August sales, profits up

PM swap dents confidence but conditions good

AUSTRALIAN business conditions rebounded in August as firms reported improved sales and profits.

But the latest National Australia Bank index of business conditions, released yesterday, showed confidence softened, perhaps in reaction to political uncertainty following the removal of Malcolm Turnbull (pictured) as the nation’s prime minister.

The index regained two points to stand at plus-15 in August, well above the longrun average of plus-six.

The survey’s measure of profitability climbed six points to plus-16 in August, recovering all of July’s dip, while its sales index added a point to a strong plus-19.

In a promising development, the survey’s employment index held firm.

“The employment index continues to suggest growth in employment of around 23,000 per month over the next six months,” said NAB group chief economist Alan Oster.

“With a stabilisation in the labour force participation rate, this should be enough to see the unemployment rate decline further over the rest of 2018.”

The official jobs report for August is due tomorrow and is expected to show the jobless rate stayed at a six-year low of 5.3 per cent.

The survey’s often volatile measure of business confidence dipped three points to plus-four in August.

The poll was taken just after the Liberal Party ousted Mr Turnbull and replaced him with treasurer Scott Morrison as the new prime minister.

The Coalition has since slumped in opinion polls, leaving the Labor Party, under Bill Shorten, in a commanding position to win the next election.

Still, firms reported strength in their own businesses, with forward orders rising and investment plans picking up outside the mining sector.

“In combination with a rebound in business conditions this month, this suggests that the business sector has continued to perform strongly as we enter the second half of 2018,” said Mr Oster.

The Reserve Bank of Australia has highlighted the resilience of business conditions as it forecast economic growth would top 3 per cent this year and next.

The central bank last week kept official interest rates unchanged for a record 25th consecutive month, citing the loose monetary policy’s role in supporting confidence.

Three of the four major banks have raised interest rates independently of the central bank.