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Surveys point to declining business confidence

SALES and employment opportunities are expected to drop off significantly in coming months, according to the September Dun & Bradstreet National Business Expectations Survey released this week.

The Dun & Bradstreet results mirror those of earlier surveys by the National Australia Bank and Westpac, which also found a sharp decline in confidence.

The DBA survey looks ahead to the December quarter and indicates a sharp fall in expectations. The decline follows a drop in August following three consecutive months of upward trends.

Employment expectations have returned to negative territory for the first time since April, while sales expectations also have been hit hard, plunging during the period but remaining in positive territory.

Interestingly in the DBA survey, 67 per cent of executives cited the low Australian dollar as having a negative effect on their business during the past 12 months.

The Westpac-Melbourne Institute Survey of Consumer Sentiment released last week provides an early indication of trends in consumer spending following the terrorist attacks on the US. It shows a significant fall, to 99.4 in October from 109.2 in September. However, the index remains above recession levels of sub-80 points and is close to its long-run average of 99.

The NBA survey showed business confidence fell to its lowest level in more than a decade.

The survey result was the lowest since a minus 25.3 recorded in 1991 and was well below the minus 6.2 before the introduction of the GST and the minus four reached during the Asian crisis in June 1998.

DBA managing director Christine Christian said the slump in expect-ations was inevitable following the September 11 terrorist attacks and the Ansett crisis.

“Those executives surveyed after September 11 were hardly going to be buoyant in the wake of such tragedy and the subsequent failure of Australia’s second largest airline,” Ms Christian said.

“These factors, combined with the uncertainty of a federal election, are likely to see expectations remain low, or fall further, in October.”

She said the resurgence in housing activity in 2001 – sparked by interest rate cuts and the doubling of the first home buyers’ grant – had provided Australian business with a “welcome shot in the arm. The DBA survey found 32 per cent of executives said the housing and construction slump of 2000 had a “very negative” or “moderately negative” effect on their business.

An additional 34 per cent said that high fuel prices had had a minor negative effect, with 38 per cent stating it had no negative effect.

DBA economic consultant Duncan Ironmonger said the future of the Australian economy was largely dependent on how well the US economy fared and the global impact of the war on terrorism.

“There is now a strong probability of a decline in employment and a rise in the unemployment rate over this period,” Dr Ironmonger said.

“Our survey shows that retailers were the only sector with a double digit net index from an increase in sales. Against the trend in the other sectors, retailers show high and increasing profits expectations.”

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