Business and consumer confidence has fallen from their post federal budget highs, weighed down by weakness in the mining sector.
The National Australia Bank business confidence index dropped to four points in July, from eight points in June.
NAB said that while confidence had eased in most industries, much of the fall was in mining and construction – which includes a large share of non-residential and engineering firms – amid worries about weaker Chinese economic growth.
Meanwhile the weekly ANZ/Roy Morgan consumer confidence index fell 0.4 per cent to 112.5 in the first full week of August, after gaining 5.5 per cent in the previous three weeks.
CommSec chief economist Craig James said it was inevitable that business and consumer confidence would fall after enjoying a honeymoon from a business-friendly federal budget and the Reserve Bank’s May interest rate cut.
“Now it’s back to normal,” he said.
“Business confidence and conditions are consistent with average levels over the past four or five years. Consumer confidence likewise.”
Mr James said the falling Australian dollar and the RBA’s prediction that the unemployment rate would, or already has, peaked below 6.5 per cent are also encouraging signs for the economy.
The NAB’s business conditions index also fell in July, down four points to six points, with gains in the services sector unable to overcome mixed readings in other areas.
NAB said that looking past the month to month volatility, business confidence is still holding up well and trading and profitability conditions remain elevated.
JP Morgan economist Ben Jarman said that some of the business conditions measures show that things are going well for the non-mining sectors of the economy.
“The services sector is still looking very perky, consistent with other indicators, and that sector is very influential for employment outcomes,” he said.
“The NAB survey reports on the labour market in July were mixed. The employment intentions index slipped two points, returning to its average of the first half of 2015. But that level has been sufficient to hold the unemployment rate relatively steady, given the moderation in labour supply growth.”
NAB’s outlook for the Australian economy is marginally stronger than it was a month ago, and now forecasts gross domestic product to grow by 2.8 per cent in 2015/16 and 3.2 per cent in 2016/17.
The bank expects the Reserve Bank to keep the cash rate unchanged at its record low of two per cent until at least late next year, and that it’s more likely to cut rather than hike until a recovery in the non-mining parts of the economy is fully underway.