"The cash rate cut in August and a lower Australian dollar may have helped sentiment, but it appears more important were political factors. This appears to reflect expectations of political change and more certainty about future political frameworks."
- Alan Oster, National Australia Bank Chief Economist
Mood among Australian companies soared to its highest in more than two years last month, suggesting a political change and more certainty about the economic outlook, the National Australia Bank said on Tuesday. A gauge of business sentiment rocketed to 6 from -3 a month earlier, while an index of current business conditions improved to -6 from -7 in July, recovering from a 4-year low. The coalition led by Tony Abbott, which ousted the Labor government of Kevin Rudd last week, has already pledged to cut red tape and decrease taxes in order to boost the $1.5 trillion economy, which is suffering for waning China-led mining investment boom.
The Australian Dollar has already lost 11.1% this year as policymakers are cut borrowing costs discouraging investors from buying the Aussie. Measures introduced by the RBA helped ease the pressure on industries including manufacturing and services sectors. Even though the economy expanded more than expected during the second quarter, falling commodity prices and weak demand from Australian biggest trading partner, will lead to a decline in the number of new mining projects, and as a result, companies will fire more workers. While business mood improved, the Treasury has already warned they expected wider budget deficit in the next three years, and downgraded its growth forecast for this fiscal year.
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