National Australia Bank
A National Australia Bank (NAB) logo is pictured on an automated teller machine (ATM) in central Sydney September 12, 2014. Reuters/David Gray

National Australia Bank (NAB) has released a survey in January showing that the country's economy was stronger compared to last year's Q3 report. In 2016, the gross domestic product reported a contraction in the country's economy. The employment index has also hit its highest level since 2011.

“This month’s jump in employment conditions bodes well for the generally underperforming labour market, and suggests stronger job creation than we have seen from the ABS in their labour force survey lately,” NAB chief economist Alan Oster said.

The improvement in the economy was also contributed by the soaring status of business conditions and confidence. According to Oster, the strength of the current economy was concentrated to New South Wales. “NSW business conditions were up 7 points in the month, to a level of +23 index points — the highest of the mainland states by a clear margin,” he said.

The rise in the housing prices has helped New South Wales' economy to grow last year. In 2017, the housing market in the state was expected to grow. Meanwhile, mainland states such as Victoria and SA fell in terms of economic growth. However, Victoria showed elevated conditions which were better than SA. Other mainland states also showed stronger economy but it came from mixed performances. Among the states in the country, Western Australia was the sole state to have negative business conditions.

NAB's survey used lead indicators including new order and capacity utilisation. The indicators created some doubt if the recent months' positive developments would be sustained in the coming period. Forward orders were above average levels while the capacity utilisation stating to tick higher.

“Forward orders are pointing to modestly positive near term prospects for activity, although perhaps not enough to sustain this month’s spike in business conditions. Nonetheless, the lift in capacity utilisation rates is a relief in terms of the outlook for business investment and the labour market,” Oster said.

The business confidence spiked from six to 10 comparing the records between December 2016 and January 2017 performance. It is currently sitting at the highest level since February 2014. The record reflected the financial markets' exuberance showing that the global economy is improving.

However, Oster said that it was too early to get excited about the nation's progress. He said that a confluence of seasonal factors suggested that getting too carried away with the results was unwise. He noted that there were still some key industries that remained fairly weak. “As for business confidence, we suspect the enthusiasm in financial markets has helped a lot. If sustained, confidence at these levels could see firms revise up their capital expenditure and hiring plans,” Oster said.