- Alan Oster, NAB chief economist
Business confidence in Australia rebounded in March from its near two-year lows due to February's cash rate cut and an end to federal government leadership uncertainty. According to the NAB's survey, which covers 400 companies across most sectors, confidence among Australian businesses improved to 3 index points, following a decline to zero in February. Meanwhile, the NAB Business Conditions Index soared to 6 from 2, the highest level since October. March increase in confidence in the mining sector appeared to be the major upside contributor to NAB's overall measure, but the retail sector's score slid into negative territory for the first time in two years as uncertainty over government policy made consumers cautious, NAB reported. Mining and manufacturing still remain weak points, despite an unexpected bounce in confidence for the mining sector. Yet another promising result was a 5 point advance in the survey's measure of capital spending plans to +9, marking the highest reading since 2011.
NAB predicts another interest rate cut in May, as the RBA tries to balance its concerns over weak non-mining investment and overheating property markets. Yet, the increase in confidence would be a sigh of relief to the central bank, which slashed rates to record lows of 2.25% in February partly aiming to revive morale in the business community.
© Dukascopy Bank SA