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Australia’s business sector has recorded strong growth in sentiment as well as in trading conditions in June. Business sentiment in the nation shrugged off the Brexit volatility.
The rebound in business sentiment is quite a positive result given it comes in the midst of the huge volatility in financial market after the UK’s decision to leave the EU. On the contrary, the ANZ-Roy Morgan consumer sentiment dropped 1.7 percent post the Brexit decision and has continued to drop due to the heightened political uncertainty locally.
Any impact from political uncertainty should be seen in next month’s survey. The sentiment continues to face headwinds, including the Australian election that took place after the survey was conducted.
A hung parliament has been avoided; however, the close result implies that the government will face an uphill battle to pass budget measures that might be a drag on confidence, noted ANZ in a research report.
Meanwhile, business conditions continued to be quite robust last month. Profitability increased again, implying that additional growth in employment is possible in the remainder of 2016. Capacity utilization continues to be on an upward trend, despite a smaller decline in June. Consistently solid business conditions indicate towards strong economic growth in the second quarter, according to ANZ.
The strength in business conditions was widespread. Trend conditions are at the highest level on record in New South Wales, whereas Tasmania continued to gain from a booming tourism sector.
Business conditions are also improving in South Australia, with sentiment possibly being aided by the decision to build AUD 50 billion of submarines in Adelaide. Meanwhile, conditions in Western Australia are in free-fall as state looks for growth outside the mining sector, said ANZ.
Overall, the continuous strength in business conditions implies that Australia’s economic growth continues to widen outside the mining sector, stated ANZ.
