Australian Business Confidence Jumps to Highest Since Mid-2019

(Bloomberg) -- Australian business confidence surged to the highest level since May 2019 as firms took heart from declining Covid infections and the southeastern state of Victoria emerged from one of the world’s strictest lockdowns.

Sentiment climbed to 5 points in October from -4 a month earlier, National Australia Bank Ltd. said Tuesday in a statement. The conditions index -- which measures hiring, sales and profits -- edged up to 1 from zero in September.

“This was likely driven by the fall in Covid-19 case numbers and looming end of lockdown in Melbourne,” said Alan Oster, chief economist at NAB. “Trading conditions and profitability drove the marginal improvement in conditions, but the employment index remains weak at -5 index points, suggesting the labor market is lagging the recovery in activity.”

Australia’s central bank predicts unemployment will peak at just under 8% in the next couple of months from 6.9% at present. It last week unveiled a new monetary stimulus package that saw interest rates cut to 0.10% and added a A$100 billion ($72.8 billion) program to buy longer-dated bonds to the existing three-year yield control target.

The central bank’s efforts are working with substantial fiscal stimulus released in the government’s budget that included income-tax cuts and incentives for business to invest and hire. The economy’s outlook has improved as Victoria state emerges from a sever lockdown to contain Covid, with job ads, sentiment and house prices all improving.

“The survey continues to show that the economy has rebounded from the sharp fall in activity in the first half of 2020 and will likely continue to recover as the economy reopens,” Oster said. “The improvement in confidence is encouraging but remains fragile, and it will likely remain that way until a vaccine is available.”

NAB’s survey of more than 400 firms was conducted Oct. 22-30.

©2020 Bloomberg L.P.