There was some positive news for Josh Frydenberg as he puts the final touches to his 2020/21 budget.
Business conditions have improved to pre-pandemic levels, while confidence has built on its recent gains heading into the budget, which will be handed down by the treasurer on Tuesday night.
Economists expect the deficit could be a whopping $240 billion as the government spends to stimulate the economy out of recession,
“The higher deficits and the higher debt burden is the cost, is the price, of saving lives and livelihoods,” Mr Frydenberg told Sky News on Monday.
He declined to pre-empt whether the government would have another crack at delivering corporate tax cuts in the budget.
“But what we are focused on is driving business investment because business investment creates jobs,” he said.
His comments came as the National Australia Bank’s monthly business survey showed its conditions index rose by a further six points in September, buoyed by its trading and profitability sub-indices.
“After some volatility in the last two months, conditions are around the level seen pre-COVID,” NAB group chief economist Alan Oster said. .
“Employment continues to lag, however, likely reflecting the fact activity has not yet fully recovered and firms remain cautious.”
While conditions are back around the levels seen in early 2020, at an index of zero, they remain well below average.
The business confidence index also rose four points in September, building on the gains of the previous month and is now well above the trough seen in March.
But despite the rise the confidence index is still at minus four points, suggesting sentiment remains fragile.
“While retail currently sees the best conditions, it is likely that, as government support fades and households adjust to a weaker labour market, retail pulls back,” Mr Oster noted.
The survey was released a day earlier than usual ahead of the budget release.
A separate survey also showed the construction industry improving across the country with the exception of Victoria, where activity has sunk to the levels seen when the coronavirus pandemic first hit.
Overall, the Australian Industry Group-Housing Industry Association performance of construction index rose 7.3 points to 45.2 in September.
It indicates the industry is contracting at a slower pace compared to August with the index remaining below the 50 points.
Even so, conditions improved in September in all states except Victoria, where its index sank to extremely low levels similar to April and May’s record lows.
Ai Group head of policy Peter Burn said there are gathering signs of a tentative construction turnaround.
“Outside of Victoria, construction conditions improved marginally in September with more distinct gains in South Australia and Western Australia,” he said.
“In contrast, Victorian construction remained in a deep trough.”
Notably, house building activity entered into positive territory for the first time since February.