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Waning business sentiment is turning into a trend, falling for the sixth successive month, according to the ANZ Business Outlook.
The level of confidence was still consistent with momentum and growth, but ANZ chief economist Cameron Bagrie said the economy had hints of Goldilocks. Good growth and low inflation was a powerful mix.
''The economic expansion still has powerful support facets. However, there are clearly more risks to manage.''
A net 24% of firms were optimistic about general prospects in August, down 16 points from July. Confidence was now down 46% from its February peak. Confidence in the agricultural sector was firmly in the red, he said.
A marginally more upbeat message was apparent across other key survey indicators, although the trend signal remained the same - down.
Firms' activity expectations dropped eight points from 45 to 37. A net 18% of businesses expected to be hiring more staff over the year ahead, which was still positive and on the right side of the ledger but well down from the peak.
''Pricing intentions and inflation expectations inched lower. That's a good sign as the Reserve Bank's pause in the big tightening cycle could last a while.''
The economy was clearly past its growth peak, Mr Bagrie said. Dairy prices were well down on their highs, the dollar was still elevated, house prices had start to slide and the official cash rate was still 1% higher than at the start of the year.
The economy had moved from recovery when you saw strong growth rates off low bases into a Goldilocks mode of solid growth with low inflation, the ideal mix, he said.
''It looks like we'll stop short of overheating which is when the brakes in the form of tight monetary policy through high interest rates really have to be applied.''