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Australian Business Confidence, Job Ads Drop in April as Rates Cool Demand

Australian business confidence fell in April for a second straight month and advertisements for job vacancies dropped for the first time since January, a sign the central bank’s interest-rate increases may cool domestic demand.

The confidence index slipped 3 points from March to 13, according to a National Australia Bank Ltd. survey of more than 400 companies between April 23 and April 30 and released in Sydney today. Vacancies advertised in newspapers and the Internet fell 1.2 percent from March, a separate report by Australia & New Zealand Banking Group Ltd. shows.

Signs that business sentiment is cooling from its highest level in almost eight years come after two former policy makers said central bank Governor Glenn Stevens has raised interest rates too quickly. Still, if the current level of confidence holds, the economy will expand at an annual rate of 4 percent in the first half, NAB said.

“While business outcomes, confidence and new orders all eased back in April, the survey readings still point to an economy travelling with a good deal of momentum,” said Alan Oster, chief economist at National Australia in Melbourne.

The Australian dollar traded at 89.99 U.S. cents at 11:45 a.m. in Sydney from 90.07 cents just before the reports were released. The two-year government bond yield fell 3 basis points to 4.83 percent. A basis point is 0.01 percentage point.

Mining Boom

Stevens, citing signs that the economy is accelerating as companies such as BHP Billiton Ltd. and Chevron Corp. stoke a record mining investment boom to meet Chinese demand for iron ore, coal and energy, boosted the benchmark lending rate last week for the sixth time in seven meetings.

“They could have paced themselves a bit more and not been so keen,” former RBA Governor Bernie Fraser said in a phone interview yesterday. “The Reserve Bank will wait for a number of months, given what’s happening in Europe and with the prospect of another global slowdown very real.”

National Australia’s business conditions gauge, a measure of hiring, sales and profits, fell 5 points to 8.

Stevens said last month that his adjustments, which are the biggest increases in interest rates by any Group of 20 central bank, are appropriate given the economy is expanding at or close to trend.

Gross domestic product growth will accelerate from 3.25 percent this year to 3.75 percent in 2011 and 4 percent in 2012, a pace that is higher than the economy’s “longer-run average rate,” the central bank said on May 7.

GDP Forecast

Three months ago, the central bank predicted GDP would increase 3.5 percent in 2011. Its forecast for this year was unchanged.

National vacancies advertised in newspapers and on the Internet averaged 160,660 per week in April, today’s ANZ Bank report showed. Newspaper advertisements fell 0.7 percent, and Internet notices dropped 1.3 percent.

“The modest decline in job advertisements in April isn’t surprising in the wake of two successive rate hikes,” ANZ Chief Economist Warren Hogan said.

“Although there has been some slowing in the monthly growth figures in recent months, trend growth in job advertisements is above its long-term average, suggesting that demand for labor remains relatively healthy,” Hogan said.

Employers added 22,500 jobs last month, according to the median estimate of 22 economists surveyed by Bloomberg ahead of a report on May 13. That’s in addition to the 19,600 jobs created in March, which kept Australia’s unemployment rate at 5.3 percent. That’s almost half the level of the U.S. and Europe.

A gauge of forward orders dropped to 2 points from 10, and employment slid 4 points to 8, today’s NAB report shows.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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