By Jason Cadden
(Australian Associated Press)
Malcolm Turnbull’s rise to the nation’s top job has given business confidence a much needed shot in the arm.
The prime minister must now come up with a clear strategy for economic growth in order to keep businesses upbeat, economists say.
National Australia Bank’s business confidence index rose four points to a reading of plus five in September, more than recovering August’s decline, though still leaving the index below its mid-year peak.
ANZ economists Cherelle Murphy and Daniel Gradwell said Mr Turnbull’s toppling of Tony Abbott was the key factor in boosting business confidence.
“The challenge for the government now is to make this increase stick,” they said.
“A clear and credible strategy for the Australian economy will be a vital component of any sustained improvement in confidence.”
Weekly consumer confidence figures have also hit a 15-week high, thanks to the change of prime minister, a recovery on the local share market and a stronger Australian dollar.
ANZ and Roy Morgan’s consumer confidence index rose 5.1 per cent in the first full week of October, more than reversing the falls of the previous two weeks.
A bounce in confidence was to be expected after the leadership change, but a slump back to previous levels also usually follows, JP Morgan economist Ben Jarman said.
“Such swings – both business and consumer – have not been particularly durable or informative on cyclical momentum in the past so we pay more attention to the business conditions index,” he said.
NAB’s business conditions index was steady at an elevated level of nine points in September, with gains in employment conditions offset by falls in trading conditions and profitability.
Mr Jarman said it is a good sign for the economy that conditions are encouraging employers to hire.
The longer-term fall of the Australian dollar appears to be assisting most of the non-mining sectors of the economy by lifting demand for services, he said.
This leaves external factors, such as weaker Asian growth and uncertainty around commodity prices, as the main drags for the economy.
But CommSec chief economist Craig James said businesses are still reluctant to borrow in order to expand.
“Almost 80 per cent of firms indicated that no borrowing was required in September,” he said.
“This may mean that businesses are living within their means, but with interest rates at record lows, the absence of borrowing is surprising.”