Post-lockdown confidence returns to earth

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)


The euphoria generated by the end of the Delta variant induced lockdowns appears to be ebbing already, although economists are still hopeful of a strong economy next year.

A series of business and consumer surveys proved a mixed bag as another difficult year draws to a close.

The influential National Australian Bank business survey showed only a modest rise in conditions in November, while confidence dropped as the initial response to restrictions ending in NSW and Victoria waned.

However, the December quarter Australian Chamber of Commerce and Industry-Westpac survey of industrial trends showed while manufacturing is barely growing, confidence in the sector is at highest in almost 30 years.

Meanwhile, the ANZ-Roy Morgan consumer confidence index rose 0.5 per cent nationally in the past week, disguising a 5.5 per cent slump in NSW where COVID-19 cases are growing again, and Omicron infections have spiked.

“Confidence … has come back to earth a little after the optimism associated with the end of lockdowns,” NAB chief economist Alan Oster said.

However, he said a rise in capital expenditure was a sign businesses are beginning to look towards a period of expansion.

“These results align with the strong rebound in activity that we believe is now underway, as well as a positive outlook for the coming months with vaccination rates now very high,” he said.

“Notwithstanding the possibility of new disruptions related to the Omicron variant, the economy is well placed to carry this momentum forward over coming months and into 2022.”

The NAB survey showed conditions rose two points to an index of 12 points in November, aided by a rise in employment.

But business confidence fell eight points to an index of 12, although managed to hold above its long-run average.

Meanwhile, the composite index in the December quarter ACCI-Westpac survey was at 50.8 points after 51.2 points in the September quarter.

This is well down from a buoyant 63.1 in June and before the outbreak of the Delta variant of the coronavirus.

Westpac senior economist Andrew Hanlan said the staggered reopening from the Delta lockdowns in NSW and Victoria crimped demand, while significant supply headwinds continued around the availability of labour and materials.

However, a net 57 per cent of respondents – the highest level since 1994 – expect the situation to improve over the next six months.

“As these restrictions have been gradually removed, manufacturers are anticipating a strong and accelerated recovery in 2022,” ACCI chief executive Andrew McKellar said.

The ANZ-Roy Morgan survey also found consumer concerns over the inflation outlook eased slightly.

“The drop in inflation expectations to 4.7 per cent was consistent with a 4.5 per cent decrease in national petrol prices over the past two weeks,” ANZ senior economist Adelaide Timbrell said.

Inflation expectations were 4.9 per cent last week and close to a recent seven-year high of five per cent, fuelled by the rise in petrol prices to record highs.

However, a separate survey by peak accounting body CPA Australia found growing inflation concerns among its members.

It found 36 per cent are worried about the inflation outlook compared with just 19 per cent when last surveyed in October.

Similarly, worries over skills shortages doubled from 15 to 30 per cent over the same October to December period.

“Our members are sensing some brittleness to the recovery,” CPA Australia general manager external affairs Jane Rennie said.

“Workforce shortages, increasing costs, supply difficulties and uncertainty about how governments may manage future COVID-19 outbreaks have accountants feeling apprehensive.”


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