Reading the data dump: The good, bad and the ugly on Australia’s economy

It’s difficult to take the Australian economy’s pulse: the Reserve Bank seems to think rates are appropriate, the miners are still going great guns, but ask many small businesses – particularly in retail, tourism and manufacturing – and there’s nothing ‘just right’ about it.

In the last two days there has been an avalanche of economic data, including two business confidence reports, job ad data, car sales and official statistics on company profits.

SmartCompany has sifted through the latest takes on the economy to extract the good things about the economy and reasons for caution.

First, the good news:

Profit, sales expectations on the rise

This week’s Dun & Bradstreet national business expectations survey – of 1200 business owners and senior executives – shows that sales expectations have climbed 15 points, to be more than 13 points above the ten-year average index.

Profit expectations are also recovering, D&B says, seven points above the ten-year average index.

Growth, not closure, is on SMEs’ minds

The latest Sensis Business Index finds fewer small businesses are planning to sell or close. The survey, of 1800 businesses with between one and 199 employees, finds that just 11% intend to do so, down six percentage points 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 despite what they perceive are comparatively adverse economic conditions,” report author Christena Singh said.


We already know Australian women rank high by global standards on entrepreneurialism.

A recent Australian Women’s Chamber of Commerce & Industry report finds that the number of women running their own business has doubled since 2007 and that one-third of these women employ staff – providing employment opportunities across the country.

AWCCI chief executive Yolanda Vega says this is the first generation of women to consider owning a business as a career.

Job ads on the rise

ANZ’s job ad series, released yesterday, showed that number of job advertisements on the internet and in newspapers rose 3.3% month-on-month in February, following an upwardly revised 7.5% rise in January.

“It appears clear from the data that total job advertising in Australia troughed in late 2011 and is picking up strongly in early 2012,” the bank said.

“If these hiring intentions are converted into actual jobs then it appears that the Australian labour market is in for a gradual improvement over the course of 2012.

“This greatly reduces the chances of a material rise in the unemployment rate over the year ahead. We are confident that the unemployment rate will track sideways between 5% and 5.5% for much of 2012.”

And the bad:

Employment expectations

On the flip side, this week’s Sensis Business Index shows that employment by small business deteriorated over the quarter. This is backed up by the D&B survey, which found that anticipated employment levels have declined from levels at the start of the year (but remain three points above the ten-year average index.)

Confidence is still fragile

It’s not a matter of “no confidence” across the economy. This morning’s National Australia Bank manufacturing activity index for the fourth quarter reported improved confidence across the manufacturing sector, helping bridge the gap with the broader economy.

But the Sensis survey, taken between 30 January and 21 February 2012, shows business confidence is still weaker than this time last year, with three in 10 businesses worried about their prospects for the year ahead, including one in 10 that are extremely worried.

Collapse numbers are still higher year-on-year

As insolvency firm Taylor Woodings puts it, although January’s company collapse number of 518 was lower from the previous month, the figures are still higher year-on-year.

“While the fall in figures may appear to bode well for the year ahead, corporate failures for the month are 13.8% higher than at the same time last year and 10.9% higher than the five year average (467) for January,” it says.

“Further, for the financial year to date, total company collapses are at 6068 compared with 5353 for the previous corresponding period, an increase of 13.4%.”

The structural adjustment continues to hurt

D&B’s economic consultant Duncan Ironmonger says the company’s research indicates the “difficulties of many businesses in adjusting to the structural re-alignment of the economy as the mining boom continues to draw resources away from manufacturing and distribution sectors.”

“The latest ABS data on capital expenditure expectations for 2011-12 and 2012-13 show very large rises in mining capital expenditure of more than 50 per cent each year. This is, however, accompanied by declines in capital expenditure in other sectors of the economy,” Ironmonger said.

The strong $A bites

The D&B survey also showed that an increasing number of businesses expect the high Australian dollar to crimp their operations in the June quarter.

“More than a third of businesses, up nearly 40% on last month, expect the high exchange rate to have a negative impact on their operations in the June quarter,” it says.

“Concern over the dollar grew noticeably among retailers, rising 12 percentage points to reach 37 per cent during February.”

And although this morning’s NAB manufacturing activity index rebounded in December, it recorded little or no growth at the end of 2011. 

And the ugly:

Chinese growth

With significant doubts about the strength of the US recovery and the outlook for Europe, the Chinese Government’s slicing of its annual growth forecasts below the key 8% level. Chinese Premier Wen Jiabao has just tipped the economy will grow by 7.5% this year, highlighting “downward pressure on economic growth” and high prices.

“Internationally, the road to global economic recovery will be tortuous, the global financial crisis is still evolving and some countries will find it hard to ease the sovereign debt crisis any time soon.”

If China slows to 7.5%, Australia should be fine. But further falls will put real pressure on our domestic economy.



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