Australia’s world record for economic growth heralds tougher times

Published on the 09/06/2017 | Written by Newsdesk

Aussie economic growth

The signs are mainly pointing downwards, according to Dun & Bradstreet…

As Australia equals a world record for uninterrupted economic growth, data insights company Dun & Bradstreet is warning that the party will shortly be over. It said business performance for the first quarter has hit a four–year low, resulting in lower expectations for the second half of the year, with its May Business Expectations Survey showing a generally muted outlook for the September quarter of 2017 despite employment expectations reaching a two-year high.

Australia has matched the Netherlands with its 103 consecutive quarters of economic growth, meaning the country has gone 26 years without seeing a recession.

While manufacturing is at a low, finance is at a high, pointing to an environment ripe for Australia’s burgeoning fintech industry to flourish; with the entry of into the local market heightening concerns about new players, it has also emerged that Australian businesses looking for growth see online competition as one of the biggest barriers to growth.

Despite a generally positive outlook for business expectations in the early part of 2017, the actual performance of the business sector slumped to its weakest level since Q2 2013. This significant shortfall in expectations was most evident in a disappointing actual result for profits, which turned negative for the first time since Q2 2011, with employment also deteriorating to a four-year low. The survey results are consistent with the economy growing, albeit at a below-trend pace.

Manufacturing businesses saw multi-year lows across expected sales, profits, and capital investment, as well as actual sales, selling prices, and capital investment. Meanwhile, the company said the Finance, Insurance & Real Estate sectors recorded multi-year highs across a number of its survey components including expected sales, employment, selling prices and capital investment, as well as actual employment and selling prices. However, capital investment activity and expectations remained low.

The drop in expectations for September, added the company, follow a softer-than-expected March quarter on the back of lower actual sales, profits, employment, selling prices and investment in the first quarter.

Stephen Koukoulas, Dun & Bradstreet Economic Adviser said in a statement that: “One encouraging aspect from the business expectations survey is the outlook for employment. This may be linked to the current low wages environment and it fits with the recent ABS labour force data which has shown a solid rise in employment in recent months. The positive outlook for employment is across almost all industries, which is a favourable development.”

Online competition is a major concern for Australian businesses, along with ‘utilities and operating costs’. Dun & Bradstreet said ‘about two-thirds of businesses’ have been impacted by rising energy costs, with more than 20 percent experiencing a ‘major’ impact.

‘Online selling by competitors’ was the second-biggest barrier to growth, with 13.8 percent of the some-800 respondents to Dun & Bradstreet’s survey citing the issue. Unsurprisingly, the threat of online competition was most acute in the retail sector, which was also concerned about cash flow as a barrier to growth.

Dun & Bradstreet said its Business Expectations Survey ‘is again proving to be a reliable indicator for key economic trends. It has correctly anticipated the pick-up in inflation from the end of 2016, and that the rise would be moderate. It has also anticipated what many in the market are now agreeing is a soft start to 2017 for the economy’.

More of the Dun & Bradstreet Business Expectations Survey here.

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