Business confidence hits 3-year high

Australian business confidence surged in September to the highest level in 3 1/2 years as majority government and lower interest rates encouraged companies even as employment conditions remained poor.

The confidence index jumped a whopping 8 places from 4 to 12 in the National Australia Bank Ltd (NAB) survey released on Tuesday of more than 400 companies from Sept. 24 to Sept. 30.

The business conditions index measuring hiring, sales and profits was at -4.20 compared with -7.40 in August.

The result suggests that Australia’s resource-rich economy may be poised for a lasting post-election bounce after three years of a hung parliament and record-low borrowing costs.

“The federal election result appears to have helped confidence further,” said NAB Chief Economist Alan Oster in a release accompanying the report.

Oster said the country’s low borrowing rates, rising consumer sentiment and the lower Australian dollar may have helped in recreation & personal services as well as retail.

Bloomberg reports that the Australian dollar has declined 9.2 % this year as the Reserve Bank of Australia (RAB) reduced rates to a record low of 2.5 %, helping ease pressure on industries including manufacturing and services.

News from China was also said to have helped sentiment in mining however employment conditions “remain subdued” painting a soft outlook for the labour market. While confidence has improved dramatically in the past two months, real business conditions remain weak.

Economists predict Australia’s unemployment rate to be at a four-year high of 5.8 % in September before government data due to be released Oct. 10.

Although an upturn is still underway, the pace of industrial growth and business sentiment in some big advanced economies has stopped improving. Emerging market trends have been mixed with China showing signs of stabilising, India remaining weak and a very modest improvement across emerging Asia and Latin America.

Meanwhile, global growth is still expected to be 3% this year and 3.5% in 2014 and 2015. US political uncertainties over its government shut-down and debt ceiling are not assumed to have a marked impact on US GDP growth.