Australia's business confidence declines in February, despite RBA's rate cut

Australia's business environment deteriorated last month, with economic slowdown and political uncertainty both contributing to the decline in confidence among Australian businesses. According to a widely-watched monthly business survey conducted by National Australia Bank, business confidence dropped by 3 points to zero in February, while the NAB Business Conditions Index remained unchanged at 2. On index, a reading above zero indicates improving conditions, while a reading below zero shows deterioration in conditions. Confidence in the mining and retail sectors declined last month, while manufacturing and construction sectors both saw an improvement. Companies reported lower employment levels, while profitability remained unchanged at low levels. 

Back on February 3, the Reserve Bank of Australia slashed its OCR to a new record low of 2.25%, despite the fact that the RBA believed that monetary policy becomes less effective at lower rates. One of the biggest headache for the central bank over the last few years has been the effect of much lower commodity prices on gross domestic income, and the impact on jobs and growth. NAB is predicting one more interest rate cut in response to the weak level of business and consumer confidence and below average economic growth. The bank also says there is around a 40% chance of a second further rate cut to 1.75% if the jobless rate keeps climbing.