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Australia’s Firms Gloomiest Since 2013, But Worse Likely to Come

Australia’s Firms Gloomiest Since 2013, But Worse Likely to Come

(Bloomberg) -- Australia’s businesses are turning more pessimistic on fallout from the coronavirus, with sentiment gauges falling and suggesting further deterioration ahead.

A gauge of business sentiment slid to -4 in February from -1, the weakest reading since July 2013, where businesses were battling heightened domestic political uncertainty and the winding down of the mining investment boom. The conditions index -- which measures hiring, sales and profits -- dropped to zero from a downwardly revised 2, National Australia Bank Ltd. said Tuesday.

The survey was conducted from Feb. 18-March 2 and covered more than 500 firms.

“It appears too early to fully quantify the effect of the coronavirus with around 50% of firms reporting no impact to date,” said Alan Oster, chief economist at NAB. “That is surprisingly small but, in our view, will clearly deteriorate going forward.”

Australia’s central bank cut interest rates last week and money markets are pricing in a further easing in April that would take the cash rate to then effective lower bound of 0.25%. The government meantime is putting the finishing touches on a fiscal package to keep companies in business and employees in work as the two arms of policy provide a combines stimulus for the economy.

Still, Bloomberg Economics is predicting that this will be unable to prevent Australia falling into a recession, ending a 28-1/2 year stretch of expansion.

“Confidence is now firmly negative and business conditions appears to have renewed its previous downward trend,” Oster said. “More importantly, forward orders deteriorated significantly and is quite negative.”

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editors responsible for this story: Paul Jackson at pjackson53@bloomberg.net, Alexandra Veroude

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