The economy remains on the path to recovery as interest rates fall and our commodity export prices outperform expectations, ANZ chief economist Sharon Zollner says.
She was commenting on results of the latest monthly ANZ Business Outlook Survey, which showed business confidence rose again during February, while inflation expectations dropped, but pricing and cost indicators were mixed.
"It seems clear from a wide range of indicators that the economy returned to positive growth in the last three months of last year," Zollner said.
GDP figures for the December quarter are due to be released on March 20. The figures for the September quarter released just prior to Christmas showed a 1.0% drop for the quarter, while revised figures for the June quarter released at the same time showed a 1.1% drop for that quarter.
Zollner says whether the GDP growth she expects in the December quarter will then falter - or strengthen - is a point of debate.
"It will depend on whether households view today’s interest rates as high or low, whether global uncertainty will constrain investment and employment or whether firms take a ‘get on with it’ attitude, and whether and when skill shortages will be a meaningful constraint on expansion," she said.
"...But firms are confident that the ducks are lining up for better times ahead.
"To be fair, that’s a low bar at this point," Zollner said.
In the latest survey, business confidence rose 4 points to +58 in February, while expected own activity eased 1 point to +45. Past own activity fell 3 points to -3, while past employment was flat at -7.
Pricing and cost indicators were mixed. One-year-ahead inflation expectations eased from 2.7% to 2.5%.
"Activity indicators saw a mix of small rises and falls in February but overall continue to tell a tale of the economy recovering as interest rates fall," Zollner said.
"Economy-wide reported past activity (the best indicator of GDP) eased a little but remains much healthier than six months ago. The improvement has been broad-based."
Inflation expectations "remain well behaved, encouragingly, down 0.2%pts to 2.5% in February".
"Firms’ numerical estimates of changes in their own costs and prices over the next three months were trending downwards, but that appears to have petered out. Firms on average expect costs to rise 2.3% over the next three months, while they expect to raise prices by 1.7% over the same period."
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