Australian Companies Remain Pessimistic on Rates
Australian business confidence slumped in April to the lowest level since the September 2001 terrorist attacks in the U.S., adding to signs the nation's economy is slowing.
The business confidence index fell 4 points to minus 8 from March, according to a National Australia Bank Ltd. survey of about 500 companies released in Melbourne today. A reading below zero shows those expecting business to deteriorate outnumber those predicting an improvement.
A record fourth straight negative reading in the index supports the central bank's view that recent interest-rate increases are slowing the $1 trillion economy, now in its 17th year of expansion. The Reserve Bank raised its inflation forecast last week and said economic growth will slow as consumers reduce spending amid higher borrowing costs and record gasoline prices.
“Business confidence has taken another hit,'' said Alan Oster, Melbourne-based chief economist at National Australia. “The combination of large falls in sales, profits, and especially forward orders, doesn't bode well for near term growth.''
“Worryingly for the Reserve Bank, the survey also paints a picture of sharply rising purchase costs, further acceleration in inflation'' and higher wages, Oster said.
The Australian dollar fell to 93.92 U.S. cents at 11:32 a.m. in Sydney from 93.99 cents immediately before the report. The two-year government bond yield was unchanged at 6.32 percent guaranteed approval cash advance loans.
Central bank Governor Glenn Stevens left the benchmark interest rate unchanged at 7.25 percent last week after boosting borrowing costs in March, February, November and August to cool the fastest inflation since 1991.
Economic Growth
“Evidence is accumulating'' that growth in demand will slow this year, Stevens said on May 6.
The central bank cut its forecast last week for economic growth in June 2009 to 2.75 percent from the 3 percent predicted in February. Gross domestic product will expand 2.5 percent in June 2010, compared with a previous outlook of 3 percent, it said.
Recent reports support that view. Sales of newly built houses dropped in March for a second month and consumer confidence plunged in April to the lowest since 1993.
“Falling confidence, especially if sustained, can have an important psychological impact on business,'' and prompt companies to scrap hiring and investment plans, Oster said. “There are now more pessimists than optimists in all sectors of the economy, other than mining.''
National Australia Bank's so-called business conditions gauge was unchanged at 7, the lowest since December 2002, today's report showed. The gauge measured hiring, profits and sales in April.
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