SYDNEY • Australian firms suffered the worst slump in conditions since the 2008 global financial crisis as evidence mounts that the economy slowed in the latter part of last year.
The business conditions index — measuring hiring, sales and profits — dropped to two in December from 11 a month earlier, a National Australia Bank Ltd (NAB) report showed yesterday. A gauge of employment fell to four from nine in November, while profitability plunged to zero from eight. A separate confidence index was unchanged at three.
NAB chief economist Alan Oster said the drop had been “broad-based” across all states and industries outside of mining. “These declines taken at face value suggest a significant slowing in business activity,” he said.
“There could be some implications for the labour market and business capital expenditure.”
The Australian dollar fell after the report, buying 71.47 US cents at 12:10pm in Sydney yesterday compared to 71.57 before its release.
The result dovetails with slower economic growth in the third quarter as falling property prices threaten to throw a wet blanket over the Australian economy. Money markets are increasingly nervous and traders are pricing in about a 70% chance of an interest-rate cut by the end of the year — despite the central bank saying it expects the next move to be an increase.
While Australia’s wage growth has been anemic in the past five years, hiring has accelerated since 2017 and consumption held up as households opted to save less. Policymakers will hold their first meeting for the year on Feb 5. — Bloomberg