Australian businesses sentiment remained at elevated levels in September, as business conditions improved slightly and despite a deterioration in retailing conditions. In NAB’s latest monthly business survey, the Business Conditions Index moved 1 point higher to 8 while the Business Confidence Index remained at 6.
In August NAB’s chief economist Alan Oster said the bank had changed its view on official interest rates over the next 12-18 months on the basis GDP growth is likely to slow, following a deterioration in conditions in the transport and wholesale sectors. This month NAB’s head of Australian Economics, Riki Polygenis, referred to any strength in business conditions as becoming “increasingly narrow-based”, while conditions in specific parts of the economy were troubling. “The recent deterioration in retail conditions is of particular concern given the implications for consumption, the largest component of domestic demand.”
The NAB Group Economics team remains of the view Australia is due for an economic slowdown which will persuade the RBA to hand out rate cuts in 2017. “Beyond the near-term, we still expect the economy to slow into 2018 as momentum from commodity exports, housing construction and AUD depreciation is lost. Ongoing low inflation combined with a more subdued growth outlook is expected to jolt the RBA into action, cutting the cash rate by 25bp two more times in H2 2017.”