Virus hits business optimism

DETERIORATING economic conditions have caused business confidence to crumble as ongoing pandemic woes threaten a financial recovery.

The latest National Australia Bank quarterly economic survey has revealed a sharp fall in conditions and confidence in the second quarter of the 2020 calendar year.

The bank’s business conditions index slipped to negative 26 points, while the confidence index fell three points to negative 15 points.

The services sector experienced the largest fall in conditions followed by the transport, utilities and mining sectors.

The decline in confidence occurred across the country with the exception of Tasmania, where regional economic conditions improved.

NAB chief economist Alan Oster said the survey reflected the uncertainty of the outlook post COVID-19

“The business sector has taken a very large hit, and this is reflected in very weak conditions and confidence,” he said.

“There will need to be a substantial recovery in activity economy-wide before we see a full recovery in conditions and confidence.”

Mr Oster said confidence had started to recover but leading indicators such as employment remained fragile.

NAB’s survey shows that expected future conditions, unemployment and capital expenditure sentiment declined in both the three-month and 12-month outlooks.

“It is likely we will continue to see a pullback in investment,” Mr Oster said. “While there may be some rebound in employment … it’s likely business will remain very cautious in expanding staffing levels.”