Businesses are beginning to feel better about the economy and their own finances, with the outlook for profits, sales and employment all beginning to stabilise – but they are still waiting until after the election to spend.
According to the latest release of the Dun & Bradstreet Business Expectations Survey, business sentiment has stabilised ahead of the September 7 federal election.
The end of an election campaign will provide more stability as well, business experts have argued.
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“While businesses are not intending to increase investment or employment in the months ahead, and although commercial credit growth is weak, business owners are more confident about sales and profits returning,” D&B chief executive Gareth Jones said in a statement.
Employment expectations have increased, although they’re still in negative territory, while the sales index has improved to 5.6 from 4.9 in the previous quarter.
Profit expectations are surprisingly high, moving from 13.2 points to 14.9, although capital expenditure expectations have dropped out to -2.1.
The major issues expected to impact business include cashflow and access to credit, although two thirds of businesses say they don’t expect any impact from the fluctuation in the dollar. Only 13% expect a “significant positive impact”.
Jones says given the results, it may be the end of the election season that “kicks these initial findings on sentiment from stable to optimistic”.
The research shows 38% of businesses are likely to delay significant business decisions and investments until after the election, which D&B suggests could “boost inactivity” before Christmas.
“The most positive tone in the outlook is reinforced by the fact that over one-third of businesses are delaying their spending and investment decisions until after the election,” D&B economic advisor Stephen Koukoulas said in a statement.
“If this spending does in fact transpire after the poll, it will further boost the growth outlook.”
D&B found 51% of respondents view operational costs as their biggest barrier to growth, while 35% expect cash flow will be an issue – 23% say fuel prices will be a problem.
“With a further interest rate cut and the lower Australian dollar still to show up in economic activity, there is a strong chance that we could see a turning point that could signal a stronger year for the economy in 2014,” said Koukoulas.