- Alan Oster, the bank's Melbourne-based chief economist
RBA's comments about a period of stable interest rate and exchange rate as well as less dovish comments from Glenn Stevens failed to boost business confidence in February. According to the National Australia Bank, a gauge of business mood fell to 7 last month from 9 a month earlier. At the same time a measure of business conditions slipped to a neutral level from 5 in January, reverting back to levels previously seen several months ago, when strong Aussie was causing headaches for companies. The weakest spots were sales and unemployment, suggesting the situation in the labour market will not pick up any time soon, as Australian entrepreneurs are still reluctant to hire new staff amid current economic conditions.
This year's first reading was the highest in almost three years and raised hopes for a turning point in the resource-rich economy that is stuck in the transition phase, as investment in the mining sector began to wane. While Australia is in its 23rd straight year of expansion, the growth is slowing down. In the final quarter of 2013 the economy expanded just 2.8% from 4% seen during early 2012. The unemployment rate has risen to 6%, hitting the highest level in more than a decade, and according to the RBA the improvement will not come soon. A further deterioration in the business conditions is suggesting below-trend growth in the first three months of 2013, with GDP expanding around 2.75% and further weakness in the second quarter.
© Dukascopy Bank SA