Australian business conditions continued to show resistance to higher interest rates and increased pricing pressures, while consumer confidence continued to fall into “deeply pessimistic” territory, highlighting the different responses of business and the domestic sector to tougher policies.
Business conditions, which measure sales, employment, and profitability, rose two points to 13 in August and remained above average levels since the start of the year, a National Australia Bank Ltd. survey showed on Tuesday. Confidence remained stable at two points, meaning that optimists outnumbered pessimists.
“Companies continue to report very high capacity utilization. This suggests that even as growth slows, the balance between supply and demand in the economy as a whole remains very tight,” said NAB chief economist Alan Oster. “Price growth also remains high. This reflects the significant cost pressures faced by businesses and the continued resilience of demand.”
That was according to a separate household survey by Westpac Banking Corp. released an hour earlier Consumer confidence fell 1.5% to 79.7 points in September, with pessimists far outnumbering optimists, with the dividing line at 100. The index has remained in a range of 78–86 over the past year.
Surveys show the ongoing gap between Australia’s heavily indebted households and the corporate sector, suggesting that companies are better able to absorb higher borrowing costs.
The NAB survey showed that leading indicators are strengthening, which is a positive sign for the economy: pre-orders increased by one point and capacity utilization reached 85.1%. At the same time, labor costs fell 3.2% quarterly, compared with 3.7% in the three months to June. Final price growth, which takes acquisition costs into account, fell to 1.7% from 1.9% in the second quarter.
The Reserve Bank is currently in watch-and-wait mode after implementing 12 rate hikes since May last year to take the key interest rate to an 11-year high of 4.1% while trying to control inflation. As consumer prices begin to fall, a robust labor market and ever-stronger wage growth have prompted policymakers to impose further restrictions if necessary.
