There has been a slump lately as new figures have been released by the National Australia Bank regarding business confidence. What does this mean for the economic picture in Australia? Find out more in this article.
According to the National Australia Bank, there was a slump in business confidence in May. The business confidence index went down five points after hitting 13 points in April. The average for the long term is seven points, so this is a substantial difference that indicates that the economic picture for Australia may not be looking as good as it should be.
Business confidence decreases
This slump is due to a decrease in the dollar, the proposed government resources profits tax and financial markets that are unsettled internationally. when grouped together, all of these factors are effecting business confidence as a whole in the country.
This is the third decline in three consecutive months and the lowest in almost 12 months. Estimated growth targets have been reduced by economists at the national Australia bank and it is partly due to the decrease in business confidence.
Confidence also went down 30 points in the sub index for resources to 4 points. This is due to the resources profits tax being proposed and mining companies having to deal with the problem. Export sales also continued to decrease as did inventory measures as a result. Profitability was weakened and there was a slowdown in the recovery of the domestic economy as business conditions decreased to a low six points during May
The national Australian bank chief economist, Alan Oster, reported that this low confidence is partly due to the disturbances with financial markets globally. He went on to say that this included sovereign debt concerns and equity price declines in Australia. As a result of these declines, economists at NAB have had to reduce their 2010 projected estimates for growth down to 2.75% from the 8.5% previous estimate. The estimate for 2011 was also lowered from 4.25% to 3.5%.
What this means for Australians is a mixed economic picture due to extra spending money being diverted to payments for mortgages, which leads to an uncertainty for retail sales.
Business confidence in Australia reached a slump in May, and estimates for projected growth has also decreased. This leads to a very mixed economic picture for Australia in the near future, and something that should be carefully monitored in the coming months.
