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Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
Business conditions struck a fresh record high in May, pointing to an extension of the rapid economic recovery from last year’s recession and a drop in the jobless rate in coming months.
However, the Victorian COVID-19 lockdown continues to sap consumer confidence, particularly, and unsurprisingly, among Melburnians
National Australia Bank’s monthly survey posted a second consecutive record peak for business conditions in May, rising five points to 37 points.
Index components for trade, employment and profitability also hit new highs.
NAB chief economist Alan Oster said overall the survey was another very strong result for the business sector and forward indicators pointed to ongoing strength in the near term.
“The economy now appears to be entering a new period of growth after a very rapid rebound,” Mr Oster said.
He said such strength in activity should see further gains in employment and hopes that business investment continued to lift.
“This could see further activity and productivity gains as the private sector takes over once again as the government gradually withdraws stimulus,” Mr Oster said.
However, any productivity gains would come off a very low base.
Productivity Commission chair Michael Brennan told a conference on Tuesday productivity growth has slowed across all developed countries in recent decades, leading to subdued growth in living standards.
“In Australia, the decade since 2010 – even excluding last year – has seen our slowest growth in GDP per capita of any decade in at least 60 years,” Mr Brennan told a Committee for Economic Development of Australia event.
He said the causes of that slowdown are much debated, but without a clear consensus.
“Perhaps the closest we could get to consensus would be the view that there is no clear individual cause, which if addressed would singly reverse the trend,” Mr Brennan said.
“Hence, productivity policy is not a mechanical process, where specific policy levers make known, quantifiable contributions to growth rates.”
The NAB survey showed the business confidence index slipped three points from April’s record high to 20 points. The survey period ended just as the latest Victorian shutdown began.
However, the weekly ANZ-Roy Morgan consumer confidence index – a pointer to future household spending – fell by 0.6 per cent nationally after the 2.5 per cent tumble the previous week.
Confidence in Melbourne dropped another 2.4 per cent after the lockdown was extended for another seven days, but in Sydney the mood recovered by 4.3 per cent, having also dropped heavily the previous week.
ANZ head of Australian economics David Plank said the emergence of a more infectious strain of COVID is raising concerns that the lockdown could be extended again.
“This could have a more lasting impact on confidence than we have seen with recent snap lockdowns,” he said.
However, while components of the index showed respondents were unhappy about their current financial position and economic views, they were more upbeat about the outlook.
The sub-index for future financial conditions rose two per cent and for future economic conditions it rose by 1.5 per cent.
“The fact that consumers became more confident about future financial and economic conditions suggests even a longer shutdown may not have a permanently dampening effect on overall sentiment,” Mr Plank said.
Victoria’s lockdown is due to end on Thursday.