Australia's Business Confidence Continues to Slide

09 July 2008

SYDNEY: Business confidence Down Under is at its lowest level since 9/11, as firms struggle to make headway against rising inflation and a worsening global economy.

A survey for the National Australia Bank in June  showed its confidence index slipping to -9, down from -4 in May, and a world away from its peak in October 2007 when it stood at 19.5.

Warns Jeff Oughton, head of NAB economics: ''The slowdown underway gained further momentum in June - importantly, rising spare capacity and higher unemployment - with significant further slowing in prospect."

The slide in confidence has come as no surprise to analysts.

Says JP Morgan economist Helen Kevans: "It's pretty much in line with expectations given that towards the end of June we did see renewed volatilty in financial markets and also a widening of credit spreads."

Inflation in Australia is running at 4.2%, well above the Reserve Bank of Australia's target of between 2% and 3%. However, the slowdown means it is unlikely the RBA will need to raise interest its rate beyond the current 7.25%.

Data sourced from Sydney Morning Herald; additional content by WARC staff