Improvement in Australian Business Conditions in July

SYDNEY (Reuters) – Australian business conditions improved in July due to a rebound in employment, according to a survey released on Tuesday. Cost pressures have continued to ease as high interest rates attempt to slow demand.

The survey from National Australia Bank (OTC:NABZY) (NAB) showed that its index of business conditions rose by 2 points to +6, just beneath its long-run average. In contrast, the more volatile business confidence index decreased by 2 points to +1.

Within the conditions measure, the employment index rose from 0 to +7, while sales eased from +11 to +9.

NAB Chief Economist Alan Oster commented, “We were concerned about the sharp decline in the employment index last month, but it jumped back to an above-average level this month, suggesting that robust job growth in the economy is continuing for now.”

Oster also noted, “The fall in conditions is consistent with the slowdown in growth that has occurred, but we expect the economy to grow more quickly in the second half of the year.”

The survey indicated a welcome reduction in price pressures, with growth in purchase costs and product prices slowing. Inflation in product prices remained steady at a quarterly rate of 0.7%, corroborating the slowdown seen in June. Purchase costs grew just 1.1% in the quarter, nearing pre-COVID rates.

However, labour costs surged to a quarterly rate of 2.5%, up from 1.5%, likely due to minimum wage increases at the beginning of the month, according to Oster.

The Reserve Bank of Australia kept interest rates steady at its August policy meeting, deeming the current rate of 4.35% sufficiently restrictive to bring inflation back to target while maintaining employment gains.