Bloomberg News

Australia Business Confidence Falls to Lowest Since 2009

September 12, 2011

(Updates with economist’s comments in 10th and 12th paragraphs.)

Sept. 13 (Bloomberg) -- Australian business confidence plunged last month to the lowest level since April 2009 as a rout in global equity markets and concern about contagion from Europe’s debt crisis damaged sentiment, a private survey showed.

The confidence index slumped to minus 8 in August from 2 in July, according to a National Australia Bank Ltd. survey of more than 500 companies from Aug. 24-30 that was released in Sydney today. The business conditions gauge, a measure of hiring, sales and profits, slid to minus 3 from minus 1.

Monthly employment growth in Australia averaged 2,800 from January through August this year, less than a 10th of the average of 30,500 job gains in the first eight months of 2010. Australia’s currency and benchmark stock index dropped last month and the MSCI World Index of equities sank 7.3 percent as concern increased that the Greek fiscal crisis would drag down other euro-area economies.

The result reflects “heightened global uncertainty, large falls in equity markets and the fear of debt market contagion,” NAB Chief Economist Alan Oster said in a statement. “That said, confidence levels remain significantly above global financial crisis or recessionary lows. Clearly, much depends on how activity holds up.”

Currency’s Decline

The local currency’s 3.5 percent decline against the U.S. dollar this month has erased about three-quarters of its gain through the first eight months of the year. The so-called Aussie, which bought $1.0334 at 12:35 p.m. today in Sydney, is up about 10 percent from a year ago and reached a record of $1.1081 on July 27.

A slump in sentiment is weighing on Australian consumers, who are reining in spending as they face the highest borrowing costs in the developed world. Reserve Bank of Australia Governor Glenn Stevens has paused raising interest rates at 4.75 percent for the past 10 months to gauge the fallout from Europe’s debt crisis.

Also unnerving households are five straight months of declines in Australia’s S&P/ASX 200 Index, the longest losing streak since the September 2008 collapse of Lehman Brothers Holdings Inc. started a global financial crisis.

Australia’s retail sales growth may struggle to rebound from a two-decade low as the nation’s stock market slumps and consumer confidence weakens, curtailing household spending, according to a Deloitte Access Economics report.

Retail Sales

Sales volumes are projected to increase 1.5 percent in the 12 months through June 30, compared with 1.3 percent growth in the 2010-11 fiscal year that was the weakest in 20 years and a 2.6 percent advance a year earlier, the Canberra-based research company said in the report released today.

“The bottom line is that things are deteriorating, but we certainly shouldn’t be comparing them to that 2008-09 period at this stage,” said Bill Evans, chief economist at Sydney-based Westpac Banking Corp., in an interview today on Bloomberg Television.

Clouding Australia’s outlook is concern the world’s largest economy is slowing. Employment in the U.S. unexpectedly stagnated in August as employers became less confident in the strength of the recovery, and the jobless rate held at 9.1 percent, according to a Sept. 2 report.

Asia’s economic expansion will probably slow and the RBA will eventually cut interest rates, he said. “The combination of that will lead to a modest weakening in the Aussie dollar,” Evans said. He said Westpac’s forecast for the currency is about parity with its U.S. counterpart by year end and “through most of next year,” he said.

--With assistance Rishaad Salamat in Hong Kong and Sunil Jagtiani in Singapore. Editors: Brendan Murray, Garfield Reynolds

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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