Business Needs a Lift

Business Conditions and Outlook Decline Across the Board

 

The latest edition of the ACCI Business Expectations Survey records virtually all actual and expectation indictors worsening in the December quarter. The movement in the three indicators across the entire survey that did improve were immaterial.

Key expectation indicators in the survey posted further steady declines. Businesses see their own trading conditions deteriorating considerably in the March quarter along with the performance of the broader economy. The Expected Economic Performance index ground lower in December, now deep in negative territory after eight consecutive quarterly declines to reach its lowest level since early 2009. Business confidence is slumping badly in response to the sovereign debt crisis in Europe and decidedly mixed trading conditions domestically. Firms are also reporting that current trading conditions are increasingly difficult, with the index on General Business Conditions declining again and now well below the neutral 50 level.

Comparisons by Size of Firm reveal that small businesses are struggling much more relative to medium- and large-sized firms. However, all firms are experiencing negative General Business Conditions that they expect will worsen in early 2012.

Mr Greg Evans, Director of Economics and Industry Policy, Australian Chamber of Commerce and Industry, commented:

Business confidence is wilting in response to the uncertainty generated by the sovereign debt crisis in Europe. The December survey shows another round of broad-based declines in actual and expectations indicators. Significant uncertainty continues to hang over the Australian economy in the form of a potential European sovereign default, but locally many businesses are experiencing difficult trading conditions as a result of the increasingly two-speed economy. Beyond the booming mining sector the economy appears to be approaching stalling speed, as evidenced by the weakest year-end growth in employment in almost twenty years.The business community believe the ongoing deterioration in current trading conditions and confidence about the near-term outlook justify the Reserve Bank delivering another 25 basis point rate cut in the cash rate after it meets in Martin Place tomorrow. Banks should cease the game playing surrounding official rate announcements and announce a decision on lending rates for households and small businesses in a timely manner. Delays serve to frustrate the effectiveness of monetary policy and appear to be an intrusion of media strategies into the important function of pricing credit in a competitive marketplace.

The Survey covered the three months to December 2011 and had 2,897 respondents. A full copy of the Survey is available on the ACCI website at: http://www.acci.asn.au

 

For further information:
Greg Evans Director of Economics and Industry Policy, ACCI 02 6273 2311 / 0407 204 559
David Turnbull Director of Communications, ACCI 02 6273 2311 / 0419 272 802
 

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