Pessimism increasing among companies: KPMG

Pessimism is increasing among Australian companies, according to a new KPMG survey, despite opportunities arising from the resources sector and the digital economy.

According to KPMG’s Private Companies Survey for 2011, based on the responses of almost 300 private Australian companies, more than 30% have reported negative profit growth, while 44% failed to meet their revenue targets in the past 12 months.

KPMG head of private enterprise Peter Siebels says skills shortages, softer consumer confidence and ongoing global uncertainty are all contributing factors, resulting in a multi-speed economy.

“The challenges vary between states. For example, the resource sector is going along nicely but if you are a manufacturer in Victoria, times are very tough,” Siebels says.

“While skill shortages are the biggest challenge to businesses in Western Australia, those in Queensland are more concerned with low consumer confidence, which may reflect the recovery from the floods and cyclones.

“In South Australia and Victoria, respondents are more concerned about business confidence and competitor activity. New South Wales is most concerned about the impact of continuing global uncertainty.”

Siebels says he doesn’t expect business confidence to turn around quickly.

“Most respondents thought Australia was on the upward leg of the economic cycle, and expected a return to prosperity in about five years’ time. In the next 12 months, however, only 20% felt that prospects for business were likely to be good,” he says.

The survey reveals that over the past year, 45% of respondents saw an increase in their banking requirements, with the cost of capital and the availability of credit cited as the main impediments to capital investment.

While the report highlights the many hurdles companies face, one positive indentified by respondents was the growth of the digital economy and the opportunities it presents.

About 45% of respondents reported an increase in online business transactions this year, confirming the need for all companies to develop a strong web presence.

Siebels says Australian companies are yet to embrace the full potential of the digital economy.

“Social media is a good example – only 31% of respondents have leveraged this technology into their business strategies,” he says.

“What private companies should be doing is understanding how these new technologies can provide them with more efficient ways of reaching their markets, or even reaching markets they haven’t reached before.”

According to new data from the Australian Bureau of Statistics, small firms are least likely to undertake innovative online activity, suggesting they are missing out the most.

The ABS recorded the level of innovation within Australian businesses, saying 44% of businesses recorded at least some type of innovation, which is defined as the introduction of new or improved goods, services, processes or methods.

The report found the proportion of innovation-active businesses increased with employment size.

While the number of businesses with up to four employees innovating was 30.5%, it increased to 49.5% for businesses with between 5-19 employees, to 56.6% for up to 60 employees and up to 69.7% for 200 or more employees.

The proportion of businesses placing orders online also increased with employment size. For businesses with up to four employees, 40% placed online orders, compared to 73% of businesses with more than 200 employees.