July resulted in positive news for Australian businesses, despite looming threats of an ongoing mortgage crisis in the wake of several national banks reeling from the Royal Commission inquiry into financial misconduct.
With conditions easing slightly, levels of activity remained consistent, but the real boon came from businesses’ determination to recruit, suggesting that the money is available to boost the national job market.
According to the results of a survey published on Tuesday 14 August, the index of business conditions from the National Bank of Australia (NAB) dropped by two points to +12 last month but still managed to stay significantly above the expected long-run average, which is at +6.
The measure of business confidence performed better than expected with so much volatility happening in the markets not only locally and nationally but also worldwide. The business confidence level went up a point and is now at +7. Other surveys had predicted a steep drop, so the addition of a point to this index should please business leaders and investors. Additionally, the employment index demonstrated a +5 increase, taking it to +10.
NAB Group Chief Economist Alan Oster said that the employment index is based on “historical patterns,” and its promising showings mean that Australia “should see the unemployment rate continue to edge lower over the rest of 2018”.
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Official government employment data should follow this trend. When it releases on Thursday, there should be an increase of nearly 15,000 jobs, which comes on the back of jobs being up over 50,000 in June.
The biggest growth occurred in the mining industry, which is in the midst of a boom, having shaken off the worst of a recession that heavily affected it in the last few years and caused the loss of thousands of jobs. Mining businesses are very much looking to hire many workers in some states, and the hopes are that this trend will continue. Healthy figures also surfaced in finance, business and property.
The construction industry saw marked improvement last month, while wholesale and personal services also saw gains. Negative growth took place in manufacturing and retail as well as public services such as transport and utilities.
Relatively stable yet subdued inflation should occur, as the survey detailed a rise in both prices and wages in July.
Oster commented on a “relatively healthy” outlook for businesses and said that there should be “enough employment growth to see a gradual reduction in spare capacity”. He also said that this will eventually lead to better wages for workers and have a positive knock-on effect in preventing inflation from rising too high.
The Reserve Bank of Australia (RBA) has said that business conditions are looking strong, and economic growth is likely to top 3% for the next two years.
NAB, meanwhile, has suffered from the ongoing inquiry into the financial misconduct scandal, reporting a Q3 drop in profits of 3%. This is mainly due to the bank having to allocate funds to cover impairment charges faced by consumers and increased compliance costs stemming from the rise in scrutiny that some major financial institutions now face.
NAB Chief Executive Andrew Thorburn said that the second half of this year is now forecast to account for “additional provisions” which would cover “previously disclosed regulatory compliance investigations”.