Business upbeat, consumers not so

Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)

New figures suggest a lower jobless rate can be expected in the next few months as an upbeat business community takes on more staff.

Business conditions hit their highest level in nearly a decade in July, while the National Australia Bank monthly survey also showed confidence among firms at pre-global financial crisis levels after a strong rise.

Prime Minister Malcolm Turnbull told his coalition colleagues at a joint parties meeting on Tuesday strong jobs growth is the result of the government’s policies.

He named the economy as one of three central themes the government would focus on for the rest of the year, the others being national security and energy.

In contrast, Opposition Leader Bill Shorten’s so-called war on inequality was, in fact, “a war on small business and family business”.

While business seems buoyant, the ANZ-Roy Morgan consumer confidence index dropped by a sharp four per cent in the past week, unwinding gains over the previous fortnight.

NAB chief economist Alan Oster remains apprehensive about how this disconnect between the business and consumer sectors will be resolved.

Retail conditions in July were sluggish, coming at a time of elevated underemployment and high household debt.

Housing construction and LNG exports have also peaked, remaining hurdles to future economic growth.

“Given the risks to the outlook, only tentative signs of moderation in the housing market, and a reluctance to see the (Australian dollar) strengthen further, the (Reserve Bank) should be content with keeping interest rates on hold for an extended period,” Mr Oster said.

ANZ head of Australian economics David Plank also points to subdued wage growth and higher energy prices as being headwinds on households.

Given the importance of the labour market on consumer confidence and interest rate policy, next week’s monthly jobs figures and quarterly wage data will be keenly watched, he said.


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