Business confidence continues to rise

Business confidence in Australia has risen for the second month in a row, despite risks and volatility in the global economy.

The NAB Monthly Business Survey for June suggested that conditions were improving, with an increase of five points to +11 on the index for the month – the highest level since October last year.

Although business confidence is increasing, the survey found that companies are generally unwilling to hire new staff, with NAB predicting unemployment to peak slightly lower than expected at 6.25 per cent. However, it will remain at this level for quite some time.

“The current reading for employment in the survey would be consistent with annual growth in employment of around 170,000 per annum, or around 15,000 jobs per annum over the next six months,” the bank said in a statement.

However, it is not enough to see the unemployment rate remain at current levels.

NAB asked businesses what return they would need before committing to new investment, with the response coming in at 13 per cent – still high compared to the low returns available within in the current market.

Industries outside of the mining sector remain sluggish and there is still a struggle to offset this with growth in non-mining sectors.

According to the survey, the federal government’s small business package announced in this year’s Budget has contributed to improved confidence within the retail sector. However, price inflation across the sector has decreased from 1.2 per cent in May to 0.5 per cent.

Further afield, the Chinese share market correction and the possibility of Greece exiting from the eurozone do not appear to have significantly impacted business plans in Australia. This is even despite international investment in mining decreasing and domestic demand for commodities remaining flat.

The volatility in the global markets has been offset by strong housing prices – particularly in NSW and Victoria – as well as low interest rates and the falling Australian dollar.

NAB forecasts that the Reserve Bank has now stopped cutting rates and is predicting the next move will be a rate increase towards the end of 2016.

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Liz Shaw

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