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Australia Business Sentiment Surges to Highest Since ‘11 on Vote

Australian business confidence surged to the highest level since May 2011 as prospects of a change of government lifted sentiment in all industries, a private survey showed.

The confidence index for August jumped to 6 from minus 3, according to a National Australia Bank Ltd. survey released today of more than 600 companies taken Aug. 20 to Sept. 3. The business conditions gauge, a measure of hiring, sales and profits, was minus 6 compared with minus 7 in July.

Tony Abbott’s coalition, which ousted the Labor government of Kevin Rudd on Sept. 7, is pledging to cut red tape and lower taxes to boost the $1.5 trillion economy as a China-led mining investment boom crests. Reserve Bank of Australia Governor Glenn Stevens and his board cut the benchmark rate to a fresh record of 2.5 percent last month to help revive non-resource industries.

“The cash rate cut in August and a lower Australian dollar may have helped sentiment, but it appears more important were political factors,” NAB Chief Economist Alan Oster said in the report. “This appears to reflect expectations of political change and more certainty about future political frameworks.”

The local dollar has declined 11.1 percent this year as central bank easing abroad discourages investors from buying the Australian currency. That has helped ease pressure on industries including manufacturing and services.

Still, “business conditions and capacity utilization remained poor,” Oster said. “Particularly concerning was a slump in employment conditions, the weakest since May 2009, painting a worrying outlook for the labor market.”

Traders are pricing in a 63 percent chance the central bank will keep rates unchanged this year, according to interest-rate swaps data compiled by Bloomberg. The RBA has eased borrowing costs by 2.25 percentage points since November 2011.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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