National Australia Bank confidence barometer rises two points in June to 10 index points – its strongest reading since September 2013

This article is more than 5 years old

This article is more than 5 years old

Australian business confidence has jumped to its highest level in almost two years as the service sector starts to take up the slack from mining.

The closely watched National Australia Bank confidence barometer rose two points in June to 10 index points – the strongest reading since September 2013. It comes after confidence bounced four points to a nine-month high in May.

NAB economist James Glenn said the booming housing market had given a boost to professional services and that the strongest job growth was coming from areas such as health and hospitality.

“When you look at the level of confidence and especially conditions by industry, we see that it is areas like finance, property and business services as well as recreational and personal services that have generally outperformed for some time now,” he said.

“I suspect that these industries have been best positioned to benefit from the lower interest rates and the lower dollar, as well as more fundamental structural shifts.”

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“Confidence is now positive in all industries except mining, which is currently zero,” he said on Tuesday.

Business conditions also improved in June, the NAB survey showed, lifting five points to its highest level since last October at 11 index points.



“Improvements in both confidence and conditions over recent months are starting to suggest a more convincing turnaround in the non-mining sectors is under way,” Glenn added.

Low interest rates continued to support the housing sector, the report said, and housing credit growth, while business credit had also been gaining momentum.

But Glenn said the bank’s forecasts for economic growth remained unchanged. Domestic demand was still weak, as evidenced by still-cautious retail spending, and although unemployment was expected to peak lower than previously expected (at about 6.25%, it will remain high).

There would be no more rate cuts by the Reserve Bank, Glenn concluded, despite the downside risk presented by the recent uncertainty caused by the euro crisis and the sell-off in the Chinese stock markets.

“The big picture is still one where the domestic economy is struggling to offset the impact of sharply lower mining investment,” Glenn said.



But lower interest rates and a sagging Aussie dollar, paired with the housing boom and a post-budget kick in confidence, appeared to have boosted business outcomes, he said.

Meanwhile, the Australian share market responded positively to the tentative deal for a Greek bailout. The ASX200 was up 1.7% to 5,567 at lunchtime on Tuesday.