In July, business condition in Australia rose with the service sector rebounding from a national lockdown; however confidence level took a direct hit following renewed Wuhan coronavirus outbreaks in the state of Victoria, Australia’s second most populous state.
The country;s index of business conditions as reflected in National Australia Bank’s index of business conditions showed a bounce to 0 in July from -8 in June. This is up from a low of -34 in April – at the height of the coronavirus pandemic.
The index of sales firmed to +1, from -6, and profitability to +2 from -8. Employment improved to -2, from -11 in June.
“Conditions have now recovered to be broadly around their pre-COVID level with improvements across the country,” said NAB Group Chief Economist Alan Oster.
“The fall in confidence even prior to the announcement of stage 4 restrictions in Melbourne demonstrates that businesses will remain very cautious given the great uncertainty around the virus at the moment.”
On Tuesday, the results of a weekly survey of consumer confidence by ANZ showed sentiment had slipped for a seventh straight week as the latest lockdown took a heavy toll on Victorians.
The bank also noted that spending on its cards had fallen by 12% in Victoria compared to the previous year ago, while it rose by 17% in the rest of the country.
The Wuhan coronavirus has ravaged Australia’s most lucrative sectors, including education and tourism; the Reserve Bank of Australia has warned that economic output could contract by 6% in 2020, in its first ever recession since the early 1990s.
The central bank has maintained interest rates to an all-time low of 0.25% and launched a major bond-buying campaign to hold yields down. The government has pledged more than $142.98 billion (A$200 billion) as a measure of fiscal stimulus.