Australia business conditions hit 2½ year lows in August as job outlook worsens
AUSTRALIAN business conditions fell to the lowest in two-and-a-half years in August with the outlook for jobs taking a hit, a survey showed on Tuesday (Sep 10), while there was mixed news on inflation pressures subsiding.
The survey from National Australia Bank (NAB) showed its index of business conditions fell three points to +3, the lowest since January 2022 and below its long-run average.
The more volatile business confidence index dropped five points to minus 4, the lowest so far this year.
Within the conditions measure, the index of employment plunged from +7 to +1 after a brief uptick in July, suggesting weak sales and profitability could be feeding into labour demand.
“That suggests the period of very strong private sector labour demand seen throughout the post-Covid period may be coming to an end,” said NAB chief economist Alan Oster.
“Conditions are now fairly clearly below average compared to the history of the survey which reflects the weakness seen in the private sector broadly as the economy has slowed.”
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The Reserve Bank of Australia (RBA) has held interest rates steady at 4.35 per cent since November, judging the current rate restrictive enough to bring inflation back to its target band of 2 to 3 per cent while preserving the employment gains.
However, underlying inflation stayed sticky at 3.9 per cent last quarter, a reason that policymakers have all but ruled out an interest rate cut this year.
Markets are still wagering there is an 80 per cent probability that the RBA could cut in December, in part due to expectations the US Federal Reserve will ease policy this month, joining most other major central banks.
The survey found some mixed news on the inflation measures, with growth in labour costs easing to a quarterly rate of 1.7 per cent from July’s 2.4 per cent which was boosted by the increase in minimum wages in the month.
However, gains in purchase costs remained elevated at 1.6 per cent in the quarter, up from July’s 1.3 per cent, while retail prices grew at 1.2 per cent for the three months ending August, up from 1 per cent in July.
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