Australia | Mar 05 2013
– Dun & Bradstreet report negative jobs growth
– High operating costs keeping Oz Business at bay
– Capital spending lowest level since September 2011
– Cash flow seen as a major issue
By Andrew Nelson
Australian businesses are increasingly putting off investments as the cost of doing business continues to rise. Significant job cuts and moves to off-shore work is a result and this is starting to take a bite out of the broader economy.
What’s worse is that this negative trend is expected to continue, with the latest data from Dun & Bradstreet’s National Business Expectations Survey showing that Australian businesses have no plans to hire new staff in the months ahead.
D&B reports its Employment Index has continued to deteriorate, with the downward trend through to the June 2013 quarter falling below the 10-year average level, to a score of zero. There have been no net jobs added since the March quarter of 2012 and the employment index has been in negative territory for three consecutive quarters now. By December last year, the index had reached its lowest point in more than three years at negative 7.
The business information company explains the weak jobs outlook by pointing to the high cost of doing business in Australia. The research indicates that 44% of businesses claim operational costs as being the biggest barrier to growth in the months ahead.
Add to the recipe sluggish sales and consumer activity and it’s no wonder that businesses are so focused on the one thing they can control: core operations. Given this is the current environment, Dun & Bradstreet think it only natural that companies are unlikely to add new jobs in the near-term.
Director of Corporate Affairs for Dun & Bradstreet, Danielle Woods, notes businesses are looking to control their costs until they can see signs of a sustained recovery in the economy.
“With businesses keeping a careful eye on their expenses, the significant cost of hiring new staff appears to be dampening expectations for jobs growth.”
“Added to the mix of operating costs, we are hearing businesses report that the high Australian dollar and cash flow will influence their capacity to grow,” she said.
This is supported by investment expectations for the June 2013 quarter data from the survey, which indicate the outlook for capital spending is now at its lowest level since the September 2011 quarter. Investment expectations for the June 2013 quarter dropped to an index of 5, compared to 14 in the previous quarter. The hard data for the December 2012 quarter is negative 3.
From a broader perspective, Dun & Bradstreet also point out that there were decreases (compared to the previous month) in all of the survey’s forward looking indices, which include sales, profits, selling prices, inventories, employment and capital investment. The broad based decline in expectations has D&B thinking that operating conditions will remain difficult, at least until the middle of this year.
Cash flow has popped up as another big issue on the minds of business managers. The survey shows that 75% of businesses see cash flow as a major issue over the months ahead. This is borne out by D&B’s latest Trade Payments Analysis, which shows that the time businesses are taking to pay each other has softened to an average of 52 days. In part, it is this lack of steady cash that is smothering the opportunity to invest in and grow businesses.
D&B’s Ms Woods went on to say that while consumers may well have regained their appetite for the share market, there really hasn’t been any spill over into more discretionary spending yet. This is what is needed to improve business confidence and growth.
“Until there is sustained improvement in confidence and trading conditions, we can expect businesses to keep a tight check on their expenses and continue to delay larger investments such as new jobs,” she concluded.
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