"We noted last month that a more pronounced lift in confidence was needed following the last RBA rate cut, and in that context the May result is encouraging"
- Alan Oster, NAB chief economist
Australian businesses felt much more upbeat in May as the Reserve Bank of Australia made operating conditions easier by cutting interest rates to a record low, according to National Bank of Australia. Business conditions edged higher by three points to seven points in May, hitting the highest level since October, while business confidence climbed 4 points to 7 points, the highest since August. However, despite some signs that record low interest rates are starting to have a positive effect, the Australian policy makers are still struggling to rebalance economic growth toward non-mining sectors after a sharp decrease in mining investment and commodity prices following a decade-long mining boom. Yet, NAB believes the Reserve Bank of Australia has finished its current easing cycle, after two 25-basis point cuts this year left the official cash rate at a record low 2%. NAB has also revised its fiscal 2015 GDP forecast to 2.4%, up from 2.3%, but lowered its fiscal 2016 GDP forecast to 2.6% from 2.9%. Its fiscal 2017 GDP forecast remains unchanged at 3%.
Separately, the change in Australian job adverts was flat in May following a revised 2.5% gain in April, adding to signs of ongoing weakness in labour demand ahead of Thursday's official employment report.
© Dukascopy Bank SA