The National Australia bank’s Business Survey is the single best indicator for the Australian economy due to the depth of coverage of industry and the sub indices that are also included.
For some time business has been in the doldrums but this morning the release of the August survey showed:
Business confidence jumped considerably in August, from -3 to +6, the largest increase since January 2011 and to its highest level since May 2011. This was the sixth largest jump in the Survey’s monthly history since March 1997.
There is a big difference between the confidence business has in the future and the conditions that business is now experiencing. NAB highlighted:
Business conditions edged only marginally higher in August from -7 to -6, fundamentally were unchanged at soggy levels and still consistent with a weak domestic economy. There was little change in trading conditions (from -4 to -5 in August), profitability improved somewhat but to a still low -9 from -11, while employment fell back, down from -5 in July to -9 in August, the equal weakest reading since May 2009, painting a worrying outlook for the labour market.
In the context of the theme we have been running that the mining boom hasn’t crashed the way many in government and industry feared, and with the recent pick-up in the data from the BRIC’s particularly China, NAB said:
There was a particularly large lift in mining industry confidence, up 21 points from -24 to -3. It is possible that mining firms are anticipating an improvement in export activity, in line with better data out of China, some benefit from a lower AUD, along with confidence that the minerals & resource rents tax would be scrapped under a new government.
But amongst the good news the thing that indicates the Australian economy still has a way to go is the employment sub-index which fell from -5 to -9.
This survey suggests the new Australian Government will have a honeymoon period in which to make changes and improve conditions but to build on this it’s likely that either the Aussie Dollar needs to fall or the RBA needs to cut again.