Australia: Business conditions come off the boil, but still hot - NAB

Analysts at NAB note that Australian business conditions index declined by 6pts to +14 index points, although it remains well above its historical average.

Key Quotes

“The business confidence index fell by 2pts to +7 index points, and it is now only just above its historical average of 6 index points.”

“According to Alan Oster, NAB Group Chief Economist “Not only do the well above average business conditions continue to point to robust business activity in Australia, it is also broadly based as conditions were equal to, or above, their historical average in all industries.”

“Leading indicators in the survey softened this month, with capacity utilisation easing slightly, while forward orders gave up much of last month’s spike.”

“Conditions are strongest in mining in trend terms, and are equal to, or above, their historical average in all industries.”

“The Survey results for March do not change our outlook for the Australian economy. The strength in business conditions and leading indicators are consistent with stronger economic growth in coming quarters and the Survey employment index is pointing to strong jobs growth which should reduce unemployment, and put gradual upwards pressure on private sector wages. We expect that towards the end of this year the RBA will be in a position to start increasing the current emergency low policy rate although it will depend heavily on the data flow – particularly for wages and inflation - and the risk is that any action by the RBA will be delayed” Mr Oster said.