Australia's Business Confidence Remains 'Flat' Despite Abbott's Tough Federal Budget
By Reissa Su | June 10, 2014 7:07 PM EST
Business confidence in Australia continues to remain "steady" in the face of the Abbott government's tough budget cuts and falling consumer confidence.
An office worker is reflected in the window of the Australian Securities Exchange building displaying the ASX50 curve for Wednesday in central Sydney August 7, 2013.
According to National Australia Bank (NAB)'s monthly survey, business confidence remained the same in May despite a federal budget that's widely blamed for the sharp decline in consumer confidence.
Alan Oster, NAB chief economist, said the result of the survey was "surprising" with many firms choosing to stay positive and upbeat.
Bank of American Chief Economist Saul Eslake said the economy is "not falling in a hole" despite the slump in consumer confidence. If consumer sentiment continues to decline, the economy may be affected. But Australian businesses hope consumer confidence will come out of that hole again.
The Westpac Melbourne Institute Index of Consumer Sentiment declined 6.8 percent in May to its lowest level since August 2011. Consumer index has remained under 100 points for the second consecutive month. This means majority of Australians feel less optimistic about the economy.
Following the days before the budget's release, Australia's consumer index has dropped in anticipation of the budget cuts. Westpac Chief Economist Bill Evans said the sharp decline in index has left an "unfavorable" reaction toward the federal budget.
Tom Kennedy, an economist for JP Morgan, was not surprised by the low consumer confidence. He said only a few were spared from the federal budget as the government announced cuts in spending for health, education and welfare. Kennedy noted families are more likely to control their spending in response to the Abbott government budget reduction.
According to reports, business conditions dropped slightly in May due to "soft" profits and employment. Eslake said "very few" of the changes in budget impact businesses. Consumers feel the more adverse effects of the budget. He said the business environment is more aligned with the government.
In April, the International Monetary Fund has downgraded its growth forecast for Australia for two years from 2.6 percento in 2014 and 2.7 percent in 2015 since October 2013.
To contact the editor, e-mail:
Most Popular Slideshows
- Flight MH17 Attack: Russians Claim 'Putin A Terrorist,' Memorial at Dutch Embassy Overflows [PHOTOS]
- Typhoon Rammasun Claims 18 Lives in China, Incurs $4.32B Losses (PHOTOS)
- Ellen DeGeneres Caught Cheating with Mutual Friend Before Portia de Rossi’s Rehab – Reports [PHOTOS]
- Malaysia Airlines MH17: Vital Black Boxes Finally Land in Hands of Malaysian Authorities, Rebels Announce Ceasefire (PHOTOS/VIDEOS)
Join the Conversation
- China Military PLA Drills Affect Flights, Hundreds Cancelled
- Malaysia Airlines MH17: EU Feared Won't Ever Enforce Sanctions on Russia; All Talk, No Force
- U.S. Flights to Israel Now Lifted, Flights To and From Tel Aviv Resume – FAA
- Reserve Bank of New Zealand Raises Interest Rates Due to 'Unsustainable' Kiwi
- Embattled Malaysia Airlines Could Run Out of Cash 2015; Diverts Plane Over Another War Zone After MH17 Crash
- Samsung Galaxy Note 4 Apps Leak Online, Five Fresh Features to Expect from the Android Smartphone
- Moto 360 Price Speculations, Key Features, Strategic Release Date, Design: A Watch That is More Than Just Time
- Windows Phone 8.1 Update Rollout: 20 Nokia Lumia Phones Eligible and 13 New Features to be Added
- Three New Moto G Successors Spotted in FCC Document Dubbed Moto G2, Moto M and More --Reports
- iPad Air 2 Release Date Will Skip IGZO Panel; To Rollout with Super-Slim iPad Mini Air
- Upcoming iPad Mini 3 Could be 30% Thinner and Likely be Called iPad Mini Air; Apple Q3 Results Show 9% Decrease in iPad Sales
- Sony Xperia M2 vs. Moto G – Specifications, Features and Price Showdown