Australia heading for ‘multi-speed’ economy

Australia’s economy is becoming “multi-speed”, despite an overall improvement in business conditions during September, according to a new report.

NAB’s monthly business survey found that conditions had edged up slightly from August, from a net positive rating of five to a rating of seven.

Trading experienced a bigger leap, up from five to 13, while profitability was up by two to a positive rating of six.

Business confidences slipped by one point to 10, although NAB points out that this is above the long-term average of seven points.

Employment, forward orders and stocks all showed significant improvements during September, according to the data, although export sales plunged from a rating of zero to minus four.

Despite the generally positive report, NAB warned that Australia was heading towards a “multi-speed” economy, with mining and transport companies faring much better than retailers and manufacturers.

“Although conditions improved in construction, it continued to experience the poorest cashflow conditions,” states the report. “Cashflow was also weak in manufacturing, retail and transport and storage. Strong cash flows were reported in wholesale, mining and finance.”

“The survey results continue to highlight the re-emergence of a multi-speed economy in Australia. Trading and profitability are exceptionally strong in mining but negative in retailing. Manufacturing has reported negative employment conditions for four months in a row, probably because its trade-exposed sectors have been pressured by slowing global growth and then by the appreciating Australian dollar.”

“Construction appears to be transitioning to stronger growth, with a sharp rise in trading conditions and profitability in September. This, and the strength of the transport sector, may be an early sign of stronger investment in the minerals sector.”