Business confidence has jumped to a near two year high but is likely to be dented by China’s financial turmoil.
National Australia Bank’s confidence barometer rose two points in June to 10 points – its highest level since September 2013.
All industries outside of mining are showing signs of optimism, NAB economist James Glenn said, due to low interest rates, a falling Australian dollar and the federal government’s business-friendly budget.
But NAB’s monthly business survey was conducted before the culmination of Greece’s debt crisis, and the recent turmoil on China’s mainland share market.
“Growing jitters on global matters, especially in regards to China, suggests that current levels may be hard to sustain,” Mr Glenn said.
June’s lift in confidence was welcomed by business leaders, and gave the Australian dollar a boost, rising from just under 74 US cents to about 74.25 US cents.
Australian Industry Group chief economist Julie Toth said higher confidence could signal a turning point for the economy’s non-mining sectors.
“Services, which is the largest part of the economy – over 70 per cent nationally – showed quite a strong improvement in June,” she said.
Business conditions also strengthened in June, the NAB survey showed, lifting five points to its highest level since October 2014.
Australian Chamber of Commerce and Industry chief executive Kate Carnell said the Abbott government’s small business stimulus was having an impact.
“Since the budget was brought down in May, business confidence has really turned a corner,” she said.
Greece’s debt crisis is a long-running saga and is unlikely to impact next month’s confidence figures, Ms Carnell added.
“There doesn’t seem to be any indication out of Europe that will lead to any form of contagion with Italy, Spain or Portugal,” she said.
But the mining sector is taking a battering from China’s slowing economy, plus a weaker Aussie dollar and slumping iron ore prices, Ms Carnell said.
The NAB survey found confidence was lowest among the miners.
“That’s not a big surprise when you look at the volatility in commodity prices and the slowdown in China,” she said.
