Australian business confidence at 3.5 year high

Business confidence in Australia soared in September, hitting a three-and-a-half year high and confirming the surprise rise recorded just before the federal election. The National Australia Bank (NAB) monthly business survey of 400 companies rose eight points in September, on top of a rise of nine points in August. Recreation and personal services, mining and retail all recorded big rises in confidence. The Sept. 7 federal election was not the only contributing factor, says NAB. "Low borrowing rates, rising consumer sentiment and a lower dollar may have also helped," NAB analysts wrote. But that positivity is yet to filter through to actual business conditions, which remained in negative territory at -4 points, up from -7 in August. The key issue now was whether the confidence boost would continue and how long it would take to translate into activity and investment, NAB said. Improvements in orders, stocks and capacity utilization pointed to better activity, although employment conditions remained subdued. "Employment continues to be a weak spot, although there are signs that the demand for labor may be stabilizing, at least in terms of hours worked," NAB said. "However, it seems unlikely that the domestic economy will generate sufficient growth to stem the rise in the unemployment rate over the next year." NAB still expects the Reserve Bank to cut rates again but have changed the timing of a possible reduction from November to February, given the recent boost in sentiment and house prices.