National Australian Bank survey shows Australian business conditions weaken
Tuesday, April 20, 2004 3:22:24 AM
SYDNEY (AFX-ASIA) - National Australia Bank said its quarterly survey of Australian business conditions showed a weakening in the March quarter from near record levels previously
It said most measures within the survey remain at robust levels with modelling suggesting trend growth in domestic demand of around 1.0 pct in the March quarter compared with 1.75 pt in the December quarter, implying growth in domestic demand of around 5.0 pct over the year to March 2004
NAB said the survey recorded weaker readings for forward orders, capacity utilization and capital expenditure
Confidence remained broadly unchanged, but had fallen in late 2003 following Reserve Bank of Australia's decision to increase rates
It said the survey showed private consumption, after increasing by around 5.5 pct during 2003, is likely to slow to around 4.5 pct through 2004 and to around 3.0 pct in 2005
"That slowing reflects the lagged impact on wealth of a flattening in house prices together with the recent (and prospective further) tightening in interest rates," NAB economists said
But, they said, solid income growth and assumed tax cuts in the forthcoming Federal Budget to be announced on May 11, will help maintain strong consumption growth over the next 12 months
The economists said relatively strong levels of profitability, high levels of capacity utilization and still strong domestic demand should maintain underlying business investment at growth rates of around 8.0 pct in 2004 before moderating to around 4.0 pct next year
With a pick-up in rural exports, and strong global demand, the NAB economists are forecasting net exports to contribute significantly to growth over the next 12-18 months
"After detracting nearly 2.5 pct percentage points from growth during 2003, we expect net exports to add around 0.75 percentage points to growth in both 2004 and 2005," they said
The NAB economists said they had not significantly altered Gross Domestic Product growth forecasts because of the survey results
"The big picture is still one of an expected slowing in domestic demand during 2004, but one that is more than offset by stronger net exports in the face of improving global conditions and much stronger rural production"
They said, GDP growth in the March quarter 2004 will be shown to have been reasonably strong at around 1 pct while annual GDP growth for 2004 has been revised upward to 4.25 pct from 4.0 pct
An early estimate of GDP growth for 2005 is 3.5 pct with the easing in growth reflecting tightening global monetary policy
The economist said Australia's current account deficit as a percentage of GDP will gradually decline to 4.5 pct in 2005 after staying around 6.0 pct in the first half of 2004
Employment expectations in the survey pointed to reasonably strong growth in near term but could slow to around 2.0 pct per annum over the next 12-18 months in the face of slower domestic demand, the NAB economists said
They said this could see the unemployment rate remain around 5.5 pct
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