Australia | Feb 10 2009
By Chris Shaw
Today’s weaker business confidence and expectations figures delivered in National Australia Bank’s monthly survey suggests, according to ANZ Banking Group senior economist Katie Dean, non-farm GDP in Australia is currently declining by around 1% annually. It also shows the stimulus from the Government’s first package proved to be only a temporary respite from the global economic slowdown.
In the view of TD Securities senior strategist Joshua Williamson, there is further weakness in business activity levels on the way given the fall in exports recorded over the month. This also suggests the effectiveness of the Government’s stimulus package is questionable and leads Williamson to suggest further policy stimulus by the Reserve Bank of Australia will be required to support the Australian economy.
The other problem according to Dean is that businesses simply aren’t looking to invest, as evidenced by 42% of respondents reporting no need for credit at present, up from 30% just three months ago. As Dean points out, this sets the scene for a significant contraction in private business investment in coming months, a view shared by Westpac senior economist Andrew Hanlan. Such a trend is not supportive for the overall economic outlook in coming months.
Williamson and Dean both suggest the data will add to the pressure on the RBA to move further with respect to monetary policy. Dean, however, takes the view the data don’t make further large cuts in rates a certainty, as the data were assembled before the recent 1.0% rate cut and the Government’s new stimulus package.
As a result Dean sees only a 0.25% cut in rates as likely at the RBA’s next meeting in March.