The Australian economy made it through the end of JobKeeper and reduction in JobSeeker payments in a healthy state, according to the March business survey from the National Australia Bank.
Business conditions rose 8pts to a record high 25 index points in March according to the NAB, with the drivers of that improvement being strong increases in all sub-components of the survey – which are all now also all at record highs.
“The strength in conditions is evident across all states and industries. Forward orders – which also rose to record levels – points to ongoing strength in activity with the pipeline of work rising further,” NAB said.
Business confidence fell 3 index points in March, to +15 index points, but remains well above average.
“Confidence was generally weaker across all industries, led by a pull-back in wholesale and manufacturing. It remains highest in mining, finance, business & property and construction. It is weakest – though still healthy – in retail and wholesale,“ the NAB said in its analysis.
“Alongside the strength in activity, capacity utilisation rose further in the month and is now well above average.
In fact the survey shows that capacity utilisation is at or above pre-COVID levels in all industries except for recreational & personal services – “which unsurprisingly is still impacted by pandemic related restrictions.”
“Taken together, the strength in conditions alongside high levels of capacity utilisation, point to an economy that is continuing to grow at a relatively healthy rate as we transition through the wind-up of the JobKeeper program and beyond,“ the bank’s chief economist, Alan Oster said in the report.
Mr Oster said the improved conditions “tell us activity is lifting strongly, capacity utilisation tells us we are already a high level.
“This is particularly encouraging as we move through the tapering in fiscal support and out of the rebound phase of the recovery. It suggests that there may be a lift in business investment and hiring as the underlying pace of growth appears relatively healthy.”
“Indeed, reported capex has now also recovered and provides some optimism that investment will continue to increase given a building pipeline of work – strong forward orders – and high rates of utilisation.”
“Price pressures have lifted in recent months, largely on the input side with a lift in employment and some evidence of higher input costs.
“Final products price inflation has also risen but are tracking at a slower rate suggesting that not all of the cost increases have been passed onto the consumer,” Mr Oster said.
The markets are now eying inflation – the March quarter Consumer Price Index is out on April 28 and the Producer Price Index a couple of days later.