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Australian businesses grew less optimistic about near-term prospects, signaling a slowdown in the fastest-growing developed economy that economists predict will force the central bank to cut interest rates again.
The business conditions index for the next three months dropped to 5, the lowest reading since the second quarter of 2009, National Australia Bank Ltd. (NAB) said in a survey released today. The second-quarter confidence index slipped to minus 2, the lowest since the third quarter last year, it showed.
The best-performing developed nation in the first quarter tracked by the Organization for Economic Cooperation and Development is showing signs of moderating as Europe’s fiscal crisis weighs on sentiment and restrains hiring. The Reserve Bank of Australia will lower the overnight cash rate target by at least a quarter percentage point by year end, adding to four reductions made since early November, according to 19 of 21 economists in a Bloomberg News survey released today.
“The cumulative 125 basis points of cuts by the RBA since late last year does not appear to have fully offset heightened concerns about Europe,” National Australia Chief Economist Alan Oster said.
The local dollar gained for a fifth day, reaching $1.0398, the highest since May 1. The so-called Aussie bought $1.0391 at 1:54 p.m. in Sydney. A 46 percent surge in the nation’s currency since the start of 2009 has hurt manufacturers and tourism industries.
Australian companies reported weaker profitability and transactions, a decline in employment and unchanged order books, according to National Australia’s survey. The poll of more than 900 companies was conducted May 22 to June 13, National Australia said.
“While official data imply that the economy grew robustly in the March quarter, activity in the June quarter appears to have softened materially,” the Melbourne-based lender said. “The deterioration in conditions reflected broad-based declines in trading conditions, profitability and employment conditions.”
Elsewhere in the Asia-Pacific (MXAP) region today, New Zealand job advertisements fell for a third time in four months, while Hong Kong’s jobless rate may rise to 3.3 percent, according to an economists’ survey.
The MSCI Asia Pacific Index gained 1.5 percent as of 12:54 p.m. in Tokyo.
Asian economies may need to ease monetary and fiscal policies further as Europe’s debt turmoil crimps global growth, the Asian Development Bank said in its inaugural Asian Economic Integration Monitor report.
In South Korea, sales at major department stores fell last month. Outlays at the three biggest chains declined 2 percent in June from a year earlier after a 1 percent gain in May, the Ministry of Knowledge Economy said in a statement.
Later today, data in Europe will show Italian industrial orders rose in May, while U.K. retail sales including fuel increased at a slower pace in June, according to Bloomberg surveys.
U.S. initial jobs claims rose to 365,000 in the week ended July 14, while June house sales increased 1.5 percent, reversing a decline in May, according to Bloomberg surveys. The Conference Board’s index of leading economic indicators probably fell after a gain in May, another survey showed.
A weaker U.S. expansion and uncertainty surrounding Europe were cited earlier this week in minutes of the Australian central bank’s July 3 policy meeting. The RBA held the rate at a 3.5 percent, the highest among major developed countries.
Australia’s gross domestic product expanded 4.3 percent in the first quarter this year from a year earlier, the best year- on-year advance since the third quarter of 2007.
Powering the Australian economy is the biggest resource boom since prospectors set off a gold rush in the 1850s. The latest bonanza -- for iron ore, coal and natural gas -- is bringing investment projects the government estimates to be worth A$500 billion. The unemployment rate, at 5.2 percent last month, is lower than 8.2 percent in the U.S. and 11.1 percent in the euro area.
The expansion probably slowed to 3.4 percent in the second quarter from a year earlier, according to the median estimate of 18 economists surveyed by Bloomberg News. Growth is projected to be 3.1 percent this quarter and 3.2 percent in the October- December period, the survey released today showed.
“Part of the deterioration in conditions may reflect a weakening in overseas demand for our exports due to the more uncertain global environment, as well as a material softening in domestic demand,” National Australia said in today’s report.
The RBA has reduced the benchmark borrowing cost four times in the past nine months -- by 25 basis points at successive meetings in November and December, by 50 points on May 1 and by another 25 points on June 5.
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