Oz Businesses Increasingly Confident About 2014

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-Significant turn in hiring intentions
-Stronger sales, profits expected
-More firms intend to access new credit
 

By Eva Brocklehurst

Confidence in the Australian economy appears to be building. Hiring intentions, as surveyed by Dun & Bradstreet, are being lifted, with twice as many businesses now intending to hire in the new year compared with the final months of 2013. The survey suggests there's an increasingly positive mood regarding the economy in 2014.

Australia's unemployment rate may continue to rise from the current level of 5.7% to over 6.0% in 2014, but D&B's Business Expectations Survey signals companies are becoming more optimistic. For the first quarter of 2014, 10% of businesses surveyed indicated they would be hiring staff whereas, for the current quarter, only 4% had indicated they would do so. This more positive aspect takes the D&B employment index to 5.1 points, the highest level since the June quarter 2012.
 

"This turnaround, especially given the recent lift in the official jobless rate, provides hope that forecasts for unemployment beyond the six per cent mark may be over-estimations, and that Australian businesses are in reasonable shape," said Danielle Woods, D&B director of corporate affairs.

Ms Wood said, given employment activity is essential to boost consumer spending, the indications that the corporate sector is willing to invest is significant. Actual employment reported by the businesses for the September quarter this year improved sharply and, supporting the capacity to employ, the survey found that 25% of businesses expect stronger sales in the March quarter next year. This is up from 15% expecting such in the preceding survey.

On the profit side, 33% anticipate higher profits, up from 28% previously. Capital investment intentions also rose out of negative territory, while 16% of businesses intend to access new credit or finance to grow operations, the highest response recorded this year.

The survey also found that 70% are more positive about growth in 2014 compared with 2013. It looks to be a broadly based upswing, according to D&B economic adviser, Stephen Koukoulas, who also noted there is an up-trend evident in expected capital expenditure. Mr Koukoulas thinks the current dynamics of the survey suggest GDP growth will exceed 3.0% in 2014. This also suggests there's little prospect for further cuts to the official cash rate. Furthermore, Mr Koukoulas suspects that if this momentum is maintained in the months ahead the market will be correct to price in a rise in the cash rate during 2014.
 

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