Economy

Executives’ confidence levels rebound, but is it flowing through to SMEs?

Cara Waters /

Business confidence in the global economy has rebounded sharply according to Ernst & Young’s Capital Confidence Barometer.

The survey found 30% of Australasian businesses believe the global economy is improving – twice as many as six months ago.

The survey of 1,500 executives from around the world, including 146 respondents from Australasia, found 82% of the Australasian businesses surveyed believe the global economy is stable or improving.

Nearly a third of local businesses are planning an acquisition in the next 12 months while 23% intend to make divestments.

E&Y partner Graeme Browning said Australian businesses have strong balance sheets with low debt to capital ratios.

“On the whole Australasian companies appear well positioned to pursue growth,” he said.

“Although there has been a noticeably positive shift in overall confidence and outlook, organisations both in Australasia and globally have not accelerated their acquisition plans.”

“This caution may be driven by lingering concerns of another false start on the road to global economic growth.”

Higher growth markets in Asia Pacific is the most preferred investment destination for businesses, with 46% of global and 89% of Australasian respondents nominating it as the region in which they are most likely to invest outside their domestic market.

Excluding Australia and New Zealand, the top four likely destinations for Australasian investment are China, India, Indonesia and Malaysia.

“In reality though, most investment by Australasian companies is in home markets.

Many Australasian companies have invested across Asia and will continue to do so.

“However in a relative sense, local companies appear to be lagging behind their global peers in this regard,” says Browning.

Peter Strong, executive director of the Council of Small Business Australia, told SmartCompany the upturn in confidence recorded by E&Y was not flowing through to small business.

“I am not seeing that, all these different surveys come out on confidence and they all say different things,” says Strong.

“It depends who you speak to, I assume people associated with the mining industry would be confident and retailers would not be.”

“I am hearing a lot of worry about the future and people are concerned that things won’t get better.”

“Manufacturing, retail, hospitality and tourism are all sectors that are not comfortable with the future.”

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Cara Waters

Cara Waters is a former SmartCompany editor. Previously, Cara was a senior reporter for the Financial Times' website and worked for The Sunday Times in London.

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