Confidence among Australian businesses rebounded in July after deteriorating steadily over the previous two months, a survey by the National Australia Bank (NAB) showed Tuesday.
At the same time, business conditions worsened in July, trending at the lowest level in three years, in the face of poor trading and profits, the survey revealed.
The business confidence index rose sharply to 4 in July from -3 in June and -2 in May. "It appears recent talks in Europe have provided some relief to financial markets, which is resonating through to an improved outlook for global demand," NAB said. "Sentiment is also likely to have picked up given carbon tax 'hurdle' has been passed."
The report noted that the survey was conducted after positive comments made by the European Central Bank President Mario Draghi, which appear to have pacified financial markets and increased expectations of further policy stimulus in both Europe and the U.S.
The business conditions index, meanwhile, fell to -3 from -1 in the preceding month. The gauge for trading fell to -3 from 3 in June, while the indicator for profitability dropped to -7 from -1. These were partly offset by a modest pick up in employment conditions.
Forward orders, capacity utilisation and stocks all remain lacklustre, the report noted. Conditions weakened across a majority of industries, particularly in retail and wholesale, as government compensation payments provided to households unwind.
The Reserve Bank of Australia has cut interest rates by a cumulative 125 basis points since November 2011, but this do not appear to have fundamentally increased businesses' appetite for credit, NAB said.
The bank expects RBA to hold rates until mid 2013, and then raise it moderately. The Australian economy may not need a rate cut in the near-term, according to NAB.
In its latest Monetary Policy Statement released on August 10, RBA scaled back its economic forecasts and warned that sustained gains in the currency could have a more contractionary effect on the economy than was thought.
The GDP is now projected to rise 3.5 percent in the year through December 2012, slightly faster than the 3 percent predicted in the May. For the year ending December 2013, GDP is seen expanding 2.5-3.5 percent.
by RTT Staff Writer
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