COVID-19 hits hard as business confidence in Australia plummets to new record low
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As markets come off the Easter break, the first run of major economic data points for March will help give some clarity around the impact of the coronavirus shutdown on Australia’s economy.
Coming in first today was NAB’s monthly business survey, a widely-read measure of conditions and confidence on the ground among Australian businesses.
And the results were definitive, as the reading for confidence came in at -66 — the lowest level ever recorded since the survey began in 1989. It was also far below the figure record in the 2008 financial crisis, when the measure for confidence fell to around -30.
While the NAB Survey revealed a historically dismal level of sentiment among Australian companies, that didn’t immediately translate into the outlook for stock prices as the ASX continued its tentative climb off the March lows in Tuesday trade.
Business conditions fared slightly better but still registered a reading of -21, which was the worst print since Australia’s last recession in the early 90s.
The primary sub-headings for trading, profitability and employment all registered negative prints of between -19 and -27. As an illustration of COVID-19’s sudden impact, the February prints came in at 4, -5 and 1 respectively.
NAB chief economist Alan Oster said numbers are indicative of a sharp 2020 recession.
“We expect a recession of unprecedented speed and magnitude for the Australian economy over the next three quarters,” Oster said.
However, he said the aggressive response from policy makers should leave the economy in a better position to rebound once the crisis was contained.
The numbers come ahead of Thursday’s job numbers from the ABS, which is expected to show the first sharp uptick in unemployment. Forecasts from the federal Treasury department are for the u/e rate to reach 10 per cent, up from 5.1 per cent in February.
Forward orders — a metric in the NAB survey used to estimate the expected level of future business activity — also collapsed to a reading of -29 in March (from -5 in February).
Looking ahead, Oster said NAB would be watching closely for a turn in confidence over the coming months, which “may take some time to recover”.
An improvement from the record low could indicate that businesses believe the worst of the crisis is over. However, “it could well be that conditions fall to the lowest level since the 1990s recession in coming months”, Oster said.