ANZ chief says business confidence ready to return

Australia’s low interest rates are ready to turn into “real action”, according to ANZ (ASX: ANZ) boss Mike Smith.

Handing down the company’s record full-year $6.5 billion cash profit yesterday, Mr Smith announced non-mining sector confidence was at its lowest point. He shrugged off concerns by the RBA, which said investment in non-mining sectors was at a 50-year low. Mr Smith instead argued that sparks of life were starting to emerge in the form of increased lending — a sign business confidence was not far off: “We’ll start to see increased drawdown of capital projects in a number of industries… It’s very important because when that starts to happen that gives employees more security, that creates consumer confidence and the whole thing is a virtuous circle.”

Recently, renowned ANZ chief economist Ivan Colhoun said business and consumer confidence was on the rise and predicted a stronger economy in the next 6 months, something the Reserve Bank of Australia was hoping would occur.

When the RBA dropped rates to 2.5%, it sought to transition economic growth from mining to non-mining sectors such as services, retail, property and manufacturing. It also hoped for a lower Australian dollar, enabling Australian products to be more competitive against foreign imports. However, the dollar recently rebounded to above 97 cents because the US Federal Reserve decided to postpone a pullback of its quantitative easing.

In spite of the prediction that we will experience rising business confidence, Deloitte Access Economics has forecasted Australia will face at least another three years of below-average economic growth. However, although the short term outlook may be unexciting, it seems now is the best time for investors to start looking at opportunities in non-mining sectors.

Foolish takeaway

If Mr Smith is right and we do see a shift in economic growth from mining companies to industrial stocks, it could bring lucrative opportunities for investors willing to take a risk.

We've discovered one stock which will benefit from this transition and pays a great dividend. You can have it for free! Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.  

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