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Australia business conditions improve, but new lockdown slugs sentiment – survey

SYDNEY (Reuters) – A measure of Australian business conditions rose in July as the service sector rebounded from a national lockdown, but confidence was badly hit by a renewed outbreak of coronavirus in the second most populous state of Victoria.

National Australia Bank’s (AX:NAB) index of business conditions bounced to 0 in July, from -8 in June. That was up from a low of -34 in April at the height of the pandemic and nearer to the long-run average of +6.

However, the survey’s measure of business confidence fell back to -14 in July, from 0 in June, though it remained well above the April trough of -46.

The index of sales firmed to +1, from -6, and profitability to +2 from -8. Employment improved to -2, from -11 in June.

“Conditions have now recovered to be broadly around their pre-COVID level with improvements across the country,” said NAB Group Chief Economist Alan Oster.

“The fall in confidence even prior to the announcement of stage 4 restrictions in Melbourne demonstrates that businesses will remain very cautious given the great uncertainty around the virus at the moment.”

A weekly survey of consumer confidence from ANZ out on Tuesday showed sentiment had slipped for a seventh straight week as the latest lockdown took a heavy toll on Victorians.

Its main index fell 2.4% last week to its lowest since late April, though it was still above the record low hit that month.

The bank also noted spending on its cards last week fell 12% in Victoria compared to a year ago, even as it climbed 17% in the rest of the country.

The pandemic has wreaked havoc on two of Australia’s most lucrative sectors, tourism and education, with the Reserve Bank of Australia warning economic output could contract by 6% this year in the first recession since the early 1990s.

The central bank has chopped interest rates to an all-time low of 0.25% and launched a major bond-buying campaign to hold yields down, while the government has pledged over A$200 billion ($142.98 billion) in fiscal stimulus.

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