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Economy’s transition ‘on track’, says NAB

Conditions are right for ‘s rebalancing away from resource-related investment. Photo: AFRBusiness confidence rebounded in November and conditions remain above average, suggesting ‘s economic transition is on track, according to National Bank.
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NAB’s latest monthly business survey found sentiment improved last month, after dipping in October. However, the 5 index points reached in November is still below the 6 points registered when Malcolm Turnbull rolled Tony Abbott in the September leadership spill.

Conditions for doing business, however, remain steady, rating 10 points for the fourth consecutive month, which is double the long-term average of 5 points and five times the post-global financial crisis average of 2.

NAB’s chief economist Alan Oster said low interest rates and the Aussie dollar’s depreciation were helping non-mining exporters and export-exposed industries. This, along with encouraging job figures, meant conditions were right for ‘s rebalancing away from resource-related investment.

“This is basically another strong result for the NAB Survey, which in conjunction with signs of improvement in the labour market, means we can put more faith in the building non-mining sector recovery,” he said.

“Interest rate and n dollar-sensitive industries have generally out-performed, while improvements in areas such as retail in November are an encouraging sign that the recovery is becoming more entrenched.

“In contrast, mining continues to weaken,” he said.

He said there was a “widening gap” between conditions in mining and related services, whose sub-indices are the only industry-specific gauges below zero, and other sectors.

Declining investment in mining infrastructure had also helped drag down the capacity utilisation sub-index, to 80.9 per cent from 81.2 per cent.

Employment also dropped, from 3 points to 1 point, suggesting a “somewhat slower momentum in employment growth in the coming six months”, Mr Oster said.

NAB’s findings come on the same day as and New Zealand Banking group’s weekly consumer confidence survey noted a bounce in the mood for the week ended on Sunday, by 3.5 points to 116.3. This compares with a four-week moving average of 114.9.

All the main sub-indices were up for the week, with respondents marking up their financial situation compared with a year ago by 5.6 points, to 109.5.

By contrast, Mr Oster described NAB’s business confidence reading as “disappointingly muted”.

“Given improved prospects for the domestic economy outside of mining, relatively subdued confidence is most likely a reflection of the uncertain global economic environment,” he said.

“In any case, it was good to see a broad-based increase in confidence across industries.”

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