Australian Business Confidence Rises From Record Low
Australian business confidence rose in December from a record low as a government stimulus package and the most aggressive interest-rate cuts since the last recession in 1991 buoyed consumer spending.
The sentiment index climbed 10 points to minus 20 from November, according to a National Australia Bank Ltd. survey of more than 400 companies released today. That’s the 12th straight reading of less than zero, indicating companies expecting their industry to deteriorate outnumber those seeing an improvement.
Australia began handing out A$8.7 billion ($5.8 billion) to pensioners and families last month as mounting job losses, shrinking wealth and a slowdown in lending damped consumer spending, equivalent to about 60 percent of the economy. Deputy Prime Minister Julia Gillard said today the government is “ready to do more” if the global financial crisis worsens.
“The survey appears to confirm the one-off nature of the government’s fiscal boost,” said Riki Polygenis, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne. “While confidence bounced, the outlook for 2009 is still deteriorating with exports, new orders and hiring intentions all remaining weak.”
National Australia, the nation’s largest lender, today predicted the economy will contract 0.25 percent this year, reversing a previous estimate of 0.5 percent growth amid a deepening global slowdown.
BHP Billiton Ltd. said last week it will cut 3,400 jobs in Australia as it shuts a nickel mine, closes part of a refinery and reduces coking coal output as much as 15 percent.
Job Cuts
Retailer David Jones Ltd. said last week it plans to cut 150 administrative jobs. The nation’s second-biggest department store operator forecasts same-store sales to drop 9.5 percent in the fiscal second quarter.
The Australian dollar traded at 66.44 U.S. cents at 2:35 p.m. in Sydney from 66.08 cents before the confidence index was released. The benchmark S&P/ASX 200 stock index gained 2.7 percent to 3,432.2 in line with increases in share markets across the Asia-Pacific region paydayloans.
Prime Minister Kevin Rudd has announced almost A$45 billion in aid for families, pensioners, bond markets, home buyers, coupled with extra spending on schools and roads.
“We stand ready to do more should international circumstances deteriorate,” Gillard told reporters in Sydney, adding that 2009 is going to be a “tough year.”
The Reserve Bank of Australia has cut interest rates by three percentage points since early September amid mounting evidence the economy may shrink.
Interest Rates
Investors have a 100 percent expectation Governor Glenn Stevens and his board will reduce the benchmark rate by three quarters of a percentage point to 3.5 percent on Feb. 3, according to a Credit Suisse Group index based on swaps trading.
“We see no reason why the Reserve Bank should not continue to rapidly lower rates,” said Alan Oster, chief economist at National Australia in Melbourne, adding that the government will also seek to boost growth by cutting taxes.
The business conditions gauge, a measure of hiring, sales and profits, gained 11 points in December to minus 6, according to today’s report.
“The critical question is whether the December reading represents a turning point from overly pessimistic recent readings or a temporary bounce,” said Oster. “There is much in the survey to point to the latter outcome” as more companies signal plans to fire workers and pare investment, he said.
An index of company hiring intentions was unchanged in December at minus 17 points, the lowest since 1991, today’s report showed. Australia’s jobless rate rose to a two-year high of 4.5 percent last month.
The threat of a long and deep recession may prompt the Reserve Bank to lower the benchmark interest rate to less than 2 percent from 4.25 percent now, former Governor Bernie Fraser said in an interview on Jan. 23.
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