Business conditions are improving as the economy opens up from COVID-19 restrictions, but confidence will be a key factor in determining how quickly the country returns to normal.
National Australia Bank chief economist Alan Oster says policy support has been crucial for the business sector.
“We think the government may need to do more next year unless confidence really rebounds,” he said while releasing the bank’s September quarter business survey on Thursday.
The survey showed conditions rose 22 points in the quarter to an index of minus four points, while confidence was up five points to an index of minus 10 points.
“Despite the strong gains, both conditions and confidence remain very weak,” Mr Oster said.
“While there had been some improvement in activity in the quarter as the economy opened up, the impact on the labour market will lag.”
However, National Skills Commissioner Adam Boyton told a Senate estimates hearing while there is a challenge ahead, there are positive signs in the jobs market.
He said unemployment forecasts by both Treasury and the Reserve Bank of Australia present a much more positive picture than the ones prepared at the height of the pandemic.
At the same time the trend in vacancies has been fairly solid over the past few months and in some states there are now higher than they were pre-pandemic.
“One would certainly hope that Victoria will start to join that recovery,” Mr Boyton said.
“It will be some months before we know that, but certainly in our monitoring of data, particularly of vacancies, trends are quite positive but aren’t going to take us in short order back to where we were.”
In the past couple of days both Prime Minister Scott Morrison and the RBA have indicated the economy has begun pulling out of the deepest recession since the 1930s.
That won’t be confirmed until the September quarter national accounts are released in early December.
Even so, economists expect the RBA will cut the cash rate from 0.25 per cent to 0.1 per cent when its board meets on November 3.
While Wednesday’s figures showed inflation surged 1.6 per cent in the September quarter, the biggest rise in 14 years, annual inflation was a meagre 0.7 per cent.
Underlying measures of inflation – which smooth out wild price swings and are closely monitored by the RBA in terms of monetary policy – remain extremely subdued.