Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)
A stubbornly downbeat household sector appears to have taken the wind out of the sails of business confidence.
The monthly National Australia Bank business survey released on Tuesday showed confidence retreating to its long-run average in May after spiking to a seven-year high in April, while conditions remained solid and substantial above their long-term trend.
National Australia Bank chief economist Alan Oster says how this disparity between the business and household sectors resolves itself will be critical to the outlook for economic growth.
“Optimists might point to solid employment conditions as providing the much-needed catalyst to lift the household sector out of its current funk,” he says.
However, wages growth remains subdued and consumers cautious about spending.
NAB expects the economy to accelerate in the second half of this year after the weather-related disruptions in the first six months of 2017.
Last week’s national accounts showed the economy grew by just 0.3 per cent in the March quarter and the June quarter could be equally as subdued from the impact of tropical Cyclone Debbie in late March.
However, NAB expects the longer-term outlook could be less sanguine as important growth drivers – LNG exports, commodity prices and housing construction – begin to fade.
A separate survey by KPMG found a growing proportion of Australian bosses are also less confident about the outlook for their global counterparts over the next three years, dropping to 43 per cent from 92 per cent 12 months ago.
Meanwhile, Australian Chamber of Commerce and Industry chief James Pearson believes the above-inflation 3.3 per cent rise in the minimum wage award also announced last week was another blow to small business
“At a time when energy prices are surging, consumers are anxious about a possible housing bubble and a major foreign retailer (Amazon) is preparing to enter the Australian market, small businesses are feeling vulnerable,” he said.
“The decision to increase award wages … will intensify the pressure and may tip some small businesses over the edge.”
However, an analysis of the national accounts by The Australia Institute found while labour productivity has grown by almost 20 per cent over the past decade, wages have grown only six per cent over the same period.
“Australia has never seen a weaker flow-through of economic growth into workers’ pay packets,” Jim Stanford, an economist and director of the Centre for Future Work at the institute said