<TABLE border=0 cellSpacing=0 cellPadding=0 width=593><TBODY><TR vAlign=top><TD><TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR vAlign=top><TD>Asia-Pacific News
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Published September 9, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Aussie business confidence jumps close to 6-year high
Case for rate hike grows as survey adds to upbeat data
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(SYDNEY) A key measure of Australian business confidence jumped to its highest in almost six years last month as firms reported improving sales and profits, adding to the case for a rise in record-low interest rates.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD>In a hurry: The National Australia Bank is tipping three consecutive 25-point increases, taking the cash rate to 3.75 per cent by February </TD></TR></TBODY></TABLE>The monthly survey of over 400 firms from National Australia Bank showed its measure of business confidence climbed 8 points to +18 points, its best since October 2003 and well above the long-run average.
The overall measure of business conditions firmed 3 points to +4 index points in August, the highest since mid-2008.
Readings of profits jumped 10 points to +11 and sales 8 points to +12, though employment disappointed with a 6-point drop to -11.
The survey is just the latest in a string of upbeat domestic data and should support the Reserve Bank of Australia's growing optimism on the economy.
The central bank has made it clear the current cash rate of 3 per cent is an 'emergency' level and will have to be adjusted upward should the economy continue to strengthen as expected.
Investors have fully priced a rise to 3.25 per cent in November, with a chance of a move as early as October. The market anticipates around 198 basis points of tightening within the next 12 months .
'This better domestic outlook and much better confidence levels further erodes the case for maintaining emergency lows in interest rates,' said NAB's chief economist, Alan Oster. 'While it is not impossible that the first rate adjustment will be in October, we see November as the more likely start point.'
NAB is tipping three consecutive 25 point increases taking the cash rate to 3.75 per cent by February.
'The further significant improvement in business confidence is quite remarkable,' said Mr Oster.
The improvement was broadly based but especially noticeable in retail, finance, manufacturing and recreational & personal services. The only sectors to report lower confidence were construction and transport.' Mr Oster suspected businesses might be over-optimistic as confidence was outstripping the gains in actual activity.
He noted that the survey measure of forward orders fell 7 points to a reading of -2 index points. The decline was broad-based across interest sensitive sectors.
Stocks continued to be run off aggressively with an index of -9, as firms met demand through inventories rather than production. As a result, capacity utilisation edged lower to 80.0 per cent, from 80.4 per cent, pointing to slack in the economy.
Inflationary pressures were also moderating with labour costs up only in the year to August, a record low. Purchase costs and economy-wide price increases also slowed.
'It is also noticeable labour markets conditions remain significantly below longer term averages and are still around the levels reported at the bottom of the 2000/01 slowdown,' said Mr Oster.
The official employment report for August is due tomorrow and analysts have been looking for a drop of around 12,500, as payback for July's surprise increase of 32,200. -- Reuters
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</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Published September 9, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Aussie business confidence jumps close to 6-year high
Case for rate hike grows as survey adds to upbeat data
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</TD><TD>Feedback</TD></TR></TBODY></TABLE>(SYDNEY) A key measure of Australian business confidence jumped to its highest in almost six years last month as firms reported improving sales and profits, adding to the case for a rise in record-low interest rates.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD>In a hurry: The National Australia Bank is tipping three consecutive 25-point increases, taking the cash rate to 3.75 per cent by February </TD></TR></TBODY></TABLE>The monthly survey of over 400 firms from National Australia Bank showed its measure of business confidence climbed 8 points to +18 points, its best since October 2003 and well above the long-run average. The overall measure of business conditions firmed 3 points to +4 index points in August, the highest since mid-2008.
Readings of profits jumped 10 points to +11 and sales 8 points to +12, though employment disappointed with a 6-point drop to -11.
The survey is just the latest in a string of upbeat domestic data and should support the Reserve Bank of Australia's growing optimism on the economy.
The central bank has made it clear the current cash rate of 3 per cent is an 'emergency' level and will have to be adjusted upward should the economy continue to strengthen as expected.
Investors have fully priced a rise to 3.25 per cent in November, with a chance of a move as early as October. The market anticipates around 198 basis points of tightening within the next 12 months .
'This better domestic outlook and much better confidence levels further erodes the case for maintaining emergency lows in interest rates,' said NAB's chief economist, Alan Oster. 'While it is not impossible that the first rate adjustment will be in October, we see November as the more likely start point.'
NAB is tipping three consecutive 25 point increases taking the cash rate to 3.75 per cent by February.
'The further significant improvement in business confidence is quite remarkable,' said Mr Oster.
The improvement was broadly based but especially noticeable in retail, finance, manufacturing and recreational & personal services. The only sectors to report lower confidence were construction and transport.' Mr Oster suspected businesses might be over-optimistic as confidence was outstripping the gains in actual activity.
He noted that the survey measure of forward orders fell 7 points to a reading of -2 index points. The decline was broad-based across interest sensitive sectors.
Stocks continued to be run off aggressively with an index of -9, as firms met demand through inventories rather than production. As a result, capacity utilisation edged lower to 80.0 per cent, from 80.4 per cent, pointing to slack in the economy.
Inflationary pressures were also moderating with labour costs up only in the year to August, a record low. Purchase costs and economy-wide price increases also slowed.
'It is also noticeable labour markets conditions remain significantly below longer term averages and are still around the levels reported at the bottom of the 2000/01 slowdown,' said Mr Oster.
The official employment report for August is due tomorrow and analysts have been looking for a drop of around 12,500, as payback for July's surprise increase of 32,200. -- Reuters
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