Australia’s Rising Business Confidence ‘Reflects Hope Rather Than Reality’

(Bloomberg) -- Australian business confidence surged in September, driven by locked down eastern states on prospects of their economies reopening, while conditions tumbled as the same firms struggled to keep their heads above water.

Confidence advanced to 13 points from a downwardly revised minus-6 in August, National Australia Bank Ltd. said in a statement Tuesday. The conditions index -- measuring hiring, sales and profits -- dropped to 5 points from 14 in the survey, which ran from Sept. 17-30.

“Confidence generally reflects hope rather than reality,” said Alan Oster, chief economist at NAB. “Current business conditions deteriorated significantly across all states, particularly New South Wales and Victoria, as lockdowns and disruptions continued to weigh on activity.”

Sydney on Monday took a first step to emerging after 106 days of lockdown and will open further in coming weeks once the vaccination rate hits 80%. Melbourne is also vaccinating rapidly even as its Covid cases remain elevated. 

Australia’s economy likely contracted sharply in the third quarter due to lockdowns, with New South Wales and Victoria accounting for about 55% of gross domestic product.

The Australian economy’s “considerable resilience” to restrictions and lockdowns “may be wearing thin,” Oster said. “Firms are now focused on the promise of a rebound in activity when vaccination targets are met and restrictions are lifted in October and November.”

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