The confidence index improved to 2 last month from a revised reading of minus 1 in September, according to a National Australia Bank Ltd. (NAB) survey of more than 400 companies from Oct. 25-31 that was released in Sydney today. The business conditions gauge, a measure of hiring, sales and profits, slid to minus 1 from 2.
The nation’s central bank cut borrowing costs Nov. 1 for the first time in 2 1/2 years, reducing the benchmark rate to 4.5 percent from 4.75 percent, as inflation pressures eased. Employment in Australia has weakened this year as consumers boosted savings amid concern about potential fallout from fiscal problems in the U.S. and Europe.
“The improvement in confidence in the month was consistent with increased speculation that the RBA would cut rates,” NAB Chief Economist Alan Oster said in a statement. There appeared to be “more decisive steps to try to resolve European sovereign-debt problems and more favorable activity data out of the U.S. appeared to have allayed fears of a double-dip recession,” he said.
Stevens said after last week’s rate cut that confidence is “subdued outside the resources sector.” Investors are betting there is at least a 92 percent chance he will reduce borrowing costs next month, interbank cash-rate futures showed before today’s report.
The so-called Aussie dollar surged 9 percent last month against the U.S. currency, regaining most of a 9.8 percent depreciation in September.
Driving Australia’s economy is demand from developing nations including China and India for iron ore, coal and natural gas. That has spurred the nation’s currency, which reached $1.1081 on July 27, the highest level since it was freely floated in 1983.
Australian job notices fell in October for a fourth straight month as global financial turmoil discouraged companies from hiring, a private report showed this week.
“Labor costs growth continued to soften in October, which was consistent with the recent deterioration in employment conditions,” Oster said. NAB predicts the central bank will lower borrowing costs by another quarter percentage point in the first quarter of next year.
Oster noted that while business conditions weakened, building strengthened significantly, suggesting “the Queensland reconstruction effort may be starting to kick in.” The state was devastated by floods and storms early in the year.
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