In recent months, the Australian economy has been facing some challenges. A survey conducted by National Australia Bank (NAB) revealed that business conditions in the country softened in January, with the service sector experiencing a slowdown. This led to a decrease in the index of business conditions to +6, just below its long-run average of +7. Despite this, the measure of business confidence increased by 1 point to +1, following a 7-point rebound in December.
The survey also showed that business sales eased 3 points to +11, while both profitability and employment dipped 2 points to +5. Capacity utilization also picked up to 83.6% from 82.8%. NAB’s chief economist Alan Oster noted that confidence remains weak due to ongoing pressures across the economy, including slowing growth and high cost growth.
In terms of costs, the survey showed that quarterly growth in purchase costs edged up to 1.8% in January, while growth in retail prices rebounded to +0.9% from +0.5% in December. Oster mentioned that despite these price pressures remaining solid, they are expected to ease in early 2024 as the economy continues to slow.
In response to these economic conditions, the Reserve Bank of Australia (RBA) raised interest rates to a 12-year peak of 4.35% in an effort to restrain inflation. The RBA also warned that another rate hike might be necessary despite the slowing economy. As such, it is important for businesses and individuals alike to closely monitor these developments and adjust their financial plans accordingly