Australian business confidence slumped in February to a five-month low as the currency’s strength and the central bank’s unexpected decision to pause interest-rate cuts weakened sentiment, a private survey showed.
The confidence index fell last month to 1, the lowest level since September, from 4 in January, a National Australia Bank Ltd. (NAB) survey of more than 500 companies taken Feb. 20-24 and released in Sydney today showed. The business conditions gauge, a measure of hiring, sales and profits, rose to 3 from 2.
Reserve Bank of Australia Governor Glenn Stevens lowered the overnight cash rate target by a quarter percentage point on Nov. 1 and Dec. 6, before keeping the benchmark unchanged for the past two meetings at 4.25 percent. Employment in Australia stalled last year as the currency’s climb hurt non-resource companies and house prices slumped by a record.
“The persistent strength in the Australian dollar and the decision by the RBA to keep rates on hold in February may have weighed on the confidence of some sectors,” NAB Chief Economist Alan Oster said in a statement. Better conditions were “supported by a solid pick up in trading conditions and a slight rise in profitability, partly offset by a softening in employment conditions,” he said.
The local dollar has risen about 3 percent this year and reached a six-month high of $1.0845 last month after the RBA unexpectedly paused at its Feb. 7 meeting. The currency bought $1.0529 at 11:06 a.m. in Sydney today.
Driving Australia’s economy is a A$456 billion ($480 billion) pipeline of investment in resource projects by companies such as BHP Billiton Ltd. (BHP), the world’s largest mining company.
Business confidence deteriorated in most industries last month “except mining, where it rose solidly,” NAB’s report said. “The most significant deterioration in confidence occurred in retail -- a fall of 8 points to return retailing to the equal lowest reading and reversing a much more upbeat tone last month.”
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