Australian business confidence has reached its highest level since mid-2019, with Victoria’s ability to quash the number of coronavirus cases fuelling an uplift in economic sentiment.
According to the latest National Australia Bank monthly business survey, business confidence has risen by five index points to a position of nine, largely caused by the opening up of the Victorian economy following its extended lockdown to curb the number of COVID-19 cases.
Business conditions also improved compared with October, rising one point to an index position of one.
NAB said trading conditions and profitability outlooks were the driving force behind the improving conditions; however, the employment index continues to remain weak at an index position of negative five.
NAB chief economist Alan Oster said NSW and Victoria made the strongest gains, and the fall in the employment index was likely a sign of further major job cuts.
“Business conditions saw a marginal improvement in the month,” Mr Oster said,
“Trading conditions and profitability continue to improve as the economy opens up. But employment continues to lag and is still negative, suggesting at face value there has been ongoing job shedding.”
South Australia, Queensland and Western Australia all experienced declines in state economic conditions.
Mr Oster noted the improvements were greater in retail and services than other industries.
“Retail has been a strong performer despite the deterioration in the labour market, likely reflecting the strong income support from the government,” Mr Oster said.
“Services have also recovered and likely seen some pent-up demand more recently.”
The survey noted the economic rebound would take some time and the economy would likely remain fragile until a vaccine became available.