The National’s excellent economic
team has somewhat changed its tune toward Henry’s view of a stronger
economy. But its overall summary is: “Business conditions in June
remain broadly unchanged – around the surprisingly high levels reported
in May.”

  • Stronger trading conditions offset by falls in profitability and employment.
  • Business confidence also Broadly unchanged – albeit at much lower levels.
  • Other key measures also similar to May – new orders down while capacity utilisation up a bit.
  • Non-residential construction and retailing contributing most to recent strength.
  • Wage pressures broadly unchanged – but slowing in annual rate terms.
  • Price pressures – especially retail – continue to Increase.
  • National’s growth forecasts unchanged – 2% for 2004/05 and 2.75% in 2005/06.
  • RBA still firmly on hold – we also still favour a cash rate cut in early 2006.
  • But risks rising, that if growth stronger, this cut may not eventuate.

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