Daily Commentary BY THE CURVE TEAM –

Rate Cuts Provide Little Reprieve for Businesses

9th of October, 2019

The business sector remains under pressure with rate cuts doing little to turn things around.

With the election result now well and truly in the rear view mirror and multiple rate cuts flowing through the economy, you would think businesses might be in a better mood. The latest monthly business survey showed little change in both conditions and confidence with both remaining anchored below their long run averages.

Businesses are clearly concerned with the outlook as confidence continues to slide. The index dropped another point to 0 in September. That keeps the down trend in tact after it was sitting at 4 only two months ago.

Conditions aren’t helping either. The index was up a point to 2 in September but the breakdown of the numbers was hardly encouraging. Trading conditions and the employment index edged up a point while profitability remains entrenched in negative territory despite a series of rate cuts.

The outlook is equally bleak with the forwards orders negative for the 8th straight month.

For the RBA there was little positive news on inflationary pressures as businesses continue to absorb cost pressures. Final producers prices posted a quarterly change of 0.1% while retail prices were flat. That comes as purchase costs were up at a quarterly rate of 0.7%. It is no wonder we aren’t seeing strong wage growth in the offering as businesses manage cost pressures to remain competitive.

Today we get the latest update on the state of the consumer with the latest sentiment survey due for release.

David Flanagan

Director - Interest Rate Markets