Business confidence on rise but investment intentions remain weak
January 11, 2010
The January Survey of Investor Confidence from the Australian Chamber of Commerce and Industry suggests that business conditions have improved over the December quarter, with most expectations indicators for the next 3 to 12 months moving into expansionary territory and increasing above their five year averages. The one notable exception, however, is the index of ‘Own Expected Level of Investment’ which remains in negative territory.
Expectations for Own Business Conditions, Sales and Profitability are now at their highest levels since October 2007, a sign of growing confidence in the economy. Future expectations of National Economic Conditions, Climate for Investment and GDP Growth are also at their highest since this survey began in 1998, while hiring intentions rose.
The survey also gauges the sensitivity of investment to various constraints. Three successive official interest rate hikes, coupled with some major lenders increasing their lending rates by more than the official rate rise, ‘Charges by Lending Institutions’ has risen from the ninth to the seventh largest impediment to business investment and Level of Interest Rates has edged up from the twelfth to the tenth constraint. Such rising funding concerns led the investment expectations index into negative territory once again.
“Overall the survey has highlighted that trading conditions and business confidence have improved further over the December quarter, based on further signs of global and domestic economic recovery,” Greg Evans, Director of Economics and Industry Policy, ACCI commented. “Nevertheless, actual conditions, sales and profitability continued to fall short of prior expectations. Weak investment indicators also suggest that businesses remain pessimistic about their business capital expenditure plans in the first half of 2009. Therefore to ensure sustainable economic recovery, it is imperative that fiscal and monetary policy settings continue to encourage productive business investment and jobs creation.”