Bloomberg News

Australian Business Confidence Rises to Highest in Seven Months

February 01, 2012

Jan. 31 (Bloomberg) -- Australian business confidence rose in December to the highest level in seven months after the central bank made the second of two consecutive rate cuts, a private survey showed.

The confidence index was 3 last month from 2 in November, according to a National Australia Bank Ltd. survey of about 400 companies from Jan. 9-13 that was released in Sydney today. That was the highest since May. The business conditions gauge, a measure of hiring, sales and profits, was unchanged at 1.

The Reserve Bank of Australia reduced the benchmark rate by a quarter percentage point on Nov. 1 and again on Dec. 6 as inflation pressures eased and risks to global growth increased. Australia recorded its worst annual job growth in 19 years in 2011 as consumers boosted savings amid concern about potential fallout from fiscal problems in the U.S. and Europe.

“Business sentiment over recent months has been seemingly resilient to the weakness in Europe, which has contributed to a slowing in global activity, perhaps reflecting the effects of the RBA’s recent interest rate cuts,” NAB Chief Economist Alan Oster said in a statement.

RBA Governor Glenn Stevens lowered the overnight cash rate target to 4.25 percent from 4.5 percent on Dec. 6, citing “considerable turbulence” in financial markets and an increased chance of a “further material slowing in global growth.”

Traders are pricing in a 64 percent chance Stevens will lower borrowing costs again at the central bank’s next meeting in February, interbank cash-rate futures show.

Driving Australia’s economy is demand from developing nations including China and India for iron ore, coal and natural gas. That has spurred the nation’s currency, which reached $1.1081 on July 27, the highest level since it was freely floated in 1983. Earlier today it bought $1.0590.

--Editors: Brendan Murray, Iain Wilson

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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