softening in the global PMI which is a good proxy for global growth (Figure 2).

In more positive news, current business conditions remained elevated and are supportive of further solid growth in the non-mining economy in the near term (Figures 3 and 4).
 
 Australian business confidence unwinds most of the Turnbull bounce: ANZ Research

The details were also encouraging. While profitability has eased a little, it remains at a high level and bodes well for near-term employment growth (Figure 4). Capacity utilisation continued to slowly improve, but our view is that ample spare capacity remains in the economy, limiting upward pressure on inflation, despite the risk that we see some belated pass-through from the lower AUD to tradables inflation (Figure 7). 
 
 Australian business confidence unwinds most of the Turnbull bounce: ANZ Research
 
 Australian business confidence unwinds most of the Turnbull bounce: ANZ Research
 
 Australian business confidence unwinds most of the Turnbull bounce: ANZ Research
 

Daniel Gradwell is economist and Justin Fabo is senior economist ANZ Research.

Tags: 
Prime Minister Market News

Community Discussion

Be the first one to comment on this article
What would you like to say about this project?