Wednesday, July 11, 2012
The latest business survey by National Australia Bank shows that conditions and confidence both remained marginally negative in June, but with large divergences across states and industries.
The balance of positive and negative responses in the survey showed that, across the nation, business conditions in June improved to -1, up from -4 in May. But business confidence went down a tad, from -2 to -3.
The bleakest detail was that the balance of companies reporting good forward orders shrank to the lowest level in three years. NAB chief economist Alan Oster said this was "driven largely by a heavy fall in manufacturing orders".
Mr Oster estimates that the Australian economy was travelling well below trend speed in the June quarter, with underlying GDP growing at an annualised 2.25 to 2.5 per cent.
In the June quarter, conditions deteriorated in every industry except retailing. Mr Oster said the standout pick-up in retailing "possibly reflects increased trading as a result of the recent spate of government cash payments to households".
Retailing conditions picked up from -11 in May to -1 in June. Conditions in the construction industry also improved after an exceptionally bad month in May, the balance of survey responses improving from -29 to -16.
Mining had the unusual double of having the strongest business conditions (+14) but the weakest business confidence (-14). Mr Oster attributed the latter to a combination of a weaker outlook for commodity prices and "trepidation over the MRRT [mining tax] and carbon tax".
Confidence picked up in the finance sector (from -10 to +2) after the Reserve Bank cut interest rates a second time. But it fell sharply in manufacturing (to -10), roughly matching the negative reports on actual conditions for the sector (-12).
But the most startling difference in the survey was between the responses from Western Australia and everywhere else. In June, WA business conditions were rated as +27, while the next strongest state was New South Wales with +1.
Victoria (-10) replaced Tasmania (-5) as the state with the worst business conditions, although Queensland (-7) rated lowest on business confidence. No state, not even WA, recorded positive business confidence last month.
Mr Oster said NAB expected the Reserve Bank to make one more rate cut this year, possibly in September, to offset the impact of the sharp budget tightening. But he expects activity to gradually pick up ahead, predicting growth of 3.3 per cent in 2013.