Confidence lifts to a 20-year high

BUSINESSES are enjoying their best conditions in more than 20 years, polling suggests, in welcome news for the Federal Government as it prepares to unveil its latest Budget.

National Australia Bank’s closely watched index of business conditions has jumped six points, clocking in at 21 points for April.

That is equal to the highest level since the business conditions survey began in 1997.

Business confidence rose two points to 10 — well above the historical average of six for that index.

Conditions increased in all industries except for manufacturing and retail and, in trend terms, were strongest in mining.

NAB chief economist Alan Oster said the survey results reinforced “that business activity in Australia is robust”.

While conditions were negative in the retail sector for the first time this year, concerns that the weakness might be spreading have been alleviated by a significant improvement in retail conditions.

Sales, profitability and employment conditions all rose strongly and remained well above their historical averages, according to Mr Oster.

“The improvement in the employment index was particularly welcome in the light of the ABS reporting a slowdown in jobs growth in recent months,” he said.

“Historically, the NAB survey does a good job at looking through short-term cycles in the ABS data and so we think the labour market continues to improve.”

According to Mr Oster, while the survey continues to point to subdued inflation and wage growth, the strength in business conditions and leading indicators suggested economic growth would strengthen.

And over time this would cause strong jobs growth and lower unemployment.

“Falling unemployment should eventually translate into upwards pressure on private sector wages, at which point the RBA will be in a position to start increasing the current emergency low policy rate,” he said.