According to Catherine Birch - Senior Economist at the Australian and New Zealand Banking Group (ANZ) - the recent RBA rate cuts have failed to deliver the expected impact on the private sector business conditions.
Although business conditions improved slightly in September, this was from a five-year low in August. Confidence slumped further, hitting a six-year low. There were small improvements across a range of indicators but most remain well below their long-run averages, including profitability, trading and forward orders. This adds to the evidence that the rate cuts and tax cuts are not having the expected (or hoped for) impact on the private sector in the near-term.
Business conditions improved slightly to 1.6 points in September from 0.6 points in August while confidence declined to -0.3 points. Forward orders (up 1.8pts), profitability (up 0.8pts), and trading (up 0.5pts) all rose, but they still have a long way to go before we can consider the private sector to be in recovery. Capacity utilisation recorded a small decline to 81.9%. The employment index jumped to 3.5 points – 1.5 points above its long-run average – but is still well below where it was a year ago.
Retail business conditions were largely unchanged in September, despite more tax cuts hitting households’ bank accounts. Mining saw a sharp drop from +17.7 to -9.6. Manufacturing was a bright spot, recording its strongest result in a year, and transport also saw a big jump. Mining, finance and manufacturing now sit above their long-run averages (smoothed using three-month averages).
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