By James Glynn
– National Australia Bank downgrades 2012 growth forecast for economy
– Survey shows small improvement in business confidence and conditions in March
– Index shows near two-year slump in construction set to continue
(Recasts story, adds details throughout.)
SYDNEY -(MarketWatch)- One of Australia’s biggest banks on Tuesday downgraded its growth forecast for the economy in the year ahead, amid worries over rising unemployment and a weak showing in the Australian economy so far in 2012.
The National Australia Bank, one of the country’s big four banks, expects the economy to grow “a touch” under 3% in 2012, nudging its forecast down from a previous 3.25%.
Despite a mining boom, the Australian economy has performed poorly in the first few months of 2012, and policy makers are expecting unemployment to rise in coming months.
NAB’s growth forecast cut comes after the Reserve Bank of Australia indicated last week that interest rates will soon be trimmed as activity slows in virtually every part of the economy except mining.
This paints a grim picture for Treasurer Wayne Swan, who is set to announce the 2012-13 budget in May that is expected to have as its centerpiece an ambitious plan for a budget surplus.
Swan, who said last month that budget revenues were in tatters, has committed to delivering a surplus for the fiscal year starting July 1, saying he will announce further spending cuts in the budget.
NAB’s monthly business survey released Tuesday, however, showed that both business confidence and conditions were higher in March, supported by a fall in the Australian dollar throughout the month, evidence of recovery in the U.S. economy and stabilization of the European sovereign debt crisis.
The business confidence index rose to +3 points in March from +1 point in February, while its business conditions index rose to +4 points from +3 points in February. Its employment index rose to 1% in March from zero previously.
A separate survey from Australia and New Zealand Banking Group Ltd., also released Tuesday, showed positive developments on the job creation front.
ANZ Bank’s survey showed that job advertising rose by 12% in the first quarter of 2012, suggesting that hiring intentions are high.
ANZ Chief Economist Warren Hogan said it points to growing demand for labor.
“The trend in total advertising points toward a modest recovery in employment growth and an unemployment rate remaining below 5.5% through 2012, despite potential divergences between regions and industries,” Hogan said.
Elsewhere, a near two-year slump in construction looks set to continue, another survey released Tuesday showed.
The Australian Industry Group’s Australian Performance of Construction Index rose only 0.6 points to 36.2 in March from February, still well below the index level of 50 points, which separates contraction from expansion.