Australia's business confidence rebounds in June, shrugs off Brexit volatility

The latest survey from National Australia Bank showed on Tuesday that business confidence in Australia improved in June. The NAB business confidence index rose to 6.0 in May from 3.0 in the previous month.

The improvement in business confidence comes amidst the large spike in financial market volatility following the June 24 referendum wherein the voters decided to leave the European Union and suggests Australia's economic growth continues to broaden outside the mining sector.

That said, business confidence continues to face challenge in political uncertainty. Australian elections have taken place. And the survey says that conducted and very close result suggests that the government will face an uphill battle to pass budget measures, which may weigh on confidence.

“We are very much seeing a continuation of the positive trends evident in the survey for some time now. Strong activity seems to be having a positive effect on labour demand in the survey, despite recent 'questionable' official labour market statistics suggesting otherwise,” noted NAB's chief economist Alan Oster in the report.

However, the view on inflation is arguably more important at this juncture, and the Survey is not suggesting any meaningful turnaround in near-term inflation pressures. These trends justify the highly accommodative setting for monetary policy, but while the August RBA meeting (post Q2 CPI) is likely to be ‘live’, current information suggest rates will remain on hold (although it is likely to be a close call).”