Three new surveys have been released today that further illustrate the serious pressure businesses are under, but they are unlikely to be enough to jolt the RBA into cutting rates.
Three new surveys have been released today that further illustrate the serious pressure businesses are under, but they are unlikely to be enough to jolt the RBA into cutting rates.
The consensus view is that the Reserve Bank of Australia Governor Glenn Stevens will announce no change in rates when the RBA board meeting concludes at 2.30pm today.
But it is telling that no-one in market or economic circles now believes there will be a rate rise today when, not too long ago, some economists were predicting two more rises this year.
The markets will be looking for signs in Stevens’s statement accompanying the decision that the RBA has shifted its thinking towards a rate cut.
And he will not want for evidence of business pain to help him along with his decision, with two major surveys released today showing big falls in confidence and conditions.
The Commonwealth Bank-ACCI Business Expectations Survey for the June 2008 quarter recorded the deepest level of pessimism about the economic outlook since it began in 1994.
More than 60% of more than 2000 business owners surveyed said they believe the economy will get weaker over the next year, up from 11% in the June quarter last year.
Business conditions also fell to the lowest level in five years. Over 30% of business owners said sales fell in the three months to June, up 10% on the same period in 2007.
The only positive mark on the ledger was in export sales growth, with 20% of businesses reporting more export revenue slightly up on this time last year.
The Dun & Bradstreet Expectations Survey recorded similarly glum results, with businesses reporting the lowest growth in sales and profits since March 1991 – a period of recession.
Looking forward to the December 2008 quarter:
“The pressures of high food and oil prices are forcing households to cut back on real levels of consumption,” Dun & Bradstreet’s economic consultant Duncan Ironmonger says. “With demand growth slowing rapidly, the Reserve Bank is unlikely to raise the cash rate this week and could begin to cut rates before the end of 2008 despite continuing high inflation.”
Wobbly consumer nerves are also reflected in Australian Industry Group-Commonwealth Bank Performance of Services index for July. It fell 2.6 to 42.8 points in July, well below the 50 point line separating growth from contraction, suggesting the services sector is being hit particularly hard.
The sour mood has spread to the sharemarkets this morning, with the S&P/ASX200 down 2.1% to 4783.9 at 12.15pm. Selling in resources stocks triggered by a tumble in commodities prices overnight is the key reason for the fall.
Curiously, the announcement by insurance company AXA Asia Pacific of a 75% fall in after-tax profit for the first half of 2008 to $94.2 million wasn’t a factor, with shares in the company lifting following the announcement.
And the Australian dollar has fallen further today on speculation of a September rate cut to be trading at US92.72c at 12.15pm.
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