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Further rise in OCR ahead, says ANZ

Tom Pullar-Strecker

ANZ Bank says its view that the Reserve Bank is likely to raise the official cash rate one more time this year has been reinforced by a monthly survey that suggests businesses are now less downcast about the economy.

ANZ reported its monthly survey of business confidence found a net 31% of businesses believed general economic conditions would be worse in a year’s time.

But that was a significant improvement on their mood last month, when a net 44% of businesses expected worse times ahead, and they were the ‘‘least pessimistic’’ they have been since December 2021. It is also a big step forward from the nadir reached in December when a record net 70% were forecasting worse times ahead in the wake of a hawkish Reserve Bank monetary policy statement in November.

ANZ reported that a net 4.5% of firms were expecting their own business activity would have dropped in a year’s time, down from 7.6% last month.

Businesses’ forecasts of future inflation ‘‘inched a little lower’’ and the proportion of firms expecting to raise their prices also eased, the bank said. But it reported the proportion of firms expecting their costs to increase in the next three months remained ‘‘stubbornly high’’.

The survey comes in the wake of a new forecast from Treasury in the Budget that the economy would escape a recession. But ANZ chief economist Sharon Zollner said it was conducted too early to be influenced by the Reserve Bank’s dovish monetary policy statement last week. ‘‘We will have to wait until next month to see the impact of that.’’

The Reserve Bank forecast last week that the official cash rate had peaked at 5.5% and deputy governor Christian Hawkesby said there was now a ‘‘high bar’’ on further rate rises.

But ANZ said it continued to expect the central bank would be ‘‘back at the hiking table by the end of the year’’.

Business

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2023-06-01T07:00:00.0000000Z

2023-06-01T07:00:00.0000000Z

https://fairfaxmedia.pressreader.com/article/281745568769512

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