Australian business confidence slumped to an eight-month low and remained “extremely poor” in the key mining industry as interest-rate cuts and a weaker currency failed to encourage companies, a private report showed.
The confidence index for July fell to minus 3, according to a National Australia Bank Ltd. survey released today of more than 400 companies taken July 25-31. The result was the worst since November 2012. The business conditions gauge, a measure of hiring, sales and profits, held at minus 7.
“Forward indicators provide little hope that demand will improve in the near term, with forward orders, stocks and capacity utilization all remaining well below long-run average levels,” NAB Chief Economist Alan Oster said in the report. “It is also possible that uncertainty over timing of the federal election kept businesses wary during the month.”
The survey underscores the challenge for Prime Minister Kevin Rudd as he pitches for another term based on economic management ahead of the Sept. 7 election. Reserve Bank Governor Glenn Stevens and his board reduced the overnight cash-rate target to a record-low 2.5 percent last week, even as the local dollar has fallen about 14 percent since early April.
“Confidence remained especially lackluster in mining, where businesses seem pessimistic about the outlook for investment in the face of slowing global demand and softening commodity prices, despite a lower Australian dollar,” Oster said. “After showing signs of improvement at the beginning of this year, construction firms again seem worried about the poor outlook for investment. Not even a falling dollar has been able to revive hopes for manufacturers.”