The number of healthcare businesses has surged in the past year while more than 2000 retailers have closed shop in a sign of the contrasting forces acting on the economy.
As the federal government prepares to release a report forecasting demand for care will double in the next 40 years, Australian Bureau of Statistics figures show an extra 10,721 healthcare and social assistance businesses started up last financial year, an increase of more than 6 per cent.
But over the same period, 2211 retailers shut their doors, coinciding with a sharp slowdown in spending by consumers squeezed by soaring inflation and high interest rates.
Reflecting this, a joint ANZ and Roy Morgan survey has found that consumer confidence fell by 2.4 points last week to 75.8 points as households remained deeply pessimistic about current conditions and the economic outlook.
Such concerns appear to be well-founded, with the government forecasting growth to be weak over the next nine to 12 months.
Though the nation is expected to dodge a recession, government sources admitted that shocks like unexpectedly soft growth in China could push the economy off its current narrow growth path.
But even if that were to occur, the government seems increasingly confident that inflation can come down without a significant increase in unemployment.
The resilience of the jobs market and the fact that wages growth has remained moderate despite the current low 3.7 per cent jobless rate has bolstered the view that inflation can be brought down while limiting the scale of job losses.
The government is understood to have been encouraged by figures showing inflation growth slowed to 6 per cent in the June quarter but is watching data on consumption closely, including the significant slowdown in retail spending.
Commonwealth Bank economist Belinda Allen said the strength of consumer spending, along with changes in prices, wages and the labour market will be important in determining whether or not interest rates stay on hold.
Ms Allen said the current official cash rate of 4.1 per cent was "restrictive", as was evident in record high mortgage debt servicing costs.
The CBA economist said that even without any more rate hikes, scheduled mortgage repayments as a proportion of household disposable income were projected to reach 9.8 per cent by the end of the year and hit a record 10.1 per cent by late 2024.
"The cash rate has been above neutral for eight months now and there is growing evidence that cash rate hikes are working as expected," Ms Allen said, adding that she expected inflation to drop below 4 per cent by the end of the year, including a moderation in services inflation.
The CBA economist predicts interest rates will remain on hold for the rest of the year before a rate cut in March 2024.
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The prospect of stable interest rates will be welcomed by many businesses grappling with high debt servicing costs and subdued consumer spending.
Overall, the ABS data showed Australia had almost 2.6 million actively trading businesses as at June 30, an increase of almost 1 per cent from a year earlier.
The biggest increase was an 8.8 per cent jump among medium-sized enterprises of between 20 and 199 employees, followed by an 8 per cent lift in the number of businesses with more than 200 workers.
While the construction industry has been marred by a number of high-profile collapses including PBS Building, the ABS reported there had been only a small 0.1 per cent drop in the building businesses.
Adrian Rollins
Adrian Rollins is economics correspondent for the Canberra Times
Adrian Rollins is economics correspondent for the Canberra Times
