Australian business conditions were robust in the first half of 2018 and a cyclical-peak was reached in April of that year. Although they remained well above average for some months, readings began to slip and by the end of 2018, they had dropped to below-average levels. Forecasts of a slowing domestic economy began to emerge in the first half of 2019 and the last few months’ readings from NAB’s survey have largely been at levels which are consistent with these forecasts.
According to NAB’s latest monthly business survey of 400 firms conducted in the latter half of September, business conditions continued to bump along at below-average levels. Since late 2018, NAB’s conditions index bounced between 3, which is on the low side of normal and 7, which is about average. The index then broke through this lower bound in May 2019. The latest reading registered 2, a modest rise from August’s figure of 1.
Largely in line with NAB’s condition index, the latest reading of the confidence index slipped from August’s reading of 1 to 0 in September, well below its long-term average reading of 6. Typically, NAB’s confidence index leads the conditions index by approximately one month, although some divergences appear from time to time.
ANZ senior economist Catherine Birch noted the improvement in business conditions was from a low base while the confidence index was at its lowest reading in six years. “There were small improvements across a range of indicators but most remain well below their long-run averages…” She added recent “rate cuts and tax cuts are not having the expected…impact on the private sector in the near-term.”