Businesses feel ‘invincible’

HAVING tackled the economic crisis, the introduction of the GST and the September 11 terrorist attacks, Australian businesses left standing appear to be succumbing to a feeling of invincibility.

Doomsday economic reports in the media since the terrorist attacks must have remained unread on the paper pile as both consumer and business sentiment continues to gain strength.

While the largest world economies continue to show signs of crumpling, domestic businesses are forecasting their strongest sales in almost two years during the March quarter,

The December Dun & Bradstreet National Business Expectations Survey of 1,200 businesses indicates a general increase in expectations across the board as the benefits of low interest rates, low inflation and a low exchange rate are more keenly felt.

But while businesses expect a bit of breathing space in the coming year, the same could not be said of last year.

More than half of the businesses surveyed said they had to resort to taking a cut in profit margins to maintain market share.

“This indicates that some companies have had a tougher time than others and have had to make some significant sacrifices along the way in order to keep their doors open for business,” D&B Australia and New Zealand CEO Christine Christian said.

“Australia is starting the new year in a far stronger position than it entered 2001.”

“Despite negative growth in the US, Japan and some other trading partners, the unexpectedly quick successes in the war on terrorism in Afghanistan have helped improve the business outlook,” she said.

“In addition, 18 months on from the introduction of the new taxation system, the initial impact and cost of compliance has eased and companies are coming to grips with life after GST.

BIS Shrapnel economist Matthew Hassan said while the economy would hold up during the year, businesses would still find conditions tough.

“Businesses are going to experience a serious impediment to activity next year, with the world economy deteriorating. It’s going to be below average.”

Mr Hassan said it was wrong to suggest the terrorist attacks would have a huge impact on the US or the world economy.

“September 11 was never going to be a major economic event. Its economic importance was more in terms of timing,” he said.

The survey shows the sales outlook in the March quarter are the highest in 20 months, profit expectations are the best in 16 months and capital investment and employee expectations are the highest in five months.

But it is not just businesses that appear to be feeling unmoved by the pessimistic forecasts. The Westpac-Melbourne Institute Index of Consumer Sentiment released this week shows that consumers continue to be bullish about the economy. And the attitude is being expressed at the tills.

WA retail trade climbed 2.3 per cent in November, following growth of 0.6 per cent in the previous month, while new motor vehicle registrations rebounded by a strong 4.5 per cent in November.

WA-based Independent Retailers’ Organisation chairman Bob Stanton said his members were looking forward to strong sales in 2002.

“The outlook is better then it was last year this time,” Mr Stanton said.

“Australia is in a pretty damn healthy position, I reckon. I don’t think Australia will follow the US into recession.”

BankWest economist Alan Langford said the positive sentiment was good news, but needed to translate into real data.

“Its encouraging from this survey that business is fairly buoyant about capital expenditure, but we just have to see it flowing through,” Mr Langford said.