AAP Finance

Business confidence gets election bounce

By AAP Newswire

Business conditions have continued to deteriorate and now sit below average for the first time in five years, NAB's latest quarterly companies survey shows, but there has also been a post-election jump in confidence.

The bank's second quarterly business survey for 2019 reports a 3.0 point decrease in the business conditions index to +1 for the three months to June 30 but business confidence jumped from zero to +6.

NAB Group chief economist Alan Oster says the confidence boost appears to be influenced by the coalition's federal election win and expectations of a looming interest rate cut.

The survey suggested the downtrend in broad-based conditions since early 2018 reflected a general pattern across most industries and states, with the weakest results in retail and property markets and the most favourable in mining.

While the employment index has registered above average, a decline from its peak last year suggests the pace of growth has likely slowed, the report said.

"Unfortunately, there is evidence of a softening in activity almost everywhere, Mr Oster said.

"Our worry is that the slowdown in activity may translate into a more substantial weakening in labour demand."

According to Mr Oster, a decrease in demand for labour could prompt another cash rate cut by the Reserve Bank.

He said the survey suggested the next quarter's business conditions are unlikely to substantially pick up due to the "significant" loss in momentum.

Meanwhile, confidence was up across all industries except business services and finance, after the bulk of the survey was conducted amid rising expectations of rate cuts between mid May and mid June.

Mr Oster said while the federal election result helped boost business confidence initially, it appears short-lived, petering off by the end of June.

Tasmania was the only state to register negative business confidence.

NAB's second quarterly survey collated data from more than 900 firms from industries excluding the farming sector.