Daily Commentary BY THE CURVE TEAM –

Post Election Euphoria Fades

10th of July, 2019

The latest monthly business survey showed the post election bounce in business confidence has faded. However there were positive signs in the survey that will provide solace for the RBA.

Business confidence has come back to the reality that not much has really changed in the post election world and it is business as usual once again. The business confidence index gave up 5 of its 7 point bounce that followed the election with the index now back at 2, well below its long run average.

While confidence eased in June, business conditions were a bit firmer. Trading conditions improved with the index climbing from 3 to 6 with the RBA’s June rate cut likely to have played a role. Profitability and new orders continue to point to headwinds, remaining unchanged at -2 and -4 respectively.

The highlight from the report was the improvement in the employment index for the second straight month. The index now sits at 5, up from 2 in May and -2 in April. A strong employment index bodes well for sustained jobs growth over the months ahead. Something the RBA will be hoping for. The survey period didn’t fully capture their July rate cut so there could still be a little more upside next month.

Next up today will be the latest consumer sentiment report. To date we have seen little improvement in sentiment despite the rate cuts from the RBA and the anticipated tax cuts from the Government. Then the focus will shift offshore as Fed Chairmen Powell heads to Capitol Hill for his two day testimony to congress.

David Flanagan

Director - Interest Rate Markets