Australian Business Confidence Gains for Second Month

By Jacob Greber

April 14 (Bloomberg) -- Australian business confidence rose in March for a second month, boosted by government cash handouts to taxpayers and the lowest borrowing costs in five decades.

The sentiment index gained 9 points to minus 13, according to a National Australia Bank Ltd. survey of more than 400 companies released in Sydney today.

While today’s report shows pessimists outnumbered optimists for a 14th month, the increase in confidence suggests government handouts and interest-rate cuts may stoke consumer spending. Reserve Bank of Australia Governor Glenn Stevens reduced the benchmark lending rate to a 49-year low of 3 percent last week.

“While an element of fear appears to be abating, the index is still quite low,” said Alan Oster, chief economist at National Australia Bank in Melbourne. The “survey still points to falling demand in the first quarter.”

The Australian dollar traded at 72.87 U.S. cents at 11:40 a.m. in Sydney from 72.86 cents just before the report was released. The two-year government bond yield was unchanged at 2.93 percent.

Australia’s jobless rate jumped to 5.7 percent in March, the biggest increase since the economy was last in a recession in 1991. Qantas Airways Ltd. said today it will cut 1,750 workers and managers amid a slump in international travel.

Oster expects the jobless rate will rise to 7.75 percent next year, higher than his previous forecast of 7.5 percent. The central bank says the economy will contract this year.

Interest Rates

A gauge of employment fell 2 points to minus 29, and a measure on the outlook for exports dropped 4 points to minus 30, National Australia Bank said.

To stoke domestic demand, central bank Governor Stevens has cut the benchmark interest rate by a record 4.25 percentage points since September. The government also is spending A$42 billion ($31 billion) on cash handouts to households and on infrastructure.

National Australia’s business conditions gauge, a measure of hiring, sales and profits, rose 3 points to minus 17, close to the lowest since June 1992.

A measure of forward orders gained 9 points to minus 18, and capacity utilization fell 0.5 points to 78.9 percent, the lowest level since July 2001, today’s report showed.

“Recent business outcomes continue to struggle,” Oster said. “Every sector is still reporting significant deterioration in activity levels.”

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net