Business confidence has taken a massive hit from the outbreak of the Omicron variant, which is threatening to dampen the Australian economy’s post-lockdown recovery.
The National Australia Bank’s monthly business survey for December showed confidence tumbling by 24 points to an index of minus 12 from plus 12 the previous month.
Business confidence — a guide to future hiring and investment — was down in every state.
“The confidence index fell below the level recorded at the beginning of the Delta outbreak, showing just how concerned business are about the current virus wave,” NAB chief economist Alan Oster said.
However, while business conditions also fell three points, they remained just above the long-run average at eight index points.
Mr Oster said conditions have been surprisingly stable through the past few months with both lockdowns and reopening having only limited effects, despite big swings in confidence.
“That should provide some comfort that businesses are continuing to find ways to adapt through difficult circumstances,” he said.
But overall the survey results are consistent with an economy that’s starting to slow.
“That probably means conditions will fall in early 2022. However, we don’t expect the Omicron variant to derail the recovery longer-term,” he said.
Meanwhile, consumer confidence has stabilised after a rocky start to 2022, buoyed by the latest labour force figures that showed the unemployment rate plunging to a 13-year low.
However, concerns about the inflation outlook remain elevated.
The weekly ANZ-Roy Morgan consumer confidence index — a pointer to future household spending — rose 2.2 per cent, partly recovering from its 7.6 per cent tumble the previous week, which was the weakest January result since 1992.
ANZ head of Australian economics David Plank said the recovery came in the same week that the jobless rate dropped to 4.2 per cent and amid signs that COVID-19 cases appeared to have peaked.
Confidence was driven by rises of 7.7 per cent in Victoria, 8.8 per cent in Western Australia and 3.7 per cent in Queensland.
However, NSW and South Australia posted declines of 2.4 per cent and 2.6 per cent respectively.
The survey’s consumer inflation expectations rose 0.1 percentage point, returning to a recent seven-year high of five per cent.
It came ahead of the latest inflation figures which are expected to show prices remained at the top of the Reserve Bank’s two-to-three per cent target, fed by higher fuel and housing costs.
In the past week, the average national petrol price rose by 3.3 cents to equal a recent record high of 170.4 cents per litre, according to the Australian Institute of Petroleum.
Inflation pressures and the drop in the unemployment rate have rekindled speculation the RBA may be forced to raise interest rates this year, and earlier than it had previously anticipated.