Jittery Australian firms fret over 2012 prospects: Report

About 30% of Australian businesses are worried about their prospects for the year ahead, new research shows, while the number of businesses planning to sell or close down has fallen 6%.

The latest Sensis Business Index is based on a survey of 1800 businesses employing one to 199 employees. The index gives a snapshot of SME business activity in Australia.

According to the index, three in 10 businesses are worried about their prospects for the year ahead. One in 10 are extremely worried, 50% are confident and the remainder are neutral.

Report author Christena Singh says there are also fewer businesses looking to close or sell their business than six months ago.

Currently, only 11% of small businesses are planning to sell or close their business, down 6% from six months ago.

“In fact, almost half of businesses are still aiming for growth, and many are planning business strategies to grow their business,” Singh says.

The index reveals 43% of small businesses are planning to increase their digital presence in 2012, while 42% are planning to introduce new products and services.

According to the index, 34% are expecting to develop a business plan. However, getting finance is proving difficult.

“Small businesses are… telling us they feel it is currently difficult to access the finance necessary to invest in their businesses,” Singh says.

“We are seeing this manifest in weak capital expenditure trends.”

A separate report by BIS Shrapnel shows that despite widespread concern about the current soft patch and problems overseas, the outlook for the Australian economy remains positive.

Not surprisingly, the report found the rapid expansion of minerals-related investment is providing a significant boost to the nation’s economy.

“The engineering construction industry is benefiting most from this activity,” BIS Shrapnel senior economist Tim Hampton says.

“But sections of other industries are as well, including some areas of manufacturing, transport, wholesale trade, accommodation, and professional and business services.”

The flipside of the minerals boom is that record-high commodity prices have seen the Australian dollar rise to post-float highs in nominal terms and near record levels in real terms.

“The tourism and international education industries, and many parts of the manufacturing industry, have suffered badly,” Hampton says.

“Other industries are also suffering due to the high Australian dollar, including retail trade, as Australian households spend more of their money offshore.”

“Many firms in professional and business services are also under pressure because the high Australian dollar is encouraging firms to take these activities offshore.”

The findings are in line with the latest Australian Performance of Services Index, which fell 5.2 points to 46.7 points in February. Readings below 50 indicate a contraction in activity.

The PSI is produced by Australian Industry Group and the Commonwealth Bank.

The fall in February’s PSI was driven largely by a significant drop in new orders across the services sector, which fell 8.5 points to 45.6 points.

“The February fall in the Australian PSI… illustrate[s] the narrow base of growth in the broader economy,” AIG chief executive Innes Willox says.

“The booming conditions in mining and mining-related activity are not translating into increased activity in large parts of the domestic economy.”

“With few exceptions, sales and new orders for services and employment in the sector were all lacklustre in February.”

Hampton says job losses in trade-exposed industries, coupled with the European debt crisis, “make for a lot of bad news in the press, and uncertainty among consumers and business”.

“This is affecting confidence and prolonging the softness in the economy. But growth, now around 2.5%, will pick up through the year,” Hampton says.

BIS Shrapnel is forecasting annual average GDP growth just above 3% for the year to June 2012, and 3.5% for the year to June 2013.

According to BIS Shrapnel, this should be sufficient to keep the unemployment rate around its current level before it starts trending down to around 4.5% in the middle of next year.