- Alan Oster, NAB Chief Economist
Australia's business conditions dropped sharply in November, while confidence declined to the lowest level in 16 months, according to the National Australia Bank. The NAB Business Confidence Index fell to 1, down from a revised 5 in October, a survey of over 400 companies showed. The business conditions indicator, a measure of employment, sales and profits, fell to 5 down from 13, driven by a decline in all three components. The retreat in November's NAB indices were largely concentrated in retail, manufacturing and service industries, according to the survey results, with companies being uncertain about outlook for their industries.
Amid poor economic data and tumbling prices for some of Australia's major resource exports, financial markets have moved decisively recently to price in at least one more cut to 2.25%. National Australia Bank also joined the growing club of banks that expect the Reserve Bank of Australia will slash its 2.5% official cash rate as economic growth disappoints. NAB is now predicting a 25-basis-point interest rate cut by the RBA in March and another in August next year. NAB has downgraded its economic growth outlook for the current financial year from 2.9 down to 2.5%, and also slashed its 2015-16 forecast to 3%. The bank also projects a higher peak in the jobless rate at 6.75%, which would be a considerable increase from the 6.2%.
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