A rosy export outlook has failed to lift the spirits of businesses, while new government forecasts highlight the impact on farmers from this month's storms in Queensland and NSW.
The heavy rainfalls and flooding have wiped $1 billion off the value of wheat production for 2010/11, the federal government's commodity forecaster said on Tuesday.
Releasing its quarterly commodities report for the December quarter, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) now predicts wheat production of $5.7 billion in 2010/11 rather than the $6.7 billion forecast in September.
"In addition to expected lower production and export volumes from Western Australia, these downward revisions reflect the impact on grain quality of untimely rain on the wheat crop in the eastern states," ABARES acting executive director Paul Morris said releasing the report.
However, the bureau still predicts record commodity exports overall of $211 billion, a 23 per cent increase compared to 2009/10, despite a $3.8 billion downgrade because crop damage and slower growth in gold, iron ore and coal exports.
The bureau still expects iron ore and coal will make a large contribution to exports in 2010/11, while mine production is forecast to increase significantly in response to higher world prices.
This still rosy export outlook came as a new survey showed only a modest improvement in business conditions in November, while confidence fell for a third straight month.
"The impending mining investment and export boom should prove a spectacular ride, but the reality is that the train is still yet to leave the platform," National Australian Bank chief economist Alan Oster said releasing the results of his bank's monthly business survey.
Its business conditions index rose two points in November, while its confidence index was down two points - both being below their long term trend.
Mr Oster said the survey shows no sign of a pick-up in economic growth half way through the December quarter, after the disappointing outcome for the September quarter.
He expects the Reserve Bank will be surprised by this weakness, and as such is not predicting a further rise in the cash rate from 4.75 per cent to 5.0 per cent until May next year.
Other data released on Tuesday showed that new home building slumped in the September quarter, even before the last round of interest rate increases in November.
Builders started work on under 40,000 homes in the quarter, a 13.2 per cent drop compared to the June quarter, and much weaker than the five per cent fall predicted by economists.
The decline was led by a 13.5 per cent drop in the more volatile other residential building component in the private sector - such as flats and townhouses - although even private house building fell by 4.3 per cent.
"The conclusion from the September report is that residential building is returning to the sluggish pre-2009 trend as the lagged effects from earlier record low cash rates and subsidy schemes in housing are unwound," JP Morgan economist Ben Jarman said.
Growth in building approvals have been in decline for much of 2010 after interest rates rose six times between October last year and May, and as the government ended its more generous first home buyers grant on January 1.
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