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SYDNEY - Australian business conditions slipped a bit but remained strong in the past quarter, a survey showed today, buoyed by strong demand and a tight job market while optimism about the current quarter was robust.
The quarterly survey of companies by National Australia Bank (NAB) showed the business conditions index down by only one point to 18 due to some easing in profitability.
"The main message from the more comprehensive quarterly business survey for the September quarter is that Business activity remains at very robust levels," said Alan Oster, NAB's group chief economist.
"Together with the rapid growth in public sector spending - and that is unlikely to slow any time soon given the Federal election announcements by both major parties to date, as well as budgeted state spending - total domestic demand (private and public) looks to have continued at the 5 per cent rate in the year to the September quarter."
Trailing in the polls ahead of a national election on November 24, conservative Prime Minister John Howard has pledged billions of dollars in tax cuts and spending plans.
Labor leader Kevin Rudd has been almost as generous in his campaign pledges as he fights to win back power for his party after 11 years in opposition.
The NAB survey showed that conditions in mining, property and business services improved significantly while transportation, finance and agri-business were weaker.
Capacity utilisation was steady around record high levels at 83.2 per cent and firms were reporting difficulties in finding suitable labour. That was consistent with the continuing strength in the labour market, and on going downward pressure on unemployment.
While business were reporting strong current and near-term expectations, the NAB survey found they were slightly less confident about the future, possibly reflecting concerns about a near-term rise in interest rates.
A stronger-than-expected rise in third-quarter inflation has triggered speculation the Reserve Bank of Australia (RBA) would raise interest rates again from a decade high of 6.5 per cent at its monthly policy meeting next week.
Financial markets are pricing in nearly a 90 per cent chance of a quarter percentage point hike with further increases factored in the next 12 months as the central bank tries of curb inflationary pressures.
- REUTERS
