Marred by European debt crises and uncertainty over China’s growth forecasts, the Australian economy faces increasing headwinds, but getting a handle on the mood of global investors and local businesses is often a difficult task.
Some look to corporate leaders, like BHP Billiton’s Marius Kloppers and Rio Tinto’s Tom Albanese, who have both outlined strategies to keep their big mining expansions firmly within budget. They warned that China’s growth might slow thanks to Europe’s failings, which would take a toll on the Western Australian economy.
Others focus on market surveys, like peer-mentoring organisation The Executive Connection, whose national confidence index survey recently found WA business leaders to be among the most confident in the nation when it came to the economic outlook.
But, for some, studying the movements of the Australian dollar is the best litmus test because it partly reflects the value of our major export commodities and the outlook for interest rates.
The Australian dollar has fallen about 10 per cent in the past few weeks after trading well above parity with the US dollar for most of the year. It has bounced around over the past week, trading just under US97 cents last Friday and nudging parity again on Monday. It was trading just under US99 cents by mid-week.
Despite your chosen method of observation, the impact the uncertainty surrounding Europe’s economic viability is having on the WA economy is undeniable.
“The past year has been marked by significant economic fluctuations, with the European debt crisis and continued talks of a second economic downturn affecting businesses throughout the world,” TEC group chair WA Tim Hantke said.
“However, what the TEC confidence index shows is that our business leaders believe they have fared better than most.”
TEC found that 26 per cent of WA respondents said they expected the economy to lift next year, compared to the national average of 16 per cent.
WA managers had the greatest expectation of a sales increase, with 65 per cent expecting sales figures to increase in 2012, while 47 per cent planned to increase staff numbers and 52 per cent expected a spike in profitability.
The latest Westpac-Chamber of Commerce and Industry WA leading index showed business confidence fell again in October, the fourth monthly fall in a row, in line with tumbling share prices.
That indicated difficult conditions for the rest of the year, according to CCIWA, but forecast improvements in Chinese industrial production, WA retail trade and building approvals are signs of improvement beyond the current uncertainty.
