According to the results of a new survey, the twin cuts in interest rates by the Australian central bank has resulted in improved business sentiment.
The results of the National Australia Bank Business Survey suggest that business conditions improved in February, posting again of two index points following the previous two point gain which occurred in January.Confidence expressed by business rose by one point, and now stands at positive four points.
“Labour market conditions remain soft and the overall outlook for near-term activity remains moderate,” NAB said in a statement.
Despite the strengthening of business conditions last month, some sectors of the economy continue to struggle.
“Profitability deteriorated in the month, while employment and trading conditions were unchanged,” the NAB said.
According to the survey, heavy declines in conditions felt by the utilities, transport, construction and wholesale sectors were offset by gains felt in manufacturing mining, recreation and personal services.
Modest gains in business conditions were felt in Queensland and Victoria, whilst sharp falls were felt in Tasmania and South Australia.
Economists at NAB said they were surprised by positive US economic data, which indicates a modest recovery is underway, however globally the economic story is quite different.
“The euro zone appears to have entered recession, while emerging economies continue to show signs of slowing,” the statement said.
“We continue to see global growth softening to around three per cent in 2012, a below-trend outcome highly dependent on the emerging economies as the OECD (Organisation of Economic Co-operation and Development) faces a long period of modest growth,” the NAB said.
NAB’s forecast for interest rates has changed, following the RBA’s decision to hold interest rates steady at its most recent meeting at the beginning of the month.
The lender said there is the possibility of an additional rate cut, which will likely take place in May.
“Thereafter, we see the cash rate unchanged until mid-2013 when rates will be under upward pressure from wages and a strengthening labour market,” the NAB said.
