Why so glum? Email Print Normal font Large font Related Coverage Business confidence slumps Advertisement Scott Murdoch July 8, 2008 - 12:18PM
The confidence of Australia's business operators is at its lowest since the September 11, 2001 terrorist attacks on the US - but has the domestic economy really hit the skids that much?
The results of the NAB business survey would suggest so, with each industry suffering a marked decline in confidence and conditions - except of course for our major miners, which are powering ahead oblivious to interest rate rises and the slowdown in most major economies, except for China and India.
There is no shortage of negative news surrounding the Australian economy at the moment. And for good reason, oil is staying dangerously high, the labour market is beginning to cool and growth is going to subside.
But it seems a case at the moment, that perhaps Australian consumers and business owners have become too used to strong economic growth - and any figure that isn't robustly buoyant causes an overreaction.
However, the fundamentals of the Australian economy are still pretty good. The NAB survey highlighted that the bank still expects the economy to grow by 2.75% for this calendar year and next.
That is still good growth, but the problem and the mindset of some at the moment is that because the projection does not have a 3 in front it - then it must mean woe.
"NAB still sees the economy as weakening faster than expected and likely to continue to do so in the near term; but higher terms of trade, personal tax cuts and rebound in farm should limit the downside to growth,'' the bank said in its report.
The growth forecasts match the outlook of Treasury delivered in the budget, and are on par with the Reserve Bank's internal projections as well.
There's no doubt a slowdown of the economy is under way, but it should not be interpreted as all doom and gloom.
The RBA has made it clear on many occasions that it wants the economy to slow, as part of its strategy of tackling inflation.
If the economy was losing ground rapidly for no reason, then there would be reason for more concern.
But so far, interest rates are finally doing their job after 12 rate rises in six years and the economy is playing to the tune set by the RBA.
(20min delay)