The results of the business conditions survey indicate that growth rebalanced in the fourth quarter of last year and that business conditions are now at their most favourable level since March 2011.
While last week’s Westpac-Melbourne Institute survey showed that consumer confidence had fallen in January, it remains above the break-even level and above the lows seen in mid-2013.
According to NAB, low interest rates, a lower Australian dollar, loose fiscal policy and greater political certainty have led to this improvement in business conditions.
NAB’s chief economist, Paul Bloxham, and economist Adam Richardson said that history shows the business conditions indicator is positively correlated with domestic demand, or gross national expenditure, so the recent increase indicates domestic demand may have been picking up at the end of last year.
Both economists said an improvement in the non-mining sectors of the economy is greatly needed since the mining sector is expected to slow down substantially.
“There are some signs that this was already happening in [the fourth quarter of 2013], with the timely indicators of economic conditions - such as retail sales, housing approvals and business conditions - all lifting.”
According to NAB, however, this was in contrast to the employment data, which was weak.
NAB believes the labour market is currently lagging the economy and expects employment growth to increase in early 2014, as improved conditions in the non-mining sectors lead to hiring in greater numbers.
