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Business confidence surges

A new report shows business confidence has grown significantly despite dismal market conditions not seen since Australia’s last recession in 1991.

南宁桑拿

The joint industrial trends survey by the Australian Chamber of Commerce and Industry (ACCI) and Westpac shows that the actual composite index rose by rose 3.9 points to 38.9 in the June quarter.

A level below 50 indicates more respondents are suffering a contraction in business activity than those enjoying an expansion.

“It does indicate some signs of economic improvement and it may indicate that we have bounced off the lows of the March quarter,” says ACCI’s acting chief executive Greg Evans.

The index of labour market conditions improved by eight points to minus 25, but remains well below a decade positive average of six.

“That is still at a level that’s historically consistent with a sharp slowing in jobs growth through the second half of this year,” Westpac senior economist Anthony Thompson says.

He says the survey was also consistent with a jobless rate of eight per cent.

Business confidence surges

Business sentiment, however, bounced by a strong 57 points, the largest improvement since 1975, to a reading of minus four.

It was the highest outcome since the December quarter of 2007 and compared with a decade average of minus six.

The jump in confidence was encouraged by “green shoots” of a global recovery, the relative resilience of the Australian economy, improved housing indicators and a reduction in the perceived difficulty of obtaining finance, the report says.

Figures could be misleading

But Mr Thompson is suspicious of such a large jump.

“Respondents are probably only recognising the conditions are unlikely to get any worse, rather than declaring a robust future,” he says.

“That would drive a shift in respondents from the ‘further deterioration’ category to the ‘stay the same’ category…explaining 40 points of that 57 point increase.”

Mr Evans believes there is scope for further official interest rate reductions over the next six months by the Reserve Bank of Australia, but there are more limited opportunities for fiscal policy.

He says the 30 per cent investment allowance for large business should be extended to the end of the year, allowing a further six months for businesses to take advantage of the initiative.

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