Business confidence climbs to 6 yr high

Business confidence climbs to 6 yr high

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Business confidence continues to climb steadily – a further sign that agents can expect activity to improve over the spring season.

According to the National Australia Bank’s monthly business survey and economic outlook, business confidence climbed eight points to an overall reading of 18 points in August, the highest reading since October 2003.

The better than domestic outlook and improved confidence levels further erodes the case for maintaining emergency lows in interest rates.

NAB’s chief economist Alan Oster said the Reserve Bank of Australia will probably be inclined to look at the data for a month or so before beginning the process of moving settings to more normal levels.

“We see the most likely path of policy being three consecutive 25 point increases in November/December/February, taking the policy rate to 3.75 per cent by early 2010,” Mr Oster said.

“After this, the RBA board is likely to pause as they view the flow of economic data and gain confirmation that the recovery is unfolding as expected. Two further 25 point moves in August and September 2010 are then likely, taking the rate to 4¼ per cent by year-end. Over 2011, we expect further policy tightening to 5½ per cent by the end of the year.”

Business confidence continues to climb steadily – a further sign that agents can expect activity to improve over the spring season.

According to the National Australia Bank’s monthly business survey and economic outlook, business confidence climbed eight points to an overall reading of 18 points in August, the highest reading since October 2003.

The better than domestic outlook and improved confidence levels further erodes the case for maintaining emergency lows in interest rates.

NAB’s chief economist Alan Oster said the Reserve Bank of Australia will probably be inclined to look at the data for a month or so before beginning the process of moving settings to more normal levels.

“We see the most likely path of policy being three consecutive 25 point increases in November/December/February, taking the policy rate to 3.75 per cent by early 2010,” Mr Oster said.

“After this, the RBA board is likely to pause as they view the flow of economic data and gain confirmation that the recovery is unfolding as expected. Two further 25 point moves in August and September 2010 are then likely, taking the rate to 4¼ per cent by year-end. Over 2011, we expect further policy tightening to 5½ per cent by the end of the year.”

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