Confidence lifts, shakes off COVID gloom

·3-min read

Businesses and consumers already had a renewed spring in their step when NSW finally ended more than 100 days of lockdown battling the coronavirus Delta variant.

Business confidence surged on the hope that roadmaps out of COVID-19 lockdowns will allow activity to rebound in coming months after a widely expected economic contraction in the September quarter.

The National Australia Bank business survey for September showed confidence spiking 19 points to an index of plus 13 points, well above its long-run average after falling into negative territory in previous months.

Confidence - an early indicator of investment and employment - soared 42 points among NSW firms ahead of Monday's reopening, while in Victoria it was up 16 points, with the state due to open up from lockdown later this month.

"Businesses are really looking forward to reopening," NAB chief economist Alan Oster said.

"The rise in confidence suggests they see the roadmaps that have been announced as sufficient to allow activity to really rebound in the coming months."

However, he said confidence was more about hope for the future than what was happening in the present.

"On that front, conditions really deteriorated, which shows that lockdowns are taking a toll, despite the resilience the economy has shown through this period," Mr Oster said.

Business conditions tumbled nine points to an index of plus five in September, continuing a rapid decline from record highs before recent lockdowns.

The drop in conditions was shared across its index components of trading, profitability and employment, and all states were in decline. Forward orders also fell.

"The good news is, if we look back at past lockdowns, confidence has tended to rebound in advance of reopening, with an improvement in conditions following," Mr Oster said.

The mood among Sydneysiders also improved further in the past week in anticipation of Monday's reopening,

The ANZ-Roy Morgan consumer confidence index - a pointer to future household spending - rose one per cent nationally in the past week, with sentiment up 2.5 per cent in Sydney.

In contrast, confidence fell 3.6 per cent in Melbourne.

"The dampened outlook in Melbourne may reflect rapidly rising COVID case numbers in the city," ANZ head of Australian economics David Plank said.

"Given that more than 84 per cent of the adult population in Victoria has been vaccinated at least once, the daily cases should peak soon, which should provide a boost to Melbourne ahead of its reopening."

The national index has now risen for five weeks in a row, to stand at its highest level since mid-July.

But the survey, taken at the weekend, also found inflation expectations remain elevated with the four-week moving average edging up to 4.8 per cent, its highest since 2014.

It comes at a time of rising petrol prices, in tandem with increasing global oil prices.

Meanwhile, the Housing Industry Association said sales of new detached houses increased by 2.3 per cent in September.

"It has been over six months since the end of HomeBuilder in March 2021 and sales have remained resilient," HIA economist Tom Devitt said.

"These relatively strong sales will ensure that the boost in home building flows through to the second half of 2022."

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