Business confidence ended 2009 at its highest level in 15 years, buoyed by government stimulus spending and a stock market rally.
National Australia Bank survey of business confidence for the December quarter rose two points to 18, the highest result since the December 1994 quarter when the nation was rebounding from a recession.
Conditions also rose in the December quarter by 4 index points to 9, the highest since March 2008, NAB said.
Analysts and policy makers alike are grappling with a mix of data as they try to assess the underlying strength of the economy. The Reserve Bank earlier this month surprised investors by opting to leave interest rates on hold despite signs of a recovery in key sectors, including employment.
NAB's quarterly figures out today are partially superseded by monthly business confidence results for January, which the bank released earlier this month. They showed business confidence rising 7 index points to a reading of 15 but the monthly survey shows business found a weaker start to 2010 with conditions falling 7 points to 3 index points level.
As for the quarterly confidence figure, NAB chief economist Alan Oster said, ``expectations for business conditions for both the short term and 12-months ahead now line up not much below pre-global financial crisis levels."
The momentum of Australia's economy which shrugged off last year's global turmoil spurred the Reserve Bank to begin lifting interest rates in October. Its three increases in 2009 took the cash rate to 3.75 per cent.
Holding up
Even with the higher rates, consumer confidence has held up and home prices, after a brief dip, went on to register a 12.1 per cent rise in 2009.
Similarly, Asia, the destination for the bulk of Australia's exports, has experienced growth throughout the downturn in the Western economies.
The Reserve Bank again underlined the benefits of Australia's exposure to the growing regions of the north, particularly China.
NAB's Mr Oster cited rising equity markets, which recovered by more than 50 per cent at one point, for pushing up gauges of confidence and conditions in the December quarter.
He also said last year's first-homebuyers' boost, enacted by the federal government, helped keep residential construction ticking along.
Australia's economic strength prompted a ``sustained and encouraging'' improvement in forward orders expectations, with that sub-index rising 7 index points to a level of 8 in the December quarter, NAB said.
Underpinning the rising expectations for the economy and the cheery assessment of its current conditions has been the strength of the labour market, which has continued to improve since the period of the NAB survey ended.
The jobless rate fell to 5.3 per cent in January from 5.5 per cent at the end of 2009.
In quarterly survey, the employment sub-index moved into positive territory for the first time since the September 2008 quarter, to 5 points in the fourth quarter, from minus-4 in the third quarter.
czappone@fairfax.com.au
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