By Chris Zappone
The business environment improved in April, helped by the Government's cash grants flowing into retail and transportation sectors.
Business conditions leapt seven index points in April to minus-10 points from minus-17 index points in March, according to the National Australia Bank's monthly business survey and economic outlook.
"There is little doubt that the results of the April Survey represent the most encouraging set of numbers for some time,'' wrote NAB chief economist Alan Oster.
The measure of business condition is the latest in a string of positive readings on the economy, including surprisingly strong retail sales and employment figures for March and April, respectively.
Last month's conditions for business were driven by a jump in forward orders, NAB said, which have improved for the second month running to minus-11 index points in April from minus-18 points in March.
"While Government stimulus packages are no doubt a key driver of the recent jump in activity reported in retail and transportation, at least there are now signs that the falls in demand may be easing," Mr Oster said.
Released on the eve of the 2009-10 federal budget, NAB said the latest business survey shows the Australian economy is in stronger shape than many of its peers abroad.
If the April survey's index results didn't change in the second quarter it "would imply a moderate return to demand and GDP growth,'' Mr Oster said.
Last month, RBA governor Glenn Stevens admitted the country was in recession by nearly any measure.
However, there have not been two consecutive quarters of GDP shrinkage, the technical definition of a recession.
The economy contracted 0.5% in the final quarter of 2008. March-quarter GDP numbers will be released in early June.
Whether the economy returns to growth in the first three months of 2009 ''is perhaps doubtful'', Mr Oster said.
"That said, the survey, at the very least, reinforces the point that the Australian economy continues to relatively outperform and is not crunching down as appears to still be the case in many of our major trading partners.''
The federal budget, to be released tomorrow evening, is expected to show the first deficit since 2001-02, as the government grapples with falling revenues and rising costs for social welfare programs brought on by the slowdown.
The reading on business conditions has been flat or lower for 11 months, since the onset of the global financial crisis, which dried up demand and toppled forecasts for growth.
Confidence, however, remains in the doldrums, easing to minus-14 index points in April from minus-13 in March, NAB said.
"While it is perhaps unwise to put too much emphasis on one month's results, the April survey does seem to point to a stabilisation of confidence at levels around those reported in late 2008 and early 2009 - that is, at levels significantly above the `fear-driven' readings of January and February.''
That gauge has been below 50 points, distinguishing positive from negative results, since January of 2008, according to data from Bloomberg.
Confidence was "broadly unchanged,'' Mr Oster said, noting that the rise in sentiment surrounding the transport and mining sectors were offset by drops to the wholesale sector.
Nonetheless, "confidence has stabilised at levels significantly up from the excessively negative reading of early 2009 when fear of global collapses reigned.''