Monday May 12, 04:00 AM
Australia's NAB April business confidence down 4 points from March
SINGAPORE (Thomson Financial) - Business confidence continued to fall in Australia in April in an environment of higher input costs, rising inflation and slowing economic growth, a survey by the National Australia Bank (Berlin: NAL.BE - news) (NAB) released on Monday showed.
NAB said business confidence in April fell 4 points to minus 8 points, after dipping 2 points to minus 4 points in March where it was at its lowest since 2001.
'There are now more pessimists than optimists in all sectors of the economy other than mining,' said Alan Oster, NAB's chief economist.
'Clearly the interest-sensitive sectors have seen very large and continuous falls from late 2007, with especially sharp falls in retail and transportation confidence in April.'
Actual business conditions in April were unchanged at 7 points, although the trading conditions and profitability sub-index fell to their lowest levels since early 2002.
'Another factor that is clearly (of concern) is the very sharp fall reported in new orders in April, with the new orders index down 5 to a reading of minus 5 points, the lowest reading since late 2001,' Oster said.
Meanwhile, the survey showed wage pressures increased to 1.5 percent in April from 1.3 percent in March, while the rate of economy-wide prices rose 1.2 percent from 0.9 percent, all of which pose significant upside risks to the inflation outlook.
But the survey again indicated that the Australian economy is slowing at a faster rate than expected and the Reserve Bank of Australia (RBA) will likely keep interest rates on hold for the rest of the year, NAB said.
'Going forward, while there will be some nervous days ahead, we still see rates on hold through 2008 with the RBA increasingly focusing on the downside risks to activity,' Oster said.
'We are happy to stay with our medium-term forecasts of rate cuts of 125 points in 2009, bringing the cash rate back to 6 percent by late 2009/early 2010.'
NAB expects Australia to post GDP growth of 2.75 percent this year and next.
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