Australian business confidence tumbled in May for a third straight month, led by a slide in sentiment among mining companies after the government announced plans to introduce a 40 percent tax on resources profits.
The confidence index dropped 8 points from April to 5, below its long-run average of 7 points, according to a National Australia Bank Ltd. survey of more than 500 companies between May 24 and May 31 and released in Sydney today.
Today’s report adds to evidence suggesting business sentiment is being buffeted by global financial market turmoil triggered by Europe’s debt crisis, the central bank’s decision to boost borrowing costs last month for the sixth time since October, and government plans to increase taxes on mining profits. Central bank Governor Glenn Stevens kept the benchmark rate at 4.5 percent last week for the first time since February.
“Confidence fell sharply in mining, presumably partly in response to the announcement of the resource super profits tax,” said Alan Oster, chief economist at National Australia in Melbourne.
The Australian dollar traded at 81.76 U.S. cents at 11:32 a.m. in Sydney from 81.74 cents just before the report was released. The two-year government bond yield was unchanged at 4.39 percent.
Oster cut National Australia’s forecast for gross domestic product growth, partly because of today’s survey result, to 2.75 percent in 2010 from a previous prediction of 3.5 percent. GDP will rise 3.5 percent in 2011, less than the 4.25 percent previously expected, he said.
Australia’s economic growth slowed in the three months to March 31 to 0.5 percent from 1.1 percent in the previous quarter, a report showed June 2. National vacancies advertised in newspapers fell 6.5 percent in May, a report by Australia & New Zealand Banking Group Ltd. showed yesterday.
Governor Stevens, citing concerns about Europe’s debt turmoil, held the benchmark lending rate unchanged on June 1, after boosting the rate by 150 basis points between early October and May.
Australia’s monetary policy setting is now “appropriate for the near term,” he said.
National Australia’s business conditions gauge, a measure of hiring, sales and profits, fell 2 points to 6.
“This broad-based reversal in confidence partly reflects disturbances on global financial markets, including concerns about sovereign debt, and associated declines in Australian equity prices,” Oster said.