Australian business confidence deteriorated last month on signs of a slowdown in capital spending as the global economy struggles to accelerate, a private survey showed.
The confidence index slipped to minus 1 from zero in September, a National Australia Bank Ltd. survey of more than 400 companies taken Oct. 18-31 and released in Sydney today showed. The business conditions gauge, a measure of hiring, sales and profits, dropped to minus 5 from minus 3.
The survey said the economy “stumbled” into the fourth quarter as a capital-spending gauge declined to the lowest level since August 2009. Sentiment worsened even after Reserve Bank of Australia Governor Glenn Stevens cut the overnight cash-rate target last month, bringing to 1.5 percentage points his reductions since Nov. 1 last year.
“Key employing sectors -- manufacturing, construction and the broader services economy -- are all in contraction and have been for most of this year,” Innes Willox, chief executive officer of Melbourne-based Australian Industry Group, said in an interview. “There is room for another rate cut. We need to get the rest of the economy going.”
NAB Chief Economist Alan Oster said in the report that “persistently weak confidence is having a material impact on demand.” The central bank’s Oct. 2 rate reduction “failed to improve sentiment, with firms instead likely to be focusing on the reasons for the rate change -- a softening global economy, fiscal tightening, a soft labor market and high Australian dollar,” he said.
Stevens held the benchmark rate at 3.25 percent on Nov. 6, citing a more stable global economy and higher-than-expected domestic inflation. Australia’s unemployment rate in October stayed at a 2 1/2-year high of 5.4 percent.
The “path for inflation remains soft,” according to the survey by National Australia Bank, which sees another 25 basis-point rate cut in February to “mitigate weakness in near-term demand.”