Business outlook remains positive

Although momentum has eased slightly, a recent survey by NAB has revealed that business conditions remain well above the long-term average.

According to NAB’s Quarterly Business Survey, business conditions further improved in the June quarter, rising by 1 point to +11 index points.

The survey results indicate non-mining recovery, seen in recent quarters, has continued, supported by record-low interest rates and a more favourable Australian dollar.

The survey also suggested the non-mining economic recovery is becoming more broad-based, since while significant variation remains across industries, the gap between the best and worst performing industries has narrowed in each quarter of the past year.

Even industries expected to be adversely affected by the depreciation of the Australian dollar, such as wholesale, have shown notable improvement – although the survey showed that services-based industries still tend to be the top performers.

Despite the improved business conditions, however, firms’ confidence slipped a little in the second quarter, with less than half of Australian industries showing an improvement on the previous quarter.

“There was a slight moderation in business confidence, but given the build-up of economic and political uncertainties since the start of the year, this is still a good result,” NAB group chief economist Alan Oster said.

“Additionally, the [survey] actually suggested business confidence lifted towards the end of the quarter.

“Firms are still quite upbeat about the outlook, albeit not as much as they were last quarter… optimism about the outlook should bode well for the labour market and business investment going forward,” he said.

The NAB survey also showed moderate inflationary pressures which, according to Mr Oster, raises the possibility of an August rate cut by the Reserve Bank.

[Related: Business conditions 'unwavering', says NAB

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Francesca Krakue

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