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Australia Business Confidence Drops in July




The world’s 12th largest economy, Australia’s business confidence weakened in July as the Reserve Bank of Australia failed to cap the rising Australian dollar. This remained unchanged even after cutting the official cash rate by 25 basis points last week.

The National Australia Bank (NAB) showed business confidence dropped by two points to 4 in July, following a 3 point gain in June.

While a reading above zero indicates improving business conditions, other economic factors point to a struggling economy confronted with weak consumer prices and high exchange rate.

Quarter-on-quarter, business confidence remains unchanged in the first and second of the year.

Last month, the RBA said strong financial sector, a competitive local currency and a low interest rate will aid the country against possible Brexit effect.

But rates cut has proven to be less effective, even though retail sales rose for fifth consecutive month in June, inflation remains below expected figure.

The Aussie dollar was relatively unaffected by last week’s monetary expansion. Prompting experts to think the central bank will have to do more to stimulate the economy.

The AUD/USD exchange rate rose more than a 0.5 percent over the past five days to 76.72 cents against the US dollar.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.