Confidence down as spending falls in Australia

Australian business confidence fell to a six-month low last month as retail spending fell and an 8 per cent gain in the local currency in the past three months cut exports.

The business confidence index dropped 10.4 points to 6.5, the lowest since May, according to a survey of 565 companies conducted by National Australia Bank.

A reading above zero indicates that companies expecting their industry to improve in the coming month outnumber those forecasting a deterioration.

The decline in sentiment adds to evidence that the fifth-largest economy in the Asia-Pacific region is slowing and the central bank won't need to raise interest rates after two increases late last year.

National Australia Bank, the nation's largest lender, this month reversed its forecast for higher rates in the first quarter amid signs of a slowdown.

"We are seeing signs the domestic economy is slowing as retail spending cools and exports aren't kicking in to fuel growth," said Alan Oster, chief economist at the National Bank. "This is sending a message to say interest rates are on hold."

The Reserve Bank of Australia has kept its benchmark overnight cash rate target unchanged at 5.25 per cent this year after increases in November and December last year.

The A$794 billion ($850 billion) economy, in its 13th year of expansion, grew 0.3 per cent in the third quarter, the slowest pace in almost four years, a report this month showed. National Australia Bank expects the economy will expand 3 per cent next year, from 3.5 per cent this year.

Retail sales fell 0.7 per cent in October.

- BLOOMBERG