NAB: Rate cuts not working, there will be no business recovery until confidence lifts

A farming family in Longreach, Queensland. Photo: Getty / File

Business conditions in Australia slipped back a little in April (+4 from +6) and confidence was unchanged at 3. But in a note accompanying the release of the survey NAB chief economist Alan Oster said:

Until confidence lifts significantly it is difficult to see a sustained economic recovery developing – to date rate cuts have not appeared to do much and it will be interesting to see what if anything this week’s Federal Budget will do.


All components of business conditions — trading, profitability and employment — weakened in April, with employment dipping back into negative territory. Changes in conditions varied considerably across industries in the month, with the recovery in the “bellwether” wholesale industry proving short-lived and dropping back into negative territory. Construction also deteriorated, but remained positive, while mining was less negative. Both the exports and orders index remain soft, while capacity utilisation and capex each eased back.

That sounds very disappointing but Oster said last week’s RBA rate cut was a “line-ball decision” and “recent signs of improvement in the economic partials are encouraging but the non mining sector needs to lift more to offset the impact on domestic demand of sharply lower mining investment and the hit to income from commodity prices. Consumers are still cautious.”

Tomorrow’s Federal budget couldn’t be more important for Australia’s economic future.