Private business grows positive: survey

The majority of Australia's private companies are optimistic about the future and are on track to meet revenue targets this year according to one of the world's "big four" accounting firms.

KPMG's latest 'Mood of the Market' survey, the first for 2010, found solid evidence of business optimism with almost 60 per cent of respondents expecting economic activity to expand.

The bi-annual report, which aims to assess current business sentiment through consultation with the nation's chief executives and managing directors of private companies, found 57 per cent of respondents expected interest rates to rise 0.5 per cent in the next six months while 62 per cent expected to meet their revenue targets for FY10.

Ninety-four per cent expected the official interest rate to increase in the future.

KPMG Partner, Graeme Matthews said the key goal for half of the respondents was business growth.

"Despite five interest rate rises in the past seven months, and an expectation by almost everyone surveyed that rates will rise again in the next six months, the mood is optimistic," Mr Matthews said.

The survey also found constraints to capital expenditure have hit private companies, with 39 per cent experiencing difficulty over the past six months.

"Availability of debt and equity capital, and the price of debt were the main culprits constraining expenditure," he said.

Fifty per cent have experienced minor impact from rising inflation with 75 per cent believing the Commonwealth should wind-back its stimulus spending.

Skill shortage has re-emerged as a key concern with research indicating that while businesses maintained (46 per cent) or increased headcount (33 per cent) in the past six months concerns with labour issues have doubled since the previous survey in August 2009.

"Notwithstanding that we have experienced a sluggish economy, 43 per cent are already suffering from skill shortages," Mr Matthews said.

He said employers who failed to invest in their people will be at risk of escalating staff turnover, as the market appears to be turning in favour of the job seeker.

"As we have seen before, it will be the disenchanted high performers who will head for the door first," he said.

"Australia's private companies are priming for growth, and a clamour for talent is on. But don't forget lessons from the downturn.

"It is all too easy to revert to old habits, for headcount and overheads to escalate out of proportion to revenue, destroying margins."

On the cost front, 36 per cent expected rising operating expenses (excluding wages) to be the most significant driver of inflation over the next six months, compared to 25 per cent who indicated wages were the key concern.