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Businesses hopeful of New Year recovery: Report

Monday, 31 October 2011 | By Oliver Milman

Australian businesses have growing optimism over their prospects in the New Year, ahead of an anticipated cut in interest rates, according to a new report.

 

The latest business expectations survey by Dun & Bradstreet shows that sales expectations for the March 2012 hit their highest level in 12 months, rising 11 points to an index of 22.

 

The survey, taken of 1,200 businesses across Australia, saw profits expectations rise two points to seven, employment outlook increase by seven points to an index of eight and investment up by seven to 13.

 

Concern over the impact of interest rates slid by 25%, while inventory expectations have jumped by 12 points.

 

However, there are still areas for worry, with more than six in 10 retailers facing slow demand and 27% of businesses concerned about wages growth, an increase of 6%.

 

Christine Christian, Dun & Bradstreet’s CEO, says: “Growing positive sentiment and a renewed interest in hiring staff and increasing investment amongst Australian firms indicates a refocus of efforts on growth rather than just survival – if only in the short-term.”

 

“It would appear that retailers and manufacturers are unlikely to significantly raise prices any time soon, in part because the higher exchange rate is restricting their capacity to raise prices.”

 

“While this may assist with volumes, margins will continue to suffer and this is being reflected in what we are seeing in terms of profit expectations.”

 

“While actual sales in the retail sector rose noticeably during the September quarter, profit remained in negative territory. For that reason, a spike in concern from retailers over wages growth is particularly worrying and a sure sign of cashflow distress, a key barometer of business health.”

 

Dr Duncan Ironmonger, Dun & Bradstreet’s economic consultant, adds: “Despite volatility in international financial markets in recent weeks, current financial conditions in Australia have become easier with bank lending rates for some housing and business loans being reduced.”

 

“This change has contributed to a more confident outlook.”

 

“The survey shows a welcome pick-up in the expected growth in employment across all sectors. If this is realised and sustained, we may see further favourable moves in the unemployment rate next year.”