Business confidence jumps to near two-year high

National Australia Bank’s business confidence index has risen to a near two-year high, with all industries outside of mining showing positive signs, according to the NAB Monthly Business Survey in June 2015, conducted before the culmination of the Greek debt crisis and the global turmoil from China’s equity market.

Australian firms appear to have shrugged off risks in the global economy as the business environment continued to improve into June, when business confidence lifted again from +8 to +10 index points in the month – the highest level since September 2013.

Confidence is now positive in all industries except mining, which is currently zero.

Business conditions improved even more, lifting 5 points to +11 index points in June – the highest level since last October.

“Improvements in both confidence and conditions over recent months are starting to suggest a more convincing turnaround in the non-mining sectors is underway. Nevertheless, a number of hurdles remain. The more sluggish rise of the employment component is a concern, but the other components (trading and profits) have been strong for a number of months,” NAB economists said.

Confidence dropped notably in retail (down 10), as well as wholesale (down 8), although both remain firmly in positive territory. Most other industries posted an improvement –the largest, unexpectedly, coming from mining (up 30).

Despite the drop, trend confidence is now the highest in retail (+10), and still lowest in mining by a significant margin (-12), NAB said.

A better GDP starting point means unemployment will peak lower than previously expected (around 6¼%), but will remain elevated.

NAB’s interest rates forecasts suggest no more cuts from the RBA. “We still see the next move in rates as up – but not till late 2016 (with a terminal cash rate of around 3.5%),” NAB said.

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