Australian business confidence tumbles

Australian business confidence fell to its lowest level since April 2020 in March, even as the sharemarket rose on hopes the United States and Iran might strike a deal. (abc.net.au) National Australia Bank’s monthly survey showed confidence dropping 29 points to minus 29, the second-largest monthly fall in the survey’s history. The bank said moves that large were previously seen only during the global financial crisis and the start of the COVID-19 pandemic. (news.nab.com.au) The survey was conducted from March 24 to March 31 and covered about 315 non-farm businesses, making it the first full read on sentiment after the Middle East conflict erupted and fuel prices jumped. Business conditions, which measure what firms say is happening now rather than what they expect next, slipped only 1 point to plus 6. (news.nab.com.au) That gap matters because it shows executives turned sharply more pessimistic before activity fully rolled over. Forward orders fell 6 points to minus 1, while profitability dropped 3 points to 1, pointing to weaker demand and tighter margins ahead. (news.nab.com.au) Costs were already moving the wrong way. National Australia Bank said purchase cost growth more than doubled to a quarterly pace of 3.0 percent in March, while product price growth rose to 1.1 percent and labour cost growth held at 1.5 percent. (news.nab.com.au) Economists tied the hit in confidence to the oil shock from the Iran war and to higher borrowing costs at home. Reuters reported that Australia imports about 80 percent of its fuel, while the Reserve Bank of Australia has lifted its cash rate to 4.1 percent after two increases this year. (whtc.com) The market told a different story on Tuesday, April 14. The benchmark Standard and Poor’s and Australian Securities Exchange 200 index closed up 44.8 points, or 0.5 percent, at 8,970.8, as traders bet diplomacy could reduce the risk of a longer disruption in the Strait of Hormuz. (morningstar.com.au) That rise was uneven. Westpac fell 2.6 percent after warning its markets division would take a hit from the war, while technology stocks such as WiseTech Global, Xero and Megaport gained between 3.8 percent and 4.5 percent. (morningstar.com.au) Other surveys released the same day showed households were rattled too. Reuters said consumer sentiment fell 12.5 percent in April to 80.1, the lowest level in more than two years, and a measure of willingness to make major purchases dropped 15 percent. (whtc.com) For now, Australia has a split picture: companies are reporting steady activity, falling confidence and rising input costs, while investors are buying on the chance the geopolitical shock fades before it hits earnings and spending harder. (westpaciq.com.au)