SYDNEY–Australian business confidence rose to its highest level in three-and-a-half years following the election of a conservative government, widely seen as more capable of managing a slowing economy as a long mining boom fades.
National Australia Bank’s monthly business confidence index rose to +12 in September, from +4 in August. Still, a separate measure of business conditions rose only slightly last month to -4 from -7, indicating that much of the real economy remains weak.
“The surge in business confidence that began following the announcement of the federal election has gained momentum in the first weeks of the new government,” said Alan Oster, NAB’s chief economist who helped compile the report. “The key issues now are whether the improved tone will continue and, if so, how long it will take to translate into business activity and investment.”
Tony Abbott’s Liberal-National coalition, which formed the country’s first conservative government in six years after winning a Sept. 7 election, has vowed to move quickly to boost the slowing economy by cutting taxes and building new infrastructure.
Meanwhile, Australia’s central bank has cut rates eight times since November 2011 in a bid to revive activity in other parts of the economy such as retail as the resources boom slows and threatens to push unemployment higher. The latest cut, in August, took the benchmark cash rate to a fresh record low 2.5%.
A batch of retail, housing and manufacturing data in the past week have pointed to a recovery in sectors the central bank has been targeting with record low interest rates to offset the mining slowdown. Consumer confidence has also picked up in recent months.
