Budget leaves firms more optimistic than consumers

BUSINESSES have remained upbeat in the wake of last month’s Federal Budget, latest polling suggests, staying confident even as households rein in their spending.

Business conditions dipped slightly in May, according to National Australia Bank’s monthly survey, although at 12 points remain well above their long-run average.

Confidence levels took a heavier dive – nearly halving on the month to six points – but also held above their longterm average. NAB chief economist Alan Oster said businesses still appeared ready to put on more staff this year.

“The business sector is looking quite upbeat, maintaining the apparent disconnect with a rather melancholy household sector,” Mr Oster said.

“The one patch of softness (in business conditions) is in retail ... although that is unsurprising given the softer trends in the household sector.

“How the disparity resolves itself will be critical to the outlook for growth.”

Retail trade figures have been weak this year, rising just 0.1 per cent in trend terms for each of the four months recorded thus far as department store operators discount heavily to drive foot traffic.

Mr Oster said optimists might point to strong employment conditions as a reason for households to shake themselves out of their funk, although subdued wage growth and cautious consumer spending habits would prove difficult hurdles to clear.

He said economic growth was expected to pick up in the three months to June, although the long-term picture was not as clear given drivers such as gas exports, commodity prices and home building were all expected to fade.

The confidence of business owners will be tested in June’s result after the Fair Work Commission boosted the minimum wage by 3.3 per cent, or $22 a week, earlier this month.