Australia: Business Confidence Worsens As Construction Orders Drop

Confidence in Australian business was recently at its lowest level since last year, raising concerns about the state of the economy, the Wall Street Journal reports.

The results from National Australia Bank’s (NAB’s) monthly business survey shows that business confidence fell two points to +5 in September – the lowest it has been since August 2013, when the country’s currency was high, its car industry failing, and upcoming elections were causing political uncertainty.

Actual business conditions during September 2014 were reportedly down to one point, and profitability was at zero. What’s more, unemployment remains at its highest level for ten years and is continuing to grow.

Alan Oster, the NAB’s chief economist, explained that many companies are experiencing a soft operating environment that is bringing confidence levels down.

“The effects of soft national income growth […] are being felt across the economy,” he stated. “This has been reflected in most industries, with conditions falling in the month for all but transport and utilities and recreation and personal services.”

Furthermore, whilst more goods are being exported by volume – with iron ore and coal accounting for 30% – their commodity prices have “declined considerably”. Saul Eslake, chief economist at Bank of America Merrill Lynch, predicts that this will weigh on both investment and employment outlooks.

The decline in confidence was met with a significant reduction in construction orders, indicating that the ‘boom’ in residential building was slowing down, explains the Sydney Morning Herald. This was largely due to suggestions from the Reserve Bank to limit investment in the housing market.

NAB’s economists predict that the Reserve Bank is likely to hold off raising rates until 2016 at the earliest.