10 April 2007
Businesses face continued inflationary pressure
Fuel prices and wages growth impact the bottom line
The latest D&B National Business Expectations Survey shows...
Outlook for June quarter 2007
- 62% of business executives expect selling prices to be higher in the June quarter than the corresponding quarter in 2006
- Expectations for growth in profits have improved but remain in negative territory
- Growth in sales is predicted for the first time in four quarters
Federal Budget
- More than half (52%) of executives indicated that reducing company tax rates would have a significant positive impact on their business
Drought
- The drought has had a negative impact on almost one third (29%) of firms surveyed, up 3% from February but down 4% since January
Interest Rates
- Almost one third (30%) of firms surveyed have been negatively impacted by the one quarter per cent increases in interest rates in May, August and November, up from 22% in the February survey
Petrol Prices
- The influence of fuel prices on business operations continues to be significant despite a decrease of 14% since January (now at 50%)
Actual for December quarter 2006
- Sales and profits growth remained in negative territory
- Selling prices continued to rise
- Capital investment remains just inside positive territory
Download the Apr-07 detailed survey's results.pdf (986KB)
Media Release
The outlook for the June quarter is set to remain uncertain despite a decision by the Reserve Bank (RBA) to keep interest rates on hold for the fourth straight time after a quarter percentage point rise in November 2006 to stem inflation.
According to the March Dun & Bradstreet (D&B) Business Expectations Survey, inflationary pressure will continue to impact businesses through to the end of the financial year, with executives looking to the Federal Budget to bring some relief to the continually challenging Australian business environment.
More than half (52%) of executives surveyed indicated that a reduction in company tax rates would have a significant positive impact on business operations. This was followed by measures to stimulate business investment (10%), initiatives to assist business export growth (9%), reducing personal income tax rates (9%) and increasing public infrastructure spending (8%).
According to Christine Christian, D&B Australasia CEO, the hold on interest rates will be welcomed by executives as the market continues to present challenges for business.
"Business executives will be pleased by the RBA's decision to keep the benchmark rate at 6.25 per cent this month as they continue to face inflationary pressures within the market.
"It is likely that we will see a rate rise before the end of the financial year - possibly as early as next month - and business needs to be prepared to manage the additional burden this will place on operations," said Ms Christian.
The March survey shows that inflationary pressure remains as 62% of business executives anticipate higher selling prices in the June quarter than a year earlier. However, this will likely be offset by an expected improvement in sales and profits, with close to one quarter (24%) of businesses expecting an increase in profits as compared to the June quarter of 2006. Growth in sales is also predicted for the first time in four quarters.
Despite a 14% reduction since January, executive concerns regarding petrol prices remain with half of executives stating that fuel prices are the most significant influence on business operations in 2007. Growth in wages and interest rates are also considered significant influences at 28% and 7% respectively.
Weak employment trends will also continue for the quarter ahead, with 9% of businesses anticipating a decrease in staff numbers and expectations for capital investment remaining subdued.
The impact of the drought on non-farming sectors has increased slightly (up 3%) since February; however it remains 4% below the January level of 33%.
Dr Duncan Ironmonger, Dun & Bradstreet's economic consultant said: "The final figures for the quarter indicate that small and medium sized firms in manufacturing, wholesaling and retailing will see some improvement in business conditions before the end of the financial year.
"Looking further ahead, executives remain concerned about the impact of high fuel prices and wages growth on the bottom line.
"Last week's decision by the Reserve Bank to keep interest rates on hold is positive for businesses expecting recovery in sales and profits - an increase in rates would have made this turnaround more difficult," said Dr Ironmonger.
The D&B index for expected sales is up 10 points to two, with 27% of executives expecting an increase in sales and 25% expecting a decrease. The profits index is up 14 points to minus four, with 24% of executives expecting profits to rise and 28% expecting a fall.
Employment expectations are up one point to an index of minus two, with 7% expecting an increase in staff, and 9% expecting a reduction. Capital investment expectations are up three points to an index of two, with 6% expecting an increase and 4% expecting to cut spending. Inventories expectations are up four points to an index of minus four.
The selling prices index is up 12 points to an index of 58, with 62% of firms now expecting to raise prices and 4% expecting to decrease process.
For further information, or to arrange an interview, please contact:
Danielle Woods
Media
Hill & Knowlton
(02) 9286 1258
Dr Duncan Ironmonger
Economic Consultant
D&B
(03) 8344 2131
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 130 million companies.
Information is gathered in 193 countries, in 95 languages or dialects, covering 186 monetary currencies. The database is refreshed more than one 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.
