Businesses require certainty to grow confidence

Monday 6 August | Categories: Economic Policy

According to the latest Commonwealth Bank CCIQ Pulse Survey of Business conditions, business confidence in Queensland has been severely impacted by uncertainty as a result of national and global economic concerns.

Following the surge in business confidence reported in March, the CCIQ Pulse Survey of Business Conditions June quarter results have highlighted just how fragile the confidence of business owners and operators is as they face the challenges of a weakening two speed national economy, overseas uncertainty, a high Australian dollar and increased costs linked to the carbon tax, wage increases and productivity losses.

CCIQ Chief Executive Officer Stephen Tait commented, "Following the state election in March, Queensland businesses expressed growing optimism as the incoming state government promised to stimulate the Queensland economy, reduce business costs and ease the burden of regulation."

"As you work through the latest findings, it is clear from the responses we have received from businesses across the state, that the uncertainty in national and global markets is key to understanding the drop in confidence.

"Time and time again, businesses were highlighting uncertainty over the impacts of the carbon tax, mineral resources rent tax, business operating costs and a continued drop off in consumer spending as the reasons for loss of confidence.

"What businesses in Queensland really require is a period of economic certainty that will enable them to plan their future with confidence and security."

The level of demand and economic activity continues as the most significant factor impacting on business growth, as businesses struggle with low levels of sales and revenue and profitability and mounting wage pressures and other costs.

Also of concern, the June Quarter Pulse Survey has found business optimism to be wavering, with little growth forecast across most of the Pulse indicators over the coming three month period to September.

CCIQ President Mr David Goodwin said that the overall business sentiment is one of caution and uncertainty.

“No one is really sure if the glass is half full or half empty at the moment, and many continue to put business decisions regarding growth, investment and employment on hold while they wait to see how state election commitments and new policies and taxes at a federal level, and the economic turmoil in some of our major international markets pan out.”

Mr Goodwin said it was important to recognise that without increased business and consumer confidence, spending and investment will continue to into negative territory in the short to medium term, regardless of the success in the resources sector.

A copy of the Pulse Survey of Business Conditions - June Quarter 2012 can be found here.

SUMMARY OF PULSE SURVEY FINDINGS:

• Confidence in the Queensland state economy returned to trend levels. The Pulse Business Confidence Index fell from its post-election high recorded in the March quarter, decreasing 13.1 percentage points to 50.2. However it remains at satisfactory levels (in positive territory above the 50 basis point mark).
• CCIQ believes that the previous Quarter’s high level of business confidence in the state economy was off-trend and are reflection of the significant election result and that this quarter’s result reflects a more realistic 12 month outlook.
• Confidence in the Australian economy is rated poor. The Pulse Business Confidence Index has reverted to negative territory, falling 9.5 percentage points to 41.9. The majority of Queensland businesses (43 per cent) expect national economic conditions to weaken further over the coming twelve months
• Sales and revenue has remained subdued in the June Quarter, with the Pulse Sales and Revenue Index continuing on trend at 49.8.
• There was a marginal improvement in the Pulse Profitability Index over the June quarter, which increased slightly to 42.3 from 41.8 in the March quarter. While this is the highest index level since September 2011, 47 per cent of businesses still reported experiencing weaker profitability levels over the past three months.
• Employment levels are forecast to weaken further over the coming three months, with the Pulse Employment Index expected to fall to 44.7.
• Brisbane, Gold Coast and North Queensland were unfortunately the worst performing regions, with each experiencing the lowest levels of profitability, sales and revenue and declining employment. The South West and Far North Queensland were the best performing in the June Quarter, enjoying strong General Business Conditions and revenue levels, and improving profitability and employment.
• Impressively, conditions in the Far North continue to build steadily. Marking a turnaround from the March quarter, Far North Queensland has experienced an increase in all but one of the Pulse indicators, showing that they are now ready to move out of the bottom of the cycle.
• The key issues highlighted as impacting on general business conditions include the carbon tax (60 per cent), global economic uncertainty (25 per cent), political instability at the Federal level (25 per cent), and lack of confidence with political leaders at the national level (15 per cent). Businesses firmly believed that all of these issues placed unnecessary downward pressure on consumer confidence thus affecting general business conditions across the state economy.

ABOUT THE CCIQ PULSE SURVEY

• The Pulse Survey has been measuring Queensland business confidence and expectations for over 2 years. The survey publishes quarterly the results from key questions put to the Queensland business community on national, state and individual economic performances.
• The survey provides a comprehensive snapshot of Queensland business sentiment with over 500 Queensland businesses interviewed as part of each survey. The survey contains data from a broad range of small, medium and large businesses located in all regions of the state, and representing all industry sectors.
• An Index level above 50 indicates that growth prospects are strengthening, while an Index level below 50 indicates that growth prospects are weakening.