Australian Employment Expectations Fall to Lowest Recorded Level

Australians business executives have given a mixed outlook on the economy as employment growth and capital investment confidence deteriorates but sales and profits expectations improve.

These findings are from the latest D&B Business Expectations Survey which shows that business executives are seeing small signs of economic revival despite remaining in negative territory. The index for expected sales is still negative but has lifted 10 points to -38; similarly the index for expected profits has lifted 11 points to -46.

However, expectations for employment and capital investment are still on a downward trend, with a net 28 percent of firms expecting to cut back on staff and a net 14 percent anticipating   need to decrease capital investment. Likewise expectations for inventory growth are at the lowest level since the 1991 recession signalling that executives are not yet planning to increase existing stock levels.

Selling price expectations rose by 30 percent in the nine months from June quarter 2008 to hit their highest level ever recorded for March quarter 2009. Expectations have now dropped back by 17 percent for the September quarter. However, two in three (66%) firms expect that they will raise prices.

Changing credit market conditions and the Aussie dollar continue to impact firms, with almost six in ten (57%) businesses negatively impacted by the credit market. With a rise in the AUD in April, 60 percent of firms report a negative impact of movements in the dollar, down from 67 percent in March. Wholesale businesses still report the greatest impact from currency fluctuations, with 71 percent now indicating a negative impact, down from 81 percent in March.

Downward movements in petrol prices have shown through with a decline since the September quarter 2008 of 91 percent in the number of executives negatively affected by fuel costs. Two percent of firms now report a negative impact while 45 percent report a positive affect.

Dun & Bradstreet CEO Christine Christian believes that the recent data indicate that while executives believe measures such as the Government stimulus packages will have a positive impact, the short term outlook is still negative in key areas such as employment.

"The declining outlook in employment growth continues to be a concern. The fact that the employment indicator has dropped to its lowest level recorded by the survey is a clear sign that this fear is shared by Australian executives," said Ms Christian.

"Sales and profit expectations have improved but are still in negative territory. This indicates that expectations in these areas may have turned the corner. Ultimately we need to see consistent improvement in key areas like sales and profit expectations before it is evident that executives are feeling positive about Australia’s business prospects."

The further small reduction in the official cash rate in April has impacted executives’ views on the issues that will influence their operations most in the quarter ahead. Forty five percent of executives now rank interest rates as the primary influence on their business in the quarter ahead, down from 48% in the last survey.

Lower fuel prices are also an issue high on the agenda for Australian firms Sixteen percent of executives anticipate that fuel prices will have the most significant influence on their operations in the September quarter, down 4% in one month. Meanwhile 18% of firms rank wages growth as their primary concern, an increase of 4% since February.

According to Dr Duncan Ironmonger, Dun & Bradstreet’s economic consultant, this week’s Federal budget will be closely examined to see whether it provides sufficient stimulus to ensure a sustainable recovery to the Australian economy.

"The Reserve Bank did not alter the cash rate last week leaving room for further cuts later in the year if needed. The latest D&B survey shows that although business expectations are still negative, there are tentative signs that the worst could be over," said Dr Ironmonger.

The D&B index for expected sales is up 10 points to -38, with 13% of executives expecting an increase in sales and 51% expecting a decrease. The profits index is up 11 points to -46, with 10% of executives expecting profits to rise and 56% expecting a fall.

Employment expectations are down two points an index of -28, with 8% of executives expecting an increase in staff and 36% expecting a reduction. Capital investment expectations are down four points to an index of -14, with 3% of executives expecting an increase and 17% expecting to cut spending. Inventories expectations are down four points an index of -22.

The selling prices index is down 12 points to an index of 58, with 66% of firms expecting to raise prices and 8% expecting to decrease them.

About the Survey
D&B Australasia conducts latest Business Expectations Surveys every month. Each quarter over 1,200 business owners and senior executives representing major industry sectors across Australia are asked if they expect increases, decreases or no changes in their upcoming quarterly Sales, Profits, Employment, Capital Investment, Inventories and Selling Prices. Since its introduction in Australia in 1988, the survey has proven to be a highly reliable measure of economic performance.

Note: The index figures used in the survey represent the net percentage of survey respondents expecting higher sales, profits, etc., compared with the same quarter of the previous year. The indices are calculated by subtracting the percentage of respondents expecting decreases from the percentage expecting increases.

About D&B
D&B is the world’s leading provider of business-to-business credit, marketing and purchasing information and receivables management services. D&B manages the world’s most valuable commercial database with information on more than 140 million companies.

Information is gathered in 193 countries, in 95 languages or dialects, covering 186 monetary currencies. The database is refreshed more than 1.5 million times daily as part of D&B’s commitment to provide accurate, comprehensive information for its more than 150,000 customers.

The Australasian operations were bought out by the senior management group in August 2001. It was the first MBO of a wholly owned subsidiary in D&B’s history worldwide. Today Lazard Carnegie Wylie owns an approximate 90% stake in DBA and the local management team a 10% stake.

Strategies for future growth include developing DBA’s commercial and consumer credit referencing business; expanding its receivables management outsourcing business; maintaining its lead in the development of unique credit and risk scoring products; and developing new products specifically tailored to the Australasian market. DBA currently employs over 500 people in Australia and New Zealand.