Business conditions have eased as confidence continues to subdued, which points to softer economic growth, as reported in an article by Bloomberg.
A survey by the National Australia Bank Ltd. (NAB) found that business conditions went from two points to six below its average, while business confidence went up by one point.
“Rates will remain high for much of the year and price pressures are still a concern against a raft of global uncertainty. We will keep a close watch on how confidence evolves through early 2024 as price pressures ease further and the focus on the easing phase of the rates cycle grows,” said Alan Oster, NAB’s chief economist, in the Bloomberg article.
A survey by Westpac Banking Corporation (Westpac) found that consumer sentiment has reached 86 points, which has furthered the belief that the Reserve Bank of Australia’s (RBA) rate hikes are over.
However, the index of consumer confidence continues to be below 100, which has been the case since February 2022.
“While sentiment is still firmly pessimistic there finally looks to be some light at the end of the tunnel. Moderating inflation and shifting expectations for interest rates appear to be the main factors behind the lift with some additional support coming from the prospect of broader income tax cuts,” said Matthew Hassan, senior economist at Westpac.
The RBA has been raising rates since May 2022 as a move to mitigate inflation. However, these hikes have impacted consumer confidence as Australians have dealt with rising mortgage repayments.
“Price pressures remain solid despite the ongoing easing in activity measures. However, they typically lag activity in the economy, and we expect an ongoing easing in price pressures across the economy in early 2024,” said Oster.
Hassan said that Westpac’s report showed that there were signs that the cost-of-living crisis may be beginning to ease.
“It also suggests that sentiment could bounce back quite strongly if an expected pivot to rate cuts is ‘franked’ by RBA messaging,” he said.
What do you think about this story? Share your thoughts in the comments below.
