Business confidence slump 'worse than GFC'

New Sensis data shows Australia has experienced a record fall in business confidence during the June quarter

Business confidence slump 'worse than GFC'
Business confidence slump ‘worse than GFC’
June 10, 2010

Australia has experienced a record fall in business confidence during the quarter, surpassing the declines experienced during the height of the GFC, according to the Sensis Business Index released today.

The quarterly survey – which provides the latest snapshot of SME business activity in Australia – reveals business confidence dropped from 49 percent in the March quarter to 31 percent in the June quarter.

Report author Christena Singh says business confidence has plummeted on the back of soft demand, low profitability and weakening economic conditions.

"The substantial fall in business confidence this quarter has negated the healthy results we had been seeing during the last half of 2009," Singh says.

"We now have more businesses worried about their prospects than we had this time last year," she says.

"Nevertheless, business confidence, overall, remains much stronger than the record low level seen in March 2009."

The report shows businesses are also expecting trading and economic conditions to deteriorate further during the next 12 months.

Sales fell strongly during the quarter (down to -11 percent) and the indicator is now trending near the low levels experienced 12 months ago.

Profitability also declined sharply, decreasing 8 percentage points to -12 percent.

Employment improved slightly but remained in negative territory at -3 percent.

"We are still seeing a landscape where more businesses are shedding staff than hiring, and lack of work remains the key barrier to employment," Singh says.

Wages and salaries remained stable at 5 percent.

To add to business’ woes, Singh says there has been a further tightening in the availability of credit during the quarter.

Ease of access to finance dropped from -15 percent in the March quarter to -21 percent in the June quarter.

Business support for the government also fell strongly during the quarter, down 13 percentage points to -26 percent.

Key reasons for disapproval include perceptions the government does not provide incentives for small businesses, taxation is too high, and there is too much bureaucracy and government interference

This latest Sensis data based on a sample size of approximately 1,800 from metropolitan and regional areas, interviewed between May 6 and June 3.

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