Business confidence in Australia hit a two-year high on the change of federal government in September.
But it is not clear how much that will have been dented by the political shenanigans in the United States over the past two weeks that saw a debt default only just avoided.
The political standoff that started with the failure of the US Congress to pass its budget at the end of last month, resulting in a partial shutdown of government, has already taken its toll on consumers’ post-election confidence in Australia.
The deadlock was only resolved on Thursday with a deal to lift the $US16.7 trillion ($A17.53 trillion) debt ceiling for now, and only hours before the world’s largest economy would have sunk into technical default.
The deal will allow the government to be funded until January 15 with the debt ceiling raised until February 7 to allow its budget negotiations to resume.
“It will be essential to reduce uncertainty surrounding the conduct of fiscal policy by raising the debt limit in a more durable manner,” International Monetary Fund managing director Christine Lagarde said in a statement after the agreement was passed by Congress.
But Westpac economist Elliot Clarke believes US budget concerns will linger.
“At this point, the only thing that is certain is that this crisis has had a material impact on (US December quarter) activity and, more importantly, on the confidence of business and consumers,” he said in a note to clients.
He expects US growth in the quarter will have been cut in the region of 0.5 percentage points.
However, relief that a deal had been struck, however temporary, helped to lift share prices in the Asia region, while the Australia dollar remained steady at around 95.50 US cents.
Meanwhile, the National Australia Bank quarterly business survey – a broader report than its monthly surveys – found confidence recovering close to its long-run average since 1989.
NAB Group chief economist Alan Oster said this improvement in the September quarter likely reflected a number of factors – an improving housing market, the weaker Australian dollar, better consumer confidence and lower interest rates.
“Fundamentally, however, it appears to reflect a reaction to the political change,” he said.
However, actual business conditions weakened further to a four-year low, pointing to below-trend growth in the overall economy.
Mining conditions were particularly weak at a fourteen and a half year low, reflecting slowing Chinese economic growth weighing on commodity prices and receding mining investment.
Economists will be hoping Reserve Bank of Australia governor Glenn Stevens will give his take on recent events on Friday when he delivers his first speech since July.